Fort Walton Beach — Comprehensive Financial Report September 30, 2021

FORT WALTON BEACH, FLORIDA www.fwb.org (850) 833-9500 Annual Comprehensive Financial Report FY 2020-21 CITY OF FORT WALTON BEACH, FL WITH COMPLIANCE MATTERS AND RESPONSES FISCAL YEAR ENDED SEPT. 30, 2021 CITY OF FORT WALTON BEACH, FLORIDA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2021 PREPARED BY: THE FINANCE DEPARTMENT Julio Lacayo, Finance Director City of Fort Walton Beach 107 Miracle Strip Parkway Fort Walton Beach, FL 32548 www.fwb.org  CITY OF FORT WALTON BEACH, FL City Council Left to right (standing): David Schmidt, Nic Allegretto, Nathan Kelley, Kirby Locklear, and Travis Smith Left to right (seated): Mike Holmes, Mayor Dick Rynearson, and MG Moran Council members are elected in odd years for four-year staggered terms. City Council meets on the second and fourth Tuesday of each month at 6:00 p.m. in the City Council Chambers located at 107 Miracle Strip Parkway, Fort Walton Beach, Florida. Appointed Officers Department Directors City Manager – Michael D. Beedie, PE Finance – Julio Lacayo, Jr. City Clerk – Kim M. Barnes, MMC Fire Services – Ken Perkins, Chief City Attorney – Hayward Dykes, Jr. Growth Management – Chris Frassetti Human Resources – Tarey Franxman Police Services – Robert Bage, Chief Public Works & Utility Services – Daniel Payne, PE Recreation & Cultural Services – Jeff Peters  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Page CITY OFFICIALS I. INTRODUCTORY SECTION Table of Contents i Letter of Transmittal City Manager iv GFOA Certificate of Achievement x Organizational Chart xi II. FINANCIAL SECTION Independent Auditors’ Report 1 A. MANAGEMENT’S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds Balance Sheet 17 Reconciliation of the Balance Sheet to the Statement of Net Position 18 Statement of Revenues, Expenditures and Changes in Fund Balance 19 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 20 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund 21 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Community Redevelopment Agency 22 Proprietary Funds Statement of Net Position 23 Statement of Revenues, Expenses and Changes in Net Position 25 Statement of Cash Flows 26 Fiduciary Funds Statement of Fiduciary Net Position 28 Statement of Changes in Fiduciary Net Position 29 Notes to the Financial Statements 30 i  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Page Schedule II. FINANCIAL SECTION (CONTINUED) C. REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Pension and OPEB Schedules Schedules of Changes in Net Pension Liability and Related Ratios 87 Schedule of Changes in Net OPEB Liability and Related Ratios 90 Schedule of Pension Contributions 91 Schedule of Investment Returns 92 Notes to the Schedule of Pension Contributions – General Employees’ Retirement Fund 93 Notes to the Schedule of Pension Contributions – Police Officers’ Retirement Fund 95 Notes to the Schedule of Pension Contributions – Firefighters’ Retirement Fund 97 D. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Non-Major Governmental Funds Combining Balance Sheet 99 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 100 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual Law Enforcement Trust Special Revenue Fund 101 Law Enforcement Trust Training Special Revenue Fund 102 Florida Building Code Special Revenue Fund 103 Community Development Block Grant Special Revenue Fund 104 Beal Memorial Cemetery Perpetual Care Special Revenue Fund 105 Debt Service Fund 106 III. STATISTICAL SECTION (UNAUDITED) Net Position by Component 107 1 Changes in Net Position 108 2 Fund Balances – Governmental Funds 110 3 Changes in Fund Balances – Governmental Funds 111 4 Revenues and Other Sources 112 5 Assessed Value of Taxable Property 113 6 ii  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Page Schedule III. STATISTICAL SECTION (UNAUDITED) Property Tax Rates Per $1,000 of Taxable Value – All Direct and Overlapping Governments 114 7 Principal Taxpayers 115 8 Property Tax Levies and Collections 116 9 Ratios of Outstanding Debt by Type 117 10 Ratio of Net General Bonded Debt Outstanding 118 11 Pledged Revenue Coverage – Schedule of Revenue Bond Coverage 119 12 Direct and Overlapping Governmental Activities Debt – General Obligations 120 13 Major Employers 121 14 Miscellaneous Demographical Statistics 122 15 Full-Time Equivalent Employees by Function/Program 123 16 Permits, Licenses and Recreation Facilities 124 17 Elections - Okaloosa County Voter Registration 125 18 Special Assessment Billings and Collections 126 19 Major Revenue Sources 127 20 Water and Wastewater Service Rates 128 21 Sanitation and Recycling Service Rates 129 22 Operating Indicators by Function/Program 130 23 Capital Asset Statistics by Function/Program 131 24 Insurance Coverage 132 25 IV. COMPLIANCE SECTION Schedule of Receipts and Expenditures of Funds Related to the 135 Deepwater Horizon Oil Spill Independent Auditors’ Report on the Schedule of Receipts and Expenditures of Funds Related to the Deepwater Horizon Oil Spill 136 Schedule of Expenditures of Federal Awards 137 Notes to the Schedule of Expenditures of Federal Awards 138 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 139 Independent Auditors’ Report on Compliance for the Major Federal Programs and on Internal Control over Compliance Required by the Uniform Guidance 141 Schedule of Findings and Questioned Costs 143 Summary Schedule of Prior Audit Findings 146 Independent Accountants’ Report on an Examination of Compliance Requirements in Accordance with Chapter 10.550, Rules of the Auditor General 148 Management Letter 149 iii  City of Fort Walton Beach “The Treasure of the Emerald Coast” 107 Miracle Strip Parkway SW * Fort Walton Beach, FL 32548 (850) 833-9504 * Fax (850) 833-9640 www.fwb.org March 8, 2022 Honorable Mayor, City Council Members, & Citizens of the City of Fort Walton Beach City of Fort Walton Beach 107 Miracle Strip Parkway SW Fort Walton Beach, FL 32548 Ladies and Gentlemen: The Comprehensive Annual Financial Report of the City of Fort Walton Beach, Florida for the fiscal year ended September 30, 2021, is hereby submitted herewith pursuant to Chapter 218.39(1)(d) of the Florida Statutes requiring each local government entity to complete an audit report within nine (9) months after the end of the fiscal year. This report consists of management’s representations concerning the finances of the City of Fort Walton Beach, Florida. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Fort Walton Beach has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformance with GAAP (Generally Accepted Accounting Principles). Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The financial statements of the City of Fort Walton Beach have been audited by Warren Averett, LLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ending September 30, 2021, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Fort Walton Beach’s financial statements for the fiscal year ending September 30, 2021, are fairly presented in conformity with GAAP. The independent auditor’s report is presented in Section II - Financial Section as the first component of this section of the 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. iv GOVERNMENT PROFILE DATE OF INCORPORATION: June 16, 1941 FORM OF GOVERNMENT: Council & Manager PAVED STREETS: 93.12 miles GEOGRAPHIC AREA: 7.60 square miles SIDEWALKS: 63.79 miles TAXABLE ASSESSED VALUE: $1,636,895,575 WATER & SEWER LINES: 283.69 miles CITY MILLAGE RATE: 5.3293 STORM DRAIN: 44.14 miles POPULATION: 20,948 (April 1, 2021 Est) POLICE STATIONS: 1 FIRE STATIONS: 2 EMPLOYEES: 358 positions, 317.14 FTE’s LIBRARIES: 1 MUSEUMS: 4 SWORN POLICE OFFICERS: 54 18-HOLE GOLF COURSES: 2 FIREFIGHTING PERSONNEL: 44.25 ACRES OF PARKS: 448.54 (includes golf course) 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 providing police and fire protection; cultural and recreational activities including parks, a library, a museum, and two championship golf courses; planning and zoning; public works such as street, sidewalk, right-of-way, and cemetery maintenance; utility services including water, sewer, and stormwater; and garbage and recycling collection to a coastal community of 20,940 full-time residents. The City has an exciting and romantic history. As early as 600 B.C., Indian tribes were attracted to Fort Walton Beach from the Mississippi and Tennessee River Valleys and the Southeast Georgia coast. The beginning for the City occurred following the War Between the States when Alabama war veteran John Brooks selected a site of 111 acres where he built a three-room cabin in 1867. Other settlers soon followed. By 1884, the population of the area required establishment of a small schoolhouse. In 1902, the first hotel, Brooks House, was built along the sound and shortly thereafter the first post office was built in 1906. The Montgomery, Alabama, Maxwell Field military base First Schoolhouse developed an airfield in Fort Walton in 1933 on 137 acres of land and used it as a bombing and gunnery range. The most significant factor in the City's growth was the creation and later expansion, of that airfield, which is now Eglin Air Force Base (the largest military installation in the world) in 1937, the year the City Charter was adopted. 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 name Walton originates from Colonel George Walton, who was Secretary of the East-West Florida Territory in 1822-26 and son of George Walton, signer of the Declaration of Independence and Governor of Georgia. The presence of the military base provided the key economic stimulus for the City's early growth, supplemented by the attractiveness of the location. The City enjoyed a substantial population and economic boom from the 1950's through the end of the 1970's. Subsequently, things started to slow down. The military base became less important to the City's economy than the growing tourism industry. In the late 1960’s and early 1970’s Fort Walton Beach began to experience a decline in economic prosperity, some of which can be attributed to the utility and transportation infrastructure getting older and commercial and residential structures becoming deteriorated. New development began to take place in the surrounding communities. The City, having nearly run out of developable land, started to focus attention on finding ways to induce private enterprise investment in the City and thus capturing a greater share of the local and regional market. v The City’s premier gathering place along the Santa Rosa Sound has been the Landing Park since its purchase in 1986. The Landing Park is slated for renovations sometime in 2022. Building upon that with the complete reconstruction of Brooks Street, including the Brooks Bridge Park in 2013, the City’s downtown waterfront was opened up to an extent never before realized and spurred economic growth downtown. Outside of downtown, the City completed construction of a new recreational complex in 2015 and a new field office complex in 2019, which has added to the attraction of the City. Downtown Redevelopment: Brooks Bridge Park Recreation Complex – opened Summer 2015 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 January with the Finance Director and Budget & Grants Analyst developing five-year financial forecasts for the General and Enterprise Funds, including best, likely, and worst-case scenarios. Revenue assumptions are developed using financial forecasting software to analyze historical trends and account for any anticipated major economic or legislative changes. Revenue projections are continually updated until the budget is adopted to ensure the amounts are based on the most current information available. Expenditure assumptions are similarly developed in the forecast model considering relevant benchmark indices such as the municipal cost index, consumer price index, and producer price index. New programs and projects are also included to determine the future impact of current financial decisions. In March or April, the City Council, acting as the Legislative Body of the City holds at least one (1) Strategic Planning Session. The goals FISCAL FINANCIAL set during this meeting are used by staff to formulate the budget policy YEAR FORECAST items that are presented to City Council in June and then utilized to BEGINS Oct 1 DEVELOPED Jan prepare the Budget. A Budget Policy Meeting is held with City BUDGET Council in June to determine Council’s priorities and position issues BUDGET ADOPTION MEETING specific to development of the operational and capital budgets for the Sep Jun upcoming fiscal year. City Council’s decisions provide the framework PUBLIC under which the budget is prepared to meet City Council’s BUDGET DEPARTMENT MEETINGS WORKSHOPS programmatic objectives within available fiscal resources projected Aug BUDGET COMMITTEE May/Jun in the five-year forecasts. The meeting is open to the public and the REVIEW Jun/Jul 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. In order to accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and Budget & Grants 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 30th, 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 21 & 22 as part of the basic financial statements for the governmental funds. For governmental funds with appropriated annual budgets, other than those previously mentioned, this comparison is presented in the combining and individual fund statements and schedules, Section D of this report, which starts on page 99. 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 2021-22 budget of $52,861,351 is $3.2M, or 6.63%, more than the adopted FY 2020-21 budget. The increase is primarily due to the inclusion of Capital Improvement Projects in the General Fund, Enterprise Funds (Utilities & Stormwater), and the CRA Fund. The budget is predicated on maintaining the current millage rate of 5.3293 mills; as a result, ad valorem revenues will increase by 5.97% citywide. 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 $6.0 billion annual economic impact on the area, with approximately 70% 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 taken into account when adopting the City’s budget for FY 2021-22. The City’s budget for FY 2021-22 allocates $27.7 million to the General Fund, $19.8 million to the Enterprise Funds, and $5.3 million to Other Funds. For the FY 2021-22 budget, the ad valorem rate remained at the current millage rate of 5.3293 mills. The FY 2021-22 budget includes Year 2 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. Also, in FY 2021-22, the fire services assessment rates were set to generate the same amount of revenues, approximately $1.11 million, as in FY 2020-21; this is Year 2 of the collection method being moved to the annual ad valorem tax bill through the Okaloosa County Tax Collector’s Office. No other significant changes to the City’s various rates and fees are included in the FY 2021-22 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, 2020. This was the eighteenth consecutive year that the City received this prestigious award. In order 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 another certificate. In addition, the City also received the GFOA’s Distinguished Budget Presentation Award for its annual budget dated October 1, 2021. This was the twenty-sixth consecutive year that the City received this prestigious award. In order 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, Michael D. Beedie, P.E., ICMA-CM 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, 2020 Executive Director/CEO x  Citizens of Fort Walton Beach City Council City Clerk City Manager City Attorney 2 FTE 3 FTE 0400 0200 Public Works Financial Growth Management Fire Services Human Resources Police Services Recreation Services and Utility Services Services 13 FTE 44 FTE 8 FTE 75.94 FTE 71.20 FTE 81 FTE 14.50 FTE 1200 0900 0300 & 0320 0800 1000 to 1080 1200 & 1300 0500 & 0520 & 0530 Utility Administration Building Inspections Accounting Advanced Life Human Resources Uniform Patrol Athletics – Adult & & Permitting Support Youth Fleet & Facilities Auditing Insurance & Risk K-9 Patrol Code Enforcement Fire Suppression Management Recreation Centers GIS/CAD Budgeting Criminal and Programming CDBG Fire Prevention IT Investigations Sanitation Purchasing Grounds Planning Fire Inspection Community Policing/ Maintenance: Parks, Sewer Collections Debt Service & CRA CRA Management Hazardous Materials Right-Of-Way and Stormwater Response Crime Prevention Cemetery Treasury Streets Fire Education Communications Library Utility Billing Water Distribution Records Museum Contingencies & Water Operations Transfers Support Services Golf Club Operations School Crossing Guards Reserve Officers xi  INDEPENDENT AUDITORS’ REPORT To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of the City of Fort Walton Beach, Florida (the City), as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fort Walton Beach, Florida, as of September 30, 2021, and the respective changes in financial position, and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund and Community Redevelopment Agency (Special Revenue Fund) for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis and the schedules related to the pension and OPEB liabilities, contributions, and investment returns, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual non-major fund financial statements and schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The combining and individual non-major fund financial statements and schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 8, 2022, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Fort Walton Beach, Florida March 8, 2022 3  MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Fort Walton Beach, Florida (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2021. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages iv - ix of this report. FINANCIAL HIGHLIGHTS  The assets and deferred outflows of the City exceeded its liabilities and deferred inflows by $75.5 million (total net position). Of this amount, $23.8 million represents unrestricted net position that is available to meet the City’s ongoing obligations to citizens and creditors.  The government’s net position increased by $7.1 million during the fiscal year. In the governmental activities, revenues and transfers exceeded expenses by $6.7 million in fiscal year 2021. This was the result of multiple factors including a $1.1 million increase in sales tax revenues; $740,344 gain on sale of assets due to the selling of city owned surplus real estate; and a $111,982 increase in utility service taxes. In the business-type activities revenues exceeded expenses and transfers out by $389,881 in fiscal year 2021. Charges for services in the business-type activities and related expenses were relatively consistent between the current and prior fiscal year.  As of the close of the fiscal year, the City’s governmental funds reported combined ending fund balances of $36.7 million, an increase of $8.3 million from the prior year. This increase is primarily attributable to the sale of surplus City real estate and increases in proceeds from issuance of long-term debt and sales-based tax revenues.  As of September 30, 2021, committed, assigned, and unassigned fund balance of the General Fund totaled $21.4 million, or 87.7% of the total General Fund expenditures.  The City’s total debt increased by $119,165 or 0.3%, during the fiscal year. This increase is proportional to scheduled principal payments and issuance of new debt. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The focus of financial statements prepared in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 34 is on both the City as a whole (government-wide) and on major individual funds. Both perspectives (government-wide and major funds) allow the user to address relevant questions, broaden a basis for comparison (year-to-year or government-to- government), and enhance the City’s accountability. Government-Wide Financial Statements Designed to be corporate-like, the government-wide financial statements consolidate governmental and business-type activities into two columns, which sum to a total for Primary Government. This provides readers with a broad overview of the City’s finances in a manner similar to a private-sector business. Two statements, the statement of net position and the statement of activities, are utilized to provide information on a government-wide basis. 4  Government-Wide Financial Statements – Continued The statement of net position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net position. This statement combines and consolidates the governmental funds’ current financial resources (short-term available resources) with capital assets and long-term obligations. Over time, increases or decreases in net position may serve as a useful indicator of the financial position of the City. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flow in future fiscal periods. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government (city clerk, city council, city manager, human resources, finance, purchasing, fleet maintenance, service maintenance, and non-departmental expenses), public safety (police, fire, building, and code enforcement services), physical environment (cemetery), transportation (engineering, streets, public works, and right-of-way), economic development (Community Development Block Grant Program, and community redevelopment agency), culture and recreation (parks, golf, library, and museum), and debt service interest. The business-type activities of the City include utilities (water, sewer, and storm water), and sanitation. The government-wide financial statements include not only the City itself (known as the primary government), but a component unit, the Community Redevelopment Agency (CRA), which is a legally separate entity for which the City is financially accountable. The CRA is considered a blended component unit of the City and is presented as a special revenue fund as part of the primary government. The government-wide financial statements are found on pages 15-16 of this report. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been separated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. FUNDS Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements are reported using an accounting method called modified accrual accounting, the focus of which is on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. The basic governmental fund financial statements are on pages 17-20 of this report. 5  Governmental Funds – Continued Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eight individual governmental funds (General Fund, Community Redevelopment Agency Fund, Florida Building Code Fund, Law Enforcement Trust Fund, Law Enforcement Training Fund, Debt Service Fund, Community Development Block Grant Fund, and Beal Memorial Cemetery Perpetual Care Fund). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund and the Community Redevelopment Agency Fund. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The Community Redevelopment Agency Fund is considered a major fund for reporting purposes. The City of Fort Walton Beach adopts an annual appropriated budget for its General Fund, as well as each of the other governmental funds. A budgetary comparison statement is provided for the General Fund and the CRA Fund on pages 21-22 of this report. Proprietary Funds All proprietary funds of the City are maintained as enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the statement of net position and the statement of activities. The City uses enterprise funds to account for its utility operations (water operations and distribution, sewer collections and treatment, and stormwater management), and sanitation operations (garbage). Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information on utilities operations, sanitation operations, and stormwater operations, all of which are presented as major funds of the City. The basic proprietary fund financial statements are found on pages 23-27 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. The City’s fiduciary funds include the Pension Trust Funds (general employees, police officers, and firefighters). Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements are found on pages 28-29 of this report. NOTES TO THE FINANCIAL STATEMENTS The notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 30 of this report. 6 OTHER INFORMATION In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension and other post-employment benefits (OPEB) to its employees. The required supplementary information is found on pages 87-98 of this report. The combining statements referred to earlier in connection with non-major governmental immediately follow the required supplementary information on pension and OPEB plans and can be found beginning on page 99 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. Assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources by $75.5 million, as reported in Table 1. The City’s net position increased by $7.1 million for the fiscal year ended September 30, 2021. Both governmental and business-type activities experienced increases. By far, the largest portion of the City’s net position, $42.1 million or 55.7%, reflects its investment in capital assets (e.g., land, infrastructure, buildings, machinery, and equipment) less any related debt still outstanding that was used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City reports the investment in its capital assets net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position of $9.6 million, or 12.8%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $23.8 million is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. Table 1 Statement of Net Position As of September 30 (In Thousands of Dollars) Governmental Business-Type Activities Total Activities 2021 2020 2021 2020 2021 2020 Current & Other $40,983 $30,535 $19,186 $18,350 $60,169 $48,885 Capital Assets 48,644 48,994 31,781 33,496 80,425 82,490 Total Assets 89,627 79,529 50,967 51,846 140,594 131,375 Deferred Outflow of Resources 7,306 7,203 1,030 726 8,336 7,929 Liabilities Long‐Term Liabilities 43,628 43,506 18,341 19,885 61,969 63,391 Other Liabilities 5,503 2,747 2,838 2,446 8,341 5,193 Total Liabilities 49,131 46,253 21,179 22,331 70,310 68,584 Deferred Inflow of Resources 2,489 1,832 599 412 3,088 2,244 Net Position Net Investment in Capital Assets 28,034 28,266 14,024 14,567 42,058 42,833 Restricted 8,999 6,209 633 622 9,632 6,831 Unrestricted 8,280 4,172 15,562 14,640 23,842 18,812 Total Net Position $45,313 $38,647 $30,219 $29,829 $75,532 $68,476 7 Reported in Table 2 are the key elements of the increase in net position for the current year. Table 2 Statement of Activities Governmental Activities Business-Type Activities Total Activities 2021 2020 2021 2020 2021 2020 Revenues Program Revenue: Charges for Services $6,052,951 $4,779,588 $17,273,977 $16,325,285 $23,326,928 $21,104,873 Operating Grants & Contributions 2,348,391 4,049,001 - - 2,348,391 4,049,001 Capital Grants & Contributions 186,874 232,491 89,963 211,962 276,837 444,453 General Revenue: Property Taxes 6,608,861 6,573,751 - - 6,608,861 6,573,751 Other Taxes 10,157,965 8,964,802 - - 10,157,965 8,964,802 Tax Increments for Redevelopment 2,320,213 2,369,529 - - 2,320,213 2,369,529 Other Revenue 4,824,606 4,323,884 398,083 643,351 5,222,689 4,967,235 Total Revenues 32,499,861 31,293,046 17,762,023 17,180,598 50,261,884 48,473,664 Expenses Primary Government General Government 4,222,810 4,182,204 - - 4,222,810 4,182,204 Public Safety 13,746,451 12,040,368 - - 13,746,451 12,040,368 Physical Environment 547,701 497,072 - - 547,701 497,072 Transportation 1,253,402 1,268,589 - - 1,253,402 1,268,589 Economic Environment 1,131,722 1,317,571 - - 1,131,722 1,317,571 Culture & Recreation 5,990,714 5,999,273 - - 5,990,714 5,999,273 Debt Service Interest 700,924 727,034 - - 700,924 727,034 Business‐Type Expenses Utilities - - 10,574,909 9,315,619 10,574,909 9,315,619 Sanitation - - 3,996,753 3,824,136 3,996,753 3,824,136 Other - - 1,040,698 764,925 1,040,698 764,925 Total Expenses 27,593,724 26,032,111 15,612,360 13,904,680 43,206,084 39,936,791 Increase/(Decrease) in Net Position 4,906,137 5,260,935 2,149,663 3,275,918 7,055,800 8,536,853 before Transfers Transfers 1,759,782 1,747,686 (1,759,782) (1,747,686) - - Increase/(Decrease) in Net Position 6,665,919 7,008,621 389,881 1,528,232 7,055,800 8,536,853 Net Position – Beginning 38,646,964 31,638,343 29,828,791 28,300,559 68,475,755 59,938,902 Net Position – Ending $45,312,883 $38,646,964 $30,218,672 29,828,791 $75,531,555 $68,475,755 Current Year Impacts – Governmental Activities Governmental activities increased the City’s net position by $6.7 million for the fiscal year ended September 30, 2021. Key elements of this change are as follows:  Total revenues increased by $1.2 million, which is primarily attributable to increases in sales tax revenue and property taxes; all driven by healthy consumption of goods and services, and an increase of 5.9%, or $92.0 million, increase in taxable assessed property values for the City.  Public safety expenses increased by $1.7 million, which is primarily attributable to increases in payroll and retirement benefits expenses as well as the City’s portion of personnel costs not covered by the Staffing for Adequate Fire and Emergency Response (SAFER) grant.  Total expenses for governmental activities increased by $1.6 million, or 6.0%, primarily due to an overall increase of 10.5% for insurance premium costs. 8  Chart 1 Expense and Revenue ‐ Governmental Activities (In millions) Debt Service Interest Culture and Recreation Economic Environment Transportation Physical Environment Public Safety General Government 0 5 10 15 Millions Revenues Expenses Chart 2 Revenues by Source ‐ Governmental Activities Franchise Fees , Municipal Revenue $2,146,088 Sharing , $1,101,020 Other Revenue , Tax Increments for $1,577,498 Redevelopment , $2,320,213 Charges for Services , Other Taxes , $6,052,951 $4,136,505 Operating Grants & Contributions , Sales Tax , $6,021,460 $2,348,391 Property Taxes , $6,608,861 Capital Grants & Franchise Fees Other Revenue Contributions , $186,874 Charges for Services Operating Grants & Contributions Capital Grants & Contributions Property Taxes Sales Tax Other Taxes Tax Increments for Redevelopment Municipal Revenue Sharing Current Year Impacts – Business-Type Activities Business-type activities increased the City’s net position by $389,881 for the fiscal year ended September 30, 2021. Key elements of this change are as follows:  Charges for services resulted in additional revenues of $948,692, or a 5.8% increase from the prior year, due an increase in demand for utility services and an increase in rates for sanitation services.  Interest and investment earnings decreased by $593,015, or 94.9%, as the result of a decline in market interest rates that significantly impacted returns on fixed-income securities. 