Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2025

CITY OF FORT WALTON BEACH, FLORIDA ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2025 PREPARED BY: THE FINANCE DEPARTMENT City of Fort Walton Beach 107 Miracle Strip Parkway Fort Walton Beach, FL 32548 www.fwb.org  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2025 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 Proprietary Funds Statement of Net Position 21 Statement of Revenues, Expenses and Changes in Net Position 23 Statement of Cash Flows 24 Fiduciary Funds Statement of Fiduciary Net Position 26 Statement of Changes in Fiduciary Net Position 27 Notes to the Financial Statements 28 i  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2025 Page Schedule II. FINANCIAL SECTION – CONTINUED C. REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Budgetary Comparison Information Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund 78 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Community Redevelopment Agency 79 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Beal Memorial Cemetery Perpetual Care Fund 80 Notes to the Budgetary Comparison Schedules 81 Pension and OPEB Schedules Schedules of Changes in Net Pension Liability and Related Ratios 82 Schedule of Changes in Total OPEB Liability and Related Ratios 87 Schedule of Pension Contributions 88 Schedule of Investment Returns 89 Notes to the Schedule of Pension Contributions - General Employees' Retirement Fund 90 Notes to the Schedule of Pension Contributions - Police Officers' Retirement Fund 92 Notes to the Schedule of Pension Contributions - Firefighters' Retirement Fund 94 D. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Non-Major Governmental Funds Combining Balance Sheet 96 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 97 Budgetary Comparison Schedules Law Enforcement Trust Special Revenue Fund 98 Law Enforcement Trust Training Special Revenue Fund 99 Florida Building Code Special Revenue Fund 100 Community Development Block Grant Special Revenue Fund 101 III. STATISTICAL SECTION (UNAUDITED) Net Position by Component 102 1 Changes in Net Position 103 2 Fund Balances – Governmental Funds 105 3 Changes in Fund Balances – Governmental Funds 106 4 Revenues and Other Sources 107 5 Assessed Value of Taxable Property 108 6 ii  CITY OF FORT WALTON BEACH, FLORIDA TABLE OF CONTENTS FOR THE YEAR ENDED SEPTEMBER 30, 2025 Page Schedule III. STATISTICAL SECTION (UNAUDITED) – CONTINUED Property Tax Rates Per $1,000 of Taxable Value - All Direct and Overlapping Governments 109 7 Principal Taxpayers 110 8 Property Tax Levies and Collections 111 9 Ratios of Outstanding Debt by Type 112 10 Ratio of Net General Bonded Debt Outstanding 113 11 Pledged Revenue Coverage – Schedule of Revenue Bond Coverage 114 12 Direct and Overlapping Governmental Activities Debt – General Obligations 115 13 Major Employers 116 14 Miscellaneous Demographical Statistics 117 15 Full-Time Equivalent Employees by Function/Program 118 16 Permits, Licenses and Recreational Facilities 119 17 Elections – Okaloosa County Voter Registration 120 18 Special Assessment Billings and Collections 121 19 Major Revenue Sources 122 20 Water and Wastewater Service Rates 123 21 Sanitation and Recycling Service Rates 124 22 Operating Indicators by Function/Program 125 23 Capital Asset Statistics by Function/Program 126 24 Insurance Coverage 127 25 IV. COMPLIANCE SECTION 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 130 Independent Accountants' Report on an Examination of Compliance Requirements in Accordance with Chapter 10.550, Rules of the Florida Auditor General 132 Management Letter 133 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 27, 2026 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, 2025, 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, 2025, 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, 2025, 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: 63.67 miles TAXABLE ASSESSED VALUE: $2,197,593,063 WATER & SEWER LINES: 282.82 miles CITY MILLAGE RATE: 4.3282 STORM DRAIN: 43.18 miles POPULATION: 21,120 POLICE STATIONS: 1 FIRE STATIONS: 2 EMPLOYEES: 362 positions, 317.51 FTE’s LIBRARIES: 1 MUSEUMS: 4 SWORN POLICE OFFICERS: 54 18-HOLE GOLF COURSES: 2 FIREFIGHTING PERSONNEL: 44 ACRES OF PARKS: 206 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 over 20,000 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. In Spring 2023, the Landing Park renovations commenced with Phase 1 of this project, with Phase 3 initiated in late 2024, and is slated to be finished in 2026. Building upon that with the complete reconstruction of Brooks Street, including Brooks Bridge Park in 2013, the City’s downtown waterfront was opened to an extent never 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. Additionally, a 4,500 square foot Museum addition and a new Beal Cemetery Administration Building were completed in 2025, which have been tremendous additions to the City. In 2026, a 12-acre Preston Hood Athletic Complex expansion broke ground and the Liza Jackson Park waterfront renovations will begin. A “once in a lifetime” project on the horizon, “Around the Mound”, will connect the then newly built Brooks Bridge to Highway 98, around the Heritage Park and Cultural Center. This will allow the City of Fort Walton Beach to have a true “downtown” atmosphere. Fort Walton Beach Landing Rendering The financial reporting entity (the government) includes all the funds and account groups of the City of Fort Walton Beach, Florida, as well as component units. Component units are legally separate entities for which the primary government is financially accountable. Accordingly, the Fort Walton Beach Community Redevelopment Agency is reported as a blended component unit of the City of Fort Walton Beach. The budget process begins in March, which includes Finance staff preparing the new fiscal year's documentation. The City Charter charges the City Manager with the duty of presenting a balanced budget to the City Council. The budget is considered balanced if the total of all available financial resources (either on hand at the beginning of the year or generated during the year) equals or exceeds the total of all financial requirements. In August, the City Manager's proposed budget is presented to City Council for review and discussion. During September, two public hearings to formally adopt the millage (property tax) rate and budget are held per State Statute. The adopted budget is published no later than October 1. In April, the City Council, acting as the Legislative Body of the City, holds at least one (1) strategic planning session, if needed. The goals set during this meeting are used by staff to formulate the budget that is presented to City Council. In June, the tentative millage rate is set, and staff determines Council’s priorities and position on issues specific to development of the operational and capital budgets for the upcoming fiscal year. City Council’s decisions provide the framework under which the budget is prepared to meet City Council’s programmatic objectives within available fiscal resources. The meeting is open to the public and the public is encouraged to attend and participate. Department Directors are responsible for identifying their staffing needs, operational funding needs within budget development parameters, five-year capital requests, as well as corresponding revenue sources to fund their needs. In addition, they must conduct a comprehensive review of departmental goals, objectives, and metrics. vi  The City Charter charges the City Manager with the duty of presenting a balanced budget to City Council. To accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and Budget Analyst. The Committee conducts comprehensive meetings with Department Directors to review their budget requests and a collaborative effort is undertaken to achieve City Council and department goals within fiscal constraints. The Budget Committee enlists assistance for areas of specialized interests, such as the Information Technology Director 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, the Community Redevelopment Agency Fund, and the Beal Memorial Cemetery Perpetual Care Fund, this comparison is presented on pages 78-81 as required supplementary information. For governmental funds with appropriated annual budgets, other than those previously mentioned, this comparison is presented with the combining and individual fund statements and schedules (Section D of this report) which starts on page 96. 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 2025-2026 budget of $65,247,932 is $4.7M, or 7.74%, more than the adopted FY 2024-2025 budget. The increase is primarily due to rising costs of items like materials, utilities, and fuel; as well as the addition of multiple capital improvement projects. The budget is predicated on a millage rate of 4.3282 mills; as a result, ad valorem revenues will increase by 5.44% city-wide as compared to the final 2023 Certification of Taxable Value DR-420. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning over 640 square miles. Defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases currently represent a $9B annual economic impact on the area, with 72% or the local economy in jobs alone 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 drivable destination in Florida, according to a survey of auto visitors by Visit Florida. vii  Long-Term Financial Planning The City undertakes several processes to assist in future planning, such as:  A five-year Capital Improvement Program (CIP) Plan is developed and approved by City Council each year during the annual budget process.  Five-year replacement plans for capital equipment, including vehicles, equipment, and computer hardware and software, are also developed and approved by management each year during the annual budget process.  Annual Strategic Plan, which focuses on a one-to-three-year time period. Relevant Financial Policies The City has several financial policies that are utilized during daily operations, as well as during the budget and financial planning processes. The City utilizes fund balance reserves only for one-time non-recurring expenditures. In addition, the City maintains its fund balance level in the General Fund at 30% of fund expenditures – this policy helps to ensure that the City has sufficient funding in place for emergency and disaster relief. Major Initiatives These financial policies, as well as other indicators, were considered when adopting the City’s budget for FY 2025-2026. The City’s budget for FY 2025-2026 allocates $32.2M to the General Fund, $22.4M to the Enterprise Funds, and $10.6M to Other Funds. For the FY 2025-2026 budget, the ad valorem rate remained at the millage rate of 4.3282 mills. The FY 2025-2026 budget includes a new five-year utility rate study, which was adopted by City Council in September 2025. The utility rate study included recommendations on rate structures for water and wastewater, stormwater, and solid waste. No other significant changes to the City’s various rates and fees are included in the FY 2024-2025 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 Annual Comprehensive Financial Report (ACFR) for the fiscal year ended September 30, 2024, which the City has received for over 20 consecutive years. To be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized ACFR, satisfying both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one (1) year only. Staff believes the current report continues to meet the Certificate of Achievement Program requirements and will be submitted to the GFOA to determine its eligibility for recertification. In addition, the City also received the GFOA’s Distinguished Budget Presentation Award for its annual budget dated October 1, 2025. The City has received this prestigious award for 30 consecutive years. 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, X Jason Davis 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, 2024 Executive Director/CEO x  Citizens of Fort Walton Beach City Council City Clerk City Manager 3 FTE 3.25 FTE City Attorney 0400 0200 & 0210 Public Works Growth Management Financial Services Fire Services Human Resources Police Services Recreation Services And Utility Services 14.25 FTE 16 FTE & 1 Contract 43.25 FTE 8.50 FTE 74.20 FTE 71.20 FTE 80 FTE 1200 to 1217 & 2000 0500 & 0520 & 0530 0900 0300 & 0320 0800 1000 to 1080 1220-1240 & 1300-1380 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 Maintenance: Parks, Sewer Collections Debt Service & Policing/CRA CRA Management Hazardous Right-Of-Way and Stormwater Materials Crime Prevention Cemetery Treasury Response Streets Communications Library Utility Billing Fire Education 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 Audit of the Financial Statements Opinions 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, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. 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, as of September 30, 2025, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit 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 City’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison information for the General Fund and major special revenue funds, 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 is the responsibility of management and, 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. 2 Supplementary 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 combining and individual nonmajor fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic 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 basic financial statements. The 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 are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2026, 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 27, 2026 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, 2025. 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 resources of the City exceeded its liabilities and deferred inflows of resources by $99.0 million (total net position). Of this amount, $19.2 million represents unrestricted net position that is available to meet the City’s ongoing obligations to citizens and creditors.  