9  Chart 3 Expenses and Program Revenue ‐ Business‐Type Activities (In millions) $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $‐ Utilities Sanitation Stormwater Expenses Revenues Chart 4 Capital Grants and Revenues by Source ‐ Business Type Activities Contributions, Miscellaneous $89,963 Income, $398,083 Charges for Services, $17,273,977 Charges for Services Capital Grants Miscellaneous Income 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. Unrestricted 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, 2021, the City’s governmental funds have combined ending fund balances of $36.7 million, an increase of $8.3 million from the prior year. Approximately 69.5% of this amount, or $25.5 million, is available for spending at the discretion of City Council. The remainder of fund balance is non-spendable or restricted. Details of the fund balance classifications can be found on page 17 of this report, as well as in Note 20. The General Fund is the chief operating fund of the City. At the end of this fiscal year, committed, assigned, and unassigned fund balance of the General Fund was $21.4 million, while total fund balance reached $27.4 million. As a measure of the General Fund’s liquidity, it may be useful to compare both committed, assigned, and unassigned fund balance and total fund balance to total expenditures. This amount represents 87.7% of the total General Fund expenditures, while total fund balance represents 112.1% of that same amount. During the 2021 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 and proceeds from the issuance of long-term debt for which the related expenditures were not incurred until the subsequent fiscal year. In addition, there were also delays in planned expenditures for various projects. The CRA’s fund balance increased by $1.1 million. This is mainly attributed to delays in planned expenditures due to permitting issues for The Landing Project. 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 $15.6 million at September 30, 2021, of which the Utilities Fund reported $12.4 million, the Sanitation Fund totaled $2.1 million, and the Stormwater Fund reported $1.0 million. The factors concerning the finances of these three 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 99.5%, an increase of 3.2% over the prior year. Employees contribute 5% of pay to the Plan and the City contributed $1.4 million, which was a decrease of $332,315 when compared to the previous fiscal year. 11  Fiduciary Funds – Continued The Police Officers’ Retirement Fund’s net position as a percentage of the total pension liability was 78.4%, a decrease of 0.4% from the previous fiscal year. Employees contribute 5% of pay to the Plan and the City and State contributed $1.0 million, an increase of $70,591 when compared to the previous fiscal year. The Firefighters’ Retirement Fund’s net position as a percentage of the total pension liability was 66.5%, an increase of 3.9% over the previous fiscal year. Employees contribute 8.0% of pay to the Plan and the City and State contributed $1.4 million, an increase of $204,728 when compared to the previous fiscal year. Additional information on the pension plans can be found on pages 52-68 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 (ICMA) Retirement Corporation. Additional information on the defined contribution plan can be found on page 69 of this report. GENERAL FUND BUDGETARY HIGHLIGHTS A statement 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 21 of this report. The difference between the original and final budgeted appropriations was an increase of $3.7 million. Significant information related to this difference is summarized as follows:  Increase for golf course irrigation loan of $1.5 million.  Ladder fire truck financed purchase for an increase of $999,320.  Cares Act grant for an increase of $550,000.  Hurricane Sally damage grant for an increase of $363,340.  Various donations and fees for an increase of $54,598. Actual results, when compared to the final budget, show a variance of $8.5 million for expenditures. This variance is primarily due to amending the budget for expenditures planned, but not yet 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, 2021, was $80.4 million (net of accumulated depreciation and related debt). This represents a net decrease of $2.1 million, or 2.5%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City purchased a fire ladder truck for $999,320 in FY21 but it will not be completed and placed in service until the subsequent fiscal year.  The City purchased a new sound system for the Council Chambers for $106,726. 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 2021 2020 2021 2020 2021 2020 Land $10,935,286 $10,915,210 $709,678 $709,678 $11,644,964 $11,624,888 Buildings 22,459,386 23,700,410 77,608 83,760 22,536,994 23,784,170 Improvements other than Buildings 9,402,876 9,773,457 27,614,642 29,117,586 37,017,518 38,891,043 Machinery & Equipment 4,653,494 4,465,950 3,228,810 3,433,863 7,882,304 7,899,813 Equipment under Capital Lease 108,673 108,673 - - 108,673 108,673 Easements - - 39,742 39,742 39,742 39,742 Construction in Progress 1,084,543 30,110 111,042 111,042 1,195,585 141,152 $48,644,258 $48,993,810 $31,781,522 $33,495,671 $80,425,780 $82,489,481 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 48-50. Long-Term Debt As shown in the following table, as of September 30, 2021, the City had total outstanding long- term debt of $40.4 million. All of the City’s debt represents notes and bonds secured solely by specified revenue sources (i.e., revenue notes) and capital leases. 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 Activities Business‐Type Activities Total 2021 2020 2021 2020 2021 2020 Revenue Notes & Bonds $21,593,776 $21,175,487 $6,637,000 $7,093,000 $28,230,776 $28,268,487 State Revolving Fund - - 11,186,723 11,907,259 11,186,723 11,907,259 Capital Leases 944,447 67,035 - - 944,447 67,035 $22,538,223 $21,242,522 $17,823,723 $19,000,259 $40,361,946 $40,242,781 Additional information on the City of Fort Walton Beach’s long-term debt can be found in Notes 14-16 of this report on pages 75-81. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES Economic indicators and factors that are useful for evaluating the framework within which the City operates are discussed below.  The Consumer Price Index (CPI) is 5.8% higher than a year ago for the Southern Region. This indicator is a widely used gauge of inflation and translates into a higher cost of providing services to residents. 13   The local unemployment rate was 3.7%, which represents an approximate 0.1% decrease from September 2020. The State of Florida’s unemployment rate was 5.0%, which represents an approximate 2.2% decrease from September 2020. The unemployment rate will impact the City’s fee and usage-based revenues and shared portions of the State of Florida’s usage-based taxes.  The published state revenue sharing distribution estimate is up by 2.0% over the prior year, the half-cent sales tax distribution estimate is up by 11.1% over the prior year, and the communication services tax distribution estimate is down by 4.0% compared to the prior year.  The military has a significant presence in our community with Eglin Air Force Base, Hurlburt Field, and Duke Field. Combined, these three installations employ over 72,000 military and civilian personnel. The military and defense-related industries have a $22 billion annual impact on Northwest Florida’s economy, according to the Florida Defense Industry Economic Impact Analysis. These financial policies, as well as other indicators, were considered when adopting the City’s budget for fiscal year 2022. The City’s budget for fiscal year 2022 totals $52.9 million, which is $3.2 million higher than the fiscal year 2021 approved budget. The 2022 budget allocates $27.7 million, a 3.4% increase as compared to the fiscal year 2021 budget, to the General Fund, $19.9 million to the enterprise funds, and $5.3 million to other funds. For the fiscal year 2022 budget, the City Council adopted a millage rate of 5.3293 mills, which is the same rate adopted for FY21. Personnel expenses account for approximately 46.7% of the City’s budget. The City’s fiscal year 2022 budget remains relatively stable in this category, at 317.1 full-time equivalent (FTE’s) positions, an increase of only 4.5 FTE’s over the prior year. REQUESTS FOR INFORMATION This financial report is designed to provide citizens, taxpayers, customers, and creditors with a general overview of the City of Fort Walton Beach’s finances and to demonstrate the City’s accountability for the money it receives. Questions concerning any of the information provided in this report, or requests for additional information, should be addressed to the City Manager, 107 Miracle Strip Parkway S.W., City of Fort Walton Beach, Florida, 32548. This document and other financial information are available on the City’s website at www.fwb.org. Inquiries may also be sent via email to the Finance Department at finance@fwb.org. 14  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2021 Primary Government Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 11,984,790 $ 980,202 $ 12,964,992 Investments 24,978,956 16,256,927 41,235,883 Receivables, net 537,976 1,052,979 1,590,955 Internal balances 82,622 (82,622) - Due from other governments 715,943 - 715,943 Inventory, at cost 259,960 25,692 285,652 Prepaid assets - 4,534 4,534 Restricted assets Cash and cash equivalents 1,928,308 943,871 2,872,179 Other assets Other receivables, net 494,636 4,065 498,701 Capital assets Non-depreciable/amortizable 12,019,829 860,462 12,880,291 Depreciable/amortizable, net 36,624,429 30,921,060 67,545,489 TOTAL ASSETS 89,627,449 50,967,170 140,594,619 DEFERRED OUTFLOWS OF RESOURCES 7,306,099 1,029,402 8,335,501 LIABILITIES Accounts payable 767,136 999,832 1,766,968 Accrued liabilities 707,458 201,965 909,423 Due to other governments 3,258 9,443 12,701 Unearned revenues 1,966,124 62,222 2,028,346 Payable from restricted assets Accrued interest 166,446 - 166,446 Customer deposits - 310,489 310,489 Non-current liabilities Due within one year Compensated absences 233,322 50,194 283,516 Leases payable 343,701 - 343,701 Revenue bonds and notes payable 1,315,562 470,000 1,785,562 State revolving loans payable - 734,290 734,290 Due in more than one year Compensated absences 699,965 150,581 850,546 Leases payable 600,746 - 600,746 Revenue bonds and notes payable 20,278,214 6,167,000 26,445,214 State revolving loans payable - 10,452,433 10,452,433 Other post-employment benefits 5,509,850 1,477,103 6,986,953 Net pension liability 16,539,184 93,631 16,632,815 TOTAL LIABILITIES 49,130,966 21,179,183 70,310,149 DEFERRED INFLOWS OF RESOURCES 2,489,699 598,717 3,088,416 NET POSITION Net investment in capital assets 28,034,343 14,023,752 42,058,095 Restricted Debt service 21,156 157,228 178,384 System improvements - 476,154 476,154 Improvement districts 4,133,412 - 4,133,412 Public safety 1,060,646 - 1,060,646 Other purposes 3,784,023 - 3,784,023 Unrestricted 8,279,303 15,561,538 23,840,841 TOTAL NET POSITION $ 45,312,883 $ 30,218,672 $ 75,531,555 See notes to the financial statements. 15  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2021 Net (Expense) Revenue and Changes in Net Position Program Revenues Primary Government Charges for Operating Grants Capital Grants and Governmental Business-Type Function/program activities Expenses Services and Contributions Contributions Activities Activities Total Governmental activities General government $ 4,222,810 $ 550,688 $ 252,317 $ - $ (3,419,805) $ - $ (3,419,805) Public safety 13,746,451 1,883,415 1,663,192 181,115 (10,018,729) - (10,018,729) Physical environment 547,701 724,582 - - 176,881 - 176,881 Transportation 1,253,402 270,779 - - (982,623) - (982,623) Economic environment 1,131,722 51,039 294,572 5,759 (780,352) - (780,352) Culture and recreation 5,990,714 2,572,448 138,310 - (3,279,956) - (3,279,956) Debt service interest 700,924 - - - (700,924) - (700,924) Total governmental activities 27,593,724 6,052,951 2,348,391 186,874 (19,005,508) - (19,005,508) Business-type activities Utilities 10,574,909 11,856,685 - 89,963 - 1,371,739 1,371,739 Sanitation 3,996,753 4,381,765 - - - 385,012 385,012 Stormwater 1,040,698 1,035,527 - - - (5,171) (5,171) Total business-type activities 15,612,360 17,273,977 - 89,963 - 1,751,580 1,751,580 Total primary government $ 43,206,084 $ 23,326,928 $ 2,348,391 $ 276,837 (19,005,508) 1,751,580 (17,253,928) General revenues Taxes Property taxes 6,608,861 - 6,608,861 Sales taxes 6,021,460 - 6,021,460 Utility service taxes 4,136,505 - 4,136,505 Tax increments for redevelopment districts 2,320,213 - 2,320,213 Franchise fees 2,146,088 - 2,146,088 Intergovernmental, unrestricted 1,101,020 - 1,101,020 Gain on sale of assets 740,344 260,579 1,000,923 Miscellaneous 93,227 105,520 198,747 Investment earnings 743,927 31,984 775,911 Transfers 1,759,782 (1,759,782) - Total general revenues and transfers 25,671,427 (1,361,699) 24,309,728 CHANGE IN NET POSITION 6,665,919 389,881 7,055,800 NET POSITION AT BEGINNING OF YEAR 38,646,964 29,828,791 68,475,755 NET POSITION AT END OF YEAR $ 45,312,883 $ 30,218,672 $ 75,531,555 See notes to the financial statements. 16  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS BALANCE SHEET SEPTEMBER 30, 2021 Community Other Total Redevelopment Governmental Governmental General Agency Funds Funds ASSETS Cash and cash equivalents $ 9,385,099 $ 1,307,091 $ 1,292,600 $ 11,984,790 Investments 18,208,593 2,723,755 4,046,608 24,978,956 Receivables 789,990 242,622 - 1,032,612 Due from other funds 304,936 - - 304,936 Due from other governments 535,641 133,387 46,915 715,943 Inventory, at cost 259,960 - - 259,960 Restricted assets Cash and cash equivalents 1,928,308 - - 1,928,308 TOTAL ASSETS $ 31,412,527 $ 4,406,855 $ 5,386,123 $ 41,205,505 LIABILITIES Accounts payable $ 738,259 $ 19,420 $ 9,457 $ 767,136 Accrued liabilities 590,433 18,397 98,628 707,458 Due to other funds - - 61,786 61,786 Due to other governments 3,258 - - 3,258 Advance from other funds 160,528 - - 160,528 Unearned revenues 1,966,124 - - 1,966,124 Total liabilities 3,458,602 37,817 169,871 3,666,290 DEFERRED INFLOW OF RESOURCES Unavailable revenue 578,316 235,626 - 813,942 FUND BALANCE Nonspendable 259,960 - - 259,960 Restricted 5,712,331 4,133,412 1,081,802 10,927,545 Committed 8,649,189 - 4,154,232 12,803,421 Assigned 3,908,571 - - 3,908,571 Unassigned 8,845,558 - (19,782) 8,825,776 Total fund balance 27,375,609 4,133,412 5,216,252 36,725,273 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES, AND FUND BALANCE $ 31,412,527 $ 4,406,855 $ 5,386,123 $ 41,205,505 See notes to the financial statements. 17  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2021 Fund balance, total governmental funds (page 17) $ 36,725,273 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Governmental non-depreciable/amortizable assets 12,019,829 Governmental depreciable/amortizable assets 86,179,201 Less accumulated depreciation/amortization (49,554,772) 48,644,258 Unavailable revenues in governmental funds is susceptible to full accrual on the entity-wide statements. Special assessments 265,325 Receivable related to sale of capital asset 548,617 813,942 Deferred inflows of resources and deferred outflows of resources are not available/receivable or due/payable, respectively, in the current period and therefore are not reported in the governmental funds. Deferred outflows of resources related to pension plans 5,586,000 Deferred outflows of resources related to OPEB plan 1,720,099 Deferred inflows of resources related to pension plans (1,380,241) Deferred inflows of resources related to OPEB plan (1,109,458) 4,816,400 Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Notes payable (21,593,776) Accrued interest (166,446) Capital leases (944,447) Compensated absences (933,287) Other post-employment benefits (5,509,850) Net pension liability (16,539,184) (45,686,990) Net position of governmental activities (page 15) $ 45,312,883 See notes to the financial statements. 18  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2021 Community Other Total Redevelopment Governmental Governmental General Agency Funds Funds REVENUES Taxes $ 12,354,453 $ 1,350,992 $ - $ 13,705,445 Permits and fees 3,442,354 24,584 635,702 4,102,640 Intergovernmental 7,815,811 974,980 303,697 9,094,488 Charges for services 3,461,193 - - 3,461,193 Fines 64,130 - 13,346 77,476 Miscellaneous 621,199 68,615 668,515 1,358,329 Total revenues 27,759,140 2,419,171 1,621,260 31,799,571 EXPENDITURES Current General governmental services 3,632,924 - - 3,632,924 Public safety 11,980,036 534,993 473,245 12,988,274 Physical environment 476,113 - 15,413 491,526 Transportation 741,097 - - 741,097 Economic environment - 648,786 296,871 945,657 Culture and recreation 4,924,696 - - 4,924,696 Capital outlay 2,651,824 161,994 9,584 2,823,402 Debt service Principal - - 1,203,619 1,203,619 Interest 4,239 - 704,720 708,959 Total expenditures 24,410,929 1,345,773 2,703,452 28,460,154 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 3,348,211 1,073,398 (1,082,192) 3,339,417 OTHER FINANCING SOURCES (USES) Sale of general capital assets 748,986 - - 748,986 Issuance of long-term debt 2,499,320 - - 2,499,320 Transfers in 1,759,782 - 1,963,506 3,723,288 Transfers out (1,963,506) - - (1,963,506) Total other financing sources (uses) 3,044,582 - 1,963,506 5,008,088 NET CHANGE IN FUND BALANCE 6,392,793 1,073,398 881,314 8,347,505 FUND BALANCE AT BEGINNING OF YEAR 20,982,816 3,060,014 4,334,938 28,377,768 FUND BALANCE AT END OF YEAR $ 27,375,609 $ 4,133,412 $ 5,216,252 $ 36,725,273 See notes to the financial statements. 19  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2021 Net change in fund balance – governmental funds (page 19) $ 8,347,505 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds do not report capital assets on the balance sheet; however, they are reported in the government-wide financial statements. Governmental funds report capital outlays as expenditures; however, in the statement of activities, the cost of those assets is depreciated/amortized over the estimated useful lives of the assets. Expenditures for capital assets 2,823,402 Less current year depreciation/amortization (3,196,730) (373,328) Governmental funds do not report capital assets on the balance sheet; however, they are reported in the government-wide financial statements. Accordingly, proceeds received for disposals of capital assets are shown as income in the governmental financial statements and a gain or loss is reported in the statement of activities. In addition, capital asset reassignments are reported as transfers on the statement of activities. Disposals of capital assets (674,352) Accumulated depreciation/amortization – disposals 663,586 Acquisition value of donated capital assets 34,500 Accumulated depreciation/amortization – transfers and adjustments 42 23,776 Special assessment revenue in the governmental funds is recognized when due; however, the revenue was recognized in the statement of activities when it was earned (when levied). Payments received from special assessments (25,052) Special assessment for interest and penalties 1,490 Payments received on receivable related to the sale of capital assets (48,910) (72,472) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. In addition, long- term debt reassignments are reported as transfers on the statement of activities. Proceeds from issuance of long-term debt (2,499,320) Debt principal and capital lease payments 1,203,619 Change in accrued interest on long-term debt 8,035 (1,287,666) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Change in net pension liability and related deferred inflows and deferred outflows of resources 410,081 Change in other post-employment benefits liability and related deferred inflows and deferred outflows of resources (296,029) Change in long-term compensated absences (85,948) 28,104 Change in net position of governmental activities (page 16) $ 6,665,919 See notes to the financial statements. 20  CITY OF FORT WALTON BEACH, FLORIDA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 11,788,623 $ 11,788,623 $ 12,354,453 $ 565,830 Permits and fees 3,202,781 3,202,781 3,442,354 239,573 Intergovernmental 4,852,257 5,828,716 7,815,811 1,987,095 Charges for services 2,943,812 2,946,955 3,461,193 514,238 Fines 81,148 81,148 64,130 (17,018) Miscellaneous 938,279 984,752 621,199 (363,553) Total revenues 23,806,900 24,832,975 27,759,140 2,926,165 EXPENDITURES Current General governmental services 4,150,883 5,106,796 3,632,924 1,473,872 Public safety 12,552,155 12,559,754 11,980,036 579,718 Physical environment 414,776 414,776 476,113 (61,337) Transportation 839,551 896,256 741,097 155,159 Culture and recreation 5,368,397 5,471,295 4,924,696 546,599 Capital outlay 5,862,576 8,473,994 2,651,824 5,822,170 Debt service - - 4,239 (4,239) Total expenditures 29,188,338 32,922,871 24,410,929 8,511,942 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (5,381,438) (8,089,896) 3,348,211 11,438,107 OTHER FINANCING SOURCES (USES) Sale of general capital assets 926,100 926,100 748,986 (177,114) Issuance of long-term debt - 2,499,320 2,499,320 - Transfers in 1,063,282 1,063,282 1,759,782 696,500 Transfers out (1,111,395) (1,111,395) (1,963,506) (852,111) Total other financing sources (uses) 877,987 3,377,307 3,044,582 (332,725) NET CHANGE IN FUND BALANCE (4,503,451) (4,712,589) 6,392,793 11,105,382 FUND BALANCE AT BEGINNING OF YEAR 4,503,451 4,712,589 20,982,816 16,270,227 FUND BALANCE AT END OF YEAR $ - $ - $ 27,375,609 $ 27,375,609 See notes to the financial statements. 21  CITY OF FORT WALTON BEACH, FLORIDA COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,350,992 $ 1,350,992 $ 1,350,992 $ - Permits and fees - - 24,584 24,584 Intergovernmental 971,117 971,117 974,980 3,863 Miscellaneous - - 68,615 68,615 Total revenues 2,322,109 2,322,109 2,419,171 97,062 EXPENDITURES Current Public safety 538,234 538,234 534,993 3,241 Economic environment 661,804 662,685 648,786 13,899 Capital outlay 1,804,418 1,803,537 161,994 1,641,543 Total expenditures 3,004,456 3,004,456 1,345,773 1,658,683 NET CHANGE IN FUND BALANCE (682,347) (682,347) 1,073,398 1,755,745 FUND BALANCE AT BEGINNING OF YEAR 682,347 682,347 3,060,014 2,377,667 FUND BALANCE AT END OF YEAR $ - $ - $ 4,133,412 $ 4,133,412 See notes to the financial statements. 22  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION SEPTEMBER 30, 2021 Sanitation Stormwater Utilities Fund Fund Fund Total ASSETS Current assets Cash and cash equivalents $ 637,556 $ - $ 342,646 $ 980,202 Restricted assets – cash and cash equivalents 942,991 880 - 943,871 Investments 12,812,371 2,615,825 828,731 16,256,927 Receivables, net 759,800 235,457 57,722 1,052,979 Advance to other funds - 52,452 - 52,452 Inventory – at cost 25,692 - - 25,692 Prepaid assets - - 4,534 4,534 Total current assets 15,178,410 2,904,614 1,233,633 19,316,657 Other assets Advance to other funds - 108,076 - 108,076 Other receivables, net 4,065 - - 4,065 Total other assets 4,065 108,076 - 112,141 Capital assets, net Non-depreciable/amortizable 801,242 - 59,220 860,462 Depreciable/amortizable, net 25,958,977 1,450,762 3,511,321 30,921,060 Total capital assets 26,760,219 1,450,762 3,570,541 31,781,522 Total non-current assets 26,764,284 1,558,838 3,570,541 31,893,663 TOTAL ASSETS 41,942,694 4,463,452 4,804,174 51,210,320 DEFERRED OUTFLOWS OF RESOURCES 598,822 317,453 113,127 1,029,402 See notes to the financial statements. 23  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION – CONTINUED SEPTEMBER 30, 2021 Sanitation Stormwater Utilities Fund Fund Fund Total LIABILITIES Current liabilities Accounts payable $ 858,572 $ 136,994 $ 4,266 $ 999,832 Accrued liabilities Compensated absences 29,803 15,851 4,540 50,194 Wages 78,409 36,262 12,102 126,773 Interest 75,018 - - 75,018 Other 148 - 26 174 Due to other funds - 243,150 - 243,150 Due to other governments - 9,443 - 9,443 Revenue note payable 470,000 - - 470,000 State revolving loan payable 734,290 - - 734,290 Payable from restricted assets Customer deposits 309,609 880 - 310,489 Unearned revenues 62,222 - - 62,222 Total current liabilities 2,618,071 442,580 20,934 3,081,585 Non-current liabilities Accrued liabilities Compensated absences 89,407 47,555 13,619 150,581 Revenue note payable 6,167,000 - - 6,167,000 State revolving loan payable 10,452,433 - - 10,452,433 Other post-employment benefits 765,959 510,145 200,999 1,477,103 Net pension liability 54,760 29,490 9,381 93,631 Total non-current liabilities 17,529,559 587,190 223,999 18,340,748 TOTAL LIABILITIES 20,147,630 1,029,770 244,933 21,422,333 DEFERRED INFLOWS OF RESOURCES 330,411 197,601 70,705 598,717 NET POSITION Net investment in capital assets 9,002,449 1,450,762 3,570,541 14,023,752 Restricted Debt service 157,228 - - 157,228 System improvements 476,154 - - 476,154 Unrestricted 12,427,644 2,102,772 1,031,122 15,561,538 TOTAL NET POSITION $ 22,063,475 $ 3,553,534 $ 4,601,663 $ 30,218,672 See notes to the financial statements. 24  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2021 Sanitation Stormwater Utilities Fund Fund Fund Total OPERATING REVENUES Charges for services $ 11,835,336 $ 4,381,765 $ 1,035,527 $ 17,252,628 OPERATING EXPENSES Personal services 1,954,536 1,146,286 303,795 3,404,617 Operating 6,422,767 2,578,662 326,811 9,328,240 Depreciation/amortization expense 1,768,020 271,805 410,092 2,449,917 Total operating expenses 10,145,323 3,996,753 1,040,698 15,182,774 OPERATING INCOME 1,690,013 385,012 (5,171) 2,069,854 NON-OPERATING REVENUES (EXPENSES) Rental income 21,349 - - 21,349 Interest expense (423,575) - - (423,575) Amortization (5,613) - - (5,613) Gain on sale of capital assets 32,581 222,728 5,270 260,579 Gain (loss) on investments (132,879) (34,169) (7,593) (174,641) Interest 153,990 43,340 9,295 206,625 Grants in aid (398) - - (398) Miscellaneous 59 105,461 - 105,520 Total non-operating revenues (expenses) (354,486) 337,360 6,972 (10,154) INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,335,527 722,372 1,801 2,059,700 CAPITAL CONTRIBUTIONS AND TRANSFERS Impact fees 89,963 - - 89,963 Transfers out (1,238,095) (325,459) (196,228) (1,759,782) Total capital contributions and transfers (1,148,132) (325,459) (196,228) (1,669,819) CHANGE IN NET POSITION 187,395 396,913 (194,427) 389,881 NET POSITION AT BEGINNING OF YEAR 21,876,080 3,156,621 4,796,090 29,828,791 NET POSITION AT END OF YEAR $ 22,063,475 $ 3,553,534 $ 4,601,663 $ 30,218,672 See notes to the financial statements. 25  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Sanitation Stormwater Utilities Fund Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 12,017,781 $ 4,366,326 $ 1,046,599 $ 17,430,706 Payments to suppliers (6,065,353) (2,607,501) (335,667) (9,008,521) Payments to employees (2,270,988) (1,276,335) (331,824) (3,879,147) Miscellaneous income 21,408 105,461 - 126,869 Net cash provided by operating activities 3,702,848 587,951 379,108 4,669,907 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Repayments on interfund loan - 51,424 - 51,424 Advanced from other funds - 219,711 - 219,711 Grants in aid (398) - - (398) Transfers out (1,238,095) (325,459) (196,228) (1,759,782) Net cash used in non-capital financing activities (1,238,493) (54,324) (196,228) (1,489,045) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Impact fees and capital received 89,963 - - 89,963 Acquisitions of capital assets (248,486) (417,911) (87,157) (753,554) Proceeds from sale of capital assets 32,581 239,875 5,909 278,365 Proceeds from capital grants and contributions - - 194,549 194,549 Principal paid on revenue note (456,000) - - (456,000) Principal paid on state revolving loan (720,536) - - (720,536) Interest paid on loans and notes payable (428,616) - - (428,616) Net cash provided by (used in) capital and related financing activities (1,731,094) (178,036) 113,301 (1,795,829) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (4,952,694) (1,273,463) (283,203) (6,509,360) Proceeds from sales and maturities of investments 4,833,468 908,701 323,751 6,065,920 Investment income, net 21,111 9,171 1,702 31,984 Net cash provided by (used in) investing activities (98,115) (355,591) 42,250 (411,456) NET CHANGE IN CASH AND CASH EQUIVALENTS 635,146 - 338,431 973,577 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 945,401 880 4,215 950,496 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,580,547 $ 880 $ 342,646 $ 1,924,073 See notes to the financial statements. 26  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS – CONTINUED FOR THE YEAR ENDED SEPTEMBER 30, 2021 Sanitation Stormwater Utilities Fund Fund Fund Total CASH AND CASH EQUIVALENTS AT END OF YEAR CONSIST OF Current assets $ 637,556 $ - $ 342,646 $ 980,202 Restricted assets 942,991 880 - 943,871 Total cash and cash equivalents $ 1,580,547 $ 880 $ 342,646 $ 1,924,073 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ 1,690,013 $ 385,012 $ (5,171) $ 2,069,854 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 1,768,020 271,805 410,092 2,449,917 Miscellaneous revenue 21,408 105,461 - 126,869 Decrease (increase) in assets: Accounts receivable 126,611 (15,439) 5,621 116,793 Due from other governments - - 5,451 5,451 Inventory (6,671) - - (6,671) Increase in deferred outflows of resources (128,772) (124,394) (55,479) (308,645) Increase (decrease) in liabilities: Accounts payable 366,973 (26,547) (8,408) 332,018 Compensated absences payable (12,682) (2,170) (2,439) (17,291) Wages (936) (8,107) 1,111 (7,932) Other liabilities (2,888) (2,292) (448) (5,628) Customer deposits 22,289 - - 22,289 Other post-employment benefits 78,094 52,015 20,521 150,630 Unearned revenue 33,545 - - 33,545 Net pension liability (326,736) (124,305) (26,917) (477,958) Increase in deferred inflows of resources 74,580 76,912 35,174 186,666 Net cash provided by operating activities $ 3,702,848 $ 587,951 $ 379,108 $ 4,669,907 SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS Amortization of deferred loss on refunding $ 5,613 $ - $ - $ 5,613 See notes to the financial statements. 27  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2021 Employee Retirement Funds ASSETS Cash and cash equivalents $ 5,501,372 Investments, at fair value U.S. Government and Agency obligations 13,742,064 Corporate obligations 5,065,510 Corporate equity 16,215,155 Mutual funds and exchange-traded funds 60,523,993 Commingled real estate investment funds 10,413,821 Total investments 105,960,543 TOTAL ASSETS 111,461,915 LIABILITIES Accounts payable 205,239 NET POSITION RESTRICTED FOR PENSIONS $ 111,256,676 See notes to the financial statements. 28  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2021 Employee Retirement Funds ADDITIONS Contributions Employer $ 3,573,658 Plan members 509,337 State of Florida 458,715 Total contributions 4,541,710 Investment income (loss) 19,526,371 Less investment expense (219,585) Net investment income (loss) 19,306,786 Miscellaneous revenue 1,094 TOTAL ADDITIONS 23,849,590 DEDUCTIONS Benefits and refunds paid Retirement payments 6,576,988 Disability payments 196,350 Refunds 94,911 Total benefits and refunds paid 6,868,249 Administrative expenses Legal 13,199 Contractual services 189,788 Other 60,878 Total administrative expenses 263,865 TOTAL DEDUCTIONS 7,132,114 CHANGE IN FIDUCIARY NET POSITION 16,717,476 NET POSITION RESTRICTED FOR PENSIONS Beginning of year 94,539,200 End of year $ 111,256,676 See notes to the financial statements. 