The City’s net position increased by $5.3 million during the fiscal year. Net position for governmental activities rose by $3.4 million, primarily driven by robust market performance that yielded $2.4 million in investment earnings. Business-type activities contributed an additional $1.9 million increase, as revenues exceeded total expenses and transfers. This growth was largely supported by capital grants and contributions; specifically, $786,644 from the Florida Department of Transportation (FDOT) for the Brooks Bridge utility relocation and $227,108 from the Florida Department of Environmental Protection (FDEP) for Martisa Road NW stormwater improvements. Outside of these capital-related grant projects, operating expenses and charges for services remained stable compared to the prior year.  As of the close of the fiscal year, the City’s governmental funds have combined ending fund balances of $39.7 million, a decrease of $4.0 million from the prior year. This decrease is mainly attributable to an increase in the number and scope of planned capital projects completed during the year and in progress at year end.  As of September 30, 2025, committed, assigned, and unassigned fund balance of the General Fund totaled $25.0 million, or 51.6% of the total General Fund expenditures.  The City’s total debt decreased by $1.9 million or 5.2%, during the fiscal year. This decrease is proportional to scheduled principal payments and issuance of leases and subscription liabilities. 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  The statement of net position presents information on all 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), and culture and recreation (parks, golf, library, and museum). 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 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. 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. 5  The City maintains seven individual governmental funds (General Fund, Community Redevelopment Agency Fund, Florida Building Code Fund, Law Enforcement Trust Fund, Law Enforcement Training 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, the Community Redevelopment Agency Fund and the Beal Memorial Cemetery Perpetual Care Fund. Data from the other four governmental funds is 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 and the Beal Memorial Cemetery Perpetual Care Fund are considered major funds 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. Budgetary comparison schedules are provided for the General Fund and the major special revenue funds on pages 78-81 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 21-25 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 26-27 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 28 of this report. 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 82-95 of this report. The combining and individual non-major funds statements and schedules referred to earlier in connection with non-major governmental funds immediately follows the required supplementary information on pension and OPEB plans and can be found beginning on page 96 of this report. 6 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 $99.0 million, as reported in Table 1. The City’s net position increased by $5.3 million for the fiscal year ended September 30, 2025. The governmental activities reported an increase of $3.4 million and the business-type activities reported an increase of $1.9 million. Table 1 Statement of Net Position As of September 30 (in Thousands of Dollars) Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Assets Current & Other $ 47,242 $ 50,310 $ 16,757 $ 16,751 $ 63,999 $ 67,061 Capital Assets 60,047 54,574 36,502 34,975 96,549 89,549 Total Assets 107,289 104,884 53,259 51,726 160,548 156,610 Deferred Outflows of Resources 6,206 11,493 301 1,994 6,507 13,487 Liabilities Long-Term Liabilities * 36,245 44,413 13,042 15,751 49,287 60,164 Other Liabilities * 4,313 5,857 2,984 3,261 7,297 9,118 Total Liabilities 40,558 50,270 16,026 19,012 56,584 69,282 Deferred Inflows of Resources 10,018 6,557 1,494 545 11,512 7,102 Net Position Net Investment in Capital Assets 40,721 35,708 23,384 20,555 64,105 56,263 Restricted 14,805 14,946 813 590 15,618 15,536 Unrestricted * 7,393 8,896 11,843 13,018 19,236 21,914 Total Net Position $ 62,919 $ 59,550 $ 36,040 $ 34,163 $ 98,959 $ 93,713 * As restated due to implementation of GASB Statement (GASBS) No. 101, Compensated Absences. By far, the largest portion of the City’s net position, $64.1 million or 64.8%, 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 $15.6 million, or 15.8%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $19.2 million is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. Reported in Table 2 on the next page are the key elements of the increase in net position for the current and prior fiscal year. 7  Table 2 Statement of Activities For Year Ended September 30 Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Revenues Program Revenue: Charges for Services $ 5,440,279 $ 5,099,923 $ 18,971,073 $ 17,804,055 $ 24,411,352 $ 22,903,978 Operating Grants & Contributions 1,239,109 1,089,161 - - 1,239,109 1,089,161 Capital Grants & Contributions 243,432 789,571 1,082,695 3,721,220 1,326,127 4,510,791 General Revenue: - - Property Taxes 7,693,921 7,750,534 - - 7,693,921 7,750,534 Other Taxes 13,038,481 13,793,955 - - 13,038,481 13,793,955 Tax Increments for Redevelopment 2,887,289 2,842,113 - - 2,887,289 2,842,113 Other Revenue 4,509,270 5,230,022 683,572 1,149,888 5,192,842 6,379,910 Total Revenues 35,051,781 36,595,279 20,737,340 22,675,163 55,789,121 59,270,442 Expenses Function/Program Activities General Government 6,893,053 5,612,265 - - 6,893,053 5,612,265 Public Safety 16,698,910 15,594,706 - - 16,698,910 15,594,706 Physical Environment 401,575 425,314 - - 401,575 425,314 Transportation 1,004,089 1,318,838 - - 1,004,089 1,318,838 Economic Environment 1,275,342 1,463,389 - - 1,275,342 1,463,389 Culture & Recreation 6,726,220 6,912,043 - - 6,726,220 6,912,043 Debt Service Interest 668,906 705,158 - - 668,906 705,158 Utilities - - 11,080,697 11,238,837 11,080,697 11,238,837 Sanitation - - 4,745,877 4,580,016 4,745,877 4,580,016 Other - - 1,048,423 1,196,475 1,048,423 1,196,475 Total Expenses 33,668,095 32,031,713 16,874,997 17,015,328 50,543,092 49,047,041 Change in Net Position Before Transfers 1,383,686 4,563,566 3,862,343 5,659,835 5,246,029 10,223,401 Transfers 1,985,575 1,848,670 (1,985,575) (1,848,670) - - Change in Net Position 3,369,261 6,412,236 1,876,768 3,811,165 5,246,029 10,223,401 Net Position – Beginning * 59,550,339 53,138,103 34,163,194 30,352,029 93,713,533 83,490,132 Net Position – Ending $ 62,919,600 $ 59,550,339 $ 36,039,962 $ 34,163,194 $ 98,959,562 $ 93,713,533 * As restated due to implementation of GASBS No. 101, Compensated Absences. Current Year Impacts – Governmental Activities Governmental activities increased the City’s net position by $3.4 million for the fiscal year ended September 30, 2025. Key elements of this change are as follows:  Total revenues decreased by $1.5 million, or 4.2%, which is primarily attributable to a decrease in investment earnings as a result of a decrease in market interest rates.  Public safety expenses increased $1.1 million, or 7.1%. This is primarily attributable to an increase in payroll and related taxes and employee benefit costs.  Total expenses increased by $1.6 million, or 5.1%, which was largely due to inflationary pressures on payroll and maintenance costs. 8  C hart 1 Program Revenues & Expenses - Governmental Activities (in millions) $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 General Government Public Safety Physical Environment Transportation Economic Environment Culture & Recreation Debt Service Interest Revenues Expenses C hart 2 Interest & Investment Revenues by Source - Governmental Activities Earnings $2,167,478 Other Revenue $622,229 Charges for Services Other Intergovernmental $5,440,279 $1,719,563 Franchise Fees Operating Grants & $2,387,255 Contributions $1,239,109 Capital Grants & Contributions $243,432 Utility Service Taxes $4,716,511 Ad Valorem Taxes $7,693,921 Sales Taxes Tax Increments for $5,934,715 Redevelopment $2,887,289 Current Year Impacts – Business-Type Activities Business-type activities increased the City’s net position by $1.9 million for the fiscal year ended September 30, 2025. Key elements of this change are as follows:  Capital grants and contributions decreased by $2.6 million, or 70.9%, which is primary attributable to expending American Rescue Plan Act (ARPA) grant funding of $3.7 million on a water meter replacement project during the prior fiscal year.  Sanitation expenses increased $165,861, or 3.6%, which is primarily attributable to an increase in in payroll and related taxes and employee benefit costs. 9  Chart 3 Program Revenues and Expenses - Business-Type Activities $16 $14 $12 Millions $10 $8 $6 $4 $2 $0 Utilities Sanitation Stormwater Revenues Expenses Chart 4 Revenues by Source - Business-Type Activities Capital Grants & Contributions $1,082,695 Interest & Investment Earnings $670,706 Other Revenue Charges for Services $12,866 $18,971,073 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, 2025, the City’s governmental funds have combined ending fund balances of $39.7 million, a decrease of $4.0 million from the prior year. Approximately 21.6% of this amount, or $8.6 million, is available for spending at the discretion of City Council. The remainder of fund balance is non-spendable, restricted, or committed. Details of the fund balance classifications can be found Note 16 to the financial statements. The General Fund is the chief operating fund of the City. At the end of the fiscal year, assigned and unassigned fund balance of the General Fund was $8.6 million, while total fund balance was $27.9 million. As a measure of the General Fund’s liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total expenditures. Total assigned and unassigned fund balances represent 22.4% of the General Fund’s total expenditures, while total fund balance represents 72.7% of the General Fund’s total expenditures. During the current fiscal year, the fund balance of the City’s General Fund decreased by $4.2 million. This decrease is primarily attributable to several ongoing major capital projects. The fund balance in the CRA Fund decreased by $442,902. This decrease is primarily attributable to two ongoing capital projects for the Fort Walton Beach Landing improvements and a museum addition at the Heritage Park and Cultural Center. The fund balance in the Beal Memorial Cemetery Perpetual Care Fund increased by $530,920. This increase is primarily attributable to earnings from the investment portfolio exceeding cemetery maintenance expenditures. Proprietary Funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $11.8 million on September 30, 2025, of which the Utilities Fund reported $8.0 million, the Sanitation Fund reported $2.7 million, and the Stormwater Fund reported $1.1 million. The factors concerning the finances of these funds have already been addressed in the discussion of the City’s business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS A schedule showing the original budget, the final budget, the actual results, and the variance from the final budget to the actual results is included for the General Fund on page 78 of the financial statements. The difference between the original budget and the final budget for expenditures was an increase of $1.5 million. Significant information related to this difference is summarized below.  Decrease of $1.1 million for capital outlay related to not being awarded anticipated grant funding.  Increase of $924,709 for capital outlay to purchase 15 vehicles for the City’s Police Department and two vehicles for the Parks and Recreation Department. 11   Increase of $500,000 for capital outlay to building a performance stage at the Fort Walton Beach Landing Park.  Increase of $386,200 for capital outlay to reconfigure fields and install synthetic turf at the Preston Hood Athletic Complex.  Increase of $300,000 for public safety expenditures to engage a contractor to perform a comprehensive traffic safety action plan that is partially funded by a federal grant award. Actual results, when compared to the final budget, show a variance of $3.4 million for expenditures. This variance is primarily due to amending the budget for expenditures planned but not yet commenced or completed. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities, as of September 30, 2025, was $96.5 million (net of accumulated depreciation). This represents a net increase of $7.0 million, or 7.8%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City expended $2.3 million for replacement vehicles for the City’s fleet.  Fort Walton Beach Landing boardwalk improvements expenditures were $1.8 million.  The City purchased artificial turf and soccer goals at Oakland Park for a total cost of $1.1 million.  The Heritage Park and Cultural Center museum addition expenditures were $594,934.  The City spent $613,710 to re-grass The Pines Course at Fort Walton Beach Golf Club. Table 3 Total Capital Assets, Net of Accumulated Depreciation As of September 30 Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Land $ 8,826,730 $ 8,826,730 $ 709,678 $ 709,678 $ 9,536,408 $ 9,536,408 Buildings 19,375,732 20,342,371 35,530 65,247 19,411,262 20,407,618 Improvements Other Than Buildings 13,522,680 12,293,660 32,430,183 26,466,498 45,952,863 38,760,158 Machinery & Equipment 6,355,377 4,955,772 2,854,666 2,750,377 9,210,043 7,706,149 Easements - - 39,742 39,742 39,742 39,742 Right-of-Use Assets 558,895 407,943 33,304 97,676 592,199 505,619 Subscription Assets 1,803,404 1,385,212 200,930 - 2,004,334 1,385,212 Construction in Progress 9,604,571 6,362,741 197,505 4,845,796 9,802,076 11,208,537 $ 60,047,389 $ 54,574,429 $ 36,501,538 $ 34,975,014 $ 96,548,927 $ 89,549,443 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 44- 47. Long-Term Debt As shown in the table on the next page, as of September 30, 2025, the City had total outstanding long- term debt of $31.7 million, which represents a decrease of $1.9 million, or 5.6% from the prior fiscal year. The City’s debt consists of notes and bonds secured solely by specified revenue sources (i.e., revenue notes and bonds); a loan from a State Revolving Fund; and various financing contracts, leases, and subscription liabilities. The City has no general obligation or special assessment debt. The State of Florida does not place a legal limit of debt on municipalities. For general obligation debts greater than one year, the City is required to conduct a voter referendum. 12  Table 4 Outstanding Debt As of September 30 Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Revenue Notes & Bonds $ 15,905,768 $ 17,457,771 $ 4,673,000 $ 5,185,000 $ 20,578,768 $ 22,642,771 State Revolving Fund Loan - - 8,164,380 8,941,531 8,164,380 8,941,531 Financing Contracts 380,874 222,785 - - 380,874 222,785 Lease Obligations 594,073 421,986 35,817 102,468 629,890 524,454 Subscription Liabilities 1,804,986 1,298,973 179,838 - 1,984,824 1,298,973 $ 18,685,701 $ 19,401,515 $ 13,053,035 $ 14,228,999 $ 31,738,736 $ 33,630,514 Additional information on the City’s long-term debt can be found in Notes 13 and 14 of this report on pages 68-74. 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 2.7% 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.  The local unemployment rate was 4.1%, which represents an approximate 1.0% increase from September 2024. The State of Florida’s unemployment rate was 3.9%, which represents an approximate 0.6% increase from September 2024. 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 Florida Department of Revenue’s Office of Tax Research has updated its estimates of tax distributions the City is expected to receive for the upcoming fiscal year. The table below summarizes the fiscal year 2026 revenue estimates compared to the actual revenues reported for the current fiscal year. FY2026 FY2025 Revenue Source Estimate Actual Variance ($) Variance (%) Communications Service Taxes $ 1,256,258 $ 1,227,012 $ 29,246 2.4% Half-Cent Sales Taxes 2,385,072 2,440,791 (55,719) -2.3% Local Option Fuel Taxes 949,160 933,849 15,311 1.6% Municipal Revenue Sharing Program 1,163,642 1,182,145 (18,503) -1.6%  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 2026. The City’s budget for fiscal year 2026 totals $75.9 million, which is $2.7 million more than the fiscal year 2025 adopted budget. The 2026 budget allocates $41.4 million to the General Fund, a 2.8% increase as compared to the fiscal year 2025 budget; $27.5 million to the enterprise funds; and $7.0 million to other funds. For the fiscal year 2026 budget, the City Council adopted the millage rate of 4.3282 mills, which is the same rate as the previous fiscal year. Personnel expenses account for approximately 46.3% of the City’s budget. The City’s fiscal year 2026 budget remains relatively stable in this category, at 320.19 full-time equivalent (FTE’s) positions, an increase of only 3.3 FTE’s from the prior year. 13 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, 2025 Primary Government Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 4,646,205 $ 719,992 $ 5,366,197 Investments 26,956,232 11,440,724 38,396,956 Receivables, net 460,496 1,278,177 1,738,673 Due from other governments 1,937,232 1,056,144 2,993,376 Inventory, at cost 556,226 19,858 576,084 Prepaid items - 4,534 4,534 Restricted assets Cash and cash equivalents 7,509,746 1,070,596 8,580,342 Net pension asset 1,706,567 1,163,735 2,870,302 Other assets Other receivables 3,468,728 3,732 3,472,460 Capital assets Non-depreciable/amortizable 18,431,301 946,925 19,378,226 Depreciable/amortizable, net 41,616,088 35,554,613 77,170,701 TOTAL ASSETS 107,288,821 53,259,030 160,547,851 DEFERRED OUTFLOWS OF RESOURCES 6,206,037 301,068 6,507,105 LIABILITIES Accounts payable 1,221,771 694,102 1,915,873 Accrued liabilities 1,203,433 214,081 1,417,514 Due to other governments 20,995 13,440 34,435 Unearned revenues 37,891 52,974 90,865 Accrued interest 174,483 53,503 227,986 Payable from restricted assets Customer deposits - 440,357 440,357 Non-current liabilities Due within one year Compensated absences 569,429 123,158 692,587 Lease obligations payable 156,282 35,010 191,292 Subscription liabilities 808,970 38,211 847,181 Financing contracts payable 119,854 - 119,854 Revenue bonds and notes payable 1,597,604 527,000 2,124,604 State revolving fund loans payable - 791,988 791,988 Due in more than one year Compensated absences 1,708,288 369,472 2,077,760 Lease obligations payable 437,791 807 438,598 Subscription liabilities 996,016 141,627 1,137,643 Financing contracts payable 261,020 - 261,020 Revenue bonds and notes payable 14,308,164 4,146,000 18,454,164 State revolving fund loans payable - 7,372,392 7,372,392 Total OPEB liability 3,774,911 1,012,016 4,786,927 Net pension liability 13,160,824 - 13,160,824 TOTAL LIABILITIES 40,557,726 16,026,138 56,583,864 DEFERRED INFLOWS OF RESOURCES 10,017,532 1,493,998 11,511,530 NET POSITION Net investment in capital assets 40,721,488 23,383,823 64,105,311 Restricted Debt service - 157,228 157,228 System improvements - 473,011 473,011 Pension benefits 268,637 183,187 451,824 Redevelopment projects 5,171,206 - 5,171,206 Public safety 1,855,189 - 1,855,189 Other purposes 7,509,746 - 7,509,746 Unrestricted 7,393,334 11,842,713 19,236,047 TOTAL NET POSITION $ 62,919,600 $ 36,039,962 $ 98,959,562 See notes to the financial statements. 15  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2025 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 $ 6,893,053 $ 699,179 $ 12,390 $ - $ (6,181,484) $ - $ (6,181,484) Public safety 16,698,910 900,575 860,931 243,432 (14,693,972) - (14,693,972) Physical environment 401,575 453,875 - - 52,300 - 52,300 Transportation 1,004,089 202,017 21,200 - (780,872) - (780,872) Economic environment 1,275,342 51,201 121,027 - (1,103,114) - (1,103,114) Culture and recreation 6,726,220 3,133,432 223,561 - (3,369,227) - (3,369,227) Debt service interest 668,906 - - - (668,906) - (668,906) Total governmental activities 33,668,095 5,440,279 1,239,109 243,432 (26,745,275) - (26,745,275) Business-type activities Utilities 11,080,697 12,484,176 - 855,587 - 2,259,066 2,259,066 Sanitation 4,745,877 5,433,078 - - - 687,201 687,201 Stormwater 1,048,423 1,053,819 - 227,108 - 232,504 232,504 Total business-type activities 16,874,997 18,971,073 - 1,082,695 - 3,178,771 3,178,771 Total primary government $ 50,543,092 $ 24,411,352 $ 1,239,109 $ 1,326,127 (26,745,275) 3,178,771 (23,566,504) General revenues Taxes Property taxes 7,693,921 - 7,693,921 Sales taxes 5,934,715 - 5,934,715 Utility service taxes 4,716,511 - 4,716,511 Tax increments for redevelopment districts 2,887,289 - 2,887,289 Franchise fees 2,387,255 - 2,387,255 Intergovernmental, unrestricted 1,719,563 - 1,719,563 Gain on sale of assets 586,414 10,479 596,893 Miscellaneous 35,815 2,387 38,202 Interest and investment earnings 2,167,478 670,706 2,838,184 Transfers 1,985,575 (1,985,575) - Total general revenues and transfers 30,114,536 (1,302,003) 28,812,533 CHANGE IN NET POSITION 3,369,261 1,876,768 5,246,029 NET POSITION AT BEGINNING OF YEAR - AS PREVIOUSLY REPORTED 60,770,051 34,399,434 95,169,485 RESTATEMENT - CHANGE IN ACCOUNTING PRINCIPLE (1,219,712) (236,240) (1,455,952) NET POSITION AT END OF YEAR $ 62,919,600 $ 36,039,962 $ 98,959,562 See notes to the financial statements. 16  CITY OF FORT WALTON BEACH, FLORIDA GOVERNMENTAL FUNDS BALANCE SHEET SEPTEMBER 30, 2025 Community Beal Memorial Other Total Redevelopment Cemetery Governmental Governmental General Agency Perpetual Care Funds Funds ASSETS Cash and cash equivalents $ 1,994,811 $ 452,118 $ 201,380 $ 1,997,896 $ 4,646,205 Investments 18,981,138 2,976,659 4,998,435 - 26,956,232 Receivables 3,928,583 641 - - 3,929,224 Due from other funds 14,899 - - - 14,899 Due from other governments 104,957 1,824,380 - 7,895 1,937,232 Inventory, at cost 556,226 - - - 556,226 Restricted assets Investments 7,509,746 - - - 7,509,746 TOTAL ASSETS $ 33,090,360 $ 5,253,798 $ 5,199,815 $ 2,005,791 $ 45,549,764 LIABILITIES Accounts payable $ 781,172 $ 432,051 $ 1,892 $ 6,656 $ 1,221,771 Accrued liabilities 1,033,221 32,383 - 137,829 1,203,433 Due to other funds - - - 14,899 14,899 Due to other governments 20,995 - - - 20,995 Unearned revenues 37,891 - - - 37,891 Total liabilities 1,873,279 464,434 1,892 159,384 2,498,989 DEFERRED INFLOWS OF RESOURCES 3,357,083 - - - 3,357,083 FUND BALANCE Nonspendable 556,226 - - - 556,226 Restricted 7,509,746 4,789,364 - 1,855,189 14,154,299 Committed 11,214,071 - 5,197,923 - 16,411,994 Assigned 6,030,470 - - - 6,030,470 Unassigned 2,549,485 - - (8,782) 2,540,703 Total fund balance 27,859,998 4,789,364 5,197,923 1,846,407 39,693,692 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE $ 33,090,360 $ 5,253,798 $ 5,199,815 $ 2,005,791 $ 45,549,764 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, 2025 Fund balance, total governmental funds (page 17) $ 39,693,692 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 $ 18,431,301 Governmental depreciable/amortizable assets 103,031,795 Less accumulated depreciation/amortization (61,415,707) 60,047,389 Other assets used in governmental activities are not current financial resources and therefore are not reported in the funds. Net pension asset 1,706,567 Unavailable revenues in governmental funds is susceptible to full accrual on the entity-wide statements. Special assessments 35,714 Receivable related to sale of capital assets 313,515 349,229 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 5,591,045 Deferred outflows of resources related to OPEB plan 614,992 Deferred inflows of resources related to pension plans (5,094,324) Deferred inflows of resources related to OPEB plan (1,915,354) (803,641) Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Notes payable (15,905,768) Accrued interest (174,483) Lease obligations payable (594,073) Subscription liabilities (1,804,986) Financing contracts payable (380,874) Compensated absences (2,277,717) Total OPEB liability (3,774,911) Net pension liability (13,160,824) (38,073,636) Net position of governmental activities (page 15) $ 62,919,600 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, 2025 Community Beal Memorial Other Total Redevelopment Cemetery Governmental Governmental General Agency Perpetual Care Funds Funds REVENUES Taxes $ 14,178,604 $ 1,530,199 $ - $ - $ 15,708,803 Permits and fees 2,440,501 - - 631,908 3,072,409 Intergovernmental 7,287,552 1,357,090 - 122,805 8,767,447 Charges for services 3,784,813 - - - 3,784,813 Fines 215,982 - - 21,184 237,166 Investment income 955,643 47,478 506,709 - 1,509,830 Miscellaneous 1,339,941 152,116 5,767 57,617 1,555,441 Total revenues 30,203,036 3,086,883 512,476 833,514 34,635,909 EXPENDITURES Current General government 6,114,022 - - - 6,114,022 Public safety 15,243,357 424,586 - 587,481 16,255,424 Physical environment 309,707 - 11,804 - 321,511 Transportation 517,572 - - - 517,572 Economic environment 20,000 933,083 - 121,027 1,074,110 Culture and recreation 5,282,268 - - - 5,282,268 Capital outlay 7,714,822 2,411,307 - - 10,126,129 Debt service Principal 2,457,508 3,684 - - 2,461,192 Interest 666,292 10,376 - - 676,668 Total expenditures 38,325,548 3,783,036 11,804 708,508 42,828,896 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (8,122,512) (696,153) 500,672 125,006 (8,192,987) OTHER FINANCING SOURCES (USES) Sale of general capital assets 491,244 - - - 491,244 Issuance of leases and financing contracts 308,843 253,251 - - 562,094 Issuance of subscription liabilities 1,183,284 - - - 1,183,284 Transfers in 1,985,575 - 30,248 - 2,015,823 Transfers out (30,248) - - - (30,248) Total other financing sources (uses) 3,938,698 253,251 30,248 - 4,222,197 NET CHANGE IN FUND BALANCE (4,183,814) (442,902) 530,920 125,006 (3,970,790) FUND BALANCE - AS PREVIOUSLY REPORTED 32,043,812 5,232,266 - 6,388,404 43,664,482 ADJUSTMENT - CHANGE FROM NONMAJOR TO MAJOR FUND - - 4,667,003 (4,667,003) - FUND BALANCE - BEGINNING OF YEAR 32,043,812 5,232,266 4,667,003 1,721,401 43,664,482 FUND BALANCE AT END OF YEAR $ 27,859,998 $ 4,789,364 $ 5,197,923 $ 1,846,407 $ 39,693,692 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, 2025 Net change in fund balance – governmental funds (page 19) $ (3,970,790) 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 $ 10,126,129 Less current year depreciation/amortization (4,662,117) 5,464,012 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 and transfers of capital assets (1,975,892) Accumulated depreciation/amortization – disposals and transfers 1,880,460 Other capital asset adjustments 104,380 8,948 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 (468) Special assessment for interest and penalties 2,320 Principal forgiven on notes receivable related to sale of capital assets (4,048) Payments received on receivable related to sale of capital assets (82,104) (84,300) 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 leases and subscription liabilities (1,745,378) Principal payments on long-term liabilities 2,461,192 Change in accrued interest on long-term debt 7,762 723,576 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 asset / liability and related deferred outflows and deferred inflows of resources 1,153,772 Change in other post-employment benefits liability and related deferred outflows and deferred inflows of resources 57,225 Change in long-term compensated absences 16,818 1,227,815 Change in net position of governmental activities (page 16) $ 3,369,261 See notes to the financial statements. 20  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION SEPTEMBER 30, 2025 Stormwater Utilities Fund Sanitation Fund Fund Total ASSETS Current assets Cash and cash equivalents $ 241,662 $ 393,023 $ 85,307 $ 719,992 Restricted assets – cash and cash equivalents 1,065,116 5,480 - 1,070,596 Investments 7,661,817 2,870,513 908,394 11,440,724 Receivables, net 901,750 312,366 64,061 1,278,177 Due from other governments 768,644 - 287,500 1,056,144 Inventory – at cost 19,858 - - 19,858 Prepaid items - - 4,534 4,534 Total current assets 10,658,847 3,581,382 1,349,796 15,590,025 Other assets Other receivables 3,732 - - 3,732 Net pension asset - restricted 620,990 474,604 68,141 1,163,735 Total other assets 624,722 474,604 68,141 1,167,467 Capital assets, net Non-depreciable/amortizable 918,393 - 28,532 946,925 Depreciable/amortizable, net 30,789,783 1,655,954 3,108,876 35,554,613 Total capital assets 31,708,176 1,655,954 3,137,408 36,501,538 Total non-current assets 32,332,898 2,130,558 3,205,549 37,669,005 TOTAL ASSETS 42,991,745 5,711,940 4,555,345 53,259,030 DEFERRED OUTFLOWS OF RESOURCES 178,451 94,740 27,877 301,068 See notes to the financial statements. 