29  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY Description of the City The City of Fort Walton Beach, Florida, (the City) was originally chartered as a municipality under laws of the State of Florida Special Act of the Florida Legislature in 1937. The City Manager – Council form of government was established in 1953. As authorized by its charter, the City provides the following services: public safety (police, fire, and inspection), highways and streets, water and sewer, sanitation, stormwater, culture and recreation, public improvements, planning and zoning, and general administrative services. The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), as applicable to governmental units and the Uniform Accounting System mandated by Chapter 218.33, Florida Statutes. The Governmental Accounting Standards Board (GASB) is the standard–setting body for governmental accounting and financial reporting. The following is a summary of the more significant accounting policies of the City: The Reporting Entity A seven-member City Council and a Mayor govern the City, each elected at-large for four-year terms. The Council has no powers other than those expressly vested in it by State Statute and the City Charter, and their governmental powers cannot be delegated. As required by U.S. GAAP, these financial statements present the City of Fort Walton Beach (the primary government) and its blended component unit. In evaluating the City as a reporting entity, management has considered all potential component units for which the City may or may not be financially accountable and, as such, be included within the City's financial statements. Management utilized criteria set forth in the GASB literature for determining financial accountability of potential component units in evaluating all potential component units. In accordance with GASB guidance, the City (primary government) is financially accountable if it appoints a voting majority of the potential component unit's governing board and 1) it is able to impose its will on the organization or 2) there is a potential for the organization to provide specific financial benefit to or impose specific financial burden on the City. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. As of September 30, 2021, the City had one component unit, which has been presented in the financial statements of the primary government using the blended presentation method and is presented as a governmental fund type with a fiscal year end of September 30. The Fort Walton Beach Community Redevelopment Agency (the CRA) was formed to prepare a community redevelopment plan for a designated geographic area within the City of Fort Walton Beach, Florida. All of the City's council members serve as board members of the CRA. The CRA’s governing body is the same as the governing body of the City. The CRA functions as a department of the City. City management has operational and fiscal responsibility for the CRA’s activities. The CRA has a separate standalone audit report that can be obtained by contacting the Growth Management Department, City Hall Annex, 105 Miracle Strip Parkway S.W., Fort Walton Beach, Florida 32548 or online at www.fwb.org. 30  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED The Reporting Entity – Continued The Fort Walton Beach Housing Authority (the Authority) is considered a related organization to the City rather than a component unit. The City Council appoints the board members of the Authority. However, the Authority's board operates independently of the City Council and does not create a financial burden or benefit to the City. Government-Wide and Fund Financial Statements The basic financial statements include both government-wide (based on the City as a whole) and fund financial statements. The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component unit. For the most part, the effects of interfund activity have been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fund financial statements are provided for the governmental and proprietary funds. Major individual governmental funds and major enterprise funds are reported as separate columns in the fund financial statements. Separate fund financial statements for the fiduciary funds are disclosed within Note 8 of these financial statements. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Pension plans recognize revenue when contributions are due as there is a statutory requirement to make the contribution. Property taxes are recorded as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 31  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Measurement Focus and Basis of Accounting – Continued Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within six months of the end of the current fiscal period, except for property taxes, for which the period is 60 days. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Franchise fees, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments and other receivables within the current fiscal period are considered to be susceptible to accrual as revenue of the current period. Sales taxes, gasoline taxes, and other intergovernmental revenues collected and held by the state at year-end on behalf of the City, are also recognized as revenue. All other revenue items are considered to be measurable and available only when cash is received by the government. The Okaloosa County Tax Collector bills and collects property taxes for the City in accordance with the laws of the State of Florida. Property taxes attach as an enforceable lien on property as of the date of assessment and remain in effect until discharge by payment. Taxes are payable when levied (on November 1st, or as soon thereafter as the assessment roll becomes available to the Tax Collector). The following is the current property tax calendar: Lien Date January 1st Levy Date November 1st Due Date November 1st Delinquent Date April 1st Discounts of 1% for each month taxes are paid prior to March 1st are granted. Revenue recognition criteria for property taxes requires that property taxes expected to be collected within 60 days of the current period be accrued. No accrual has been made for 2021 ad valorem taxes because property taxes are not legally due until subsequent to the end of the fiscal year. Current year taxes, which are uncollected as of the end of the fiscal year, are generally immaterial in amount and highly susceptible to uncollectibility and, therefore, are not recorded as a receivable on the balance sheet date. 32  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Basis of Presentation The financial transactions of the City are recorded in individual funds. Each fund is a separate accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are other charges between the government's utility function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Any portion of franchise fees that is not based on gross receipts are reported as a charge for service in the function or activity that generates the fee. During fiscal year 2021, franchise fees were all based on gross receipts and thus recorded as general revenues. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. The City considers all impact fee revenue as capital contributions for the water and sewer system; therefore, no amount from the impact fees are included in operating revenue. Operating expenses for enterprise funds include the cost of sales and service, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The following three broad classifications are used to categorize the fund types used by the City: Governmental Governmental funds focus on the determination of financial position and changes in financial position (sources, uses, and balances of financial resources) and not net income. The City has the following major governmental funds: General Fund – This is the City's primary operating fund and is used to account for all financial resources except those required to be accounted for in another fund. Community Redevelopment Agency Fund – The Community Redevelopment Agency Fund is the operating fund of the Fort Walton Beach Community Redevelopment Agency (the "Agency"). It is used to account for the activities of the Agency. Revenue sources for this fund include tax increment financing proceeds from ad valorem taxes as well as investment income. 33  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Basis of Presentation – Continued Proprietary Proprietary funds focus on the determination of net income, changes in net position, financial position, and cash flows. All of the City's proprietary funds are enterprise funds, as fees are charged to external users for services. The following is a description of the major proprietary funds of the City: Utilities Fund – Used to account for the operations of the City, which provides distribution of potable water, sales and service and sanitary wastewater collection, treatment and disposal. Sanitation Fund – Accounts for the operation of the City that provides for solid waste collection and disposal. Stormwater Fund – Used to account for the revenues and expenses associated with operating the City’s stormwater utility system. Fiduciary Fiduciary funds are used to account for the assets held on behalf of outside parties, including other governments, or on behalf of other funds within the City. The City has the following type of fiduciary fund: Pension Trust Funds – Used to report the resources that are required to be held in trust for the members and beneficiaries of the three defined benefit pension plans administered by the City: General Employees' Retirement Fund, Police Officers' Retirement Fund, and Firefighters' Retirement Fund. Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance Cash and Cash Equivalents The City defines cash and cash equivalents as cash held at a depository and cash on hand for operating purposes and those investments which are short term and highly liquid. Generally, those investments have maturities of three (3) months or less from the date of acquisition. The City maintains an equity in pooled cash fund. The City’s cash deposits are held by banks that qualify as public depositories under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. The City’s cash deposits are fully insured by the Public Deposits Trust Fund. Investments Investments for the City are reported at fair value (generally based on quoted market prices). Investments are pooled together for investment purposes while each individual fund and/or account is maintained on a daily transaction basis. Investment earnings are distributed in accordance with the participating funds’ relative equity. Allowable investments, with the appropriate minimum rating requirements, can consist of certificates of deposit, local government surplus trust fund, intergovernmental investment pool, SEC registered money market funds, United States government securities, repurchase agreements, banker’s acceptances, commercial paper, United States government agencies, federal instruments, securitized issues, corporate notes and state or local government taxable or tax-exempt debt. 34  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Investments – Continued In addition, the Beal Memorial Cemetery Perpetual Care special revenue fund and the pension trust funds maintain separate investment accounts that are governed by separate investment policies. The Beal Memorial Cemetery investment policy allows for investments in domestic equities, international equities, real estate investment trusts, inflation hedges, fixed income securities, and cash equivalents within allowable ranges, ratings, and consideration of target asset allocations by asset class. The pension trust funds’ investment policies allow for investments in domestic and international equities, fixed income securities, mutual funds, exchange-traded funds, commingled funds, money market funds, and value add real estate within allowable ranges, ratings, and considerations of target asset allocations by range; however allowable asset classes, targets, ranges, and benchmarks vary by each individual policy. These investments are also reported at fair value. Receivables and Payables Interfund transactions are reflected as loans, services provided, reimbursements, or transfers. Loans between funds outstanding at the end of the fiscal year are referred to as either "due to other funds" or "due from other funds" (i.e., the current portion of interfund loans) or "advances" (i.e., the non- current portion of interfund loans). Any residual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable and available financial resources. Services provided, deemed to be at market, or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide columnar presentation. All proprietary fund receivables are shown net of an allowance for uncollectible accounts. The allowance is computed by considering 100% of receivables in excess of 90 days, past trends on collections of accounts, and current year account write–offs. Inventory Inventory is valued at cost (first-in, first-out). The consumption method is used to account for inventory. Under the consumption method, inventory items are recorded as expenditures during the period the inventory is used. The General Fund inventory balance is considered nonspendable in the fund financial statements to indicate that it is not available for appropriation. 35  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Restricted Assets Certain resources in the following funds are restricted for specific purposes: in the Debt Service Fund for repayment of long-term debt; in the General Fund for unspent proceeds related to the Capital Improvement Revenue Note, Series 2018 and the Golf Course Irrigation System Revenue Note, 2021; and in the Utilities Fund customer deposits, impact fees, and repayment of Utility System Revenue Refunding Note, Series 2015. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (roads, bridges, curbs and sidewalks, drainage systems, lighting systems and similar items) are reported in the applicable governmental or business-type activities columns in the government–wide financial statements. Capital assets are defined by the City as assets with an initial cost more than the following: Land All Buildings and improvements / infrastructure $ 10,000 Improvements – other $ 10,000 Equipment, vehicles, computers $ 1,000 Library books All In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the government chose to include all such items regardless of their acquisition date or amount. The government was able to estimate the historical cost for the initial reporting of these assets through various allowable estimating techniques. As the government constructs or acquires additional capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. Donated capital assets are recorded at their acquisition value on the date of donation. Major outlays for capital assets and improvements are capitalized in proprietary funds as projects are constructed. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until the completion of the project with interest earned on the invested proceeds over the same period. 36  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Capital Assets – Continued Property, plant, and equipment of the primary government are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 20-50 Years Improvements other than buildings / system infrastructure 7-40 Years System infrastructure 20-40 Years Machinery and equipment 3-10 Years Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. See Note 7 for additional information on the City’s deferred outflows of resources. In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. See Note 7 for additional information on the City’s deferred inflows of resources. Compensated Absences It is the City's policy to permit employees to accumulate earned, but unused, vacation and sick leave based on the length of service to the City. All vacation leave is accrued when incurred in the government-wide and proprietary fund financial statements. Sick leave is accrued in the government-wide and proprietary fund financial statements based on a ratio of the sum of sick leave paid over the last several years to the total balance of sick leave at the end of each fiscal year. A liability for the amounts of vacation and sick leave is reported in the governmental fund financial statements only if they have matured, for example, as a result of employee resignations and retirements. Compensated absences of the governmental activities are primarily paid from the General Fund. Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective and straight-line interest methods. Bond issuance costs are expensed as they are incurred. Bonds payable are reported net of the applicable bond premium or discount. 37  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Long-Term Obligations – Continued In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Other Postemployment Benefits (OPEB) Liability For the purposes of measuring the total OPEB Liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the total OPEB liability of the Fort Walton Beach's Retiree Health Care Plan and additions to/deductions from the plan's total OPEB liability have been determined on the same basis as they are reported by the plan. For this purpose, the plan recognizes benefit payments when due and payable in accordance with the benefit terms. See Note 11 for additional information about the City’s other postemployment benefit plan. Net Pension Liability For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of each plan, and additions to/deductions from the fiduciary net position of each plan have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments (including refunds of employee contributions, if any) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. Administrative costs are financed from each respective fund’s investment earnings. Typically, pension liabilities in the governmental fund types have been liquidated by the fund that incurred the expenditures for pensionable wages. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date (VD) October 1, 2019 Measurement Date (MD) September 30, 2020 Measurement Period (MP) October 1, 2019 to September 30, 2020 Classification of Fund Balance GASB guidance establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications are comprised of the following: Nonspendable – Includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example: inventories, deposits, prepaid items, and advances from other funds. 38  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Classification of Fund Balance – Continued Restricted – Includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. Committed – Includes fund balance amounts that can be used only for the specific purposes that are internally imposed by the formal action (an Ordinance) of the government’s highest level of decision- making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action (an Ordinance) that imposed the constraint initially. Contractual obligations are included to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual obligations. Assigned – Includes spendable fund balance amounts that are intended to be used for specific purposes that are neither considered restricted nor committed. Intent is expressed by (a) the City Council or (b) a body (for example: a budget or finance committee) or official to which the City Council has delegated the authority to assign amounts to be used for specific purposes. This indicates that resources in these funds are, at a minimum, intended to be used for the purposes of that fund. The City Council has delegated authority to the City Manager and Finance Director in accordance with the City's fund balance policy. Unassigned – Includes residual positive fund balance within the General Fund which has not been classified within the other aforementioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of restraint, such as external versus internal compliance requirements. Unassigned fund balance is a residual classification within the General Fund. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. The City's formal fund balance policy establishes a targeted minimum reserve balance in the General Fund for committed fund balance equal to 30% of annual budgeted expenditures, which constitutes the City’s minimum fund balance policy. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. 39  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF THE CITY – CONTINUED Assets, Liabilities, Deferred Outflows/Inflows, and Net Position or Fund Balance – Continued Net Position When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first and then unrestricted resources, as they are needed. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts presented in the prior year have been reclassified in order to be consistent with the current year presentation. Such reclassifications have no effect on total fund balance or net position previously reported. Subsequent Events The City has evaluated events and transactions that occurred between September 30, 2021, and March 8, 2022, which is the date the financial statements were available to be issued, for possible recognition or disclosure in the financial statements. 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgets Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. Annual appropriated budgets are adopted by resolution for all governmental and proprietary funds. However, budgets for proprietary funds are not legally required to be reported on and are not included in these financial statements. All appropriations lapse at fiscal year-end except for appropriations related to multi-year capital projects. Budgetary data reflected in the financial statements are established by the following procedures: Prior to September 1st of each year, proposed budgets are received by the City Council from the City Manager. These proposed expenditures, along with all estimated receipts, taxes to be levied, and balances expected to be brought forward are considered by the City Council. The City Council requires such changes as deemed necessary, sets proposed mileages, and establishes dates for tentative and final public budget hearings as prescribed by Florida Statutes. Proposed budgets are advertised in a newspaper of general circulation in the City. Public hearings are conducted for the purposes of receiving input, responding to complaints, and providing reasons and explanations for intended actions to all citizens participating. 40  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY – CONTINUED Budgets – Continued Prior to October 1st, the budget for all governmental and proprietary funds of the City is legally enacted through passage of a resolution. Budget amendments are periodically passed via resolutions throughout the fiscal year. Budgeted beginning fund balance in the accompanying financial statements reflects planned utilization of prior years' unassigned fund balance to the level required to accomplish current year objectives. The level of budgetary control (that is the level at which expenditures cannot legally exceed appropriations) has been established at the fund level. The City Manager and Finance Director are authorized to transfer budgeted amounts within departments of a fund and between departments of a fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. Budget amounts reflected in the financial statements are originally adopted amounts as amended by action of the City Council by revision of fund totals. All amendments to the originally adopted amounts were made in a legally permissible manner. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting is a form of budgetary control to ensure that appropriations are not exceeded. Encumbrances outstanding at year-end are reported as assignments of fund balance in the governmental fund types. 3. DEPOSITS AND INVESTMENTS The City maintains a cash and investment management pool in which each major governmental and enterprise fund participates on a dollar equivalent and daily transaction basis. The City's cash and investment management pool includes pooled cash maintained in interest-bearing demand deposit accounts, and pooled investments managed by a financial institution. Interest income (which includes unrealized gains and losses) is distributed monthly based on the average balances. Deposits Custodial Credit Risk – It is the City's policy to maintain its deposits only with "Qualified Public Depositories" as defined in Chapter 280, Florida Statutes. The provisions of this statute allow qualified public depositories to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All qualified public depositories must place with (or in the name of) the Chief Financial Officer of the State of Florida, collateral in the amount of the average daily balance of public deposits multiplied by the average monthly balance of public deposits or 125 percent of the average daily balance of public deposits greater than capital. In the event of default by a qualified public depository, excess losses over insurance and collateral will be recovered through assessments to all qualified public depositories of the same type as the depository in default. Under this method, all City deposits, including certificates of deposit, are considered fully insured. As of September 30, 2021, the value of the City's deposits was $16,112,392, all of which was held by qualified public depositories under Florida Statutes. 41  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments As of September 30, 2021, the City's investments consist of the pooled investments held by each fund to maximize earnings on surplus cash, those held in the various pension trust funds and the Beal Memorial Cemetery Perpetual Care special revenue fund. The types of investments, which can be made by the City, are restricted by state statutes, retirement fund plan documents, and other contractual agreements. A description of the requirements and the types of investments allowed can be found in Note 1. As of September 30, 2021, the City held the following investments and related maturities: INVESTMENT MATURITIES (YEARS) Fair Value <1 1-5 5-10 10-15 15-20 20-25 25-30 >30 Investments subject to interest rate risk: Corporate debt $ 14,991,450 $ 384,227 $ 10,865,092 $ 3,742,131 $ - $ - $ - $ - $ - Municipal debt 2,917,831 100,646 2,817,185 - - - - - - U.S. Treasury 19,496,265 1,861,801 12,522,470 3,897,478 - - 1,214,516 - - U.S. Government Agencies 4,485,217 - 4,485,217 - - - - - - U.S. Government Agency Pools 5,717,591 - - - 1,465,899 4,251,692 - - - 47,608,354 $ 2,346,674 $ 30,689,964 $ 7,639,609 $ 1,465,899 $ 4,251,692 $ 1,214,516 $ - $ - Investments not subject to interest rate risk: Money market funds 273,090 Common stock 16,215,155 Mutual and exchange- traded funds 64,560,802 Real estate investment funds 10,413,821 External investment pools 8,125,204 Total $ 147,196,426 Interest Rate Risk – The City's investment policy encourages matching investment maturities with known cash needs and anticipated cash flow requirements in order to manage interest rate risk. Investments of current operating funds shall have maturities of no longer than 24 months. Investments of bond reserves, construction funds, and other non-operating funds shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall the investment duration of these funds exceed five years. The investment policies for the pension trust funds do not specifically address interest rate risk. 42  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Credit Rate Risk – State law limits investments of surplus public funds to those investments described on the previous page. The table below outlines the authorized investments of the pension trust funds. General Police Employees' Officers' Firefighters' Retirement Retirement Retirement Investment Type Fund Fund Fund Minimum rating of Limited to obligations Minimum rating of Money Market or short-term A1 by S&P or backed by full faith & A1 by S&P or investment fund (STIF) options P1 by Moody's credit of US government P1 by Moody's Minimum rating in one Minimum rating of Minimum rating in one of Fixed-income securities of the four highest "investment grade" or the four highest classifications by a higher by a major rating classifications by a major 1 major rating service service rating service (1) No more than 5% of the total portfolio may be invested in securities that fall below these rating guidelines. All pension trust funds were in compliance with respective investment policies regarding credit rate risk as of September 30, 2021. The Moody's rating ranges of the different investment classes held by each respective plan at September 30, 2021, are as follows: General Pension Police Pension Plan Plan Fire Pension Plan Corporate debt A1-A3 A1-A3 A1-A3 U.S. Treasury Aaa Aaa Aaa U.S. government agency pools N/A N/A N/A The Beal Memorial Cemetery investment policy does not limit investments to those with specific credit ratings for domestic or international equities. The overall rating of fixed income investments shall be at least investment grade based on the rating of two of the three Nationally Recognized Statistical Rating Organizations (NRSRO). 43  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Concentration of Credit Risk – The City limits the amount that may be invested in any one issuer based on the type of investment. Investments issued by or explicitly guaranteed by the U.S. Government and investments in mutual funds, external investment pools, and other pooled investments are exempt from concentration of credit risk disclosures. The General Employees’ Retirement Fund and the Firefighters’ Retirement Fund investment policies limit investment concentration as follows:  Equities – No more than 5% of the Plan’s assets, at the time of purchase, shall be invested in the common stock, capital stock, or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company.  Fixed Income – The value of bonds issued by any single corporation shall not exceed 10% of the Plan’s total fair value.  Other Limitations – Investments in corporate common stock and convertible bonds shall not exceed 75% of the Plan’s assets at fair value, and foreign securities shall not exceed 25% of the Plan’s fair value. The Police Officers’ Retirement Fund investment policy limits investment concentration as follows:  Equities – No more than 5% of the Plan’s assets, at the time of purchase, shall be invested in the common stock, capital stock, or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company.  Fixed Income – The value of bonds issued by any single corporation shall not exceed 3% of the Plan’s total fair value.  Other Limitations – Investments in corporate common stock and convertible bonds shall not exceed 70% of the Plan’s assets at fair value, and foreign securities shall not exceed 25% of the Plan’s fair value. All pension trust fund plans were in compliance with respective investment policies regarding concentration of credit risk as of September 30, 2021. 44  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Concentration of Credit Risk – Continued The Beal Memorial Cemetery investment policy limits investment concentrations as follows:  Domestic Equities – No more than 5% of the fair value of the total equity portfolio may be invested in the equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity at fair value may be held in any one sector.  