21  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF NET POSITION – CONTINUED SEPTEMBER 30, 2025 Stormwater Utilities Fund Sanitation Fund Fund Total LIABILITIES Current liabilities Accounts payable $ 429,018 $ 179,070 $ 86,014 $ 694,102 Accrued liabilities Compensated absences 69,813 42,411 10,934 123,158 Wages 128,543 64,730 20,808 214,081 Interest 53,503 - - 53,503 Due to other governments - 13,440 - 13,440 Lease obligations payable 16,806 - 18,204 35,010 Subscription liabilities 38,211 - - 38,211 Revenue note payable 527,000 - - 527,000 State revolving loan payable 791,988 - - 791,988 Unearned revenues 52,974 - - 52,974 Payable from restricted assets Customer deposits 434,877 5,480 - 440,357 Total current liabilities 2,542,733 305,131 135,960 2,983,824 Non-current liabilities Accrued liabilities Compensated absences 209,439 127,231 32,802 369,472 Lease obligations payable 807 - - 807 Subscription liabilities 141,627 - - 141,627 Revenue note payable 4,146,000 - - 4,146,000 State revolving loan payable 7,372,392 - - 7,372,392 Other post-employment benefits 524,830 349,541 137,645 1,012,016 Total non-current liabilities 12,395,095 476,772 170,447 13,042,314 TOTAL LIABILITIES 14,937,828 781,903 306,407 16,026,138 DEFERRED INFLOWS OF RESOURCES 789,431 577,196 127,371 1,493,998 NET POSITION Net investment in capital assets 18,675,486 1,655,954 3,052,383 23,383,823 Restricted Debt service 157,228 - - 157,228 System improvements 473,011 - - 473,011 Pensions 97,752 74,709 10,726 183,187 Unrestricted 8,039,460 2,716,918 1,086,335 11,842,713 TOTAL NET POSITION $ 27,442,937 $ 4,447,581 $ 4,149,444 $ 36,039,962 See notes to the financial statements. 22  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2025 Sanitation Stormwater Utilities Fund Fund Fund Total OPERATING REVENUES Charges for services $ 12,461,490 $ 5,433,078 $ 1,053,819 $ 18,948,387 OPERATING EXPENSES Personal services 2,511,744 1,375,261 384,257 4,271,262 Operating 6,261,452 3,100,620 433,407 9,795,479 Depreciation/amortization expense 1,969,232 269,996 229,066 2,468,294 Total operating expenses 10,742,428 4,745,877 1,046,730 16,535,035 OPERATING INCOME 1,719,062 687,201 7,089 2,413,352 NON-OPERATING REVENUES (EXPENSES) Rental income 22,686 - - 22,686 Interest expense (313,352) - (1,693) (315,045) Amortization (5,613) - - (5,613) Gain (loss) on disposal of capital assets (18,906) 10,479 - (8,427) Investment earnings 100,873 25,559 5,825 132,257 Interest income 370,486 126,714 41,249 538,449 Grants in aid (398) - - (398) Miscellaneous (68) 2,455 - 2,387 Total non-operating revenues (expenses) 155,708 165,207 45,381 366,296 INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,874,770 852,408 52,470 2,779,648 CAPITAL CONTRIBUTIONS AND TRANSFERS Capital grants and contributions 770,493 - 227,108 997,601 Impact fees 85,094 - - 85,094 Transfers out (1,338,201) (427,937) (219,437) (1,985,575) Total capital contributions and transfers (482,614) (427,937) 7,671 (902,880) CHANGE IN NET POSITION 1,392,156 424,471 60,141 1,876,768 NET POSITION AS PREVIOUSLY REPORTED 26,154,609 4,139,061 4,105,764 34,399,434 Restatement - Change in Accounting Principle (103,828) (115,951) (16,461) (236,240) Net Position at Beginning of Year 26,050,781 4,023,110 4,089,303 34,163,194 NET POSITION AT END OF YEAR $ 27,442,937 $ 4,447,581 $ 4,149,444 $ 36,039,962 See notes to the financial statements. 23  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2025 Sanitation Stormwater Utilities Fund Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 12,587,990 $ 5,454,822 $ 1,060,176 $ 19,102,988 Payments to vendors and suppliers (6,739,205) (3,088,097) (357,134) (10,184,436) Payments to employees (2,476,507) (1,422,247) (376,584) (4,275,338) Miscellaneous income 22,618 2,455 - 25,073 Net cash provided by operating activities 3,394,896 946,933 326,458 4,668,287 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Interfund activity 2,388,193 - - 2,388,193 Grants in aid (398) - - (398) Transfers out (1,338,201) (427,937) (219,437) (1,985,575) Net cash provided by (used in) non-capital financing activities 1,049,594 (427,937) (219,437) 402,220 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Impact fee receipts 85,094 - - 85,094 Acquisitions of capital assets (2,488,577) (614,332) (673,222) (3,776,131) Proceeds from sale of capital assets 6,835 10,479 - 17,314 Proceeds from capital contributions 1,849 - - 1,849 Principal paid on long-term debt (1,377,070) - (43,322) (1,420,392) Interest paid on long-term debt (318,936) - (1,693) (320,629) Net cash used in capital and related financing activities (4,090,805) (603,853) (718,237) (5,412,895) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments (369,344) (113,123) (24,375) (506,842) Interest and dividends 370,486 126,714 41,249 538,449 Net cash provided by investing activities 1,142 13,591 16,874 31,607 NET CHANGE IN CASH AND CASH EQUIVALENTS 354,827 (71,266) (594,342) (310,781) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 951,951 469,769 679,649 2,101,369 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,306,778 $ 398,503 $ 85,307 $ 1,790,588 See notes to the financial statements. 24  CITY OF FORT WALTON BEACH, FLORIDA PROPRIETARY FUNDS STATEMENT OF CASH FLOWS – CONTINUED FOR THE YEAR ENDED SEPTEMBER 30, 2025 Sanitation Stormwater Utilities Fund Fund Fund Total CASH AND CASH EQUIVALENTS AT END OF YEAR CONSIST OF Cash and cash equivalents $ 241,662 $ 393,023 $ 85,307 $ 719,992 Retricted cash and cash equivalents 1,065,116 5,480 - 1,070,596 Total cash and cash equivalents $ 1,306,778 $ 398,503 $ 85,307 $ 1,790,588 RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income $ 1,719,062 $ 687,201 $ 7,089 $ 2,413,352 Adjustments to reconcile operating income to net cash flows from operating activities: Depreciation 1,969,232 269,996 229,066 2,468,294 Bad debt 70,824 27,338 5,122 103,284 Other income 22,618 2,455 - 25,073 Decrease (increase) in assets: Accounts receivable (6,903) (5,594) 1,235 (11,262) Inventory 572 - - 572 Other receivables 48 - - 48 Net pension asset (1,412,735) (1,079,711) (155,019) (2,647,465) Increase (decrease) in liabilities: Accounts payable (478,325) 11,082 76,273 (390,970) Compensated absences payable 34,652 (22,784) 8,872 20,740 Accrued wages 21,019 (9,367) 2,257 13,909 Due to other governments - 1,441 - 1,441 Customer deposits 73,693 - - 73,693 Unearned revenue (11,162) - - (11,162) Total OPEB liability (14,541) (9,684) (3,814) (28,039) Net change in deferred outflows/inflows - pension 1,400,257 1,070,175 153,650 2,624,082 Net change in deferred outflows/inflows - OPEB 6,585 4,385 1,727 12,697 Net cash flows from operating activities $ 3,394,896 $ 946,933 $ 326,458 $ 4,668,287 SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITES Assets acquired through SBITA's $ 244,428 $ - $ - $ 244,428 Gain (loss) on disposal of capital assets $ (18,906) $ 10,479 $ - $ (8,427) Change in fair value of investments $ 100,873 $ 25,559 $ 5,825 $ 132,257 Capital grants receivable $ 768,644 $ - $ 287,500 $ 1,056,144 Accrued capital-related payables $ 41,360 $ - $ 66,821 $ 108,181 SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS Amortization of deferred loss on refunding $ 5,613 $ - $ - $ 5,613 See notes to the financial statements. 25  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2025 Pension Trust Funds ASSETS Investments, at fair value U.S. Government and Agency obligations $ 10,486,442 Corporate obligations 647,438 Corporate equity 2,431,367 Mutual funds and exchange-traded funds 95,902,276 Infrastructure investment funds 7,518,553 Real estate investment funds 8,871,543 Total investments 125,857,619 Accounts receivable 94,958 TOTAL ASSETS 125,960,365 LIABILITIES Accounts payable 360,594 NET POSITION RESTRICTED FOR PENSIONS $ 125,599,771 See notes to the financial statements. 26  CITY OF FORT WALTON BEACH, FLORIDA FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2025 Pension Trust Funds ADDITIONS Contributions Employer $ 3,377,909 Plan members 501,464 State of Florida 663,427 Total contributions 4,542,800 Investment income 13,649,550 Less investment expense (210,679) Net investment income 13,438,871 TOTAL ADDITIONS 17,984,833 DEDUCTIONS Benefits and refunds paid Retirement payments 7,276,294 Disability payments 196,351 Refunds 164,400 Total benefits and refunds paid 7,637,045 Administrative expenses Legal 34,631 Contractual services 275,478 Other 106,199 Total administrative expenses 416,308 TOTAL DEDUCTIONS 8,053,353 CHANGE IN FIDUCIARY NET POSITION 9,931,480 NET POSITION RESTRICTED FOR PENSIONS Beginning of year 115,668,291 End of year $ 125,599,771 See notes to the financial statements. 27  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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, 2025, 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 in 1977 under the provisions of Chapter 163, Florida Statutes, to prepare a community redevelopment plan for a designated geographic area within the City of Fort Walton Beach, Florida. All the City's council members serve as the CRA’s Board of Directors. Therefore, 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. 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. 28  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. 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. 29  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 1 st 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 2025 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. 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. Generally, 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 2025, 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 is 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. 30  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 CRA). It is used to account for the activities of the CRA. Revenue sources for this fund include tax increment financing proceeds from ad valorem taxes as well as investment income. Beal Memorial Cemetery (BMC) Perpetual Care Fund – Accounts for a portion of lot sales at Beal Memorial Cemetery (the Cemetery), as well as the investment earnings on accumulated unspent proceeds from lot sales, that are committed by ordinance to fund perpetual care of the Cemetery. 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 held by banks that are Qualified Public Depositories under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. 31  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. 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. 32  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Restricted Assets Certain resources in the following funds are restricted for specific purposes: in the General Fund for discretionary sales taxes, local option fuel taxes, and various contributions from donors for specified purposes; in the Utilities Fund for customer deposits, impact fees and debt service; in the Sanitation Fund for customer deposits. 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. 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 Right-of-use lease assets 3-20 Years Subscription assets 3-10 Years 33  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Leases The City recognizes a lease receivable and a deferred inflow of resources for noncancellable leases in which the City is the lessor. At the commencement of the lease, the City measures the lease receivable at the present value of payments expected to be received during the lease term. The deferred inflow of resources is measured at the initial amount of the lease receivable adjusted for lease payments received at or before the lease commencement date. In subsequent periods, the lease receivable is reduced by the principal portion of lease payments received and the deferred inflow of resources is recognized as revenue over the life of the lease term. The City monitors changes in circumstances that would require remeasurement of lease receivables and deferred inflows of resources. The City recognizes a right-of-use (ROU) asset and a lease liability for noncancellable leases in which the City is the lessee. At the commencement of the lease, the City measures the lease liability at the present value of expected lease payments to be made during the lease term. The lease asset is measured as the initial amount of the lease liability adjusted for payments made prior to the lease commencement date and any ancillary costs to place the asset into service. The ROU asset is amortized over the shorter of the useful life of the asset or the lease term. In subsequent periods, the lease liability is reduced by the principal portion of lease payments made. The City monitors changes in circumstances that would require remeasurement of ROU assets and lease liabilities. Subscription Based Information Technology Arrangements (SBITA’s) The City records a subscription asset and a related subscription liability for subscription-based information technology arrangements (SBITA’s) at the commencement of the agreement. The subscription liability is measured at the present value of payments expected to be made during the subscription term. The subscription asset is measured at the initial amount of the subscription liability adjusted for any payments made at or before the beginning of the subscription term. The City monitors changes in circumstances that would require remeasurement of subscription assets and liabilities. 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 assets 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 net assets 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 The City records a compensated absences liability for leave that 1) can be carried forward to future reporting periods; 2) was earned based on service that the employee has already provided; and 3) is more likely than not to be used, paid, or otherwise settled with the City. The compensated absences liability is measured using the pay rates in effect as of the financial statement date, including directly and incrementally associated salary-related employer taxes and benefits. Changes to pay rates will be recognized in future periods as those changes occur. The City uses a first-in, first-out (FIFO) flow assumption for calculating the portion of the liability due within one year. 34  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. 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. Typically, OPEB liabilities for governmental activities have been liquidated by the General Fund. 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 for governmental activities have been liquidated by the General Fund. 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, 2023 Measurement Date (MD) September 30, 2024 Measurement Period (MP) October 1, 2023 to September 30, 2024 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. 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. 35  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. 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. Change in Accounting Principle Effective October 1, 2024, the City adopted the provisions of GASB Statement No. 101, Compensated Absences (GASBS 101). This pronouncement establishes a unified model for recognition and measurement of liabilities associated with compensated absences, including vacation, sick leave and other paid time off. GASBS 101 is expected to result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation and can be applied consistently to different types of leave offered by governmental employers. As part of the implementation process, the City has evaluated whether leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means by assessing relevant factors, such as the City’s employment policies related to compensated absences; historical information about the use, payment, or forfeiture of compensated absences; and known information that would indicate that historical information may not be representative of future trends or patterns. GASBS 101 was retroactively implemented, which resulted in a restatement of the City’s beginning net position. The effects of the restatement on beginning net position for each reporting unit can be found in Note 20. 36  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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, 2025, and March 27, 2026, 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. GAAP. 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. 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 that are not expected to be satisfied by restricted or committed resources 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. 37  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Under this method, all City deposits, including certificates of deposit, are considered fully insured. As of September 30, 2025, the value of the City's deposits was $6,968,397, all of which was held by Qualified Public Depositories under Florida Statutes. Investments As of September 30, 2025, 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. 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. As of September 30, 2025, 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 $ 12,996,438 $ 453,029 $ 12,083,499 $ 459,910 $ - $ - $ - $ - $ - Municipal debt 124,759 124,759 - - - - - - - U.S. Treasury 23,921,401 - 18,672,603 3,570,557 - 1,105,166 573,075 - - U.S. Government agencies CMO's 5,237,644 - - - 159,029 164,054 53,286 4,861,275 - 42,280,242 $ 577,788 $ 30,756,102 $ 4,030,467 $ 159,029 $ 1,269,220 $ 626,361 $ 4,861,275 $ - Investments not subject to interest rate risk: Money market funds 2,719,068 Mutual and exchange- traded funds 100,888,865 Real estate investment funds 8,871,543 Infrastructure investment funds 7,518,553 External investment pools 9,486,050 Total $ 171,764,321 Credit Rate Risk – State law limits investments of surplus public funds to those investments described on the previous page. The table on the next page outlines the authorized investments of the pension trust funds. 38  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 General Police Employees' Officers' Firefighters' Retirement Retirement Retirement Investment Type Fund Fund Fund Money Market or short- Minimum rating of Limited to obligations Minimum rating of term investment fund A1 by S&P or backed by full faith & A1 by S&P or (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 major rating service service rating service 1 (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, 2025. The Moody's rating ranges of the different investment classes held by each respective plan at September 30, 2025, are as follows: General Pension Police Pension Plan Plan Fire Pension Plan Corporate debt N/A Aa2-A3 Aa2-A3 U.S. Treasury N/A Aa1 Aaa U.S. government agency pools N/A NR NR 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). 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. 39  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 single issuing company, nor shall the aggregate investment in any single 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 single issuing company, nor shall the aggregate investment in any single 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, 2025. 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 and external investment pools held by the pension trust funds are based on the investments’ NAV per share, as provided by the investee. 40  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. The infrastructure funds consist of three open-ended funds that invest in long-duration core infrastructure assets throughout North America, Europe, and Australia. Although the funds are private investments, they can be redeemed on a quarterly basis, subject to available liquidity. Unfunded Redemption Redemption Fair Value Commitments Frequency Notice Period Real estate funds $ 8,871,543 None Quarterly 0 - 90 days Infrastructure funds 7,518,553 None Quarterly 0 - 90 days Local Government Investment Pool The City has an investment account with an external intergovernmental investment pool known as Florida Public Assets for Liquidity Management (FL PALM). FL PALM is a stable $1 NAV government investment pool established pursuant to Section 163.01, Florida Statutes. The investment pool meets the requirements for reporting at amortized cost, which is not materially different from fair value. FL PALM is designed to maintain a dollar-weighted average maturity of no more than 60 days and was rated AAAm by Standard & Poor’s. As of September 30, 2025, there were no redemption fees or maximum transaction amounts, or any other requirements that serve to limit the City’s daily access to 100 percent of its account value. 4. FAIR VALUE OF INVESTMENTS The City measures and records its investments using fair value measurement 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. The table on the next page presents the investments carried at fair value on September 30, 2025. 41  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Fair Value Level 1 Level 2 Level 3 Money market funds $ 2,719,068 $ 2,431,367 $ 287,701 $ - Debt securities U.S. Treasury bonds 23,921,401 19,664,708 4,256,693 - U.S. Government Agency collateralized mortgage obligations (CMO's) 5,237,644 - 5,237,644 - Corporate bonds 12,996,438 - 12,996,438 - Municipal bonds 124,759 - 124,759 - Total debt securities 42,280,242 19,664,708 22,615,534 - Equity securities Mutual funds and exchange-traded funds 100,888,865 95,902,276 4,986,589 - * Infrastructure investment funds 7,518,553 - - - * Real estate investment funds 8,871,543 - - - Total investments measured at fair value 162,278,271 $ 117,998,351 $ 27,889,824 $ - Total investments measured at amortized cost 9,486,050 Total investments at September 30, 2025 $ 171,764,321 * 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. 5. RECEIVABLES Receivables on September 30, 2025, were as follows: Governmental Activities Business-Type Activities General CRA Fund Utilities Sanitation Stormwater Total Taxes $ 28,173 $ - $ - $ - $ - $ 28,173 Accounts 192,297 641 1,032,013 368,043 75,811 1,668,805 Less allowance for doubtful accounts - - (133,446) (55,677) (11,750) (200,873) Assessments 35,714 - 3,183 - - 38,897 Notes 313,515 - - - - 313,515 Leases receivble 3,358,884 - - - - 3,358,884 Total receivables, net $ 3,928,583 $ 641 $ 901,750 $ 312,366 $ 64,061 $ 5,207,401 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 5.00% per year and includes a balloon payment of $250,065 due to the City in October 2026. The balance of this note receivable was $272,762 as of September 30, 2025. 42  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 During fiscal year 2014, the City sold a recreation 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 was $29,000 as of September 30, 2025. During fiscal year 2023, the City sold a building for $165,400 and received $125,000 from the buyer at closing. The remaining balance of $40,400 is due in January 2030. The promissory note gives the buyer the option to make specified in-kind building improvements to satisfy the note in lieu of repayment. The balance of the note receivable was $11,753, as of September 30, 2025. Since these notes receivable will be collected outside the periods of availability, they are reflected in the General Fund’s balance sheet as deferred inflows of resources as of September 30, 2025. Leases Receivable The City leases real property to various unrelated parties. The real property is used by the lessees for the following purposes: retail business space, office space, parking lots, cellular and radio communications towers, a restaurant, a fitness center, an art gallery, and an elementary school. Under the provisions of GASB Statement No. 87, the City is a lessor under 10 real property leases. The City’s lease receivable is measured at the present value of lease payments expected to be received during the lease term, including options reasonably certain to be exercised. The remaining lease terms range from 4 to 46 years, and the discount rate used to calculate the present value of the lease payments range from 2.50% to 6.50%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 5.13%, which is the City’s estimated incremental borrowing rate for real property. The total amount of inflows of resources recognized and reflected in the financial statements were as follows: General Fund Lease revenue $ 475,091 Interest 155,168 Total inflows of resources - leases $ 630,259 Due from Other Governments As of September 30, 2025, the City's receivables from other governments for governmental activities were $1,937,232. Amounts due from other governments for governmental activities consists primarily of amounts due from federal and state grant funding agencies for eligible grant expenditures incurred prior to September 30, 2025. As of September 30, 2025, the City’s receivables from other governments for business-type activities were $1,056,144, which is consists entirely of amounts due from the Florida Department of Environmental Protection for eligible grant expenses incurred prior to September 30, 2025. 43  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 6. CHANGES IN CAPITAL ASSETS Capital asset activity for the year ended September 30, 2025, was as follows: Beginning Adjustments/ Ending Balance Increases Decreases Transfers Balance Governmental activities Capital assets not being depreciated/amortized Land $ 8,826,730 $ - $ - $ - $ 8,826,730 Construction in progress 6,362,741 4,961,264 - (1,719,434) 9,604,571 Total capital assets not being depreciated/amortized 15,189,471 4,961,264 - (1,719,434) 18,431,301 Capital assets being depreciated/amortized Buildings 36,382,890 157,702 (59,861) - 36,480,731 Improvements other than buildings 39,001,195 1,249,108 (700) 1,134,908 41,384,511 Software 574,366 16,950 - - 591,316 Machinery and equipment 17,153,390 1,995,477 (1,071,030) 516,204 18,594,041 Financed equipment 1,464,154 242,000 - - 1,706,154 Right-of-use assets 1,226,225 320,344 (766,005) - 780,564 Subscription assets 2,389,490 1,183,284 (78,296) - 3,494,478 Total capital assets being depreciated/amortized 98,191,710 5,164,865 (1,975,892) 1,651,112 103,031,795 Less accumulated depreciation/amortization Buildings (16,040,519) (1,124,341) 59,861 - (17,104,999) Improvements other than buildings (26,707,535) (1,246,388) 700 91,392 (27,861,831) Software (572,034) (4,918) - - (576,952) Machinery and equipment (13,664,104) (1,369,185) 992,797 81,310 (13,959,182) Right-of-use assets (818,282) (169,392) 766,005 - (221,669) Subscription assets (1,004,278) (747,893) 61,097 - (1,691,074) Total accumulated depreciation/amortization (58,806,752) (4,662,117) 1,880,460 172,702 (61,415,707) Total capital assets being depreciated/amortized, net 39,384,958 502,748 (95,432) 1,823,814 41,616,088 Governmental activities, net $ 54,574,429 $ 5,464,012 $ (95,432) $ 104,380 $ 60,047,389 44  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 4,845,796 621,329 - (5,269,620) 197,505 Easements 39,742 - - - 39,742 Total capital assets not being depreciated/amortized 5,595,216 621,329 - (5,269,620) 946,925 Capital assets being depreciated/amortized Buildings 183,323 - (51,483) - 131,840 Improvements other than buildings 55,165,357 2,479,345 (3,329) 5,288,635 62,930,008 Software 120,031 - (16,099) - 103,932 Machinery and equipment 12,163,759 673,608 (832,540) (11,859) 11,992,968 Right-of-use assets 258,128 - - - 258,128 Subscription Assets - 244,428 - - 244,428 Total capital assets being depreciated/amortized 67,890,598 3,397,381 (903,451) 5,276,776 75,661,304 Less accumulated depreciation/amortization Buildings (118,075) (3,977) 25,742 - (96,310) Improvements other than buildings (28,698,860) (1,787,128) 3,329 (17,166) (30,499,825) Software (119,297) (735) 16,100 - (103,932) Machinery and equipment (9,414,116) (568,584) 832,539 11,859 (9,138,302) Right-of-use assets (160,452) (64,372) - - (224,824) Subscription Assets - (43,498) - - (43,498) Total accumulated depreciation/amortization (38,510,800) (2,468,294) 877,710 (5,307) (40,106,691) Total capital assets being depreciated/amortized, net 29,379,798 929,087 (25,741) 5,271,469 35,554,613 Business-type activities, net $ 34,975,014 $ 1,550,416 $ (25,741) $ 1,849 $ 36,501,538 45  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Amortization of equipment under financing contracts and right-of-use assets 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 $ 880,432 Public safety 1,490,380 Physical environment 80,234 Transportation 517,323 Economic environment 221,407 Culture and recreation 1,472,341 Total