International Equities – No more than 5% of the fair value of the total equity portfolio may be invested in the common equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity at fair value may be held in any one sector.  Fixed Income Investments – Securities of any one issuer shall not exceed 5% of a total bond portfolio at time of purchase. Investments in Entities That Calculate Net Asset Value (NAV) per Share The fair values of investments in real estate funds held by the pension trust funds are based on the investments’ NAV per share, as provided by the investee. Unfunded Redemption Redemption Fair Value Commitments Frequency Notice Period Real Estate Funds $ 10,413,821 None Quarterly 0 - 90 days The real estate funds consist of three open-ended commingled funds that invest in office, industrial, retail, and multi-family real estate assets throughout the United States. Although the funds are private investments, they can be redeemed on a quarterly basis, subject to available liquidity. 4. FAIR VALUE OF INVESTMENTS The City measures and records its investments using fair value measurements guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follow:  Level 1 – Quoted prices (unadjusted) for identical assets in active markets that a government can access at the measurement date.  Level 2 – Inputs other than quoted prices included within Level 1 that are observable for an asset, either directly or indirectly.  Level 3 – Unobservable inputs for an asset. 45  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 4. FAIR VALUE MEASUREMENTS – CONTINUED The following table presents the investments carried at fair value on September 30, 2021: Fair Value Level 1 Level 2 Level 3 Money market funds $ 273,090 $ - $ 273,090 $ - Debt securities U.S. Treasury bills 694,980 694,980 - - U.S. Treasury bonds 18,801,285 18,801,285 - - U.S. Government Agency obligations 4,485,217 - 4,485,217 - U.S. Government Agency collateralized mortgage obligations (CMO's) 5,717,591 - 5,717,591 - Corporate bonds 14,991,450 - 14,991,450 - Municipal bonds 2,917,831 - 2,917,831 - Total debt securities 47,608,354 19,496,265 28,112,089 - Equity securities Domestic common stock 14,788,724 14,788,724 - - Foreign common stock 1,426,431 1,426,431 - - Mutual funds and exchange-traded funds 64,560,802 243,868 64,316,934 - Total equity securities 80,775,957 16,459,023 64,316,934 - * Commingled real estate investment funds 10,413,821 - - - Total investments measured at fair value 139,071,222 $ 35,955,288 $ 92,702,113 $ - Total investments measured at amortized cost 8,125,204 Total investments at September 30, 2021 $ 147,196,426 * In accordance with GASB 72, certain investments that were measured at NAV per share (or its equivalent) have not been classified in the fair value hierarchy. Money market funds, debt securities, and equity securities classified in Level 2 are determined by broker quotes that utilize matrix pricing models and other observable market inputs. 46  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 5. RECEIVABLES Receivables at September 30, 2021, were as follows: Governmental Activities Business-Type Activities Community Redevelopment General Fund Utilities Sanitation Stormwater Total Taxes $ 24,090 $ - $ - $ - $ - $ 24,090 Accounts 187,302 6,996 810,210 247,081 61,716 1,313,305 Less allowance for doubtful accounts - - (51,952) (11,624) (3,994) (67,570) Assessments 29,981 235,626 1,542 - - 267,149 Notes 548,617 - - - - 548,617 Other - - 4,065 - - 4,065 Total receivables, net $ 789,990 $ 242,622 $ 763,865 $ 235,457 $ 57,722 $ 2,089,656 During fiscal year 2015, the City sold a building for $462,000 and will receive $442,000 of the proceeds over twelve years ($2,917 monthly payments started November 2014). This note receivable bears interest at 5% per year and includes a balloon payment of $250,065 due to the City in October 2026. The balance of this note receivable is $348,617 as of September 30, 2021. During fiscal year 2014, the City sold a recreational center for $425,000 and will receive the proceeds over twelve years ($3,000 monthly principal only payments started October 2015). The City has calculated imputed interest on the receivable, but it has not been recorded as the imputed amount was deemed to be immaterial to the financial statements. The balance of this note receivable is $200,000 as of September 30, 2021. Since these receivables will be collected outside the periods of availability, they are reflected in the general fund’s balance sheet as unavailable revenues as of September 30, 2021. Due from Other Governments The City's receivables from other governments for governmental activities as of September 30, 2021, are $715,943. Due from other governments in the governmental activities consists primarily of federal proceeds related to grants from the U.S. Department of Housing and Urban Development, the U.S. Department of Justice, and the Federal Emergency Management Agency. 47  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 6. CHANGES IN CAPITAL ASSETS Capital asset activity for the year ended September 30, 2021, was as follows: Beginning Adjustments/ Ending Balance Increases Decreases Transfers Balance Governmental activities Capital assets not being depreciated/amortized Land $ 10,915,210 $ 20,076 $ - $ - $ 10,935,286 Construction in progress 30,110 1,054,433 - - 1,084,543 Total capital assets not being depreciated/amortized 10,945,320 1,074,509 - - 12,019,829 Capital assets being depreciated/amortized Buildings 36,419,950 62,772 (44,317) - 36,438,405 Improvements other than buildings (1) 33,571,877 570,461 (198,817) - 33,943,521 Software 573,318 - - - 573,318 Machinery and equipment 14,396,342 1,150,160 (431,218) - 15,115,284 Equipment under capital lease 108,673 - - - 108,673 Total capital assets being depreciated/amortized 85,070,160 1,783,393 (674,352) - 86,179,201 Less accumulated depreciation/amortization Buildings (12,719,540) (1,086,696) 31,821 (204,604) (13,979,019) (1) Improvements other than buildings (23,798,420) (941,084) 198,817 42 (24,540,645) Software (571,043) (501) - (2) (571,546) Machinery and equipment (9,932,667) (1,168,449) 432,948 204,606 (10,463,562) Total accumulated depreciation/amortization (47,021,670) (3,196,730) 663,586 42 (49,554,772) Total capital assets being depreciated/amortized, net 38,048,490 (1,413,337) (10,766) 42 36,624,429 Governmental activities, net $ 48,993,810 $ (338,828) $ (10,766) $ 42 $ 48,644,258 (1) Includes infrastructure assets 48  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 6. CHANGES IN CAPITAL ASSETS – CONTINUED Beginning Adjustments/ Ending Balance Increases Decreases Transfers Balance Business-type activities Capital assets not being depreciated/amortized Land $ 709,678 $ - $ - $ - $ 709,678 Construction in progress 111,042 - - - 111,042 Easements 39,742 - - - 39,742 Total capital assets not being depreciated/amortized 860,462 - - - 860,462 Capital assets being depreciated/amortized Buildings 411,900 - (207,051) - 204,849 Improvements other than buildings 51,062,225 213,620 (35,410) - 51,240,435 Software 120,031 - - - 120,031 Machinery and equipment 11,231,827 539,934 (643,732) - 11,128,029 Total capital assets being depreciated/amortized 62,825,983 753,554 (886,193) - 62,693,344 Less accumulated depreciation/amortization Buildings (328,140) (5,677) 206,576 - (127,241) Improvements other than buildings (21,944,639) (1,711,844) 30,690 - (23,625,793) Software (91,519) (8,140) - - (99,659) Machinery and equipment (7,826,476) (724,256) 631,141 - (7,919,591) Total accumulated depreciation/amortization (30,190,774) (2,449,917) 868,407 - (31,772,284) Total capital assets being depreciated/amortized, net 32,635,209 (1,696,363) (17,786) - 30,921,060 Business-type activities, net $ 33,495,671 $(1,696,363) $ (17,786) $ - $ 31,781,522 49  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 6. CHANGES IN CAPITAL ASSETS – CONTINUED Amortization of equipment under capital lease is included with depreciation expense in the financial statements. Depreciation and amortization expense was charged to functions/programs of the primary government as follows: Governmental activities General government $ 542,109 Public safety 889,837 Physical environment 58,063 Transportation 504,423 Economic environment 184,348 Culture and recreation 1,017,950 Total depreciation/amortization expense – governmental activities $ 3,196,730 Business-type activities Utilities Fund $ 1,768,020 Sanitation Fund 271,805 Stormwater Fund 410,092 Total depreciation/amortization expense – business-type activities $ 2,449,917 50  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES As of September 30, 2021, the City had various components of deferred outflows of resources and deferred inflows of resources as follows: Governmental activities: Community General Redevelopment Governmental Fund Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ - $ - $ 3,729,010 Net difference between projected and actual earnings on pension plan investments - - - Differences between expected and actual experience on pension plan actuarial assumptions - - 598,719 Changes in assumptions related to pension plan - - 1,258,271 City OPEB contributions made subsequent to the measurement date 180,039 Changes in assumptions related to OPEB plan - - 1,540,060 Total deferred outflows $ - $ - $ 7,306,099 Deferred inflows Differences between expected and actual experience on pension plan actuarial assumptions $ - $ - $ 406,838 Net difference between projected and actual earnings on pension plan investments - - 910,479 Changes in assumptions related to pension plan - - 62,924 Differences between expected and actual experience on OPEB plan actuarial assumptions - - 1,008,667 Changes in assumptions related to OPEB plan 100,791 Unavailable revenue – special assessments 29,699 235,626 - Unavailable revenue – long-term receivable from sale of buildings 548,617 - - Total deferred inflows $ 578,316 $ 235,626 $ 2,489,699 51  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES – CONTINUED Business-type activities: Utilities Sanitation Stormwater Business-Type Fund Fund Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ 220,623 $ 118,813 $ 37,795 $ 377,231 Deferred loss on refunding 65,953 - - 65,953 City OPEB contributions made subsequent to the measurement date 25,022 16,666 6,575 48,263 Changes in assumptions related to OPEB plan 214,057 142,571 56,223 412,851 Total deferred outflows $ 598,822 $ 317,453 $ 113,127 $ 1,029,402 Deferred inflows Net difference between projected and actual earnings on pension plan investments $ 176,217 $ 94,898 $ 30,187 $ 301,302 Changes in assumptions related to pension plan - - - - Differences between expected and actual experience on pension plan actuarial assumptions - - - - Changes in assumptions related to OPEB plan 14,008 9,331 3,681 27,020 Differences between expected and actual experience on OPEB plan actuarial assumptions 140,186 93,372 36,837 270,395 Total deferred inflows $ 330,411 $ 197,601 $ 70,705 $ 598,717 8. DEFINED BENEFIT PENSION PLANS The City of Fort Walton Beach, Florida sponsors three single employer defined benefit pension plans: the General Employees' Retirement Fund (GERF), the Police Officers' Retirement Fund (PORF) and the Firefighters' Retirement Fund (FRF). These plans provide benefits for all qualifying employees of the City. The financial activity of each plan is reported as a Pension Trust Fund in the City of Fort Walton Beach, Florida's internal combined financial statements and can be found under subheading “Fund Financial Statements” of this note. There is no separate report available for the individual pension plans. Plan Description – General Employees’ Retirement Fund (GERF) Plan Administration The authority and responsibility for the establishment, amendment and administration of this Plan is vested in the City Council, and the Members thereof shall be designated as trustees of the fund. The trustees are authorized to adopt reasonable rules and regulations for the administration of the fund created by this Plan. 52  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – General Employees’ Retirement Fund (GERF) – Continued Plan Administration – Continued The Plan is a single employer defined benefit pension plan administered by the City’s Finance Director. The Finance Director shall administer this Plan for the trustees and participants, subject at all times to the limitations and conditions specified in or imposed by provisions of this Plan and the rules and regulations adopted by the City Council. The trustees and the plan administrator shall serve without additional compensation beyond that already provided by the City for their respective duties. Plan membership consists of all full-time City employees including the City Manager, Finance Director, and the Chief of Police, if they elect to participate, but not including City Council Members, police officers other than the Chief of Police, and firefighters. Effective January 1, 2010, the plan is closed to new entrants. Plan Membership as of October 1, 2019: Inactive Plan Members or Beneficiaries Current Receiving Benefits 166 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 43 Active Plan Members 63 272 Benefits Provided The plan provides retirement, termination, disability and death benefits. A member may retire at age 52 with 10 years of credited service (early retirement) or at age 62 and 10 years of credited service (normal retirement). Benefits become 100% vested upon completion of 10 years of credited service. For the City Manager, Finance Director, or Department Heads, including the Chief of Police, the Member becomes vested at 20% per year, except that credited service other than that as a Charter Officer or Department Head will accrue at a rate of 10% per year. Retirement benefits are a percentage (2.75% or 2.50%) of final average earnings times the years of credited service with maximum of 75% or 100% of current compensation depending on vested status at April 5, 1999. Benefits are reduced by 3% for each year by which the early retirement date precedes the age of 62. Varied benefits exist for service and non-service-connected disabilities as well as death in the line of duty or other pre-retirement death. In accordance with the annual increase in CPI-U as measured in December, all retirees are entitled to an adjustment payable each April 1, subject to a minimum of 0% and a maximum of 3%. The adjustment does not apply to members who retire following a vested terminated status or disability retirees. Funding Policy and Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2021, the participants’ contribution rate was 5.0%. The City is required to contribute the remaining amount necessary to fund the normal cost and amortize the unfunded actuarial accrued liability over not more than 15 years. For the year ended September 30, 2021, the City was required to contribute $1,024,247. 53  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – GERF The measurement date is September 30, 2020. The measurement period for the pension expense was October 1, 2019 to September 30, 2020. The reporting period is October 1, 2020 through September 30, 2021. The city’s net pension liability was measured as of September 30, 2020. The total pension liability used to calculate the net pension liability was determined as of that date. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2019 updated to September 30, 2020 using the following actuarial assumptions: Inflation 2.50% Salary Increases 3.50% - 6.50% Discount Rate 7.30% Investment Rate of Return 7.30% Mortality rates for healthy lives were obtained from the PubG.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set back one-year Females – Employees and Healthy Retirees Mortality rates for disabled lives were obtained from the PubG.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – Disabled Retirees with three-year set forward Females – Disabled Retirees with three-year set forward The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2019 FRS valuation report for non-special risk employees, with appropriate risk and collar adjustments made based on plan demographics. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2020, the inflation rate assumption of the investment advisor was 2.50%. 54  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – GERF – Continued Actuarial Assumptions – Continued Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2020 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 55.00% 7.50% International equity 10.00% 8.50% Broad market fixed income 20.00% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.30%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that Sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 55  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Change in Net Pension Liability – GERF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2020 (Valuation Date of 10/01/2019) $ 50,294,277 $ 48,423,281 $ 1,870,996 Changes: Service cost 366,197 - 366,197 Interest 3,723,744 - 3,723,744 Differences between expected and actual experience 60,721 - 60,721 Changes of assumptions 618,633 - 618,633 Contributions – employer - 1,419,339 (1,419,339) Contributions – employee - 147,885 (147,885) Net investment income - 4,869,412 (4,869,412) Benefit payments, including refunds of employee contributions (3,327,697) (3,327,697) - Administrative expenses - (50,568) 50,568 Net changes 1,441,598 3,058,371 (1,616,773) Balances at September 30, 2021 (Measurement Date of 9/30/2020) $ 51,735,875 $ 51,481,652 $ 254,223 Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.30% 7.30% 8.30% Sponsor's net pension liability (asset) $ 5,676,016 $ 254,223 $ (4,339,612) Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 56  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – GERF For the year ended September 30, 2021, the City recognized a reduction in pension expense of $646,287. On September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City contributions subsequent to measurement date $ 1,024,247 $ - Net difference between projected and actual earnings on pension plan investments - 818,089 Changes of assumptions 309,317 - Differences between expected and actual experience 30,361 - Total $ 1,363,925 $ 818,089 Deferred outflows of resources related to pensions of $1,024,247 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2022 $ (194,289) 2023 (170,351) 2024 137,841 2025 (251,612) $ (478,411) Plan Description – Police Officers’ Retirement Fund (PORF) Plan Administration The Police Officers’ Retirement Board of Trustees (Police Board) is designated as the plan administrator. The Police Board shall consist of five Trustees, two of whom, unless otherwise prohibited by law, shall be legal residents of the City, who shall be appointed by the City Council, and two of whom shall be Members of the System, who shall be elected by a majority of the Police Officers who are Members of the System. The fifth Trustee shall be chosen by a majority of the previous four Trustees as provided for herein, and such person's name shall be submitted to the City Council who shall, as a ministerial duty, appoint such person to the Police Board as its fifth Trustee. Each person employed by the City’s police department as a full-time police officer becomes a member of the Plan as a condition of his employment. All police officers are therefore eligible for plan benefits as provided for in the plan document and by applicable law. 57  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – PORF – Continued Plan Membership as of October 1, 2019: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 47 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 18 Active Plan Members 42 107 Benefits Provided The plan provides retirement, termination, disability and death benefits. A member may retire at age 50 with 10 years of credited service or completion of 25 years of credited service (early retirement) or at age 55 or the completion of 30 years of credited service (normal retirement). Members hired between ages 45 and 50 must work 10 years. Benefits become 100% vested upon completion of 10 years of credited service. The plan provides retirement benefits in the amount of 2.75% of average final compensation times credited service. Benefits are reduced 6% for each year prior to the age of 55. Varied benefits exist for disability and pre-retirement death. Each April 1 the benefit paid to service retires is adjusted in accordance with the CPI increase during the previous year not to exceed 3%. Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2021, the participants’ contribution rate was 5.0% of payroll until a 75% maximum accrual is attained and then 0.5% thereafter. The State of Florida is required to contribute 7.5% of payroll and the City is required to contribute the difference between the actuarially determined rate and the contribution rate of the participants and the State of Florida. For the year ended September 30, 2021, the City was required to contribute 32.7% of payroll. Net Pension Liability – PORF The measurement date is September 30, 2020. The measurement period for the pension expense was October 1, 2019 to September 30, 2020. The reporting period is October 1, 2020 through September 30, 2021. The city’s net pension liability was measured as of September 30, 2020. The total pension liability used to calculate the net pension liability was determined as of that date. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2019 updated to September 30, 2020 using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.20% Investment rate of return 7.20% 58  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – PORF – Continued Actuarial Assumptions – Continued Mortality rates for healthy lives were obtained from the PubS.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set forward one-year Females – (Below Median) for Employees and Healthy Retirees set forward one-year Mortality rates for disabled lives were obtained from the PubH-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – 80% PubG.H-2010 for Disable Retirees / 20% PubS.H-2010 for Disable Retirees Females – 80% PubG.H-2010 for Disable Retirees / 20% PubS.H-2010 for Disable Retirees The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2019 FRS valuation report for special risk employees, with appropriate risk and collar adjustments made based on plan demographics. The other significant actuarial assumptions used in the October 1, 2019 valuation were based on the results of an actuarial experience study dated June 4, 2018. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2020, the inflation rate assumption of the investment advisor was 2.50%. Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2020 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 47.50% 7.50% International equity 15.00% 8.50% Broad market fixed income 22.50% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Total 100.00% 59  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – PORF – Continued Discount Rate The discount rate used to measure the total pension liability was 7.20%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in Net Pension Liability – PORF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2020 (Valuation Date of 10/01/2019) $ 28,099,293 $ 22,132,402 $ 5,966,891 Changes: Service cost 546,326 - 546,326 Interest 2,143,525 - 2,143,525 Contributions – employer - 806,946 (806,946) Contributions – state - 217,473 (217,473) Contributions – employee - 132,013 (132,013) Change in excess state contributions (172,843) - (172,843) Net investment income - 2,166,715 (2,166,715) Differences between expected and actual experience (211,485) - (211,485) Changes of assumptions 46,143 46,143 Changes of benefit terms 1,428,025 - 1,428,025 Benefit payments, including refunds of employee contributions (1,868,482) (1,868,482) - Administrative expenses - (57,304) 57,304 Net changes 1,911,209 1,397,361 513,848 Balances at September 30, 2021 (Measurement Date of 9/30/2020) $ 30,010,502 $ 23,529,763 $ 6,480,739 60  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – PORF – Continued Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.20% 7.20% 8.20% Sponsor's net pension liability $ 10,032,279 $ 6,480,739 $ 3,529,297 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – PORF For the year ended September 30, 2021, the City recognized pension expense of $1,948,179. On September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 1,456,033 $ - Net difference between projected and actual earnings on pension plan investments - 198,500 Changes of assumptions 326,916 62,924 Differences between Expected and Actual experience 141,906 366,968 Total $ 1,924,855 $ 628,392 Deferred outflows of resources related to pensions of $1,456,033 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2022 $ (186,161) 2023 181,612 2024 (43,544) 2025 (111,477) $ (159,570) 61  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – Firefighters’ Retirement Fund (FRF) Plan Administration The Plan is administered by the Firefighters’ Retirement Board of Trustees (Fire Board) comprised of: a. Two members of the fund elected by a majority of the membership, b. Two City residents appointed by the City Council, c. Fifth member elected by other four and appointed by City Council as a ministerial duty. Each person employed by the City’s fire department as a full-time firefighter becomes a member of the plan as a condition of this employment. All firefighters are therefore eligible for plan benefits as provided for in the plan document and by applicable law. Plan Membership as of October 1, 2019: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 27 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 5 Active Plan Members 35 67 Benefits Provided The plan provides retirement, disability and death benefits. A member may retire at age 45 with 10 years of credited service (early retirement) or at age 55 and 10 years of credited service or 25 years of credited service regardless of age (normal retirement). Benefits become 100% vested upon completion of 10 years of credit service. The plan provides a retirement benefit which is 3.25% of average final compensation times credited service with maximum of 100% of current compensation. Benefits are reduced 0.25% for each month prior to the normal retirement date. Varied benefits exist for disability and pre-retirement death. Benefits for service retirees are adjusted for a 3% cost of living increase on the January 1 following the later of age 58 or the date of retirement. Contributions Contributions to the Plan are established based on an actuarially determined rate recommended by an independent actuary. For the year ended September 30, 2021, the participants’ contribution rate was 8.0% of payroll. The State of Florida is required to contribute 9.2% of payroll and the City is required to contribute the difference between the actuarially determined rate and the contribution rate of the participants and the State of Florida. For the year ended September 30, 2021, the City was required to contribute 45.1% of payroll. Net Pension Liability – FRF The measurement date is September 30, 2020. The measurement period for the pension expense was October 1, 2019 to September 30, 2020. The reporting period is October 1, 2020 through September 30, 2021. The city’s net pension liability was measured as of September 30, 2020. The total pension liability used to calculate the net pension liability was determined as of that date. 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF – Continued Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2019 updated to September 30, 2020 using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.20% Investment rate of return 7.20% Mortality rates for healthy lives were obtained from the PubS.H-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – (Below Median) for Employees and Healthy Retirees set forward one-year Females – (Below Median) for Employees and Healthy Retirees set forward one-year Mortality rates for disabled lives were obtained from the PubH-2010 table and were projected generationally with Scale MP-2018 with the following adjustments: Males – 80% PubG.H-2010 for Disable Retirees / 20% PubS.H-2010 for Disable Retirees Females – 80% PubG.H-2010 for Disable Retirees / 20% PubS.H-2010 for Disable Retirees The above mortality assumption rates were mandated by Chapter 2015-157, Laws of Florida. This mandate requires the use of assumptions used by the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2019 FRS valuation report for special risk employees, with appropriate risk and collar adjustments made based on plan demographics. The most recent actuarial experience study used to review the other significant assumptions was dated June 2, 2017. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2020, the inflation rate assumption of the investment advisor was 2.50%. 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – FRF – Continued Actuarial Assumptions – Continued Best estimates of arithmetic real rates of return for each major asset class included in the Pension Plan's target asset allocation as of September 30, 2020 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 50.00% 7.50% International equity 15.00% 8.50% Broad market fixed income 20.00% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.20%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 64  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – FRF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2020 (Valuation Date of 10/01/2019) $ 28,063,048 $ 17,559,808 $ 10,503,240 Changes: Service cost 546,149 - 546,149 Interest 2,063,083 - 2,063,083 Contributions – employer - 1,231,466 (1,231,466) Contributions – state - 209,723 (209,723) Contributions – employee - 204,865 (204,865) Net investment income - 1,922,011 (1,922,011) Changes of assumptions 66,865 - 66,865 Differences between expected and actual experience 231,328 - 231,328 Benefit payments, including refunds of employee contributions (1,459,394) (1,459,394) - Administrative expenses - (55,253) 55,253 Net changes 1,448,031 2,053,418 (605,387) Balances at September 30, 2021 (Measurement Date of 9/30/2020) $ 29,511,079 $ 19,613,226 $ 9,897,853 Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.20% 7.20% 8.20% Sponsor's net pension liability $ 13,745,938 $ 9,897,853 $ 6,740,223 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 65  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2021, the City recognized a pension expense of $1,865,605. On September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 1,625,961 $ - Net difference between projected and actual earnings on pension plan investments - 195,192 Changes of assumptions 735,960 - Differences between expected and actual experience 437,634 39,870 Total $ 2,799,555 $ 235,062 Deferred outflows of resources related to pensions of $1,625,961 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2022 $ 387,045 2023 427,358 2024 247,674 2025 (123,545) $ 938,532 Pension Expense For the fiscal year ended September 30, 2021, the City recognized an aggregate pension expense of $3,167,497 on all defined benefit pension plans. 