depreciation/amortization expense – governmental activities $ 4,662,117 Business-type activities Utilities Fund $ 1,969,232 Sanitation Fund 269,996 Stormwater Fund 229,066 Total depreciation/amortization expense – business-type activities $ 2,468,294 Construction in Progress – Governmental Activities The Landing Improvements In February 2023, the City engaged a construction contractor to perform the Fort Walton Beach Landing Phase I improvements for a total price of $2,479,665. The City has approved various change orders for the project since commencement and the total contract price was $2,702,165 as of September 30, 2025. In April 2024, the City engaged a construction contractor to perform the Fort Walton Beach Landing Phase II improvements. The total contract price was $2,671,377 as of September 30, 2025, which includes change orders totaling $219,786. In December 2024, the City engaged a construction contractor to perform the Fort Walton Beach Landing Phase III improvements. The total contract price was $983,831 as of September 30, 2025, which includes change orders totaling $345,158. The project costs are being funded from several sources including a grant from the Florida Department of Environmental Protection (FDEP), tourist development tax proceeds, discretionary sales surtax proceeds, and tax increment revenues of the CRA. As of September 30, 2025, the City has incurred total contract costs of $4,865,894 for all phases of the project, which includes unbilled retainage of $91,554. The project is expected to be completed in April 2026. Heritage Park and Cultural Center Museum Addition In August 2023, the City engaged a construction contractor to perform the Heritage Park and Cultural Center museum addition. The addition includes a new entrance for the museum, a larger gift shop, administrative offices, storage, and an area for specialty programs. As of September 30, 2025, the total contract price was $1,896,422, which includes change orders. The project costs are being funded from multiple sources including tourist development tax proceeds, discretionary sales surtax proceeds, and tax increment revenues of the CRA. The City reported total contract costs of $1,872,711, as of September 30, 2025, which includes unbilled retainage of $153,638. The project was completed in November 2025. 46  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES As of September 30, 2025, the City had various components of deferred outflows of resources and deferred inflows of resources as follows: Governmental activities: General Governmental Fund Activities Deferred outflows of resources City pension contributions made subsequent to the measurement date $ - $ 3,948,635 Differences between expected and actual experience on pension plan actuarial assumptions - 1,448,861 Changes in assumptions related to pension plan - 193,549 City OPEB contributions made subsequent to the measurement date 173,546 Changes in assumptions related to OPEB plan - 441,446 Total deferred outflows of resources $ - $ 6,206,037 Deferred inflows of resources Differences between expected and actual experience on pension plan actuarial assumptions $ - $ 724,921 Net difference between projected and actual earnings on pension plan investments - 4,369,403 Differences between expected and actual experience on OPEB plan actuarial assumptions - 1,041,904 Changes in assumptions related to OPEB plan 873,450 Leases 3,007,854 3,007,854 Unavailable revenue - special assessments 35,714 - Unavailable revenue - long-term receivables from sale of buildings 313,515 - Total deferred inflows of resources $ 3,357,083 $ 10,017,532 Business-type activities: Utilities Sanitation Stormwater Business-Type Fund Fund Fund Activities Deferred outflows of resources City pension contributions made subsequent to the measurement date $ 49,467 $ 37,806 $ 5,428 $ 92,701 Deferred loss on refunding 43,501 - - 43,501 City OPEB contributions made subsequent to the measurement date 24,119 16,064 6,338 46,521 Changes in assumptions related to OPEB plan 61,364 40,870 16,111 118,345 Total deferred outflows of resources $ 178,451 $ 94,740 $ 27,877 $ 301,068 Deferred inflows of resources Net difference between projected and actual earnings on pension plan investments $ 523,238 $ 399,895 $ 57,415 $ 980,548 Changes in assumptions related to OPEB plan 121,382 80,849 31,912 234,143 Differences between expected and actual experience on OPEB plan actuarial assumptions 144,811 96,452 38,044 279,307 Total deferred inflows of resources $ 789,431 $ 577,196 $ 127,371 $ 1,493,998 47  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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’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. 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, 2023: Inactive Plan Members or Beneficiaries Current Receiving Benefits 173 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 39 Active Plan Members 35 247 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 on 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. 48  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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, 2025, 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, 2025, the City was required to contribute $228,642. Net Pension Liability – GERF The measurement date is September 30, 2024. The measurement period for the pension expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 through September 30, 2025. The City’s net pension liability was measured as of September 30, 2024. 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, 2023 updated to September 30, 2024 using the following actuarial assumptions: Inflation 2.50% Salary Increases Age-Based Discount Rate 7.00% Investment Rate of Return 7.00% 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, 2021, FRS valuation report for non-special risk employees, with appropriate 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 2024, 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 the September 30, 2024, measurement date are summarized in the table on the next page: 49  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 52.50% 7.50% International equity 10.00% 8.50% Broad market fixed income 17.50% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Infrastructure 5.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. 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- GERF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2024 (Valuation Date of 10/01/2023) $ 53,101,382 $ 49,441,828 $ 3,659,554 Changes: Service cost 245,027 - 245,027 Interest 3,606,688 - 3,606,688 Differences between expected and actual experience 380,100 - 380,100 Contributions – employer - 284,704 (284,704) Contributions – employee - 100,094 (100,094) Net investment income - 10,432,744 (10,432,744) Benefit payments, including refunds of employee contributions (3,644,603) (3,644,603) - Administrative expenses - (55,871) 55,871 Net changes 587,212 7,117,068 (6,529,856) Balances at September 30, 2025 (Measurement Date of 9/30/2024) $ 53,688,594 $ 56,558,896 $ (2,870,302) 50  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 105.35%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% City's net pension liability (asset) $ 2,508,451 $ (2,870,302) $ (7,447,493) 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 – GERF For the year ended September 30, 2025, the City recognized actuarial pension expense of $170,948. On September 30, 2025, 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 $ 288,642 $ - Net difference between projected and actual earnings on pension plan investments - 2,418,478 Total $ 288,642 $ 2,418,478 Deferred outflows of resources related to pensions of $288,642 resulting from the City’s contributions subsequent to the measurement date will be recognized as a change in the net pension liability for the year ending September 30, 2026. 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: 2026 $ (420,153) 2027 999,111 2028 (1,579,863) 2029 (1,417,573) $ (2,418,478) 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. 51  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. Plan Membership as of October 1, 2023: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 50 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 25 Active Plan Members 51 126 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, 2025, 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 was required to contribute 7.2% of payroll and the City was 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, 2025, the City was required to contribute 36.5% of payroll. Net Pension Liability – PORF The measurement date is September 30, 2024. The measurement period for the pension expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 through September 30, 2025. The City’s net pension liability was measured as of September 30, 2024. 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, 2023 updated to September 30, 2024, using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.00% Investment rate of return 7.00% 52  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Females – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled 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, 2021, FRS valuation report for special risk employees, with appropriate adjustments made based on plan demographics. The other significant actuarial assumptions used in the October 1, 2023, 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 2024, 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 the September 30, 2024, measurement date are summarized in the table below: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 45.00% 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% Infrastructure 5.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. 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. 53  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Changes in Net Pension Liability – PORF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2024 (Valuation Date of 10/01/2023) $ 32,744,351 $ 25,984,001 $ 6,760,350 Changes: Service cost 902,915 - 902,915 Interest 2,280,478 - 2,280,478 Differences between expected and actual experience 1,333,735 - 1,333,735 Contributions – employer - 1,760,809 (1,760,809) Contributions – state - 288,411 (288,411) Contributions – employee - 187,008 (187,008) Net investment income - 5,236,088 (5,236,088) Benefit payments, including refunds of employee contributions (2,138,041) (2,138,041) - Administrative expenses - (74,185) 74,185 Net changes 2,379,087 5,260,090 (2,881,003) Balances at September 30, 2025 (Measurement Date of 9/30/2024) $ 35,123,438 $ 31,244,091 $ 3,879,347 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 88.96%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% City's net pension liability $ 8,382,887 $ 3,879,347 $ 179,205 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. 54  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – PORF For the year ended September 30, 2025, the City recognized actuarial pension expense of $1,098,157. On September 30, 2025, 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 $ 1,809,215 $ - Net difference between projected and actual earnings on pension plan investments - 1,586,162 Differences between expected and actual experience 1,000,302 657,886 Total $ 2,809,517 $ 2,244,048 Deferred outflows of resources related to pensions of $1,809,215 resulting from the City 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, 2026. 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: 2025 $ (331,112) 2026 298,287 2027 (527,647) 2028 (683,274) $ (1,243,746) 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. 55  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Plan Membership as of October 1, 2023: Inactive Plan Members or Beneficiaries Currently Receiving Benefits 29 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 14 Active Plan Members 42 85 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, 2025, the participants’ contribution rate was 8.0% of payroll. The State of Florida was required to contribute 8.8% of payroll and the City was 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, 2025, the City was required to contribute 46.5% of payroll. Net Pension Liability – FRF The measurement date is September 30, 2024. The measurement period for the pension expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 through September 30, 2025. The City’s net pension liability was measured as of September 30, 2024. 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, 2023, updated to September 30, 2024, using the following actuarial assumptions: Inflation 2.50% Salary increases Service based Discount rate 7.00% Investment rate of return 7.00% 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 56  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Females – 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled 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, 2021, FRS valuation report for special risk employees, with appropriate adjustments made based on plan demographics. The most recent actuarial experience study used to review the other significant assumptions was dated June 8, 2022. 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 2024, 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 the September 30, 2024, measurement date are summarized in the table below: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic equity 42.50% 7.50% International equity 15.00% 8.50% Broad market fixed income 17.50% 2.50% Fixed income (non-core) 2.50% 2.50% Global fixed income 2.50% 3.50% Real estate 10.00% 4.50% Infrastructure 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.00%. 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. 