66  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements The following are the financial statements for the individual pension trust funds (GERF, PORF and FRF) for the year ended September 30, 2021: COMBINING STATEMENT OF PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ASSETS Cash and cash equivalents $ 1,647,745 $ 2,093,289 $ 1,760,338 $ 5,501,372 Investments, at market U.S. Government and Agency obligations 7,146,437 3,951,415 2,644,212 13,742,064 Corporate obligations 2,999,874 1,199,083 866,553 5,065,510 Corporate equity 16,215,155 - - 16,215,155 Mutual and exchange-traded funds 25,854,439 18,181,215 16,488,339 60,523,993 Commingled real estate investment funds 6,134,611 2,256,743 2,022,467 10,413,821 Total investments, at market 58,350,516 25,588,456 22,021,571 105,960,543 TOTAL ASSETS 59,998,261 27,681,745 23,781,909 111,461,915 LIABILITIES Accounts payable 40,030 66,202 99,007 205,239 NET POSITION RESTRICTED FOR PENSIONS $ 59,958,231 $ 27,615,543 $ 23,682,902 $ 111,256,676 67  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements – Continued COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ADDITIONS Contributions Employer $ 989,560 $ 1,193,572 $ 1,390,526 $ 3,573,658 Plan members 136,164 147,074 226,099 509,337 State of Florida - 223,280 235,435 458,715 Total contributions 1,125,724 1,563,926 1,852,060 4,541,710 Investment income 10,988,422 4,591,037 3,946,912 19,526,371 Less investment expense (148,781) (36,886) (33,918) (219,585) Net investment income 10,839,641 4,554,151 3,912,994 19,306,786 Miscellaneous revenue 1,094 - - 1,094 TOTAL ADDITIONS 11,966,459 6,118,077 5,765,054 23,849,590 DEDUCTIONS Benefits and refunds paid Retirement payments 3,327,874 1,728,228 1,520,886 6,576,988 Disability payments 33,582 156,874 5,894 196,350 Other - 21,261 73,650 94,911 Total benefits and refunds paid 3,361,456 1,906,363 1,600,430 6,868,249 Administrative expenses Legal 4,820 3,344 5,035 13,199 Contractual 70,202 60,425 59,161 189,788 Other 23,754 17,180 19,944 60,878 Total administrative expenses 98,776 80,949 84,140 263,865 TOTAL DEDUCTIONS 3,460,232 1,987,312 1,684,570 7,132,114 INCREASE IN PLAN NET POSITION 8,506,227 4,130,765 4,080,484 16,717,476 NET POSITION RESTRICED FOR PENSIONS Beginning of year 51,452,004 23,484,778 19,602,418 94,539,200 End of year $ 59,958,231 $ 27,615,543 $ 23,682,902 $ 111,256,676 68  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 9. DEFINED CONTRIBUTION PENSION PLAN City of Fort Walton Beach Defined Contribution Plan In December 2009, City Council closed the General Employees’ Defined Benefit Plan. All general, full-time employees hired on or after January 1, 2010, are members of the Defined Contribution Retirement Plan (Plan). The Plan is a money purchase defined contribution retirement plan administered by ICMA Retirement Corporation, with the City serving as trustee. All funds are held in the ICMA Retirement Corporation Governmental Money Purchase Plan & Trust in the name of each participant. The City finance director serves as the coordinator for the Plan. The Plan requires a 5% payroll contribution by the employee with a 5% employer (City) match. Employees can increase their contribution; however, only an additional 2½% is eligible for City match. Members of the General Employees’ Defined Benefit Pension Plan, who were not fully or partially vested at the time the Plan was opened, were permitted to transfer their contributions to the Plan as a one-time, irrevocable election. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the city has no liability for investment losses. The authority for establishing and amending the Plan’s provisions lies with the City Council. The City Council also has the authority for amending contribution requirements. Contributions made to the Plan by the employees and by the City were $269,187 and $269,187, respectively, for the fiscal year ending September 30, 2021. The City’s contributions vest 20% each year beginning after one year of employment. Participants are fully vested after 5 years of service. 10. DEFERRED COMPENSATION PLAN The City offers employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457 (Plan). The Plan is a tax-deferred supplemental retirement program that allows City employees to contribute a portion of their salary, before federal income taxes, to a retirement account. The assets are held in trust for the employees’ benefit. The Plan participants individually select and make changes in funding options, which are made available by the independent plan administrator. Since participants select the investment fund or funds in which their deferred compensation accounts are invested, the City has no liability for investment losses. The City’s fiduciary responsibility is to administer the Plan properly and to assure the investment alternatives made available are reasonable. Assets of the Plan have a fair value of $2,838,456 at September 30, 2021. Contributions made by Plan members during the fiscal year ended September 30, 2021, were $66,526. 69  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) Plan Description The Fort Walton Beach’s Retiree Health Care Plan (the Plan) is a single employer defined benefit postemployment health care plan that covers eligible retired employees of the City. The Plan, which is administered by the City, allows employees who retire and meet retirement eligibility requirements under one of the City’s retirement plans to continue medical, dental, and life insurance coverage as a participant in the City’s plan. Plan Membership as of September 30, 2020: Inactive Plan Members or Beneficiaries Current Receiving Benefits 123 Inactive Plan Members Entitled to But Not Yet Receiving Benefits - Active Plan Members 256 379 Benefits Provided The benefits provided are the same as those provided for active employees. Spouses and dependents of eligible retirees are also eligible for medical coverage. All employees of the City are eligible to receive postemployment health care benefits. Contributions Retirees participating in the group insurance plans offered by the City are required to contribute 100% of the active premiums. In future years, contributions are assumed to increase at the same rate as premiums. Total OPEB Liability The City’s total OPEB liability was measured as of September 30, 2020. The total OPEB liability was determined by an actuarial valuation. The measurement period for OPEB expense was October 1, 2019 to September 30, 2020. The reporting period is October 1, 2020 to September 30, 2021. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2020 using the following actuarial assumptions: Inflation 2.50% Salary Increases Service based Discount Rate 2.14% Initial Trend Rate 7.00% Ultimate Trend Rate 4.00% Years to Ultimate 54 70  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Total OPEB Liability – Continued Actuarial Assumptions – Continued For general employees, mortality rates were based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For female lives, the headcount-weighted PubG- 2010 female employee table was used. For male lives, the headcount-weighted PubG-2010 male below median income employee table, set back one year, was used. For disabled female lives, 100% of the Disabled Female table was used, set forward three years. For disabled male lives, 100% of the Disabled Male table was used, set forward three years. For police and fire employees, mortality rates were also based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For both males and females, the PubS.H-2010 below median income employee table, set forward one year, was used. For both disabled males and females, the 80% PubG.H-2010 and 20%PubS.H-2010 for Disabled Retirees was used. Discount Rate Given the City’s decision not to fund the program, all future benefit payments were discounted using a high-quality municipal bond rate of 2.14%. The high-quality municipal bond rate was based on the week closest but not later than the measurement date of the Bond Buyer 20-Bond Index as published by the Federal Reserve. The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's “Aa2” rating and S&P's “AA” rating. Change in Total OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Total OPEB Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2020 $ 6,274,415 $ - $ 6,274,415 Changes for the year: Service cost 230,648 - 230,648 Interest 228,430 - 228,430 Differences between expected and actual experience (1,195,507) - (1,195,507) Changes of assumptions 1,699,860 - 1,699,860 Contributions – employer - 253,893 (253,893) Benefit payments (250,893) (250,893) - Administrative expense - (3,000) 3,000 Net changes 712,538 - 712,538 Reporting period ending September 30, 2021 $ 6,986,953 $ - $ 6,986,953 71  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Change in Total OPEB Liability – Continued Sensitivity of the Total OPEB Liability to Changes in the Discount Rate Current 1% Decrease Discount Rate 1% Increase 1.14% 2.14% 3.14% Total OPEB liability $ 8,276,702 $ 6,986,953 $ 5,977,993 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Trend Rates Healthcare Cost 1% Decrease Trend Rates 1% Increase 3.00%-6.00% 4.00%-7.00% 5.00%-8.00% Total OPEB liability $ 6,097,531 $ 6,986,953 $ 8,129,145 OPEB Plan Fiduciary Net Position The plan is unfunded, so the OPEB plan’s fiduciary net position is $0. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended September 30, 2021, the City recognized OPEB expense of $603,687. On September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between Expected and Actual experience $ - $ 1,279,062 Changes of assumptions 1,952,911 127,811 Employer contributions subsequent to the measurement date 228,302 - Total $ 2,181,213 $ 1,406,873 72  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – Continued Deferred outflows of resources related to pensions of $228,302 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year ended September 30: 2022 $ 1,072 2023 128,883 2024 128,883 2025 128,879 2026 158,321 $ 546,038 12. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee medical benefits and natural disasters. The City purchases insurance through commercial carriers. Insurance coverage for workers’ compensation, liability, casualty, inland marine, flood, police accidental death, public officials’ bonds, fiduciary and fuel tanks were purchased from several commercial carriers during the year ended September 30, 2021. There has been no significant reduction in insurance coverage from the prior year. Commercial insurance coverage has been sufficient to cover all claims made in the prior three fiscal years. 73  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 13. OPERATING LEASES Lessor The City receives rental income from leasing various parcels of land and buildings under cancelable operating agreements. The lease periods vary from one to forty years. Income for the year ended September 30, 2021, was $391,868 in the General Fund, $51,039 in the CRA Fund, and $21,336 in the Utilities Fund. Future minimum lease payments were as follows: Governmental Business-Type Year Ending September 30 Activities Activities 2022 $ 323,862 $ 20,373 2023 278,785 22,014 Total minimum lease payments $ 602,647 $ 42,387 Lessee The City leases golf carts in the General Fund through an operating lease with Yamaha. The original lease term began September 2020 and expires in August 2024. Monthly payments are $6,954 plus property tax paid by the lessor. Rent expense for the fiscal year ending September 30, 2021 was $87,271. Future minimum lease payments were as follows: Governmental Year Ending September 30 Activities 2022 $ 83,445 2023 83,445 2024 76,491 Total minimum lease payments $ 243,381 74  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 13. OPERATING LEASES – CONTINUED Lessee – Continued The City leases maintenance equipment and utility carts for the golf course and parks department in the General Fund through various operating leases with DLL Finance. The leases have expiration dates ranging from December 2020 to December 2023. Aggregate monthly lease payments for the maintenance equipment and utility carts are $5,727 plus property taxes paid by the lessor. Lease expense for the fiscal year ending September 30, 2021 was $83,090. Future minimum lease payments were as follows: Governmental Year Ending September 30 Activities 2022 $ 82,190 2023 73,948 2024 37,895 2025 16,963 2026 6,182 Total minimum lease payments $ 217,178 14. CAPITAL LEASES The City has entered into a lease agreement for financing the acquisition of fitness equipment for its recreation complex and a ladder fire truck that is in progress at year-end. These lease agreements qualify as capital leases for accounting purposes as a result of the transfer of title or bargain purchase option and therefore has been recorded at the present value of the future minimum lease payments as of the inception date in the General Fund. 75  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 14. CAPITAL LEASES – CONTINUED The assets acquired through capital leases were as follows: Governmental Assets Activities Fitness equipment $ 75,385 Ladder fire truck - construction in progress 999,320 Accumulated depreciation (21,359) Assets acquired by lease, net $ 1,053,346 The future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2021, were as follows: Governmental Year Ending September 30 Activities 2022 $ 358,625 2023 358,626 2024 244,804 2025 8,580 Total minimum lease payments 970,635 Less amount representing interest (26,188) Present value of minimum lease payments $ 944,447 76  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 15. LONG-TERM DEBT Changes in Long-Term Debt Liabilities The following is a summary of changes in long-term debt liabilities of the City for the year ended September 30, 2021: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities Direct placements: Capital Improvement Revenue Note, Series 2011 $ 62,668 $ - $ (62,668) $ - $ - Capital Improvement Revenue Note, Series 2013 2,957,530 - (238,399) 2,719,131 243,347 Capital Improvement Revenue Note, Series 2013A 6,005,773 - (395,970) 5,609,803 406,621 Capital Improvement Revenue Bonds, Series 2018 12,149,516 - (384,674) 11,764,842 399,407 Direct borrowings: Golf Course Irrigation System Revenue Note, 2021 - 1,500,000 - 1,500,000 266,187 Capital lease - fitness equipment 67,035 - (13,294) 53,741 14,161 Capital lease - ladder fire truck - 999,320 (108,614) 890,706 329,540 Compensated absences 847,339 823,167 (737,219) 933,287 233,322 Total governmental activities $ 22,089,861 $ 3,322,487 $ (1,940,838) $ 23,471,510 $ 1,892,585 Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type activities Direct placements: Utility System Revenue Refunding Note, Series 2015 $ 7,093,000 $ - $ (456,000) $ 6,637,000 $ 470,000 Direct borrowings: State Revolving Fund Loan, 2015 11,907,259 - (720,536) 11,186,723 734,290 Compensated absences 218,066 244,907 (262,198) 200,775 50,194 Total business-type activities $ 19,218,325 $ 244,907 $ (1,438,734) $ 18,024,498 $ 1,254,484 For the governmental activities, compensated absences are generally liquidated by the General Fund. 77  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 15. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding Governmental Activities – Direct Placements $819,000 City of Fort Walton Beach, Florida, Capital Improvement Revenue Note, Series 2011, due in quarterly installments of $24,449 through April 2016 then $21,156 from June 2016 through April 2021; interest at 2.55%. Available non ad valorem revenues are pledged for payment of the note. Proceeds were used for purchase of a fire truck and golf equipment. The note was repaid in full as of September 30, 2021. $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. 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 capital lease 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 lease agreement does not contain any subjective acceleration clauses. 78  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 15. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding – Continued Governmental Activities – Direct Borrowings $999,320 ladder fire truck capital lease 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 lease agreement does not contain any subjective acceleration clauses. 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. 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, 2021, were as follows: Governmental Activities Capital Leases Revenue Bonds and Notes Year Ending September 30 Principal Interest Principal Interest 2022 $ 343,701 $ 14,924 $ 1,315,562 $ 683,993 2023 349,979 8,647 1,379,848 649,471 2024 242,343 2,461 1,415,409 611,910 2025 8,424 156 1,551,610 573,209 2026 - - 1,597,208 529,610 2027-2031 - - 8,316,577 1,837,097 2032-2036 - - 4,423,769 826,231 2037-2041 - - 1,593,793 84,207 Total $ 944,447 $ 26,188 $ 21,593,776 $ 5,795,728 79  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 15. LONG-TERM DEBT – CONTINUED Annual Requirements to Amortize Debt Outstanding – Continued Business-Type Activities Revenue Note State Revolving Loan Year Ending September 30 Principal Interest Principal Interest 2022 $ 470,000 $ 193,800 $ 734,290 $ 209,076 2023 484,000 180,076 748,308 195,059 2024 498,000 165,944 762,593 180,773 2025 512,000 151,402 777,152 166,215 2026 527,000 136,452 791,988 151,379 2027-2031 2,875,000 442,292 4,192,584 524,251 2032-2036 1,271,000 55,947 3,179,808 121,975 Total $ 6,637,000 $ 1,325,913 $ 11,186,723 $ 1,548,728 16. COMMENTS REQUIRED BY THE BOND AND ORDINANCES Capital Improvement Refunding Revenue Note, Series 2013 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2021. 3. The City is not aware of any instances of noncompliance with the debt covenants. Capital Improvement Revenue Note, Series 2013A 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2021. 3. The City is not aware of any instances of noncompliance with the debt covenants. 80  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 16. COMMENTS REQUIRED BY THE BOND AND ORDINANCES – CONTINUED Capital Improvement Revenue Note, Series 2018 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2021. 3. The City is not aware of any instances of noncompliance with the debt covenants. Golf Course Revenue Note, Series 2021 1. The balance sheet and statement of revenues, expenditures, and changes in fund balance of the Debt Service Fund are shown in the financial section of the report. 2. The City is required to establish sinking fund amounts sufficient to pay all principal and interest becoming due on the notes on the next semiannual payment date. The sinking fund was not required to be funded at September 30, 2021. 3. The City is not aware of any instances of noncompliance with the debt covenants. Utility System Revenue Refunding Note, Series 2015 1. The statement of net position and statement of revenues, expenses, and changes in net position of the Utility Fund are shown in the financial section of the report. 2. Net revenues pledged consist of gross revenues less costs of operation and maintenance. The net revenues pledged in fiscal year 2021 were approximately $3,458,033. 3. The debt issued refunded Series 2005 bond used for system improvements. 4. The term of the pledge commitment ends in January 2033. 5. The pledged revenues needed to meet the rate covenants in fiscal year 2021 were $828,895. The covenant is based upon 125% of the annual debt service requirement. 6. The pledged revenues exceeded the debt service requirements by $2,629,138 in fiscal year 2021. 7. The City is not aware of any instances of noncompliance with the debt covenants. 81  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 17. UNEARNED REVENUES The composition of unearned revenues as of September 30, 2021, was as follows: General Utilities Fund Fund Totals Federal grant proceeds received in advance of meeting eligibility requirements $ 1,937,014 $ - $ 1,937,014 Unredeemed gift cards 29,110 - 29,110 Charges for services paid in advance - 62,222 62,222 $ 1,966,124 $ 62,222 $ 2,028,346 The American Rescue Plan (ARP) Act and the Federal Emergency Management Agency (FEMA) grant documents do not require unspent funds to be held in a separate bank account and since the revenue is not earned, it is not a component of net position at either the fund or government-wide level. The terms of the grant require the funds to be expended by specific dates, and unspent grant funds are not typically considered restricted assets of the governmental unit. Therefore, the City has not reported the unspent proceeds as restricted assets as of September 30, 2021. 18. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2021, was as follows: Due to/from Other Funds Receivable Fund Payable Fund Amount General Community Development Block Grant $ 61,786 General Sanitation $ 243,150 Advance to/from Other Funds Receivable Fund Payable Fund Amount Sanitation General $ 160,528 General Fund receivables from the Community Development Block Grant Fund and the Sanitation Fund are the result of eliminating temporary deficit cash balances. On September 30, 2014, the City’s Sanitation Fund loaned the General Fund $500,000 to purchase a Fire Engine. The loan from the Sanitation Fund will be paid back over a 10-year period at an interest rate of 2.00%. The balance of the advance as of September 30, 2021 is $160,528. 82  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 18. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS – CONTINUED The composition of interfund transfers for the year ended September 30, 2021, was as follows: Transfers In Other Governmental Transfers Out General Fund Funds Total General Fund $ - $ 1,963,506 $ 1,963,506 Utilities Fund 1,238,095 - 1,238,095 Sanitation Fund 325,459 - 325,459 Stormwater Fund 196,228 - 196,228 $ 1,759,782 $ 1,963,506 $ 3,723,288 The transfers out of the General Fund are $1,963,506. These transfers consist of a $1,908,339 transfer to the Debt Service Fund (Other Governmental Fund) for principal and interest payments on debt, and a $55,167 transfer to the Beal Memorial Cemetery Perpetual Care Fund (Other Governmental Fund) for permanent maintenance. Transfers into the General Fund of $1,759,782 consist of franchise fees, compensation for heavy trucks wear and tear on roadways, and a portion of the debt service for the new field office complex from the enterprise funds representing their portion of use of the facility. 19. ENCUMBRANCES The amount of encumbrances outstanding as of September 30, 2021, were as follows: Governmental Funds – General Fund $ 1,331,285 Community Redevelopment Agency Fund 433,317 Other Governmental Funds 29,960 $ 1,794,562 Encumbrances at year end do not constitute expenditures or liabilities; therefore, they are not reflected in the statement of revenues, expenditures, and changes in fund balances. 83  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 20. GOVERNMENTAL FUND BALANCES At September 30, 2021, the City's governmental fund balances were classified as follows: Community Other Total Redevelopment Governmental Governmental General Fund Agency Funds Funds Nonspendable Inventory $ 259,960 $ - $ - $ 259,960 Restricted for Public safety - - 1,060,646 1,060,646 Debt service - - 21,156 21,156 Improvement districts - 4,133,412 - 4,133,412 Library capital projects 104,714 - - 104,714 Field office complex 428,308 - - 428,308 Discretionary sales taxes 3,673,641 - - 3,673,641 Golf course improvements 1,500,000 - - 1,500,000 Other purposes 5,668 - - 5,668 Total restricted 5,712,331 4,133,412 1,081,802 10,927,545 Committed Affordable housing projects 340,000 - - 340,000 Cemetery maintenance - - 4,154,232 4,154,232 Natural disaster recovery 8,309,189 - - 8,309,189 Total committed 8,649,189 - 4,154,232 12,803,421 Assigned for Capital expenditures 939,464 - - 939,464 FY22 appropriations 1,298,209 - - 1,298,209 Long-term debt 850,000 - - 850,000 Other purposes 820,898 - - 820,898 Total assigned 3,908,571 - - 3,908,571 Unassigned 8,845,558 - (19,782) 8,825,776 $ 27,375,609 $ 4,133,412 $ 5,216,252 $ 36,725,273 The Community Development Block Grant special revenue fund had a deficit fund balance at year end. The deficit will be eliminated by future transfers from other funds and by future grant funding. 84  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 21. EXPENDITURES IN EXCESS OF BUDGETED APPROPRIATIONS The Debt Service Fund had an excess of expenditures over final budgeted appropriations for the year ending September 30, 2021 in the amount of $831,760. 22. COMMITMENTS AND CONTINGENCIES Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the City expects such amount, if any, to be immaterial. Joint Project with Florida Department of Transportation (FDOT) The City Council adopted a resolution in fiscal year 2021 to pledge $1,000,000 toward the cost of a project development and environment (PD&E) study for the “Around the Mound” transportation alternative via the City’s Downtown Master Plan. This resolution was adopted in order to accelerate the timeline for completing the study. The total cost of the study is estimated at $2,000,000, which will be split between the City and FDOT. The City has pledged revenues from the Redevelopment Trust Fund and discretionary sales tax proceeds to pay for its share of the cost of the study. As of the date of this report, the study has not been started by FDOT. No fund balances have been assigned for this project in the governmental funds as the pledged revenue sources are restricted by external sources. Fort Walton Beach Housing Authority (FWBHA) Development Project The FWBHA has applied to the Florida Housing Finance Corporation for low-income housing tax credits (LIHTC) for the Bayside Gardens redevelopment of Charlie Hill Terrace. In order to make the application more competitive, the FWBHA requested a commitment of $340,000 from the City as the Local Government Area of Opportunity (LGAO). The City Council adopted a resolution in fiscal year 2021 to commit the funding requested in the form of a 50% grant and 50% loan to the FWBHA. As of the date of this report, the FWBHA is awaiting a final decision on the application filed with the Florida Housing Finance Corporation. Demolition of Field Office Complex and Golf Course Structures In August 2021, the City Council awarded a bid to a local contractor to perform demolition services related to the old field office complex and various golf course structures. The total amount of the contract is $193,554. The portion of the contract allocated to the demolition of the field office complex is $156,277. This amount will be paid from unspent proceeds from the Capital Improvement Revenue Bonds, Series 2018 issue. The portion of the contract allocated to the demolition of golf course structures is $37,277. As of the September 31, 2021, the work on the project has not commenced. The project is expected to be completed in February 2022. 85  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 22. COMMITMENTS AND CONTINGENCIES – CONTINUED Wastewater Service Interlocal Agreement with Okaloosa County In 2009, the City adopted the Wastewater Service Interlocal Agreement with Okaloosa County (Agreement). The Agreement outlines a long–term association with Okaloosa County Water & Sewer for the treatment of the City’s influent wastewater flow at a set percentage of the County’s base sewer rate plus a locked-in annual rate escalator. The agreement provides other ancillary benefits to the City such as the provision of “no cost” tertiary treated effluent for use as irrigation water at the City’s’ 36–hole municipal Golf Club. The Agreement is effective for 30 years and can be automatically extended for up to two additional terms for a period of ten years for each extension term. On a monthly basis, the County bills the City at a rate equal to $2.77 per each 1,000 gallons of wastewater flow. Additionally, the City pays to the County the Sewer Readiness to Serve Fee, which is equal to $4,893 per month. Annually, the rate per thousand and the Readiness to Serve Fee increases by 3%. Fees paid for wastewater treatment to Okaloosa County, Florida during the year ended September 30, 2021, were $3,359,721. The minimum commitment by the City under the Agreement is as follows: Fiscal Year Ending September 30 2022 $ 63,380 2023 65,281 2024 67,239 2025 69,256 2026 71,334 2027 through 2031 390,081 2032 through 2036 452,210 2037 through 2041 305,201 Total $ 1,483,982 23. SUBSEQUENT EVENTS Golf Course Irrigation System Contract In December 2021, the City entered into an agreement with a specialty contractor to perform the golf course irrigation system replacement project. The total contract amount is $672,500, which will be paid in installments as the work is completed. The project is expected to be completed in Spring 2022. 86 REQUIRED SUPPLEMENTARY INFORMATION  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) GENERAL EMPLOYEES’ RETIREMENT FUND Reporting Date * 2021 2020 2019 2018 2017 2016 2015 Total Pension Liability Service cost $ 366,197 $ 372,064 $ 446,214 $ 504,055 $ 557,163 $ 569,712 $ 622,382 Interest 3,723,744 3,888,510 3,827,379 3,771,606 3,317,396 3,314,990 3,222,809 Differences between expected and actual experience 60,721 (466,270) (265,877) (404,763) 400,221 (1,074,244) - 1 Changes of assumptions 618,633 (768,706) - - 4,485,495 - - Benefit payments, including refunds of employee contributions (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) (2,575,304) Net change in total pension liability 1,441,598 (136,214) 850,020 814,454 5,901,386 134,420 1,269,887 Total pension liability – beginning 50,294,277 50,430,491 49,580,471 48,766,017 42,864,631 42,730,211 41,460,324 Total pension liability – ending (a) $ 51,735,875 $ 50,294,277 $ 50,430,491 $ 49,580,471 $ 48,766,017 $ 42,864,631 $ 42,730,211 Plan Fiduciary Net Position Contributions – employer $ 1,419,339 $ 1,751,654 $ 2,006,925 $ 1,254,097 $ 1,280,082 $ 1,355,041 $ 1,296,450 Contributions – member 147,885 150,018 158,138 171,869 202,268 209,567 212,790 Net investment income 4,869,412 1,788,274 4,975,937 4,967,834 4,031,981 (4,390) 3,228,153 Benefit payments, including refunds of employee contributions (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) (2,575,304) Administrative expenses (50,568) (40,421) (49,518) (42,201) (35,704) (39,535) (42,483) Net change in plan fiduciary net position 3,058,371 487,713 3,933,786 3,295,155 2,619,738 (1,155,355) 2,119,606 Plan fiduciary net position – beginning 48,423,281 47,935,568 44,001,782 40,706,627 38,086,889 39,242,244 37,122,638 Plan fiduciary net position – ending (b) $ 51,481,652 $ 48,423,281 $ 47,935,568 $ 44,001,782 $ 40,706,627 $ 38,086,889 $ 39,242,244 Net pension liability – ending (a) – (b) $ 254,223 $ 1,870,996 $ 2,494,923 $ 5,578,689 $ 8,059,390 $ 4,777,742 $ 3,487,967 Plan fiduciary net position as a percentage of the total pension liability 99.51% 96.28% 95.05% 88.75% 83.47% 88.85% 91.84% Covered payroll $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 $ 4,191,304 $ 4,255,801 Net pension liability as a percentage of covered payroll 8.60% 62.36% 78.88% 162.30% 199.23% 113.99% 81.96% Notes: 1 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019 actuarial valuation for non-special risk lives, with appropriate risk and collar adjustments made based on plan demographics. The investment rate of return assumption was lowered from 7.60% to 7.30% for the 2021 reporting date. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 87  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) POLICE OFFICERS’ RETIREMENT FUND Reporting Date * 2021 2020 2019 2018 2017 2016 2015 Total Pension Liability Service cost $ 546,326 $ 384,431 $ 395,440 $ 334,061 $ 344,958 $ 336,234 $ 322,118 Interest 2,143,525 1,976,534 2,112,261 2,084,744 1,948,181 1,953,123 1,905,286 Change in excess state money (172,843) 40,065 20,893 8,823 - - - 3 Changes of benefit terms 1,428,025 - - - - - - Differences between expected and actual experiences (211,485) 283,813 (833,418) (343,066) (425,107) (659,966) - 2 Changes of assumptions 46,143 584,615 (251,695) - 1,633,122 - - Benefit payments, including refunds of employee contributions (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) (1,632,053) Net change in total pension liability 1,911,209 1,418,384 (321,094) 262,835 1,756,444 (25,678) 595,351 Total pension liability – beginning 28,099,293 26,680,909 27,002,003 26,739,168 24,982,724 25,008,402 24,413,051 Total pension liability – ending (a) $ 30,010,502 $ 28,099,293 $ 26,680,909 $ 27,002,003 $ 26,739,168 $ 24,982,724 $ 25,008,402 Plan Fiduciary Net Position 1 Contributions – employer $ 806,946 $ 732,187 $ 830,613 $ 569,215 $ 577,564 $ 628,975 $ 836,053 Contributions – state 217,473 221,641 202,468 190,399 181,303 175,025 175,703 Contributions – member 132,013 113,192 112,112 104,557 102,214 101,886 96,591 Net investment income 2,166,715 1,085,486 1,609,609 2,036,244 1,698,093 (538,198) 1,869,244 Benefit payments, including refunds of employee contributions (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) (1,632,053) Administrative expenses (57,304) (64,930) (54,400) (39,184) (44,882) (25,084) (38,242) Net change in plan fiduciary net position 1,397,361 236,502 935,827 1,039,504 769,582 (1,312,465) 1,307,296 Plan fiduciary net position – beginning 22,132,402 21,895,900 20,960,073 19,920,569 19,150,987 20,463,452 19,156,156 Plan fiduciary net position – ending (b) $ 23,529,763 $ 22,132,402 $ 21,895,900 $ 20,960,073 $ 19,920,569 $ 19,150,987 $ 20,463,452 Net pension liability – ending (a) – (b) $ 6,480,739 $ 5,966,891 $ 4,785,009 $ 6,041,930 $ 6,818,599 $ 5,831,737 $ 4,544,950 Plan fiduciary net position as a percentage of the total pension liability 78.41% 78.76% 82.07% 77.62% 74.50% 76.66% 81.83% Covered payroll $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 $ 2,037,716 $ 1,975,478 Net pension liability as a percentage of covered payroll 245.46% 263.57% 213.40% 288.93% 328.89% 286.19% 230.07% Notes: 1 Adjusted for actual contributions made 2 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019 actuarial valuation for special risk lives, with appropriate risk and collar adjustments made based on plan demographics. For the 2021 reporting date, changes of assumptions resulted from the changes in benefit terms discussed below; the retirement assumptions were updated to assume 25% probability of retirement between ages 52-54 with less than 25 year of service, as well as 50% probability of retirement upon completion of 25 years of service, and a 100% probability of retirement upon completion of 26 or more years of service. The investment rate of return assumption was lowered from 7.40% to 7.20% for the 2021 reporting date. 3 For the 2021 reporting date, the plan was amended by Ordinance 2025 to provide the following benefit changes: 1) requirements for normal retirement eligibility to be the earlier of age 52 and 10 years of service or 25 years of service (regardless of age); 2) reduces the early retirement reduction from 6.00% to 3.00% per year for each year prior to normal retirement; and 3) increases the maximum benefit accrual rate from 2.75% to 3.00% of average final compensation per year for each year of service, up to a maximum of 75% of average final compensation. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 88  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) FIREFIGHTERS’ RETIREMENT FUND Reporting Date * 2021 2020 2019 2018 2017 2016 2015 2014 Total Pension Liability Service cost $ 546,149 $ 513,466 $ 477,930 $ 494,032 $ 453,506 $ 478,365 $ 414,836 $ 384,107 Interest 2,063,083 1,978,589 1,864,720 1,830,663 1,645,954 1,554,072 1,425,875 1,367,809 Change in excess state money - - - - - - 89,886 2 Changes of benefit terms - (2,402) - - - 804,097 - - Differences between expected and actual experiences 231,328 98,199 513,043 (199,349) 261,007 (224,382) - - Contributions – buy back - - - 32,155 - 72,413 - - 1 Changes of assumptions 66,865 655,972 601,424 258,300 1,243,794 - - - Benefit payments, including refunds of employee contributions (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) (1,071,302) (1,042,333) Net change in total pension liability 1,448,031 1,836,270 2,138,961 981,327 2,366,872 1,544,133 859,295 709,583 Total pension liability – beginning 28,063,048 26,226,778 24,087,817 23,106,490 20,739,618 19,195,485 18,336,190 17,626,607 Total pension liability – ending (a) $ 29,511,079 $ 28,063,048 $ 26,226,778 $ 24,087,817 $ 23,106,490 $ 20,739,618 $ 19,195,485 $ 18,336,190 Plan Fiduciary Net Position Contributions – employer $ 1,231,466 $ 1,016,560 $ 1,089,746 $ 794,144 $ 744,019 $ 672,369 $ 715,439 $ 703,618 Contributions – state 209,723 219,901 195,017 204,568 201,904 205,007 214,272 204,226 Contributions – member 204,865 189,154 182,127 173,480 164,876 150,357 135,622 133,633 Contributions – buy back - - - 32,155 - 72,413 - - Net investment income 1,922,011 564,309 1,430,717 1,401,324 969,107 15,563 1,201,162 1,099,298 Benefit payments, including refunds of employee contributions (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) (1,071,302) (1,042,333) Administrative expenses (55,253) (66,388) (67,773) (28,449) (43,625) (47,088) (34,537) (33,706) Net change in plan fiduciary net position 2,053,418 515,982 1,511,678 1,142,748 798,892 (71,811) 1,160,656 1,064,736 Plan fiduciary net position – beginning 17,559,808 17,043,826 15,532,148 14,389,400 13,590,508 13,662,319 12,501,663 11,436,927 Plan fiduciary net position – ending (b) $ 19,613,226 $ 17,559,808 $ 17,043,826 $ 15,532,148 $ 14,389,400 $ 13,590,508 $ 13,662,319 $ 12,501,663 Net pension liability – ending (a) – (b) $ 9,897,853 $ 10,503,240 $ 9,182,952 $ 8,555,669 $ 8,717,090 $ 7,149,110 $ 5,533,166 $ 5,834,527 Plan fiduciary net position as a percentage of the total pension liability 66.46% 62.57% 64.99% 64.48% 62.27% 65.53% 71.17% 68.18% Covered payroll $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 $ 2,072,260 $ 2,054,879 $ 2,054,879 Net pension liability as a percentage of covered payroll 386.56% 444.22% 403.36% 394.54% 422.96% 344.99% 269.27% 283.94% Notes: 1 The investment rate of return assumption was lowered from 7.40% to 7.20% for the 2021 reporting date. As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System in its July 1, 2019 actuarial valuation for special risk lives, with appropriate risk and collar adjustments made based on plan demographics. 2 Effective July 1, 2019, Chapter 118.1816, Florida Statutes states that a death or disability for a firefighter due to the diagnosis of cancer or circumstances that arise out of the treatment of cancer will be treated as duty-related. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. 89  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS (UNAUDITED) FORT WALTON BEACH RETIREE HEALTH CARE PLAN Reporting Date * 2021 2020 2019 2018 2017 Total OPEB Liability Service cost $ 230,648 $ 190,791 $ 91,714 $ 105,139 $ 85,100 Interest 228,430 235,597 205,213 187,954 195,814 Differences between expected and actual experience 2 (1,195,507) - (494,909) - - Changes of assumptions 1 1,699,860 519,859 288,811 (639,051) 702,672 Benefit payments (250,893) (232,308) (151,409) (139,227) (139,227) Net change in total OPEB liability 712,538 713,939 (60,580) (485,185) 844,359 Total OPEB liability - beginning 6,274,415 5,560,476 5,621,056 6,106,241 5,261,882 Total OPEB liability - ending (a) 6,986,953 6,274,415 5,560,476 5,621,056 6,106,241 Plan Fiduciary Net Position Contributions - employer 253,893 242,108 154,409 148,727 141,727 Benefit payments 3 (250,893) (232,308) (151,409) (139,227) (139,227) Administrative expenses (3,000) (9,800) (3,000) (9,500) (2,500) Net change in plan fiduciary net position - - - - - Plan fiduciary net position - beginning - - - - - Plan fiduciary net position - ending (b) - - - - - Sponsor's total OPEB liability - ending (a) - (b) $ 6,986,953 $ 6,274,415 $ 5,560,476 $ 5,621,056 $ 6,106,241 Plan fiduciary net position as a percentage of total OPEB liability ** 0.00% 0.00% 0.00% 0.00% 0.00% Covered payroll (projected) $ 12,085,491 $ 11,392,366 $ 10,891,364 $ 7,927,323 $ 7,520,263 City's total OPEB liability as a percentage of covered payroll 57.81% 55.08% 51.05% 70.91% 81.20% Notes: 1 As a result of Chapter 2015-157, Laws of Florida, the assumed rates of mortality were changed to the assumptions used by the Florida Retirement System to match the pension plan assumptions. Changes of assumptions and other inputs also reflect the changes in the discount rate each period. The following are the discount rates used in each period: FY 2021: 2.14% FY 2020: 3.58% FY 2019: 4.18% In addition, there were changes to actuarial assumptions for updated health care costs and premiums, health care trend rates, mortality rates, retirement rates, and disability rates. 2 Differences between expected and actual experience reflects the impact of changes to the census data from the prior valuation to the valuation as of 9/30/2020. * This schedule is intended to show information for ten years. Additional years will be displayed as they become available. **There are no OPEB plan assets accumulated in a GASB compliant trust to pay for related plan benefits. 90  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) LAST TEN FISCAL YEARS Reporting Date 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 General Employees' Retirement Fund Actuarially determined contribution $ 1,024,247 $ 1,419,339 $ 1,602,192 $ 1,771,147 $ 1,120,584 $ 1,197,424 $ 1,286,744 $ 1,187,794 $ 1,268,253 $ 1,258,659 Contributions in relation to the actuarially determined contributions 1,024,247 1,419,339 1,751,654 2,006,925 1,254,097 1,280,082 1,355,041 1,296,450 1,318,790 1,306,268 Contribution deficiency (excess) $ - $ - $ (149,462) $ (235,778) $ (133,513) $ (82,658) $ (68,297) $ (108,656) $ (50,537) $ (47,609) 1 Covered payroll $ 2,723,263 $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 $ 4,191,304 $ 4,255,801 $ 4,259,070 $ 4,542,537 Contributions as a percentage of covered payroll 37.61% 47.99% 58.38% 63.45% 36.48% 32.33% 32.33% 30.46% 30.96% 28.76% Police Officers' Retirement Fund Actuarially determined contribution $ 1,456,033 $ 1,024,419 $ 837,623 $ 928,289 $ 650,347 $ 709,037 $ 772,294 $ 932,426 $ 881,697 $ 875,055 Contributions in relation to the actuarially determined contributions 1,456,033 1,024,419 913,763 1,033,081 750,791 790,573 772,294 1,011,756 925,589 968,003 Contribution deficiency (excess) $ - $ - $ (76,140) $ (104,792) $ (100,444) $ (81,536) $ - $ (79,330) $ (43,892) $ (92,948) 1 Covered payroll $ 2,941,480 $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 $ 2,037,716 $ 1,975,478 $ 2,038,886 $ 2,178,847 Contributions as a percentage of covered payroll 49.50% 38.80% 40.36% 46.07% 35.90% 38.13% 37.90% 51.22% 45.40% 44.43% Firefighters' Retirement Fund Actuarially determined contribution $ 1,534,814 $ 1,293,057 $ 1,127,832 $ 1,138,295 $ 899,929 $ 816,138 $ 748,086 $ 824,007 $ 817,997 $ 700,045 Contributions in relation to the actuarially determined contributions 1,625,961 1,441,189 1,236,461 1,284,763 998,712 945,923 877,376 839,825 829,245 784,705 Contribution deficiency (excess) $ (91,147) $ (148,132) $ (108,629) $ (146,468) $ (98,783) $ (129,785) $ (129,290) $ (15,818) $ (11,248) $ (84,660) 1 Covered payroll $ 2,826,544 $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 $ 2,072,260 $ 2,121,613 $ 2,153,568 $ 1,946,811 Contributions as a percentage of covered payroll 57.52% 56.29% 52.29% 56.43% 46.06% 45.90% 42.34% 39.58% 38.51% 40.31% ¹ As of 2014, the Covered payroll numbers shown are in compliance with GASB Statement No. 82. See notes to the schedule of contributions. 91  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS SEPTEMBER 30, 2021 Measurement Date 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 General Employees' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 10.25% 3.78% 11.43% 12.45% 10.78% -0.01% 8.82% Police Officers' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 10.01% 5.08% 7.82% 10.52% 9.12% -2.69% 9.96% Firefighters' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 11.01% 3.33% 9.24% 9.88% 7.25% 0.12% 9.72% Note: This information is not available for previous years. 92  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) GENERAL EMPLOYEES’ RETIREMENT FUND Valuation Date: October 1, 2019 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Funding method: Entry-Age Actuarial Cost Method Mortality rates: Healthy lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP2000 Generational, 50% Annuitant White Collar / 50% Annuitant Blue Collar, Scale BB Disabled lives: Female: 100% RP2000 Disabled Female set forward two years Male: 100% RP2000 Disabled Male set back four years Interest rate: 7.60% per year, compounded annually, net of investment related expenses Inflation: 2.50% Termination rates: Age-based rates. Sample rates as follows: Sample Ages Probability 25 7.724% 30 7.397% 35 6.858% 40 6.113% 45 5.163% 50 4.316% 55 4.371% 60 5.631% Disability rates: Age-based rates. Sample rates as follows: Sample Ages Probability 20 0.07% 30 0.11% 40 0.19% 50 0.51% 60 1.66% 93  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED GENERAL EMPLOYEES’ RETIREMENT FUND Salary increases: Age-based increase table, as follows: Age Increase* Under 25 6.50% 25-34 5.50% 35-44 4.50% 45+ 3.50% *Increase shown is inclusive of a 3% wage inflationary assumption. Retirement age: 100% probability of retirement upon attaining age 62 and ten years of service, along with probabilities of retiring with a subsidized benefit prior to age 62 at the following rates: Age Probability 52 4.218% 53 4.249% 54 4.293% 55 4.371% 56 4.500% 57 4.688% 58 4.941% 59 5.258% 60 5.631% 61 6.053% Payroll growth: None (closed plan) for purposes of amortizing the Unfunded Actuarial Accrued Liability. Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. 94  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) POLICE OFFICERS’ RETIREMENT FUND Valuation Date: October 1, 2019 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Funding method: Entry-Age Normal Actuarial Cost Method Mortality rates: Healthy lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB Disabled lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no set back, no projection scale Male: 60% RP2000 Disabled Male set back four years / 40% Annuitant White Collar with no set back, no projection scale Interest rate: 7.40% per year, compounded annually, net of investment related expenses Retirement age: Member Age Retirement Probability 55 10.0% 56 10.0% 57 33.3% 58 50.0% 59 50.0% 60+ 100.0% In addition to the above table, 50% are assumed to retire upon completion of 30 years of service, and 100% are assumed to retire upon completion of 31 years of service. Early retirement: Service Years Retirement Probability Less than 25 5.0% 25-27 10.0% 28-29 25.0% Cost-of-living increase: 2.50% per year beginning at retirement Payroll growth: None Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. 95  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED POLICE OFFICERS’ RETIREMENT FUND Salary increases: Service Years Assumption Less than 1 10.0% 1-4 6.5% 5-9 6.0% 10-14 5.5% 15-19 4.5% 20+ 3.5% In addition to the table on the previous page, projected salary at retirement is increased 20% to account for non-regular compensation. Disability rate: % Becoming Disabled During the Age Year 20 0.28% 25 0.30% 30 0.36% 35 0.46% 40 0.60% 45 1.02% 50 2.00% 55 3.10% 60 4.18% Termination rate: Service Years Termination Probability Less than 2 15.0% 2-4 12.0% 5-6 10.0% 7-9 2.0% 10 8.0% 11 7.5% 12 7.0% 13 6.5% 14-19 6.0% 20+ 2.0% 96  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) FIREFIGHTERS’ RETIREMENT FUND Valuation Date: October 1, 2019 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method: Entry Age Normal Actuarial Cost Method Mortality rates: Healthy lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB Disabled lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no set back, no projection scale Male: 60% RP2000 Disabled Male set back four years / 40% Annuitant White Collar with no set back, no projection scale Interest rate: 7.40% per year compounded annually, net of investment related expenses Disability rate: See table below; it is assumed that 75% of disablements and active Member deaths are service related. Termination rate: See table below; assumed rates were approved in conjunction with an actuarial experience study dated June 2017. Salary increases: See table below; assumed rates were approved in conjunction with an actuarial experience study dated June 2017. Cost-of-living increase: 3.00% per year beginning at age 58 Payroll growth: 1.49% per year, in compliance with Part VII of Chapter 112, Florida Statutes Actuarial asset All assets are valued at fair value with an adjustment made to uniformly spread method: actuarial investment gains and losses (as measured by actual fair value investment return against expected fair value investment return) over a five-year period. Salary increases: Service Years Increase 0 12.0% 1-9 6.0% 10+ 5.0% 97  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED FIREFIGHTERS’ RETIREMENT FUND Disability rate: Age Disability Rate 20 0.14% 25 0.15% 30 0.18% 35 0.23% 40 0.30% 45 0.51% 50 1.00% 55 1.55% 60 2.09% 65 2.09% Termination rate: Service Years Termination Rate 0 13.0% 1 12.0% 2 11.0% 3 10.0% 4 9.0% 5 8.0% 6 7.0% 7 6.5% 8 6.0% 9 5.5% 10 5.0% 11 4.5% 12+ 4.0% Retirement age: Member Age Retirement Probability 45 - 54 3.0% 55+ 100.0% In addition to the above table, 100% are assumed to retire upon completion of 25 years of service. The assumed rates in this table were approved in conjunction with an actuarial experience study dated June 2017. 98  CITY OF FORT WALTON BEACH, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2021 Special Revenue Funds Beal Law Memorial Total Law Enforcement Florida Community Cemetery Nonmajor Enforcement Trust Building Development Perpetual Governmental Trust Training Code Block Grant Care Debt Service Funds ASSETS Cash and cash equivalents $ 191,051 $ 18,029 $ 950,233 $ - $ 112,131 $ 21,156 $ 1,292,600 Investments - - - - 4,046,608 - 4,046,608 Due from other governments 4,523 - - 42,392 - - 46,915 TOTAL ASSETS $ 195,574 $ 18,029 $ 950,233 $ 42,392 $ 4,158,739 $ 21,156 $ 5,386,123 LIABILITIES Accounts payable $ 480 $ - $ 4,082 $ 388 $ 4,507 $ - $ 9,457 Accrued liabilities 86,886 - 11,742 - - - 98,628 Due to other funds - - - 61,786 - - 61,786 Total liabilities 87,366 - 15,824 62,174 4,507 - 169,871 FUND BALANCE Restricted 108,208 18,029 934,409 - - 21,156 1,081,802 Committed - - - - 4,154,232 - 4,154,232 Unassigned - - - (19,782) - - (19,782) Total fund balance 108,208 18,029 934,409 (19,782) 4,154,232 21,156 5,216,252 TOTAL LIABILITIES AND FUND BALANCE $ 195,574 $ 18,029 $ 950,233 $ 42,392 $ 4,158,739 $ 21,156 $ 5,386,123 99  CITY OF FORT WALTON BEACH, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2021 Special Revenue Funds Beal Law Memorial Total Law Enforcement Florida Community Cemetery Nonmajor Enforcement Trust Building Development Perpetual Debt Governmental Trust Training Code Block Grant Care Service Funds REVENUES Permits and fees $ - $ - $ 635,702 $ - $ - $ - $ 635,702 Intergovernmental 9,125 - - 294,572 - - 303,697 Fines 8,864 4,482 - - - - 13,346 Miscellaneous 4,623 18 1,078 - 662,796 - 668,515 Total revenues 22,612 4,500 636,780 294,572 662,796 - 1,621,260 EXPENDITURES Current Public safety 2,784 - 470,461 - - - 473,245 Physical environment - - - - 15,413 - 15,413 Economic environment - - - 296,871 - - 296,871 Capital outlay 8,434 - 1,150 - - - 9,584 Debt service Principal - - - - - 1,203,619 1,203,619 Interest - - - - - 704,720 704,720 Total expenditures 11,218 - 471,611 296,871 15,413 1,908,339 2,703,452 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 11,394 4,500 165,169 (2,299) 647,383 (1,908,339) (1,082,192) OTHER FINANCING SOURCES Transfers in - - - - 55,167 1,908,339 1,963,506 Total other financing sources - - - - 55,167 1,908,339 1,963,506 NET CHANGE IN FUND BALANCE 11,394 4,500 165,169 (2,299) 702,550 - 881,314 FUND BALANCE (DEFICIT) AT BEGINNING OF YEAR 96,814 13,529 769,240 (17,483) 3,451,682 21,156 4,334,938 FUND BALANCE (DEFICIT) AT END OF YEAR $ 108,208 $ 18,029 $ 934,409 $ (19,782) $ 4,154,232 $ 21,156 $ 5,216,252 100  CITY OF FORT WALTON BEACH, FLORIDA LAW ENFORCEMENT TRUST SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ - $ 10,500 $ 9,125 $ (1,375) Fines - - 8,864 8,864 Miscellaneous 2,309 2,309 4,623 2,314 Total revenues 2,309 12,809 22,612 9,803 EXPENDITURES Current Public safety 14,402 14,402 2,784 11,618 Capital outlay - 10,500 8,434 2,066 Total expenditures 14,402 24,902 11,218 13,684 NET CHANGE IN FUND BALANCE (12,093) (12,093) 11,394 23,487 FUND BALANCE AT BEGINNING OF YEAR 12,093 12,093 96,814 84,721 FUND BALANCE AT END OF YEAR $ - $ - $ 108,208 $ 108,208 101  CITY OF FORT WALTON BEACH, FLORIDA LAW ENFORCEMENT TRUST TRAINING SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Fines $ 400 $ 400 $ 4,482 $ 4,082 Miscellaneous 100 100 18 (82) Total revenues 500 500 4,500 4,000 EXPENDITURES Current Public safety 500 500 - 500 Total expenditures 500 500 - 500 NET CHANGE IN FUND BALANCE - - 4,500 4,500 FUND BALANCE AT BEGINNING OF YEAR - - 13,529 13,529 FUND BALANCE AT END OF YEAR $ - $ - $ 18,029 $ 18,029 102  CITY OF FORT WALTON BEACH, FLORIDA FLORIDA BUILDING CODE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Permits and fees $ 472,211 $ 472,211 $ 635,702 $ 163,491 Miscellaneous 2,000 2,000 1,078 (922) Total revenues 474,211 474,211 636,780 162,569 EXPENDITURES Current Public safety 479,061 479,061 470,461 8,600 Capital outlay 4,510 4,510 1,150 3,360 Total expenditures 483,571 483,571 471,611 11,960 NET CHANGE IN FUND BALANCE (9,360) (9,360) 165,169 174,529 FUND BALANCE AT BEGINNING OF YEAR 9,360 9,360 769,240 759,880 FUND BALANCE AT END OF YEAR $ - $ - $ 934,409 $ 934,409 103  CITY OF FORT WALTON BEACH, FLORIDA COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ 234,807 $ 433,526 $ 294,572 $ (138,954) Total revenues 234,807 433,526 294,572 (138,954) EXPENDITURES Current Economic environment 255,836 454,555 296,871 157,684 Total expenditures 255,836 454,555 296,871 157,684 NET CHANGE IN FUND BALANCE (21,029) (21,029) (2,299) 18,730 FUND BALANCE (DEFICIT) AT BEGINNING OF YEAR 21,029 21,029 (17,483) (38,512) FUND BALANCE (DEFICIT) AT END OF YEAR $ - $ - $ (19,782) $ (19,782) 104  CITY OF FORT WALTON BEACH, FLORIDA BEAL MEMORIAL CEMETERY PERPETUAL CARE SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Miscellaneous $ 26,500 $ 26,500 $ 662,796 $ 636,296 EXPENDITURES Current Physical environment 12,200 12,200 15,413 (3,213) EXCESS OF REVENUES OVER EXPENDITURES 14,300 14,300 647,383 633,083 OTHER FINANCING SOURCES (USES) Transfers in 40,983 40,983 55,167 14,184 Transfers out (60,000) (60,000) - 60,000 Total other financing sources (uses) (19,017) (19,017) 55,167 74,184 NET CHANGE IN FUND BALANCE (4,717) (4,717) 702,550 707,267 FUND BALANCE AT BEGINNING OF YEAR 4,717 4,717 3,451,682 3,446,965 FUND BALANCE AT END OF YEAR $ - $ - $ 4,154,232 $ 4,154,232 105  CITY OF FORT WALTON BEACH, FLORIDA DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Miscellaneous $ - $ - $ - $ - Total revenues - - - - EXPENDITURES Debt service Principal 799,647 799,647 1,203,619 (403,972) Interest 276,932 276,932 704,720 (427,788) Total expenditures 1,076,579 1,076,579 1,908,339 (831,760) DEFICIENCY OF REVENUES UNDER EXPENDITURES (1,076,579) (1,076,579) (1,908,339) (831,760) OTHER FINANCING SOURCES Transfers in 1,076,579 1,076,579 1,908,339 831,760 NET CHANGE IN FUND BALANCE - - - - FUND BALANCE AT BEGINNING OF YEAR - - 21,156 21,156 FUND BALANCE AT END OF YEAR $ - $ - $ 21,156 $ 21,156 106 III. STATISTICAL SECTION (UNAUDITED) This section of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, and note disclosures say about the City’s overall financial Health. Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive and annual financial reports for the relevant year.  City of Fort Walton Beach, Florida SCHEDULE 1 NET POSITION BY COMPONENT Last Ten Fiscal Years (full accrual basis of accounting) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Governmental Activities Net investment in capital assets $ 25,379,050 $ 23,531,576 $ 24,866,399 $ 27,443,877 $ 27,791,054 $ 27,347,098 $ 29,375,380 $ 28,280,342 $ 28,266,271 $ 28,034,343 Restricted Debt service 113,507 21,156 25,449 25,449 21,156 21,156 26 - 21,156 21,156 Improvement Districts 3,736,100 3,833,430 4,073,364 1,874,265 1,437,363 1,552,484 1,812,525 1,691,456 3,060,014 4,133,412 Public safety 262,648 462,375 565,946 507,625 536,448 426,892 468,331 673,892 879,583 1,060,646 Other purposes 194,193 177,129 172,630 187,575 165,895 93,456 66,707 1,370,446 2,248,298 3,784,023 Unrestricted 11,487,979 9,329,608 10,700,661 159,868 2,158,813 (1,447,438) (2,667,720) (377,793) 4,171,642 8,279,303 Total governmental activities net position $ 41,173,477 $ 37,355,274 $ 40,404,449 $ 30,198,659 $ 32,110,729 $ 27,993,648 $ 29,055,249 $ 31,638,343 $ 38,646,964 $ 45,312,883 Business-Type Activities Net investment in capital assets $ 14,929,648 $ 17,305,881 $ 13,779,184 $ 12,886,793 $ 12,893,855 $ 13,818,340 $ 13,829,575 $ 13,678,160 $ 14,566,978 $ 14,023,752 Restricted Debt service 184,933 1,087,405 1,082,935 157,228 157,228 157,228 157,228 157,228 157,228 157,228 System improvements 112,863 305,508 367,263 382,734 404,761 452,472 440,212 454,564 465,123 476,154 Unrestricted 8,552,169 9,379,587 9,658,709 10,656,992 11,118,844 11,731,659 12,252,058 14,010,607 14,639,462 15,561,538 Total business-type activities net position $ 23,779,613 $ 28,078,381 $ 24,888,091 $ 24,083,747 $ 24,574,688 $ 26,159,699 $ 26,679,073 $ 28,300,559 $ 29,828,791 $ 30,218,672 Primary Government Net investment in capital assets $ 40,308,698 $ 40,837,576 $ 38,645,583 $ 40,330,670 $ 40,684,909 $ 41,165,438 $ 43,204,955 $ 41,958,502 $ 42,833,249 $ 42,058,095 Restricted 4,604,244 5,887,003 6,287,587 3,134,876 2,722,851 2,703,688 2,945,029 4,347,586 6,831,402 9,632,619 Unrestricted 20,040,148 18,709,195 20,359,370 10,816,860 13,277,657 10,284,221 9,584,338 13,632,814 18,811,104 23,840,841 Total primary government net position $ 64,953,090 $ 65,433,774 $ 65,292,540 $ 54,282,406 $ 56,685,417 $ 54,153,347 $ 55,734,322 $ 59,938,902 $ 68,475,755 $ 75,531,555 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 107  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Expenses Governmental activities General government $ 4,314,050 $ 2,662,406 $ 3,179,768 $ 2,735,875 $ 3,285,039 $ 3,581,072 $ 3,799,439 $ 3,559,619 $ 4,182,204 $ 4,222,810 Public safety 9,805,368 9,729,228 9,685,621 9,562,140 10,172,215 11,507,059 11,420,904 11,159,777 12,040,368 13,746,451 Physical environment 383,970 379,681 392,255 379,334 430,490 543,287 505,458 519,126 497,072 547,701 Transportation 1,592,150 1,631,665 1,495,374 1,474,209 1,494,178 1,536,979 1,401,819 1,406,227 1,268,589 1,253,402 Economic environment 707,603 1,090,025 803,175 1,813,782 1,540,230 1,591,643 1,174,794 1,412,332 1,317,571 1,131,722 Culture and recreation 2,880,815 2,715,977 4,829,004 4,601,503 5,375,183 5,403,198 5,538,881 5,781,339 5,999,273 5,990,714 Debt service interest 254,516 324,405 483,301 340,497 323,639 304,331 291,590 664,131 727,034 700,924 Total government activities 19,938,472 18,533,387 20,868,498 20,907,340 22,620,974 24,467,569 24,132,885 24,502,551 26,032,111 27,593,724 Business-type activities Utilities 7,017,160 7,644,240 9,185,338 9,205,259 10,066,769 9,420,248 9,810,437 9,961,949 9,315,619 10,574,909 Sanitation 2,741,266 3,163,638 3,393,269 3,319,760 3,407,992 3,687,087 3,774,624 3,720,984 3,824,136 3,996,753 Golf 2,012,165 2,023,186 2,215 - - - - - - - Stormwater 497,211 611,962 439,191 460,314 611,351 681,541 727,282 762,181 764,925 1,040,698 Total business-type activities 12,267,802 13,443,026 13,020,013 12,985,333 14,086,112 13,788,876 14,312,343 14,445,114 13,904,680 15,612,360 Total primary government expenses $ 32,206,274 $ 31,976,413 $ 33,888,511 $ 33,892,673 $ 36,707,086 $ 38,256,445 $ 38,445,228 $ 38,947,665 $ 39,936,791 $ 43,206,084 Program Revenues Governmental activities Charges for services General government $ 430,718 $ 409,983 $ 476,824 $ 421,987 $ 421,503 $ 448,911 $ 434,820 $ 508,494 $ 532,475 $ 550,688 Public safety 373,855 640,271 495,111 490,379 523,163 570,556 532,536 643,944 1,440,937 1,883,415 Physical environment 439,555 404,429 376,998 409,253 371,205 399,338 387,821 414,695 415,266 724,582 Transportation 118,067 122,275 140,038 140,809 207,860 240,653 246,164 252,418 258,883 270,779 Economic environment 58,000 34,652 10 5,000 392,118 12,000 - 21,300 36,701 51,039 Culture and recreation 400,215 374,362 1,853,087 1,930,131 1,805,332 1,846,019 2,078,405 2,171,484 2,095,326 2,572,448 Operating grants and contributions 589,253 786,652 682,200 909,461 908,595 825,624 706,094 765,032 4,049,001 2,348,391 Capital grants and contributions 156,794 80,936 109,629 525,320 802,809 361,641 1,487,587 37,406 232,491 186,874 Total governmental activities program revenues 2,566,457 2,853,560 4,133,897 4,832,340 5,432,585 4,704,742 5,873,427 4,814,773 9,061,080 8,588,216 Business-type activities Charges for services Utilities 7,974,601 8,623,082 8,586,045 9,233,820 10,141,724 10,970,823 10,737,496 11,390,289 11,356,045 11,856,685 Sanitation 3,313,559 3,499,559 3,571,037 3,582,005 3,599,838 3,663,445 3,774,519 3,871,204 3,934,207 4,381,765 Golf 1,776,649 1,758,709 - - - - - - - - Stormwater 577,706 591,196 596,133 694,581 860,644 917,844 975,805 1,027,310 1,035,033 1,035,527 Operating grants and contributions - 1,071 - - - - - - - - Capital grants and contributions 331,609 1,871,295 (157,294) 87,797 533,515 1,314,521 151,049 93,282 211,962 89,963 Total business-type activities program revenues 13,974,124 16,344,912 12,595,921 13,598,203 15,135,721 16,866,633 15,638,869 16,382,085 16,537,247 17,363,940 Total primary government program revenues $ 16,540,581 $ 19,198,472 $ 16,729,818 $ 18,430,543 $ 20,568,306 $ 21,571,375 $ 21,512,296 $ 21,196,858 $ 25,598,327 $ 25,952,156 Continued… 108  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net (Expense)/Revenue Governmental activities $ (17,372,015) $ (15,679,827) $ (16,734,601) $ (16,075,000) $ (17,188,389) $ (19,762,827) $ (18,259,458) $ (19,687,778) $ (16,971,031) $ (19,005,508) Business-type activities 1,706,322 2,901,886 (424,092) 612,870 1,049,609 3,077,757 1,326,526 1,936,971 2,632,567 1,751,580 Total primary government $ (15,665,693) $ (12,777,941) $ (17,158,693) $ (15,462,130) $ (16,138,780) $ (16,685,070) $ (16,932,932) $ (17,750,807) $ (14,338,464) $ (17,253,928) General Revenues and Other Changes in Net Position Governmental activities Taxes Property taxes $ 4,295,068 $ 4,175,136 $ 5,385,235 $ 5,473,438 $ 5,617,998 $ 5,807,598 $ 6,041,303 $ 6,416,668 $ 6,573,751 $ 6,608,861 Sales taxes 2,198,270 2,241,242 2,362,190 2,557,062 2,707,153 2,792,840 2,941,301 4,335,114 4,940,279 6,021,460 Utility service taxes 3,739,311 3,761,437 3,889,976 4,036,009 3,931,939 3,962,859 4,182,026 4,045,085 4,024,523 4,136,505 Tax Increments for Redevelopment district 1,386,521 1,311,101 1,501,208 1,552,560 1,628,439 1,649,589 1,811,121 1,893,803 2,369,529 2,320,213 Franchise Fees 1,876,575 1,764,733 2,004,101 2,162,617 2,202,420 2,034,209 2,131,104 2,084,717 2,070,302 2,146,088 Intergovernmental, unrestricted 809,756 818,039 819,556 896,837 910,615 981,613 1,009,901 1,034,884 978,949 1,101,020 Gain on sale of assets 16,440 37,833 520,152 524,720 873,101 - - 66,523 158,530 740,344 Miscellaneous 154,996 106,546 103,986 199,776 27,976 157,806 93,106 77,264 44,913 93,227 Investment earnings 159,465 62,285 345,734 272,076 444,972 414,160 263,824 1,225,235 1,071,190 743,927 Special item: Impairment loss - (271,287) - - - - - - - - Transfers 1,656,032 (2,145,441) 2,851,638 657,558 755,846 761,739 847,373 1,091,579 1,747,686 1,759,782 Total governmental activities 16,292,434 11,861,624 19,783,776 18,332,653 19,100,459 18,562,413 19,321,059 22,270,872 23,979,652 25,671,427 Business-type activities Gain on sale of assets 35,111 20,662 22,813 716 26,093 32,663 14,258 44,914 16,801 260,579 Miscellaneous 48,550 6,504 6,839 9,222 5,502 27,727 16,575 17,671 1,551 105,520 Investment earnings 69,622 11,107 55,669 159,761 165,583 85,567 9,388 713,509 624,999 31,984 Special item: Impairment loss (588,652) (786,713) - - - - - - - - Transfers (1,656,032) 2,145,441 (2,851,638) (657,558) (755,846) (761,739) (847,373) (1,091,579) (1,747,686) (1,759,782) Total business-type activities (2,091,401) 1,397,001 (2,766,317) (487,859) (558,668) (615,782) (807,152) (315,485) (1,104,335) (1,361,699) Total primary government $ 14,201,033 $ 13,258,625 $ 17,017,459 $ 17,844,794 $ 18,541,791 $ 17,946,631 $ 18,513,907 $ 21,955,387 $ 22,875,317 $ 24,309,728 Change in Net Position Governmental activities $ (1,079,581) $ (3,818,203) $ 3,049,175 $ 2,257,653 $ 1,912,070 $ (1,200,414) $ 1,061,601 $ 2,583,094 $ 7,008,621 $ 6,665,919 Business-type activities (385,079) 4,298,887 (3,190,409) 125,011 490,941 2,461,975 519,374 1,621,486 1,528,232 389,881 Total primary government $ (1,464,660) $ 480,684 $ (141,234) $ 2,382,664 $ 2,403,011 $ 1,261,561 $ 1,580,975 $ 4,204,580 $ 8,536,853 $ 7,055,800 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY13, Cost Allocations were reported as expense reductions in General Government - in prior years they were reported as transfers. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 109  City of Fort Walton Beach, Florida SCHEDULE 3 FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 General Fund Nonspendable $ 2,857,963 $ 254,229 $ 262,964 $ 249,732 $ 240,865 $ 245,181 $ 250,315 $ 269,837 $ 286,427 $ 259,960 Restricted 194,193 7,868,522 4,083,267 183,512 163,817 93,456 66,707 4,497,485 2,248,298 5,712,331 Committed 5,040,585 5,501,353 5,589,056 5,761,221 6,009,523 6,687,557 6,663,230 8,019,062 8,045,739 8,649,189 Assigned 354,999 1,301,385 1,584,887 1,396,207 1,198,378 1,891,555 1,913,861 2,341,510 2,184,202 3,908,571 Unassigned 1,611,120 788,076 1,300,881 2,225,633 4,356,681 3,561,586 2,282,375 3,291,695 8,218,150 8,845,558 Total general fund $ 10,058,860 $ 15,713,565 $ 12,821,055 $ 9,816,305 $ 11,969,264 $ 12,479,335 $ 11,176,488 $ 18,419,589 $ 20,982,816 $ 27,375,609 All Other Governmental Funds Nonspendable $ - $ - $ 798 $ 848 $ 1,762 $ - $ - $ - $ - $ - Restricted 4,112,255 4,316,961 4,663,961 2,410,554 1,995,283 2,000,532 2,280,882 2,365,348 3,960,753 5,215,214 Committed 1,959,836 2,035,225 2,249,720 2,259,756 2,467,828 2,739,865 2,974,049 3,120,593 3,451,682 4,154,232 Unassigned (302) (2,745) (6,231) - - (5,861) (19,270) (31,326) (17,483) (19,782) Total all other governmental funds $ 6,071,789 $ 6,349,441 $ 6,908,248 $ 4,671,158 $ 4,464,873 $ 4,734,536 $ 5,235,661 $ 5,454,615 $ 7,394,952 $ 9,349,664 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 110  City of Fort Walton Beach, Florida SCHEDULE 4 CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Revenues Taxes $ 10,065,983 $ 9,901,157 $ 11,537,812 $ 11,837,177 $ 11,941,311 $ 12,220,392 $ 12,741,642 $ 13,101,370 $ 13,441,866 $ 13,705,445 Licenses, permits, and fees 2,142,995 2,221,406 2,392,487 2,564,079 2,623,810 2,514,178 2,586,035 2,659,200 3,475,389 4,102,640 Intergovernmental 3,291,693 3,400,876 3,376,079 3,951,367 4,322,696 4,266,425 4,880,937 5,516,224 9,870,743 9,094,488 Charges for services 969,560 1,065,316 2,373,486 2,499,107 2,402,801 2,488,384 2,739,021 2,868,887 2,757,191 3,461,193 Fines and forfeits 142,936 241,923 133,645 131,020 121,513 127,406 101,378 94,578 93,827 77,476 Miscellaneous 537,975 431,625 827,526 1,142,936 935,821 1,042,958 819,264 1,770,325 1,561,538 1,358,329 Total Revenues 17,151,142 17,262,303 20,641,035 22,125,686 22,347,952 22,659,743 23,868,277 26,010,584 31,200,554 31,799,571 Expenditures General governmental services 3,899,740 2,514,734 2,891,275 2,813,835 3,017,374 3,228,767 3,631,410 3,377,241 3,620,756 3,632,924 Public safety 9,154,002 9,066,246 9,082,876 9,080,984 9,053,178 9,913,344 10,584,430 10,157,745 11,255,650 12,988,274 Physical environment 295,459 311,684 325,864 339,596 337,831 372,552 425,472 439,446 440,769 491,526 Transportation 966,050 1,012,387 867,730 862,712 852,602 890,762 762,058 824,349 723,669 741,097 Economic environment 652,086 1,032,659 745,586 1,730,631 1,432,788 1,468,393 1,045,687 1,282,063 1,182,887 945,657 Culture and recreation 2,383,239 2,267,141 3,744,452 4,122,310 4,196,979 4,170,787 4,477,927 4,685,690 4,929,243 4,924,696 Capital outlay 2,609,203 1,282,142 4,721,096 8,128,139 2,105,686 1,598,285 3,574,823 10,498,028 4,546,491 2,823,402 Debt service Principal 211,683 4,540,488 612,996 660,107 673,851 682,229 718,320 698,381 1,084,666 1,203,619 Interest and other costs 243,959 203,347 377,574 354,544 336,835 316,629 297,245 547,165 734,680 708,959 Total expenditures 20,415,421 22,230,828 23,369,449 28,092,858 22,007,124 22,641,748 25,517,372 32,510,108 28,518,811 28,460,154 Excess of revenue over (under) expenditures (3,264,279) (4,968,525) (2,728,414) (5,967,172) 340,828 17,995 (1,649,095) (6,499,524) 2,681,743 3,339,417 Other Financing Sources (Uses) Capital lease proceeds - 103,784 - 67,774 - - - 350,000 74,135 - Transfers in 2,284,416 673,836 1,636,165 1,721,632 1,798,184 1,794,419 1,868,634 2,353,906 3,620,644 3,723,288 Transfers out (628,384) (2,819,277) (1,241,454) (1,064,074) (1,042,338) (1,032,680) (1,021,261) (1,262,327) (1,872,958) (1,963,506) Sale of general capital assets - - - - 850,000 - - - - 748,986 Debt issuance - 12,942,539 - - - - - 12,520,000 - 2,499,320 Total other financing sources (uses) 1,656,032 10,900,882 394,711 725,332 1,605,846 761,739 847,373 13,961,579 1,821,821 5,008,088 Net change in fund balance $ (1,608,247) $ 5,932,357 $ (2,333,703) $ (5,241,840) $ 1,946,674 $ 779,734 $ (801,722) $ 7,462,055 $ 4,503,564 $ 8,347,505 Debt service as a percentage of noncapital expenditures 2.56% 22.65% 5.31% 5.08% 5.08% 4.75% 4.63% 5.66% 7.59% 7.46% Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 111  City of Fort Walton Beach, Florida SCHEDULE 5 REVENUES AND OTHER SOURCES (1) Last Ten Fiscal Years Unaudited Other Fiscal Licenses, Fees, Intergovernmental Charges for Fines and Interest and Financing Year Taxes and Permits Revenues Services Forfeitures Other Revenues Sources TOTAL 2021 $13,705,445 $4,102,640 $9,094,488 $3,461,193 $77,476 $1,358,329 $5,008,088 $36,807,659 2020 13,441,866 3,475,389 9,870,743 2,757,191 93,827 1,561,538 1,821,821 33,022,375 2019 13,101,370 2,659,200 5,516,224 2,868,887 94,578 1,770,325 15,223,906 41,234,490 2018 12,741,642 2,586,035 4,880,937 2,739,021 101,378 819,264 1,868,634 25,736,911 2017 12,220,392 2,514,178 4,266,425 2,488,384 127,406 1,042,958 1,794,419 24,454,162 2016 11,941,311 2,623,810 4,322,696 2,402,801 121,513 935,821 2,648,184 24,996,136 2015 11,837,177 2,564,079 3,951,367 2,499,107 131,020 1,142,936 1,789,406 23,915,092 2014 11,537,812 2,392,487 3,376,079 2,373,486 133,645 827,526 1,636,165 22,277,200 2013 9,901,157 2,221,406 3,400,876 1,065,316 241,923 431,625 13,720,159 30,982,462 2012 10,065,983 2,142,995 3,291,683 969,560 152,936 537,975 2,284,416 19,445,548 (1) Includes General Fund, LETFs, CDBG Fund, FBC Fund, CRA Fund, Debt Service Fund, Capital Projects Fund, and Beal Memorial Fund Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 112  City of Fort Walton Beach, Florida SCHEDULE 6 ASSESSED VALUE OF TAXABLE PROPERTY (1) Last Ten Fiscal Years Unaudited Total Assessed Total Tax Real Personal Assessed Value for Direct Tax Year Property Property Value Exemptions Operations Rate 2021 $ 1,509,800,706 $ 127,094,869 $ 2,156,732,885 $ 519,837,310 $ 1,636,895,575 5.3293 2020 1,423,217,107 121,764,835 2,054,497,373 509,515,431 1,544,981,942 5.3293 2019 1,330,528,554 118,539,677 1,942,542,259 493,474,028 1,449,068,231 5.6395 2018 1,240,032,941 113,382,574 1,831,324,319 477,406,649 1,353,917,670 5.7697 2017 1,622,927,933 117,555,021 1,740,482,954 462,721,193 1,277,761,761 5.7697 2016 1,569,650,612 113,113,590 1,682,764,202 458,344,109 1,224,420,093 5.7697 2015 1,521,529,660 112,451,954 1,633,981,614 448,170,536 1,185,811,078 5.7697 2014 1,475,665,054 108,533,120 1,584,198,174 434,639,300 1,149,558,874 5.7697 2013 1,451,775,552 118,155,863 1,569,931,415 442,204,485 1,127,726,930 5.7697 2012 1,445,327,759 120,653,616 1,565,981,375 446,565,401 1,119,415,974 4.5383 (1) Florida State Law requires all property to be assessed at current fair market. The January 2019 assessment is the basis for Fiscal Year 2018-19 tax revenues. Source: Okaloosa County Property Appraiser 113  City of Fort Walton Beach, Florida SCHEDULE 7 PROPERTY TAX RATES PER $1,000 OF TAXABLE VALUE - ALL DIRECT AND OVERLAPPING GOVERNMENTS (1) Last Ten Fiscal Years Unaudited City of Fort Walton Beach Direct Rate Overlapping Rates* Okaloosa Northwest Florida Total Fiscal Total Direct Okaloosa County School Water Overlapping Year Basic Rate Rate County Board Management Rates 2021 5.3293 5.3293 3.8308 5.9430 0.0294 9.8032 2020 5.3293 5.3293 3.8308 6.0350 0.0311 9.8969 2019 5.6395 5.6395 3.8308 6.2060 0.0327 10.0695 2018 5.7697 5.7697 3.8308 6.3610 0.0338 10.2256 2017 5.7697 5.7697 3.8308 6.5880 0.0353 10.4541 2016 5.7697 5.7697 3.4308 6.9070 0.0366 10.3744 2015 5.7697 5.7697 3.4308 7.2790 0.0378 10.7476 2014 5.7697 5.7697 3.4308 7.4410 0.0390 10.9108 2013 5.7697 5.7697 3.4308 7.5510 0.0400 11.0218 2012 4.5383 4.5383 3.2899 7.4760 0.0400 10.8059 (1) As of levy date, November 1 of each year listed. The 2019 millage rate is the basis for Fiscal Year 2018-19 tax revenues. * Overlapping rates are those of local and county governments that apply to property owners within the City of Fort Walton B Source: Okaloosa County Tax Collector 114  City of Fort Walton Beach, Florida SCHEDULE 8 PRINCIPAL TAXPAYERS Unaudited 2021 2012 Total Total Assessed Assessed Taxpayer Value Percentage Rank Value Percentage Rank Florida Power & Light Co. $ 29,163,143 1.78% 1 $ 14,236,425 1.27% 1 Uptown Station Investors, LLC Suso 2 Uptown, LP 16,723,033 1.02% 2 7,395,000 0.66% 2 Presidio Developers, LLC BAE Systems Technology 9,414,638 0.58% 3 6,287,673 0.56% 3 BLC Westwood, LLC Pacifica Walton Beach LLC 8,018,984 0.49% 4 4,916,159 0.44% 4 DRS Training & Control Systems Cox Communications Gulf Coast, LLC 7,360,150 0.45% 5 4,867,494 0.43% 5 DDRM Shoppes at Paradise 99 Eglin LTD 7,262,643 0.44% 6 4,193,682 0.37% 6 FNBT Bank H&E Equipment Service 7,203,248 0.44% 7 4,095,529 0.37% 7 Choctaw Plaza LTD 127 Miracle Strip LLC 6,691,847 0.41% 8 4,088,691 0.37% 8 ECH II - Captain's Quarters, LLC DJD Investments of FL II LLC 6,236,692 0.38% 9 3,736,780 0.33% 9 Mariner Plaza Realty Assoc. University Place, Inc. 5,864,625 0.36% 10 3,605,499 0.32% 10 Brown, Brown & Brown Total Taxable Assessed Value of Principal Taxpayers 103,939,003 6.35% 57,422,932 5.13% Total Taxable Assessed Value of Other Taxpayers 1,532,956,572 93.65% 1,061,993,042 94.87% Total Taxable Assessed Value $ 1,636,895,575 100.00% $ 1,119,415,974 100.00% (1) The 2020 tax roll is the basis for Fiscal Year 2020-21 tax revenues. Source: Okaloosa County Property Appraiser 115  City of Fort Walton Beach, Florida SCHEDULE 9 PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Unaudited Ratio of Ratio of Amount of Percent of Amount of Total Total Taxes Delinquent Current Current Delinquent Collected Collected to Amount of Taxes to Tax Total Tax Taxes Taxes Taxes for the Current Delinquent Current Year Levy (1) Collected Collected Collected Year Levy Taxes Levy 2021 The 2021 tax levy is the basis for Fiscal Year 2021-22 tax revenues. 2020 $ 8,245,481 $ 7,939,074 96.3% $ 13,594 $ 7,952,668 96.4% $ 6,029 0.1% 2019 8,186,794 7,900,798 96.5% 18,327 7,919,125 96.7% 7,490 0.1% 2018 7,822,441 7,526,583 96.2% 20,747 7,547,330 96.5% 3,469 0.0% 2017 7,387,081 7,119,876 96.4% 8,632 7,128,508 96.5% 8,122 0.1% 2016 7,080,530 6,826,718 96.4% 18,798 6,845,517 96.7% 9,696 0.1% 2015 6,858,983 6,606,940 96.3% 30,392 6,637,332 96.8% 8,058 0.1% 2014 6,656,342 6,414,562 96.4% 31,452 6,446,014 96.8% 3,604 0.1% 2013 6,528,146 6,269,683 96.0% 76,388 6,346,071 97.2% 11,388 0.2% 2012 5,096,206 4,880,002 95.8% 50,880 4,930,882 96.8% 10,265 0.2% (1) Includes discount taken for early payment of taxes (maximum of 4%). Source: Okaloosa County Tax Collector 116  City of Fort Walton Beach, Florida SCHEDULE 10 RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Unaudited Governmental Activities Business Activities General General State Total Percentage Fiscal Obligation Lease Revenue Revenue Obligation Lease Revenue Revolving Revenue Primary of Personal Per (1) Year Bonds Payable Notes Bonds Bonds Payable Notes Loans Bonds Government Income Capita (2) 2021 $ - $ 944,447 $ 9,828,934 $ 11,764,842 $ - $ - $ 6,637,000 $ 11,186,723 $ - $ 40,361,946 0.35% 1,726.42 2020 - 67,035 9,025,971 12,149,516 - - 7,093,000 11,907,259 - 40,242,781 0.42% 1,742.64 2019 - 6,681 9,726,372 12,520,000 - - 7,537,000 12,614,297 - 42,404,350 0.44% 1,920.14 2018 - 42,217 10,408,945 - - - 7,968,000 13,308,089 - 31,727,251 0.36% 1,484.80 2017 - 76,099 11,073,656 - - - 8,387,000 13,988,885 - 33,525,640 0.39% 1,578.57 2016 - 106,653 11,725,331 - - - 8,794,000 14,656,929 - 35,282,913 0.43% 1,617.22 2015 - 134,249 12,371,587 - - - 8,794,000 15,312,458 - 36,612,294 0.45% 1,754.39 2014 - 89,654 13,008,515 - - - - 14,004,706 9,640,146 36,743,021 0.48% 1,773.40 2013 - 101,696 13,535,936 - - - 73,533 7,068,522 9,925,055 30,704,742 0.42% 1,515.83 2012 - - 661,796 4,470,000 - 13,458 61,221 - 10,199,963 15,406,438 0.21% 762.92 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. (1) See Schedule 15 for personal income data. (2) See Schedule 15 for population data. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 117  City of Fort Walton Beach, Florida SCHEDULE 11 RATIO OF NET GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years Unaudited Governmental Activities Percentage of General Actual Taxable Fiscal Year Obligation Bonds Value of Property (1) Per Capita (2) 2021 $ - 0.00% $ - 2020 - 0.00% - 2019 - 0.00% - 2018 - 0.00% - 2017 - 0.00% - 2016 - 0.00% - 2015 - 0.00% - 2014 - 0.00% - 2013 - 0.00% - 2012 - 0.00% - Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. (1) See Schedule 6 for property value data. (2) See Schedule 15 for population data. Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 118  City of Fort Walton Beach, Florida SCHEDULE 12 PLEDGED REVENUE COVERAGE SCHEDULE OF REVENUE BOND COVERAGE Last Ten Fiscal Years Unaudited Average Non-Ad Valorem Revenues Fiscal Non-Ad Valorem Avail. for Debt Service Requirements (2) Year Revenues (1) Debt Service Principal Interest Total Coverage 2021 $ 40,695,849 $ 39,997,947 $ 2,380,155 $1,133,336 $ 3,513,491 11.38 2020 39,300,045 43,467,423 2,235,704 1,185,842 3,421,546 12.70 2019 47,634,800 39,571,847 1,823,173 1,029,403 2,852,576 13.87 2018 31,508,894 29,893,013 1,846,847 803,314 2,650,161 11.28 2017 28,277,131 28,292,306 1,726,719 831,220 2,557,939 11.06 2016 28,307,481 28,537,163 1,301,785 860,023 2,161,808 13.20 2015 28,766,844 27,680,114 962,155 940,698 1,902,853 14.55 2014 26,593,384 26,466,080 890,954 797,317 1,688,271 15.68 2013 26,338,776 25,803,342 364,156 460,197 824,353 31.30 2012 25,267,908 25,556,504 497,049 697,060 1,194,109 21.40 (1) Non-Ad Valorem Revenues of General Fund, Capital Projects Fund, other governmental funds, and proprietary funds. (2) Combined Debt Service requirements for Capital Improvement Revenue Note Series 2013 & 2013A, Capital Improvement Revenue Bonds, Series 2018, Utility System Revenue Note 2015, SRF Loan, 2011 Revenue Note, and Capital Leases. See Financial Statement Notes for detail. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. 119  City of Fort Walton Beach, Florida SCHEDULE 13 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Unaudited Percentage Amount Net Debt Applicable to Applicable to Governmental Unit Outstanding Fort Walton Beach Fort Walton Beach Overlapping Debt Okaloosa County Revenue Bonds $ 71,890,000 10.71% (2) $ 7,697,491 Okaloosa County School District Certificates of Participation 3,424,000 25.45% (1) 871,564 Subtotal: Overlapping Debt $ 75,314,000 $ 8,569,054 Direct Debt City of Fort Walton Beach Revenue Notes $ 21,593,776 100.00% $ 21,593,776 City of Fort Walton Beach Lease Payable 343,701 100.00% 343,701 Subtotal: Direct Debt $ 21,937,477 $ 21,937,477 Total Direct and Overlapping Debt $ 97,251,477 $ 30,506,531 Source: Okaloosa County, Okaloosa County School Board (1) Calculation based on total schools in Okaloosa County School District versus schools in Fort Walton Beach. (2) Calculation based on total population in Okaloosa County versus population in Fort Walton Beach. 120  City of Fort Walton Beach, Florida SCHEDULE 14 MAJOR EMPLOYERS Unaudited 2021 2012 Percentage Percentage of Total of Total Employer Product Employees Employment Ranking Employees Employment Ranking USAF - Eglin(1) Air Force Development Test Center 17,040 18.24% 1 19,310 20.51% 1 (2) USAF - Hurlburt Air Force Special Ops Command 13,594 14.55% 2 10,564 11.22% 2 Okaloosa County School District Education Services 3,294 3.53% 3 3,129 3.32% 3 Fort Walton Beach Medical Center (4) Medical Services 1,341 1.44% 4 1,097 1.17% 5 Publix (Okaloosa Combined) Consumer Products 1,092 1.17% 5 (3) Okaloosa County BCC Local Government Services 955 1.02% 6 1,346 1.43% 4 Lockheed Martin Defense Contractor 925 0.99% 7 827 0.88% 6 Reliance Test & Technology Government Contractor 721 0.77% 8 Northwest Florida State College Education Services 717 0.77% 9 701 0.74% 8 North Okaloosa Medical Center Medical Services 609 0.65% 10 InDyne Inc Military Technical Support 800 0.85% 7 Jacobs Technology - TEAS Group Military Technical Support 566 0.60% 9 ResortQuest Property Management Services 463 0.49% 10 40,288 43.13% 38,803 41.22% (1) Includes military, civilian, and contractor personnel; a portion of contractor personnel may be duplicated with private sector employees also listed here. (2) Includes military and civilian personnel. (3) Includes County Commission, Clerk of Court, Property Appraiser, Sheriff (estimated), Supervisor of Elections, and Tax Collector. (4) Economic Development Council estimated the employee count for largest employers in Okaloosa County for FY19. Source: Personnel Department of each employer 121  City of Fort Walton Beach, Florida SCHEDULE 15 MISCELLANEOUS DEMOGRAPHICAL STATISTICS Last Ten Fiscal Years Unaudited Fiscal Fort Walton Beach Okaloosa County FWB as a % Personal Income Per Capita Unemployment Year Population Population of the County (thousands of dollars) Personal Income Rate 2021 23,379 218,346 10.71% $ 11,626,309 $ 54,630 2.8% 2020 23,093 214,542 10.76% 10,680,336 50,680 4.1% 2019 22,084 210,738 10.48% 10,194,990 48,875 2.3% 2018 21,368 206,934 10.33% 9,678,184 47,433 3.4% 2017 21,238 203,478 10.44% 9,151,339 46,836 3.0% 2016 21,817 200,071 10.90% 8,925,717 44,923 4.9% 2015 20,869 197,748 10.55% 8,534,823 44,695 4.4% 2014 20,719 194,615 10.65% 8,151,537 45,277 4.6% 2013 20,256 192,688 10.51% 8,094,613 44,960 4.7% 2012 20,194 189,762 10.64% 7,586,859 43,132 6.0% OKALOOSA COUNTY EDUCATION FY 2021 FY 2020 FY 2019 Schools: Grades K-5 23 23 23 Grades 6-8 12 12 12 Grades 9-12 8 8 8 PK-12 / Charter / Alternate 2 / 5 / 10 2 / 5 / 10 2 / 5 / 10 Grades K-8 1 1 1 Vocational / Technical 1 1 1 Exceptional Children 2 2 2 Students: Grades K-5 16,554 22,082 15,459 Grades 6-8 8,560 9,967 8,014 Grades 9-12 10,116 10,070 9,428 Adult Students 622 638 473 Exceptional Children 7,564 7,543 6,023 Personnel: Instructional (Classroom) 1,816 1,791 1,920 Non-Instructional 789 849 752 Source: Office of Economic & Demographic Research, FL Research & Economic Information Database, Okaloosa County School Board 122  City of Fort Walton Beach, Florida SCHEDULE 16 FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Full-Time Equivalent Employees as of September 30 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 General Government City Manager 3.00 3.00 3.00 3.00 3.00 3.00 3.00 2.00 2.00 2.00 Human Resources 4.00 4.00 4.70 4.70 4.70 3.60 3.00 3.00 3.00 3.00 Information Technology 4.00 4.00 4.00 4.00 3.80 2.00 2.00 2.00 2.00 2.00 City Clerk 2.00 2.00 2.40 2.40 2.40 2.50 2.50 2.50 2.50 2.50 Finance 7.00 6.00 6.00 6.00 6.00 6.00 6.00 7.00 7.00 7.00 Purchasing 3.00 3.00 3.00 3.00 3.00 3.00 2.75 2.75 2.50 2.50 Public Safety Police 70.94 69.83 71.82 70.90 65.90 61.90 61.38 60.99 59.99 70.99 Fire 44.00 44.00 37.00 37.00 37.00 37.00 38.00 37.00 37.00 37.00 Recreation & Cultural Services Administration 12.70 12.70 12.70 11.50 11.50 12.90 12.64 12.32 13.45 13.67 Parks Maintenance 13.00 13.00 12.00 10.25 10.25 10.00 10.00 10.00 10.00 11.00 Right-of-Way Maintenance - - 1.00 1.00 2.00 1.00 1.00 1.00 1.00 1.00 Senior Citizens Center - - - - - - - 1.85 1.85 1.85 Golf Club 13.42 13.42 13.96 13.81 13.81 14.26 13.93 14.26 - - Golf Grounds Maintenance 15.75 15.75 15.75 15.75 15.75 15.75 15.75 15.75 - - Library 9.22 9.22 8.72 8.72 8.72 8.02 8.02 8.02 8.02 8.02 Museum 4.10 4.10 3.60 4.00 4.00 4.60 4.10 3.60 3.60 3.60 Cemetery 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Growth Management Administration 2.00 2.00 2.00 3.00 3.00 3.00 4.00 4.00 5.00 5.00 Planning & Zoning 4.00 4.00 4.00 4.00 4.00 3.00 2.00 2.00 1.00 1.00 Building & Permitting 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.70 Code Enforcement 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Fleet Maintenance 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 9.00 8.75 Facilities Maintenance 6.00 6.00 6.00 7.00 7.00 7.00 7.00 7.00 8.00 8.00 Streets Maintenance 5.00 5.00 5.00 5.00 5.00 6.00 6.00 6.00 5.50 5.50 Community Development Block Grant - - - - - - 0.48 0.48 0.48 0.48 Community Redevelopment Agency 6.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 3.00 3.00 Utility (Water/Sewer) Enterprise Administration 6.00 6.00 6.00 5.00 5.00 8.00 8.00 8.00 7.00 7.00 Customer Service 4.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 5.50 GIS 3.00 3.00 3.00 3.00 3.00 - - - - - Water Operations 8.00 8.00 8.00 9.00 9.00 9.00 10.00 9.00 9.00 9.00 Water Distribution 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Sewer Collections 13.00 13.00 13.00 13.00 13.00 13.00 13.00 13.00 13.00 12.00 Sanitation Enterprise Solid Waste 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 19.00 Recycling 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 - - Golf Enterprise Golf Club - - - - - - - - 14.26 14.26 Golf Grounds Maintenance - - - - - - - - 15.75 15.75 Stormwater Enterprise Stormwater 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Total 312.63 310.52 306.15 304.53 300.33 292.03 292.05 291.02 289.40 300.07 Source: City of Fort Walton Beach Adopted Budget for the relevant year. Note: Golf Enterprise Fund moved to the General Fund in FY14. 123  City of Fort Walton Beach, Florida SCHEDULE 17 PERMITS, LICENSES AND RECREATION FACILITIES Last Ten Fiscal Years Unaudited MISCELLANEOUS PERMITS Year Mechanical Electrical Gas Plumbing Water & Sewer 2021 228 543 205 244 26 2020 262 573 196 231 22 2019 303 392 201 172 25 2018 300 360 159 159 37 2017 260 368 169 213 45 2016 200 216 144 92 81 2015 153 216 116 75 34 2014 247 379 136 194 27 2013 148 188 121 82 26 2012 148 168 102 100 39 BUSINESS TAX RECEIPTS ISSUED (formerly referred to as occupational licenses) Year Number Sold 2021 1,248 2020 1,120 2019 1,389 2018 1,101 2017 2,595 2016 2,115 2015 2,259 2014 2,402 2013 2,087 2012 1,947 MUNICIPAL RECREATIONAL FACILITIES 2 18-hole Golf Courses 1 Library 1 18-hole Disc Golf Course 4 Museums 1 Auditorium 23 Playgrounds 12 Baseball-Softball Facilities 2 Racquetball Court Facility 1 BMX/Skateboard Facility 1 Recreation Center 5 Boat Ramps 4 Soccer Field Facility 8 Exercise/Walking Tracks 16 Tennis Court Facilities 1 Fairgrounds 7 Undeveloped Parks 0 Football Stadium 7 Waterfront Parks 4 Beach Volleyball Court 16 Pickleball Courts Sources: City of Fort Walton Beach Customer Service, Building & Permitting, and Recreation departments. Note: Change in facility and athletic field totals due to the construction of the new Recreation Center, which was complete in FY 2015. 124  City of Fort Walton Beach, Florida SCHEDULE 18 ELECTIONS - OKALOOSA COUNTY VOTER REGISTRATION Unaudited Registered Voters Pct Place Name Total Dems Reps NPA Other 01 BAKER 2,590 272 1,929 353 36 02 BLACKMON 684 80 510 92 2 03 MILLIGAN 1,388 171 955 237 25 04 HOLT 1,354 176 934 229 15 05 LAUREL HILL 1,166 191 786 171 18 06 GARDEN CITY 4,172 615 2,709 761 87 07 DORCAS 1,889 291 1,167 396 35 08 HONEY CREEK 4,432 865 2,562 891 114 09 YELLOW RIVER 4,179 776 2,391 916 96 10 WEST WRIGHT 6,211 1,511 2,910 1,646 144 11 EAST CRESTVIEW 11,448 2,590 5,453 3,087 318 12 WEST CRESTVIEW 945 491 249 188 17 13 NORTH CRESTVIEW 3,920 724 2,320 798 78 14 WEST NICEVILLE 2,931 511 1,679 668 73 15 VALPARAISO 3,023 506 1,748 696 73 16 SHALIMAR 2,913 631 1,538 675 69 17 CENTRAL WRIGHT 3,207 832 1,435 863 77 18 OCEAN CITY 2,607 593 1,297 653 64 19* EAST FWB 1,813 511 740 519 43 20 WEST DESTIN 2,675 440 1,609 574 52 21 MARY ESTHER 2,722 547 1,503 605 67 22* S CENTRAL FWB 2,159 554 1,053 504 48 23 EGLIN AFB 753 156 287 282 28 24* WEST FWB 2,927 810 1,311 732 74 25 N CENTRAL NICEVILLE 1,937 341 1,118 425 53 26 SEMINOLE 2,680 353 1,775 515 37 27 CINCO BAYOU 266 51 130 77 8 28* GARNIERS 339 63 197 68 11 29* GOLF COURSE 2,078 344 1,266 434 34 30 OKALOOSA ISLAND 1,626 267 961 363 35 31 LONGWOOD 2,123 361 1,385 346 31 32* FERRY PARK 2,480 463 1,476 493 48 33 ROCKY BAYOU 4,709 582 3,176 871 80 34 FLOROSA 3,668 814 1,787 981 86 35 NORTH DESTIN 3,427 487 2,137 732 71 36 SOUTH NICEVILLE 2,777 398 1,761 556 62 37 LAKE LORRAINE 2,729 397 1,716 566 50 38 NORTHGATE 2,174 474 1,147 507 46 39 EAST WRIGHT 2,301 572 1,122 562 45 40 SOUTH BLUEWATER 2,944 379 1,934 575 56 41* N CENTRAL FWB 1,351 261 795 269 26 42* NEW HEIGHTS 2,276 705 954 579 38 43 S CENTRAL NICEVILLE 2,290 421 1,311 504 54 44 CENTRAL DESTIN 1,846 334 980 492 40 45 SOUTH CRESTVIEW 4,497 1,027 2,188 1,158 124 46 NORTH BLUEWATER 4,462 641 2,788 932 101 47 WYNNEHAVEN BEACH 2,037 390 986 610 51 48* WESTWOOD RETIREMENT 105 22 72 11 - 49 EAST DESTIN 3,311 379 2,252 618 62 50 SOUTH DESTIN 3,018 351 2,044 567 56 51 AIRPORT ROAD 2,097 321 1,277 460 39 52 LIVE OAK 3,940 717 2,147 981 95 Countywide Total 141,596 26,759 79,957 31,788 3,092 *City Precinct City Total 15,528 3,733 7,864 3,609 322 Source: Okaloosa County Supervisor of Elections 125  City of Fort Walton Beach, Florida SCHEDULE 19 SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS Last Ten Fiscal Years Unaudited Total Ratio of Outstanding Assessments Collections Current and Fiscal Collected or to Amount Delinquent Year Assessments (1) Released Assessed Assessment 2021 $ 1,490 $ 25,052 7.81% $ 265,325 2020 766 31,086 8.86% 288,887 2019 925 31,912 9.09% 319,207 2018 755 27,180 7.20% 350,194 2017 660 25,807 6.41% 376,619 2016 380,571 27,804 6.47% 401,766 2015 - 60,251 55.15% 48,999 2014 2,014 3,328 2.96% 109,250 2013 1,942 152,555 57.98% 110,564 2012 63,916 12,200 4.46% 261,177 (1) Assessments are payable over a 15-20 year period. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 126  City of Fort Walton Beach, Florida SCHEDULE 20 MAJOR REVENUE SOURCES Last Ten Fiscal Years Unaudited Other Fiscal Property % of Total Taxes/ % of Total Sewer % of Total Sanitation % of Total Water % of Total Golf % of Total Year Taxes Revenues Franchise Fees Revenues Fees Revenues Fees Revenues Fees Revenues Fees Revenues 2021 $ 6,608,861 13.3% $ 14,624,266 29.5% $ 7,272,112 14.7% $ 4,381,765 8.8% $ 4,432,189 8.9% $ 1,960,608 4.0% 2020 6,573,751 13.6% 13,404,633 27.8% 6,999,110 14.5% 3,934,207 8.2% 4,067,771 8.4% 1,751,965 3.6% 2019 6,416,668 11.5% 12,358,719 22.1% 7,005,068 12.5% 3,871,165 6.9% 4,041,311 7.2% 1,696,822 3.0% 2018 6,041,303 15.3% 7,343,744 18.7% 6,728,172 17.1% 3,774,520 9.6% 3,902,809 9.9% 1,676,940 4.3% 2017 7,457,189 20.9% 7,015,584 19.6% 6,668,790 18.7% 3,663,445 10.3% 3,906,282 10.9% 1,317,803 3.7% 2016 7,271,903 20.5% 7,124,985 20.0% 6,310,574 17.7% 3,589,419 10.1% 3,769,366 10.6% 1,378,730 3.9% 2015 7,025,998 19.6% 7,171,032 20.0% 5,748,749 16.1% 3,581,264 10.0% 3,425,909 9.6% 1,399,101 3.9% 2014 6,886,443 20.6% 6,807,274 20.3% 5,177,966 15.5% 3,562,694 10.6% 3,238,894 9.7% 1,365,764 4.1% 2013 5,486,237 17.2% 6,355,549 20.0% 4,949,525 15.6% 3,499,459 11.0% 3,078,174 9.7% 1,591,423 5.0% 2012 5,681,589 18.4% 6,482,596 20.9% 4,839,764 15.6% 3,313,559 10.7% 3,052,071 9.9% 1,656,721 5.4% Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information beginning in that year. Note: Beginning in FY14, the Golf Enterprise Fund was transferred into the General Fund. 127  City of Fort Walton Beach, Florida SCHEDULE 21 WATER AND WASTEWATER SERVICE RATES Unaudited Monthly Water Rates(1,2) Residential Commercial Number of Inside Outside(3) Inside Outside(3) Meters Lifeline Rate(4) $11.78 $14.73 $11.78 $14.73 Monthly Base Charge(5), Meter Size: 3/4" $11.78 $14.73 $11.78 $14.73 9,146 1.0" $11.78 $14.73 $11.78 $14.73 344 1.5" $16.00 $20.00 $16.00 $20.00 112 2.0" $27.20 $34.00 $27.20 $34.00 233 3.0" $41.45 $51.81 $41.45 $51.81 14 4.0" $51.79 $64.74 $51.79 $64.74 27 6.0" $82.40 $103.00 $82.40 $103.00 0 8.0" or 10.0" $123.49 $154.36 $123.49 $154.36 1 Multi-Residential, Addt'l per Unit $8.72 $10.90 $8.72 $10.90 9,877 Residential Customers (6) 8,603 Commercial Customers (6) 1,174 Total Customers 9,777 Gallonage Rate (per 1,000 gallons per unit) Inside Outside Block 1 (0 - 2,000) Included in monthly base charge Block 2 (2,001 - 4,000) $3.51 $4.39 Block 3 (4,001 - 8,000) $4.29 $5.36 Block 4 (8,001 +) $6.44 $8.05 Monthly Wastewater Rates(2) Residential Commercial Lifeline Rate(4) $26.31 $31.59 Monthly Base Charge $26.31 $31.59 Gallonage Rate (per 1,000 gallons per unit)(5) Block 1 (0 - 2,000) Included in monthly base charge Block 2 (2,001 +) $8.27 $9.93 (1) Irrigation customers subject to water rates as outlined herein (2) Monthly Base Charge is per Unit. Residential Single Family and Commercial count as 1 unit Multi-Family and Multi-Commercial are billed according to meter size and unit count (3) Outside City surcharge of 25% for water (4) Single family residence with less than 2,000 gallons per month (5) Residential service capped at 16,000 gallons per unit (6) Billed in September Source: City of Fort Walton Beach Comprehensive Fee Schedule 128  City of Fort Walton Beach, Florida SCHEDULE 22 SANITATION AND RECYCLING SERVICE RATES Unaudited Basic Garbage Rates Garbage Tipping Total Residential One Container $15.60 $7.03 $ 22.63 Two Containers 31.20 13.90 45.10 Residential Dumpsters, Individual Meters 15.60 7.03 22.63 Commercial One Container 31.53 7.86 39.39 Two Containers 63.06 15.77 78.83 Shared Dumpster (minimum charge) 31.53 7.86 39.39 Garbage and Trash Collection Garbage Tipping Total 2 Cubic Yards 2 times per week $66.93 $56.73 $ 123.66 3 times per week 100.38 85.00 185.38 4 times per week 133.90 113.21 247.11 5 times per week 167.31 141.52 308.83 6 times per week 200.77 169.79 370.56 4 Cubic Yards 2 times per week 94.49 113.21 207.70 3 times per week 141.73 169.79 311.52 4 times per week 188.97 226.37 415.34 5 times per week 236.21 282.89 519.10 6 times per week 283.46 339.47 622.93 6 Cubic Yards 2 times per week 124.04 169.79 293.83 3 times per week 186.05 254.68 440.73 4 times per week 248.01 339.47 587.48 5 times per week 310.02 424.31 734.33 6 times per week 372.04 509.26 881.30 8 Cubic Yards 2 times per week 149.61 226.37 375.98 3 times per week 224.42 339.47 563.89 4 times per week 299.22 452.63 751.85 5 times per week 374.02 565.79 939.81 6 times per week 448.83 675.89 1,124.72 Compactor Commercial Rate x 3 x Bulk Container(s) Commercial Recycling Garbage Tipping Total 4 Cubic Yards 2 times per week $112.70 $ - $ 112.70 3 times per week 169.00 - 169.00 4 times per week 225.35 - 225.35 5 times per week 281.70 - 281.70 6 Cubic Yards 2 times per week 169.00 - 169.00 3 times per week 253.50 - 253.50 4 times per week 338.00 - 338.00 5 times per week 422.50 - 422.50 8 Cubic Yards 2 times per week 225.35 - 225.35 3 times per week 338.00 - 338.00 4 times per week 450.70 - 450.70 5 times per week 563.35 - 563.35 Contaminated Load Fee (per dump) 4 CY 20.00 32.45 52.45 6 CY 20.00 58.35 78.35 8CY 20.00 90.70 110.70 Source: City of Fort Walton Beach Comprehensive Fee Schedule 129  City of Fort Walton Beach, Florida SCHEDULE 23 OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function Fiscal Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Public Safety Police Arrests 643 627 611 660 757 921 1,041 873 867 1,042 Traffic citations 1,973 1,327 1,404 1,632 2,436 2,693 2,864 3,119 3,413 3,773 Fire Emergency medical responses 3,159 1,265 3,123 3,310 2,994 3,067 3,322 3,278 3,231 3,197 Fire responses 1,407 2,825 1,406 1,324 1,249 1,210 1,270 1,389 1,277 1,288 Inspections 944 643 1,008 966 932 2,409 1,000 700 800 758 Code Enforcement Code violations 1,129 965 1,251 1,446 1,825 1,807 1,702 1,766 2,118 2,158 Engineering Services Building permits issued 2,741 2,288 2,095 2,006 332 n/a n/a n/a n/a n/a Residential building permits issued 2,266 1,692 1,942 1,855 483 23 1,214 1,220 1,095 697 Commercial building permits issued 475 596 153 151 178 5 402 310 457 164 Value of permits (in millions) $70.86 $81.98 $65.80 $4.10 $2.70 n/a n/a n/a n/a n/a Value of residential permits (in millions) $ 31 $ 29 $ 41 $ 26 $ 12 $ 4 $ 16 $ 16 $ 15 $ 9 Value of commercial permits (in millions) $ 40 $ 53 $ 24 $ 15 $ 15 $ 1 $ 832 $ 27 $ 23 $ 9 Business Tax Receipts Sold 166 212 406 628 1,769 2,115 2,259 2,402 2,087 1,947 Street resurfacing (lane miles) 1.06 1.27 0.00 0.18 0.00 1.01 0.64 0.16 - 1.70 Pot holes (hours spent repairing) 422 494 557 166 213 163 770 528 813 989 Sanitation Refuse collected (tons) 27,749 27,854 26,498 26,317 26,151 25,203 24,467 26,102 24,059 25,374 Recyclables collected (tons) 2,204 2,030 2,048 2,032 1,811 1,507 1,191 754 615 375 Culture and Recreation Parks and Recreation Recreation program participants 212 191 206 199 102 154 n/a n/a n/a 92,267 Recreation program registrations n/a n/a n/a n/a n/a n/a 650 651 571 n/a Adult athletic participants 857 1,042 820 770 530 n/a n/a n/a n/a 6,728 Adult athletic registrations n/a n/a n/a n/a n/a 621 424 426 467 n/a Youth athletic participants 1,791 1,496 2,264 2,123 2,394 n/a n/a n/a n/a 14,548 Youth athletic registrations n/a n/a n/a n/a n/a 2,086 1,978 1,347 1,253 n/a Skate/tennis park participants n/a n/a n/a n/a n/a n/a n/a n/a n/a 13,114 Library Circulation volume 121,287 127,507 157,554 147,760 139,980 144,474 137,363 145,684 142,888 139,196 Museum Number of visitors/participants(1) 9,636 13,662 30,050 23,012 24,522 22,437 22,683 19,461 22,901 21,480 Water System New connections 26 22 25 37 45 81 34 27 26 39 Water customers 9,777 9,677 9,642 9,639 9,620 9,618 9,537 9,480 9,279 8,846 Water produced (million gallons) 947 940 912 895 866 883 891 884 855 868 Source: City of Fort Walton Beach Performance Measures. 130  City of Fort Walton Beach, Florida SCHEDULE 24 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function/Program Fiscal Year 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Sworn Officers 52 45 45 47 45 39 43 43 43 51 Engineering Services Miles of roads 93.12 93.12 93.12 93.12 93.12 93.12 93.12 93.12 93.12 93.06 Miles of sidewalks 63.79 63.79 63.79 63.67 63.67 64.73 63.67 64.73 64.05 63.93 Signs fabricated and installed 391 531 461 286 614 854 1,133 918 785 935 Culture and Recreation Parks and Recreation Recreational Amenities 116 116 129 129 129 129 129 116 117 122 Parks (acres) 448.54 448.54 (1) 206.00 206.00 206.00 206.00 196.56 180.26 180.26 180.26 Library Inventoried collection 47,216 51,398 56,973 62,513 67,881 70,353 72,313 72,729 74,649 74,448 Water and Sewer System Potable water lines (miles) 146.77 146.48 146.40 146.33 146.10 144.91 144.77 146.25 145.90 118.63 Sanitary sewer lines (miles) 129.82 129.44 129.49 129.49 129.62 129.51 110.45 130.32 118.76 118.76 Reuse water lines (miles) 7.10 7.10 7.10 7.10 7.10 7.10 7.10 7.10 7.14 3.82 Potable Water Elevated Storage Tank Capacity: 1 tank 200,000 gal; 1 tank 750,000 gal; 2 tanks 500,000 gal Potable Water Ground Storage Tank Capacity: 1 tank 135,000 gal; 1 tank 250,000 gal; 1 tank 1,000,000 gal; 1 tank 25,000 gal Pumping Capacity of Potable Water Wells: 9.231 million gallons per day Sanitary Sewer Ground Storage Tank Capacity: 4,000,000 gal Reuse Water Elevated Storage Tank Capacity: 1 tank 200,000 gal Reuse Water Ground Storage Tank Capacity: 1 tank 1,000,000 gal Stormwater System Storm drains (miles) 44.14 44.14 43.33 43.18 42.10 42.03 42.05 42.01 41.64 41.64 (1) FY 2020 Increase due to golf courses not being included in prior years. N/A: Not available. Source: City of Fort Walton Beach Performance Measures. 131  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 12/6/21 to 12/6/22 Wright National 1151306332 Fisher-Brown Agency Flood $ 500,000 B #7 Hollywood Boulevard $ 500,000 C Police Department 10/12/21 to 10/12/22 Wright National 1151291263 Fisher-Brown Agency Flood $ 500,000 B #5 Hollywood Boulevard $ 300,000 C Fire Department 10/12/21 to 10/12/22 Wright National 1151292103 Fisher-Brown Agency Flood $ 402,700 B 107 Miracle Strip Parkway $ 128,200 C Auditorium 10/12/21 to 10/12/22 Wright National 1151291796 Fisher-Brown Agency Flood $ 402,700 B 107 Miracle Strip Parkway $ 382,900 C City Hall 10/12/21 to 10/12/22 Wright National 1151292114 Fisher-Brown Agency Flood $ 177,300 B 107 Miracle Strip Parkway $ 25,000 C Council Chamber 10/12/21 to 10/12/22 Wright National 1151292125 Fisher-Brown Agency Flood $ 402,700 B 107 Miracle Strip Parkway $ 382,900 C Annex Building 10/12/21 to 10/12/22 Wright National 1151292120 Fisher-Brown Agency Flood $ 389,700 B 107 Miracle Strip Parkway $ 16,300 C Bathrooms Building 10/12/21 to 10/12/22 Wright National 1151291389 Fisher-Brown Agency Flood $ 450,000 B 141 Miracle Strip Parkway $ 100,000 C City Museum 10/12/21 to 10/12/22 Wright National 1151291280 Fisher-Brown Agency Flood $ 350,000 B 22 McGriff Street $ 50,000 C Child Care Facility 12/2/20 to 12/2/21 Wright National 1150164378 Fisher-Brown Agency Flood $ 38,500 B 338 Miracle Strip Parkway Restroom, East of Pavilion Liza Jackson Park 12/2/20 to 12/2/21 Wright National 1150164379 Fisher-Brown Agency Flood $ 38,500 B 338 Miracle Strip Parkway Restroom Near Ditch Liza Jackson Park 05/17/21 to 05/17/22 Wright National 1150342974 Fisher-Brown Agency Flood $ 98,300 B 55 Ferry Road Boy Scout Hut 07/23/21 to 07/23/22 Wright National 1151270502 Fisher-Brown Agency Flood $ 300,000 B 18 Robinwood Drive $ 50,000 C Pump Station #1 06/23/21 to 06/23/22 Wright National 1150458831 Fisher-Brown Agency Flood $ 55,000 B 168 Coral Drive SW City Hall Ball Field Restrooms 10/01/21 to 10/01/22 Commerce and Industry Insurance 12896318 Public Risk Insurance Agency Petroleum $ 1,000,000/inc Golf Course, Police, City Yard, Fuel Station Liability $ 1,000,000/agg Pump Station - Fire, Recreation Center 132  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 10/01/21 to 10/01/22 PGIT PKFL10462003 21-17 Public Risk Insurance Agency Inland $ 750,000 2M | Blanket Unscheduled Marine $ 32,672 6M | Contractor's / Mobile Equipment $ 35,953 6M | Contractor's / Mobile Equipment $ 44,669 6M | Contractor's / Mobile Equipment $ 30,204 6M | Contractor's / Mobile Equipment $ 30,204 6M | Contractor's / Mobile Equipment $ 30,204 6M | Contractor's / Mobile Equipment $ 26,827 6M | Contractor's / Mobile Equipment $ 29,079 6M | Contractor's / Mobile Equipment $ 29,079 6M | Contractor's / Mobile Equipment $ 49,788 6M | Contractor's / Mobile Equipment $ 45,158 6M | Contractor's / Mobile Equipment $ 54,284 6M | Contractor's / Mobile Equipment $ 78,902 6M | Contractor's / Mobile Equipment $ 665,000 125 - 2020 Yamaha DR2E AAC Golf Carts $ 52,765 6M | Contractor's / Mobile Equipment $ 97,373 6M | Contractor's / Mobile Equipment $ 35,808 6M | Contractor's / Mobile Equipment $ 48,088 6M | Contractor's / Mobile Equipment $ 55,654 6M | Contractor's / Mobile Equipment $ 32,943 6M | Contractor's / Mobile Equipment $ 30,843 6M | Contractor's / Mobile Equipment $ 30,753 6M | Contractor's / Mobile Equipment $ 54,116 6M | Contractor's / Mobile Equipment $ 25,343 6M | Contractor's / Mobile Equipment $ 40,343 6M | Contractor's / Mobile Equipment $ 37,236 6M | Contractor's / Mobile Equipment $ 26,165 6M | Contractor's / Mobile Equipment $ 29,660 6M | Contractor's / Mobile Equipment $ 81,611 6M | Contractor's / Mobile Equipment $ 81,611 6M | Contractor's / Mobile Equipment $ 35,403 6M | Contractor's / Mobile Equipment $ 25,190 6M | Contractor's / Mobile Equipment $ 28,428 6M | Contractor's / Mobile Equipment $ 63,048 6M | Contractor's / Mobile Equipment $ 26,358 6M | Contractor's / Mobile Equipment $ 24,657 6M | Contractor's / Mobile Equipment $ 24,657 6M | Contractor's / Mobile Equipment $ 30,567 6M | Contractor's / Mobile Equipment $ 35,543 6M | Contractor's / Mobile Equipment $ 93,150 Electronic Data Processing Equipment - RC $ 730,000 Fine Arts $ 6,500 Other Inland Marine (Street Signs) $ 250,000 Rented, Borrowed, Leased Equipment - ACV $ 4,065,836 Total All Inland Marine 133  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 7/13/21 to 7/13/22 Julio Lacayo Travelers 107301424 Fisher-Brown Agency Public Official $ 50,000 Finance Director Bond 7/25/21 to 7/25/22 Carrie Gagnon - Travelers 107128081 Fisher-Brown Agency Public Official $ 50,000 Customer Service Administrator, Finance Bond Department 2/18/21 - Until CancelledKim Barnes - Travelers 107222946 Fisher-Brown Agency Public Official $ 50,000 City Clerk Bond 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Auto $ 100,000 Uninsured Motorist $ 1,000,000 CSL Liability 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Forgery $ 250,000 Alteration 10/01/21 to 10/01/22 PGIT PKFL1046200315-11 Public Risk Insurance Agency Money & $ 10,000 Securities (theft) 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Crime $ 250,000 Public Employees (Employee dishonesty) Blanket Fidelity Bond 10/01/21 to 10/01/22 PGIT PKFL1046200316-07 Public Risk Insurance Agency General $ 1,000,000 Occurance Liability 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Property $ 56,869,117 Blank Real & Personal Property 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Property $ 500,000 Business Income $ 1,000,000 Additional Expense 10/01/21 to 10/01/22 PGIT WC-FL1046200316-07 Public Risk Insurance Agency Worker's $ 1,000,000 Accident Comp $ 1,000,000 Disease 10/01/21 to 10/01/22 PGIT PKFL1046200316-12 Public Risk Insurance Agency Public Officials $ 5,000,000/inc Claims Made Empl. Practice $ 5,000,000/agg Claims Made 10/01/21 to 10/01/22 Ace American N16744931 Chubb AD&D $ 75,000 Line of Duty Coverage ACHUBB Co. $ 150,000 Fresh Pursuit Coverage $ 225,000 Unlawful/Unintentional 10/01/21 to 10/01/22 PGIT PKFL1046200315-11 Public Risk Insurance Agency Boiler & $ 56,869,117 Machinery 5/01/21 to 5/01/24 Travelers 105927344 Fisher-Brown Agency Fiduciary $ 2,000,000 Retirement Fund for General Liability Employees and Police 10/01/21 to 10/01/22 Ace American PTP N1793868A Chubb Group Cancer $ 25,000 First Diagnosis Cancer Benefit $ 25,000 First Diagnosis Benefit Continuation Source: City of Fort Walton Beach Risk Management Department $ 75,000 Cancer Death Benefit 134  CITY OF FORT WALTON BEACH, FLORIDA OTHER SUPPLEMENTARY INFORMATION SCHEDULE OF RECEIPTS AND EXPENDITURES OF FUNDS RELATED TO THE DEEPWATER HORIZON OIL SPILL FOR THE YEAR ENDED SEPTEMBER 30, 2021 Amounts Amounts Received in Expended in the 2020-2021 the 2020-2021 Source Fiscal Year Fiscal Year Florida Coastal Protection Trust Fund Early Restoration Deepwater Horizon oil spill $ - $ 5,759 135  INDEPENDENT AUDITORS’ REPORT ON THE SCHEDULE OF RECEIPTS AND EXPENDITURES OF FUNDS RELATED TO THE DEEPWATER HORIZON OIL SPILL To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida We have audited the financial statements of the City of Fort Walton Beach, Florida (the City) as of and for the year ended September 30, 2021, and have issued our report thereon dated March 12, 2021, which contained an unmodified opinion on those financial statements. Our audit was performed for the purpose of forming an opinion on the financial statements as a whole. The Schedule of Receipts and Expenditures of Funds related to the Deepwater Horizon Oil Spill, as listed in the table of contents, is presented for the purpose of additional analysis as required by Chapter 288.8018, Florida Statutes, and the Chapter 10.557(3)(f), Rules of the Auditor General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Fort Walton Beach, Florida March 8, 2022 136  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Federal Agency Assistance Passed Pass-Through Entity Listing Through to Federal Project Number Contract/Grant Number Expenditures Subrecipients U.S. Department of Housing & Urban Development Direct programs: Community Development Block Grants 2019-21 14.218 N/A $ 109,199 $ 76,800 COVID-19 Community Development Block Grants 14.218 B-20-MW-12-0030 185,373 134,410 294,572 211,210 U.S. Department of Justice Direct programs: Public Safety Partnership and Community Policing (COPS) Grant 16.710 2020UMWX0107 138,996 - Indirect programs: Pass-through from Florida Department of Law Enforcement (FDLE): COVID-19 Coronavirus Emergency Supplemental Funding (CESF) 16.034 2021-CESF-OKAL-2-C9-136 83,496 - Byrne Memorial Justice Assistance Grant 2020 16.738 2020-JAGC-OKAL-8-5R-024 9,125 - 231,617 - U.S. Department of the Treasury Indirect programs: Pass-through from Florida Division of Emergency Management (FDEM) and Okaloosa County, Florida: COVID-19 Coronavirus Relief Fund 21.019 SLT0050 702,459 - U.S. Department of Homeland Security Direct programs: Assistance to Firefighters Grant 97.044 EMW-2019-FG-11054 63,119 - Staffing for Adequate Fire and Emergency Response (SAFER) Grant 97.083 EMW-2018-FH-00488 336,742 - Indirect programs: Pass-through from Florida Division of Emergency Management (FDEM): Disaster Grants - Public Assistance 97.036 Z2635 216,272 - 616,133 - TOTAL EXPENDITURES OF FEDERAL AWARDS $ 1,844,781 $ 211,210 137  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the City of Fort Walton Beach, Florida (the City), under programs of the federal government for the year ended September 30, 2021. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the City, it is not intended to, and does not, present the financial position, changes in net position, or cash flows of the City. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 3. INDIRECT COST RATE The City has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. 138  INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fort Walton Beach, Florida (the City), as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 8, 2022. Internal Control over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and questioned costs, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item 2021-001 to be a material weakness. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item 2021-002 to be a significant deficiency. 139 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. City of Fort Walton Beach, Florida’s Response to Findings The City’s response to the findings identified in our audit is presented in the accompanying schedule of findings and responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fort Walton Beach, Florida March 8, 2022 140  INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR THE MAJOR FEDERAL PROGRAMS AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Report on Compliance for Each Major Federal Program We have audited the City of Fort Walton Beach, Florida’s (the City) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the City’s major federal programs for the year ended September 30, 2021. The City’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal program. Auditors’ Responsibility Our responsibility is to express an opinion on compliance for the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal programs. However, our audit does not provide a legal determination of the City’s compliance. Opinion on Major Federal Programs In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal programs for the year ended September 30, 2021. 141 Report on Internal Control Over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected and corrected on a timely basis. A significant deficiency in internal control over compliance is a deficiency or a combination of deficiencies in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Fort Walton Beach, Florida March 8, 2022 142  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 I. SUMMARY OF AUDITORS' RESULTS Financial Statements Type of auditors' report issued: Unmodified Internal control over financial reporting: • Material weakness(es) identified? X Yes No • Significant deficiency(ies) identified? X Yes No Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: • Material weakness(es) identified? Yes X No • Significant deficiency(ies) identified? Yes X No Type of auditors' report issued on compliance for major programs: Unmodified • Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance? Yes X No Identification of major programs: Assistance Listing No. Name of Federal Program 21.019 Coronavirus Aid, Relief, and Economic Security (CARES) Act 97.044 Assistance to Firefighters Dollar threshold used to distinguish between type A and type B programs: $ 750,000 Auditee qualified as federal low-risk auditee? Yes X No 143  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 II. FINANCIAL STATEMENT FINDINGS FINDING 2021-001 – RECONCILIATION OF GRANT ACTIVITIES Criteria The City’s internal control over financial reporting is designed to allow for management and employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, a material misstatement on a timely basis. Pursuant to GASB Statement No. 33, recipients of expenditure-driven grants should recognize revenue as qualifying expenditures are incurred. Condition The City provided schedule of grant revenues and expenditures, including unearned revenues and receivables, did not reconcile to the accounting records and other supporting documentation. Cause Reconciliation of grant activities for financial reporting purposes was not prepared and reviewed on a timely basis by appropriately experienced and trained personnel. While the City has a written policy for grant administration activities, that policy does not provide the guidance necessary to facilitate financial reporting of grant activities in accordance with U.S. general accepted accounting procedures as well as preparation of the Schedule of Expenditures of Financial Awards (SEFA) required by the Uniform Guidance. Effect Various audit adjustments were proposed and accepted by management to properly reconcile grant activity for financial reporting purposes and to prepare the SEFA. Recommendation  Management should adopt written policies and procedures for identifying and reconciling expenditure-driven grant revenues with related qualifying expenditures.  These policies should reflect who is responsible for preparing and reviewing the reconciling schedule of grant activities for financial reporting purposes as well as preparation of the SEFA. Management’s Response Concur. The Finance Department will adopt written policies and procedures for identifying and reconciling expenditure-driven grant revenues with related expenditures/expenses. The Finance Director will present a policy update to the City Manager to ensure this practice is implemented. 144  CITY OF FORT WALTON BEACH, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 II. FINANCIAL STATEMENT FINDINGS – CONTINUED FINDING 2021-002 – COMPREHENSIVE ACCOUNTING POLICIES AND PROCEDURES / DEPARTMENT STAFFING Criteria The City’s internal control over financial reporting is designed to allow for management and employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, a material misstatement on a timely basis. Condition The City does not have written policy that outlines the nature and types of general ledger and account reconciliation reviews that should take place on a monthly, quarterly and year end basis in a centralized location. There were several correcting journal entries proposed by management after the year-end financial information was provided to auditors in January 2022. Cause There is not sufficient time for City staff to accomplish a robust review of the final trial balances, due to the lack of cohesive and comprehensive accounting policies and procedures that identify all tasks, particularly year end closing considerations. In addition, there is inadequate accounting department staffing for the volume of accounting activities to be performed and reviewed throughout the year. Effect The system of internal control over financial accounting and reporting is not functioning as designed for the year ended September 30, 2021. Recommendation  The City should adopt a comprehensive and cohesive set of written policies outlining accounting and financial reporting procedures and activities.  These policies should outline the personnel responsible for performing and reviewing each task as well as the timeframe for completion. In addition, management should establish more effective review and reconciliation policies and procedures, as a customary part of the accounting process, to perform more frequent reviews of the general ledger activity throughout the year.  The accounting department has been unable to fill a vacant senior accountant position. City management needs to evaluate the pay scale along with advertising strategies for the position. Management’s Response Concur. Management is in the process of revising outdated policies regarding the timing of general ledger account reconciliations. The City is actively trying to hire additional professional staff to facilitate the performance of a robust accounting review of work performed on a timely basis. 145  City of Fort Walton Beach “The Treasure of the Emerald Coast” 107 Miracle Strip Parkway SW * Fort Walton Beach, FL 32548 (850) 833-9504 * Fax (850) 833-9640 www.fwb.org SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED SEPTEMBER 30, 2021 I. FINANCIAL STATEMENT FINDINGS FINDING 2020-001 – BANK RECONCILIATIONS Condition Bank reconciliations were not performed on a timely basis at the end of each month from October 2019 through February 2020. Bank reconciliations were timely prepared and reviewed starting in April 2020 and throughout the rest of the fiscal year. The City does not have a written policy that requires bank reconciliations be prepared within a designated time period after the end of the month, however it has instituted a standard operating procedure requiring the reconciliations to be reviewed and approved within 15 days of year end. Current Status Corrective action was taken. FINDING 2020-002 – AUDITOR PROPOSED JOURNAL ENTRIES Condition Several audit adjustments were then necessary to properly reflect account balances as follows:  Adjustments to correct opening fund balance to the prior year audited balances;  Adjustments to capital outlay transactions involving accounting for trade-ins;  Adjustments to capital outlay transactions involving equipment acquired via capital lease;  Accruing payables that related to FY20 that were recorded as expenditures in FY21;  Accruing revenue on cost-reimbursement grants to match qualifying expenditures in FY20;  Adjustments to debt payments in the enterprise funds that were recorded on the modified accrual basis of accounting rather than the full accrual basis of accounting required by U.S. GAAP;  Adjustments to record accrued interest on long-term debt. Current Status With the exception of the adjustment to accrue revenue on cost-reimbursement grants to match qualifying expenditures, corrective action was taken for this finding. See finding 2021-001 in the accompanying schedule of findings and questioned costs for additional information about the grant reconciliation process. 146  CITY OF FORT WALTON BEACH, FLORIDA SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS – CONTINUED YEAR ENDED SEPTEMBER 30, 2020 FINDING 2020-003 – FRAUDULENT TRANSACTIONS Condition The City’s former Finance Director opened an American Express card in the name of the City in May 2019. Purchases on the card, which were for personal use, were made between August 2019 and February 2020. Outbound ACH transactions totaling approximately $45,000 from the City’s bank account were used to pay the credit card charges. The Finance Director was terminated after being arrested and charged with criminal misconduct in February 2020. Journal entries in the amount of $6,581 was posted in the City’s general ledger to account for the ACH payments during FY2020. The support documentation provided with the journal entry was falsified and not reflective of the actual charges made on the credit card. The journal entries and the accompanying support documentation were prepared by the City’s former Finance Director and reviewed and approved by the City’s Comptroller. The outbound ACH transactions initiated in December 2019, January 2020, and February 2020 totaling $37,910 had not been accounted for in the City’s general ledger at the time of the former Finance Director’s arrest. Current Status Corrective action was taken. The City adopted a written ACH payment policy and implemented user access controls within the online banking application to ensure compliance with the ACH payment policy. FINDING 2020-004 – IT RISK ASSESSMENT Condition City management has discussed the need for a current external IT risk assessment but has not formally taken action to procure the assessment. Current Status Corrective action was taken. FINDING 2020-005 – BUDGET AMENDMENT Condition The City’s final budget amendment for the fiscal year ended September 30, 2020 was not adopted by Council until January 2021, which is outside the 60-day statutory period. Current Status Corrective action was taken. 147  INDEPENDENT ACCOUNTANTS’ REPORT ON AN EXAMINATION OF COMPLIANCE REQUIREMENTS IN ACCORDANCE WITH CHAPTER 10.550, RULES OF THE AUDITOR GENERAL To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida We have examined the City of Fort Walton Beach, Florida’s (the City’s) compliance with the following requirements for the year ended September 30, 2021: 1) Section 218.415, Florida Statutes, in regard to the investments. 2) Section 218.8018, Florida Statutes, in regard to the Deepwater Horizon Oil Spill receipts and expenditures. Management is responsible for the City’s compliance with those requirements. Our responsibility is to express an opinion on the City’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the City complied, in all material respects, with the specified requirements. An examination involves performing procedures to obtain evidence about whether the City complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgement, including the assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Our examination does not provide a legal determination of the City’s compliance with specified requirements. In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2021. Fort Walton Beach, Florida March 8, 2022 148  MANAGEMENT LETTER To the Honorable Mayor and City Council Members City of Fort Walton Beach, Florida Report on the Financial Statements We have audited the financial statements of the City of Fort Walton Beach, Florida (the City), as of and for the fiscal year ended September 30, 2021, and have issued our report thereon dated March 8, 2022. Auditors’ Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and Chapter 10.550, Rules of the Auditor General. Other Reporting Requirements We have issued our Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards; Independent Auditors’ Report on Compliance for the Major Federal Program and on Internal Control over Compliance Required by Uniform Guidance, Schedule of Findings and Questioned Costs; and Independent Accountant’s Report on an Examination of Compliance Requirements in Accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule, which are dated March 8, 2022, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial report. Corrective actions have been taken to address findings and recommendations made in the preceding financial audit report. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The official title and legal authority for the City of Fort Walton Beach, Florida has been disclosed in Note 1 to the financial statements. 149 Financial Condition and Management Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether or not the City has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.b., and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the City. It is management's responsibility to monitor the City's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we identified the following recommendation in addition to those matters discussed in our schedule of findings and questioned costs. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate noncompliance with provisions of contracts or grant agreements, or abuse, that has occurred, or are likely to have occurred, that has an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, see the schedule of findings and questioned costs. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the City Council Members, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. We greatly appreciate the assistance and cooperation extended us during our audit. Fort Walton Beach, Florida March 8, 2022 150