57  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Changes in Net Pension Liability – FRF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2024 (Valuation Date of 10/01/2023) $ 35,603,888 $ 22,824,393 $ 12,779,495 Changes: Service cost 763,298 - 763,298 Interest 2,484,595 - 2,484,595 Share plan allocation 58,611 - 58,611 Differences between expected and actual experience 70,616 - 70,616 Contributions – employer - 1,630,438 (1,630,438) Contributions – state - 333,611 (333,611) Contributions – employee - 243,145 (243,145) Net investment income - 4,748,767 (4,748,767) Benefit payments, including refunds of employee contributions (1,745,932) (1,745,932) - Administrative expenses - (80,823) 80,823 Net changes 1,631,188 5,129,206 (3,498,018) Balances at September 30, 2025 (Measurement Date of 9/30/2024) $ 37,235,076 $ 27,953,599 $ 9,281,477 As of the measurement date, the Plan’s fiduciary net position as a percentage of the total pension liability was 75.07%. Sensitivity of the Net Pension Liability to changes in the Discount Rate Current Discount 1% Decrease Rate 1% Increase 6.00% 7.00% 8.00% City's net pension liability $ 14,245,665 $ 9,281,477 $ 5,234,060 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. 58  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2025, the City recognized actuarial pension expense of $1,595,076. On September 30, 2025, 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 $ 2,003,479 $ - Net difference between projected and actual earnings on pension plan investments - 1,345,311 Changes of assumptions 193,549 - Differences between expected and actual experience 448,559 67,035 Total $ 2,645,587 $ 1,412,346 Deferred outflows of resources related to pensions of $2,003,479 resulting from the City 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, 2026. 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: 2026 $ 185,461 2027 444,405 2028 (772,555) 2029 (627,549) $ (770,238) Pension Expense For the fiscal year ended September 30, 2025, the City recognized an aggregate pension expense of $2,864,181 on all defined benefit pension plans. 59  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Fund Financial Statements The following are the financial statements for the individual pension trust funds (GERF, PORF and FRF) as of and for the year ended September 30, 2025: COMBINING STATEMENT OF PLAN NET POSITION Pension Trust Funds General Police Employees' Officers' Firefighters' Total Pension Retirement Retirement Retirement Trust Funds ASSETS Accounts receivable $ 23,497 $ 31,101 $ 40,360 $ 94,958 Investments, at market Money-market funds 1,005,147 851,902 574,318 2,431,367 U.S. Government and Agency obligations - 5,530,054 4,956,388 10,486,442 Corporate obligations - 331,884 315,554 647,438 Mutual and exchange-traded funds 52,158,865 23,338,001 20,405,410 95,902,276 Infrastructure investment funds 2,909,020 1,610,956 2,998,577 7,518,553 Real estate investment funds 4,127,222 2,507,292 2,237,029 8,871,543 Total investments, at market 60,200,254 34,170,089 31,487,276 125,857,619 TOTAL ASSETS 60,223,751 34,201,190 31,535,424 125,960,365 LIABILITIES Accounts payable 63,251 171,843 125,500 360,594 NET POSITION RESTRICTED FOR PENSIONS $ 60,160,500 $ 34,029,347 $ 31,409,924 $ 125,599,771 60  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Pension Trust Funds General Police Employees' Officers' Firefighters' Total Pension Retirement Retirement Retirement Trust Funds ADDITIONS Contributions Employer $ 228,642 $ 1,502,419 $ 1,646,848 $ 3,377,909 Plan members 71,535 195,826 234,103 501,464 State of Florida - 306,796 356,631 663,427 Total contributions 300,177 2,005,041 2,237,582 4,542,800 Investment income 7,176,538 3,284,140 3,188,872 13,649,550 Less investment expense (72,089) (63,285) (75,305) (210,679) Net investment income 7,104,449 3,220,855 3,113,567 13,438,871 Miscellaneous revenue 888 2,274 - 3,162 TOTAL ADDITIONS 7,405,514 5,228,170 5,351,149 17,984,833 DEDUCTIONS Benefits and refunds paid Retirement payments 3,663,813 2,004,775 1,607,706 7,276,294 Disability payments 33,583 156,874 5,894 196,351 Other - 98,548 65,852 164,400 Total benefits and refunds paid 3,697,396 2,260,197 1,679,452 7,637,045 Administrative expenses Legal 13,399 9,925 11,307 34,631 Contractual 89,355 88,683 97,440 275,478 Other 42,432 29,758 34,009 106,199 Total administrative expenses 145,186 128,366 142,756 416,308 TOTAL DEDUCTIONS 3,842,582 2,388,563 1,822,208 8,053,353 INCREASE IN PLAN NET POSITION 3,562,932 2,839,607 3,528,941 9,931,480 NET POSITION RESTRICED FOR PENSIONS Beginning of year 56,597,568 31,189,740 27,880,983 115,668,291 End of year $ 60,160,500 $ 34,029,347 $ 31,409,924 $ 125,599,771 61  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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 (the Plan). The Plan is a money purchase defined contribution retirement plan administered by ICMA Retirement Corporation and Mission Square Retirement, 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 $449,161 and $450,996, respectively, for the fiscal year ending September 30, 2025. 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 (the 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. Contributions made to the Plan by the employees and by the City were $119,353 and $44,269, respectively, for the fiscal year ending September 30, 2025. Assets of the Plan have a fair value of $3,295,088, as of September 30, 2025. 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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, 2024: Inactive Plan Members or Beneficiaries Current Receiving Benefits 113 Inactive Plan Members Entitled to But Not Yet Receiving Benefits - Active Plan Members 254 367 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, 2024. The total OPEB liability was determined by an actuarial valuation. The measurement period for OPEB expense was October 1, 2023 to September 30, 2024. The reporting period is October 1, 2024 to September 30, 2025. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2024, using the following actuarial assumptions: Inflation 2.50% Salary Increases Service based Discount Rate 4.06% Initial Trend Rate 6.75% Ultimate Trend Rate 4.00% Years to Ultimate 50 For general employees, mortality rates were based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2021. 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. 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 For police and fire employees, mortality rates were also based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2021. 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 4.06%. 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. Changes in Total OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Total OPEB Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2024 $ 4,919,554 $ - $ 4,919,554 Changes for the year: Service cost 270,609 - 270,609 Interest 247,233 - 247,233 Differences between expected and actual experience (656,654) - (656,654) Changes of assumptions 235,921 - 235,921 Contributions – employer - 232,826 (232,826) Benefit payments (229,736) (229,736) - Administrative expense - (3,090) 3,090 Net changes (132,627) - (132,627) Reporting period ending September 30, 2025 $ 4,786,927 $ - $ 4,786,927 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate Current 1% Decrease Discount Rate 1% Increase 3.06% 4.06% 5.06% Total OPEB liability $ 5,543,570 $ 4,786,927 $ 4,178,433 64  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Trend Rates Healthcare Cost 1% Decrease Trend Rates 1% Increase 3.00%-5.75% 4.00%-6.75% 5.00%-7.75% Total OPEB liability $ 4,230,615 $ 4,786,927 $ 5,485,663 OPEB Plan Fiduciary Net Position The plan is unfunded, so the OPEB plan’s fiduciary net position is $0. There are no OPEB assets accumulated in a GASB compliant trust to pay for related plan benefits. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended September 30, 2025, the City recognized OPEB expense of $147,500. On September 30, 2025, 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 $ - $ 1,321,211 Changes of assumptions 559,791 1,107,593 Employer contributions subsequent to the measurement date 220,067 - Total $ 779,858 $ 2,428,804 Deferred outflows of resources related to OPEB of $220,067 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ending September 30, 2026. 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: 2026 $ (343,990) 2027 (502,308) 2028 (446,570) 2029 (446,570) 2030 (69,471) Thereafter (60,104) $ (1,869,013) 65  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 12. UNEARNED REVENUES The composition of unearned revenues as of September 30, 2025, was as follows: General Utilities Fund Fund Totals Unredeemed gift cards $ 37,891 $ - $ 37,891 Charges for services paid in advance - 52,974 52,974 $ 37,891 $ 52,974 $ 90,865 13. LONG-TERM DEBT Changes in Long-Term Debt Liabilities The table that follows summarizes changes in long-term liabilities of the City for the year ended September 30, 2025. Beginning Reductions / Ending Due Within Balance Additions Adjustments Balance One Year Governmental activities Direct placements: Capital Improvement Revenue Note, Series 2013 $ 1,966,584 $ - $ (259,906) $ 1,706,678 $ 267,883 Capital Improvement Revenue Note, Series 2013A 4,356,831 - (440,326) 3,916,505 452,171 Capital Improvement Revenue Bonds, Series 2018 10,520,145 - (547,078) 9,973,067 568,032 Direct borrowings: Golf Course Irrigation System Revenue Note, 2021 614,211 - (304,693) 309,518 309,518 Financing contract - fitness equipment 8,424 - (8,424) - - Financing contract - police equipment 214,361 - (71,454) 142,907 71,454 Financing contract - driving range equipment - 242,000 (4,033) 237,967 48,400 Lease obligations 421,986 320,094 (148,007) 594,073 156,282 Subscription liabilities 1,298,973 1,183,284 (677,271) 1,804,986 808,970 (1) Compensated absences 2,294,535 - (16,818) 2,277,717 569,429 Total governmental activities $ 21,696,050 $ 1,745,378 $ (2,478,010) $ 20,963,418 $ 3,252,139 66  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type activities Direct placements: Utility System Revenue Refunding Note, Series 2015 $ 5,185,000 $ - $ (512,000) $ 4,673,000 $ 527,000 Direct borrowings: State Revolving Fund Loan, 2015 8,941,531 - (777,151) 8,164,380 791,988 Lease obligations 102,468 - (66,651) 35,817 35,010 Subscription liabilities - 244,428 (64,590) 179,838 38,211 (1) Compensated absences 471,890 20,740 - 492,630 123,158 Total business-type activities $ 14,700,889 $ 265,168 $ (1,420,392) $ 13,545,665 $ 1,515,367 (1) Additions and reductions are reported on a net basis for compensated absences. Beginning balances have been restated to reflect the change in accounting principle described in Note 20. Description of Long-Term Debt Outstanding Governmental Activities – Direct Placements $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 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 were used for golf course repairs and renovations. 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. 67  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 $75,135 fitness equipment contract, 2020, due in monthly installments of $1,430 through March 2025, which included principal and interest at 6.34%. The financing contract was fully repaid as of September 30, 2025. $304,825 police equipment financing contract, 2023, due in annual installments of $71,454 through March 2027. The City has calculated imputed interest on the contract, but it has not been recorded as the imputed amount was determined to be immaterial to the City’s financial statements. In the event of default (non- payment), the lender may repossess the financed equipment. The agreement does not contain any subjective acceleration clauses. $242,000 golf driving range equipment financing contract, 2025, due in monthly installments of $4,033 through August 2030. The City has calculated imputed interest on the contract, but it has not been recorded as the imputed amount was determined to be immaterial to the City’s financial statements. In the event of default (non-payment), the lender may repossess the financed equipment. The agreement does not contain any subjective acceleration clauses. The City has acquired the right to use two parking lots, golf carts, utility carts, commercial mowers, and related ancillary equipment through leases with various unrelated parties. Under the provisions of GASB Statement No. 87, the City is a lessee under two real property leases and nine equipment leases for its governmental activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The leases require annual base payments ranging from $2,448 to $132,750. The remaining lease terms range from 1 to 20 years, and the discount rate used to calculate the present value of the lease payments range from 4.63% to 18.80%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. The City has entered into seven subscription-based information technology arrangements with various software vendors for its governmental activities. The City’s subscription liability is measured using the present value of subscription payments expected to be remitted to the vendors during the subscription terms, including options reasonably certain to be exercised. The agreements require annual base subscription payments ranging from $35,000 to $250,961. The remaining subscription terms range from 1 to 5 years, and the discount rate used to calculate the present value of the subscription payments range from 2.36% to 4.63%. In circumstances in which the rate implicit in the agreement cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for similar assets. The carrying value of the related subscription assets can be found in Note 6. In the event of default, the lenders may revoke the City’s licenses to use the underlying software. These agreements do not contain any subjective acceleration clauses. 68  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. The City has acquired the right to use two loaders and two excavators through leases with various unrelated parties. The City is a lessee under four equipment leases for its business-type activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The leases require annual base payments ranging from $7,466 to $10,244. The remaining lease terms range from 0 to 2 years, and the discount rate used to calculate the present value of the lease payments is 4.63%, which is the City’s estimated incremental borrowing rate for similar assets. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. The City has entered into two subscription-based information technology arrangements with software vendors for its business-type activities. The City’s subscription liability is measured using the present value of subscription payments expected to be remitted to the vendors during the subscription terms, including options reasonably certain to be exercised. The agreements require annual base subscription payments ranging from $26,285 to $43,141. The remaining subscription terms range from 2 to 5 years, and the discount rate used to calculate the present value of the subscription payments range from 3.41% to 4.63%. In circumstances in which the rate implicit in the agreement cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for similar assets. The carrying value of the related subscription assets can be found in Note 6. In the event of default, the lenders may revoke the City’s licenses to use the underlying software. These agreements do not contain any subjective acceleration clauses. 69  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Annual Requirements to Amortize Debt Outstanding The annual requirements to amortize all debt outstanding except compensated absences as of September 30, 2025, was as follows: Governmental Activities: Year Ending Revenue Bonds and Notes Financing Contracts September 30 Principal Interest Principal Interest 2026 $ 1,597,604 $ 529,215 $ 119,854 $ - 2027 1,329,416 486,495 119,853 - 2028 3,894,503 439,084 48,400 - 2029 924,195 334,442 48,400 - 2030 1,054,180 303,456 44,367 - 2031-2035 4,559,598 996,289 - - 2036-2038 2,546,272 181,729 - - Total $ 15,905,768 $ 3,270,710 $ 380,874 $ - Year Ending Lease Obligations Subscription Liabilities September 30 Principal Interest Principal Interest 2026 $ 156,282 $ 56,122 $ 808,970 $ 56,216 2027 172,700 32,158 443,962 28,267 2028 46,854 14,627 257,078 13,086 2029 10,920 13,244 263,328 6,836 2030 8,401 12,719 31,648 435 2031-2035 50,838 54,762 - - 2036-2040 69,430 36,170 2041-2045 78,648 11,112 - - Total $ 594,073 $ 230,914 $ 1,804,986 $ 104,840 70  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 Business-Type Activities: Year Ending Revenue Note State Revolving Fund Loan September 30 Principal Interest Principal Interest 2026 $ 527,000 $ 136,452 $ 791,988 $ 151,379 2027 542,000 121,063 807,107 136,260 2028 558,000 105,237 822,515 120,852 2029 575,000 88,943 838,217 105,150 2030 591,000 72,153 854,219 89,148 2031-2035 1,880,000 110,843 4,050,334 194,816 Total $ 4,673,000 $ 634,691 $ 8,164,380 $ 797,605 Year Ending Lease Obligations Subscription Liabilities September 30 Principal Interest Principal Interest 2026 $ 35,010 $ 590 $ 38,211 $ 3,674 2027 807 3 63,525 5,901 2028 - - 24,382 2,663 2029 - - 26,005 1,832 2030 - - 27,715 945 2031-2035 - - - - Total $ 35,817 $ 593 $ 179,838 $ 15,015 14. 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, 2025. 3. The City is not aware of any instances of noncompliance with the debt covenants. 71  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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, 2025. 3. The City is not aware of any instances of noncompliance with the debt covenants. Capital Improvement Revenue Bonds, 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, 2025. 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, 2025. 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 2025 were approximately $3,688,294. 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 2025 were $829,253. The covenant is based upon 125% of the annual debt service requirement. 6. The pledged revenues exceeded the debt service requirements by $2,859,041 in fiscal year 2025. 7. The City is not aware of any instances of noncompliance with the debt covenants. 72  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 15. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2025, was as follows: Receivable Fund Payable Fund Amount General Community Development Block Grant $ 14,899 General Fund receivables from the Community Development Block Grant Fund are the result of eliminating a temporary deficit cash balance. The composition of interfund transfers for the year ended September 30, 2025, was as follows: Transfers In Beal Memorial Cemetery Perpetual Transfers Out General Fund Care Fund Total General Fund $ - $ 30,248 $ 30,248 Utilities Fund 1,338,201 - 1,338,201 Sanitation Fund 427,937 - 427,937 Stormwater Fund 219,437 - 219,437 $ 1,985,575 $ 30,248 $ 2,015,823 The transfers out of the General Fund of $30,248 to the Beal Memorial Cemetery Perpetual Care Fund were for permanent maintenance. Transfers into the General Fund of $1,985,575 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. 73  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 16. GOVERNMENTAL FUND BALANCES At September 30, 2025, the City's governmental fund balances were classified as follows: Community Beal Memorial Other Total Redevelopment Cemetery Governmental Governmental General Fund Agency Perpetual Care Funds Funds Nonspendable Inventory $ 556,226 $ - $ - $ - $ 556,226 Restricted for Public safety - - - 1,855,189 1,855,189 Transportation 77,143 - - - 77,143 Redevelopment projects - 4,789,364 - - 4,789,364 Library capital projects 145,302 - - - 145,302 Capital facilities and equipment 7,275,884 - - - 7,275,884 Other purposes 11,417 - - - 11,417 Total restricted 7,509,746 4,789,364 - 1,855,189 14,154,299 Committed Affordable housing projects 1,376,292 - - - 1,376,292 Cemetery maintenance 23,838 - 5,197,923 - 5,221,761 Tree mitigation program 146,700 - - - 146,700 Natural disaster recovery 9,667,241 - - - 9,667,241 Total committed 11,214,071 - 5,197,923 - 16,411,994 Assigned for Capital expenditures 702,232 - - - 702,232 FY26 appropriations 4,212,565 - - - 4,212,565 Long-term debt 850,000 - - - 850,000 Other purposes 265,673 - - - 265,673 Total assigned 6,030,470 - - - 6,030,470 Unassigned 2,549,485 - - (8,782) 2,540,703 $ 27,859,998 $ 4,789,364 $ 5,197,923 $ 1,846,407 $ 39,693,692 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. 17. ENCUMBRANCES The amount of encumbrances outstanding as of September 30, 2025, were as follows: Governmental Funds – General Fund $ 2,395,402 Community Redevelopment Agency Fund 2,216,516 Other Governmental Funds 2,936 $ 4,614,854 74  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 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. Encumbrances are reported as assigned fund balance in the General Fund, unless included in a more restrictive classification (i.e., restricted or committed). Encumbrances are not reported as assignments of fund balance in the special revenue funds as those resources are restricted or committed for specific purposes. 18. 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, 2025. 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. 19. COMMITMENTS AND CONTINGENCIES Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies. 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. Workforce Housing Incentive Fund In May 2022, the City Council adopted a resolution establishing the Workforce Housing Incentive Fund, which shall be managed by the City’s Growth Management Department. The funds will be used in accordance with guidelines established in section 4.10 of the City’s Land Development Code and any requests for funding will be made in the form of development agreements and require City Council approval. Requests for funding may either be approved as up-front payments or as reimbursements once projects are completed. The City Council shall determine the manner of payments to recipients. The resolution sets forth an initial commitment of $1,500,000 from the City’s General Fund resources to the Workforce Housing Incentive Fund. As of September 30, 2025, the remaining funding in the Workforce Housing Incentive Fund was $1,376,292. 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 $5,507 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, 2025, were $3,370,200. 75  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 The minimum commitment by the City under the Agreement is as follows: Fiscal Year Ending September 30 2026 $ 71,334 2027 73,474 2028 75,678 2029 77,948 2030 80,286 2031 through 2035 439,039 2036 through 2039 401,067 Total $ 1,218,826 Water Tank Management Contract In February 2025, the Council authorized the City Manager to enter into a contract with U.S. Tank, Inc. to perform maintenance for nine of the City’s water towers and tanks. The contract term is ten years and requires total payments of $2,174,275, which will be made in annual installments ranging from $18,000 to $619,500. The contract includes an option to renew for an additional 10-year term at the expiration of the original term. 20. RESTATEMENT – CHANGE IN ACCOUNTING PRINCIPLE As discussed in Note 1, the City adopted the provisions of GASBS 101 on October 1, 2024. As a result, the City restated its September 30, 2024 net position to implement the change in accounting principle. The financial statement line items affected by the change in accounting principle in the City’s financial statements as of and for the year ended September 30, 2024, were as follows: Governmental Utilities Sanitation Stormwater Business-Type Activities Fund Fund Fund Activities Statement of Net Position Compensated absences - due within one year as previously reported $ 268,706 $ 35,193 $ 19,119 $ 4,601 $ 58,913 Implementation of GASB Statement No. 101 304,928 25,957 28,988 4,115 59,060 Compensated absences - due within one year as restated $ 573,634 $ 61,150 $ 48,107 $ 8,716 $ 117,973 Compensated absences - due in more than one year as previously reported $ 806,117 $ 105,579 $ 57,356 $ 13,802 $ 176,737 Implementation of GASB Statement No. 101 914,784 77,871 86,963 12,346 177,180 Compensated absences - due in more than one year as restated $ 1,720,901 $ 183,450 $ 144,319 $ 26,148 $ 353,917 Net position - unrestricted - as previously reported $ 10,115,793 $ 8,951,288 $ 2,827,443 $ 1,475,568 $ 13,254,299 Implementation of GASB Statement No. 101 (1,219,712) (103,828) (115,951) (16,461) (236,240) Net position - unrestricted - as restated $ 8,896,081 $ 8,847,460 $ 2,711,492 $ 1,459,107 $ 13,018,059 76  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2025 21. SUBSEQUENT EVENTS Preston Hood Athletic Complex Expansion Project In October 2025, the City Council awarded a bid to a commercial contractor to perform construction services for the Preston Hood Recreation Complex Expansion Project for a contract price of $7,059,313. The scope of the project includes constructing a new 2,000 square foot recreation operations building, a restroom facility, various multi-purpose fields, pickleball courts, approximately 200 additional parking spaces, and all other components necessary to achieve a fully functional recreation complex. The project is expected to commence after project is fully financed and is expected to be completed in Fall 2026. The project will primarily be funded by tax-exempt debt financing. The remaining funding will come from the City’s allocation of tourist development tax proceeds and discretionary sales tax proceeds. In January 2026, the Council authorized the issuance of a Capital Improvement Revenue Note, Series 2026 in the amount of $7,500,000 to provide funds to finance the expansion to the City’s recreation center and pay for the costs associated with the issuance of such a note. The revenue note is structured as a tax-exempt negotiated private placement with a financial institution and bears interest at a rate of 4.08% per annum. The City closed on the note in January 2026. Liza Jackson Park Improvements Project In March 2026, the City Council awarded a bid to a commercial contractor to perform construction services for the Liza Jackson Park Improvements Project for a contract price of $3,139,270. The scope of the project includes constructing a new 850 square foot restroom building, stormwater improvements, as well as the addition of a concrete sidewalk and boat trailer and vehicle parking. The estimated construction period for the project is six months and is expected to commence in August 2026. The project will primarily be funded by tax increment revenues of the CRA. 77 REQUIRED SUPPLEMENTARY INFORMATION  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 13,837,646 $ 13,837,646 $ 14,178,604 $ 340,958 Permits and fees 2,366,230 2,366,230 2,440,501 74,271 Intergovernmental 7,762,375 8,127,375 7,287,552 (839,823) Charges for services 3,912,727 3,920,109 3,784,813 (135,296) Fines 103,000 103,000 215,982 112,982 Investment income 250,000 250,000 955,643 705,643 Miscellaneous 786,727 855,797 1,339,941 484,144 Total revenues 29,018,705 29,460,157 30,203,036 742,879 EXPENDITURES Current General government 8,459,187 8,459,187 6,114,022 2,345,165 Public safety 15,865,620 16,091,490 15,243,357 848,133 Physical environment 297,298 297,298 309,707 (12,409) Transportation 626,668 991,668 517,572 474,096 Economic environment 35,861 35,861 20,000 15,861 Culture and recreation 5,470,961 5,954,773 5,282,268 672,505 Capital outlay 8,202,528 8,622,037 7,714,822 907,215 Debt service 1,287,899 1,287,899 3,123,800 (1,835,901) Total expenditures 40,246,022 41,740,213 38,325,548 3,414,665 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (11,227,317) (12,280,056) (8,122,512) 4,157,544 OTHER FINANCING SOURCES (USES) Sale of general capital assets - - 491,244 491,244 Issuance of leases and financing contracts - - 308,843 308,843 Issuance of subscription liabilities - - 1,183,284 1,183,284 Transfers in 1,140,074 1,140,074 1,985,575 845,501 Transfers out (37,000) (37,000) (30,248) 6,752 Total other financing sources (uses) 1,103,074 1,103,074 3,938,698 2,835,624 NET CHANGE IN FUND BALANCE (10,124,243) (11,176,982) (4,183,814) 6,993,168 FUND BALANCE AT BEGINNING OF YEAR 10,124,243 11,176,982 32,043,812 20,866,830 FUND BALANCE AT END OF YEAR $ - $ - $ 27,859,998 $ 27,859,998 See notes to the required supplementary information. 78  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION COMMUNITY REDEVELOPMENT AGENCY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes $ 1,530,199 $ 1,530,199 $ 1,530,199 $ - Intergovernmental 1,354,347 1,354,347 1,357,090 2,743 Investment income - - 47,478 47,478 Miscellaneous - - 152,116 152,116 Total revenues 2,884,546 2,884,546 3,086,883 202,337 EXPENDITURES Current Public safety 427,826 427,826 424,586 3,240 Economic environment 1,326,978 1,326,978 933,083 393,895 Capital outlay 3,528,605 8,246,393 2,411,307 5,835,086 Debt service - - 14,060 (14,060) Total expenditures 5,283,409 10,001,197 3,783,036 6,218,161 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,398,863) (7,116,651) (696,153) 6,420,498 OTHER FINANCING SOURCES Issuance of leases - - 253,251 (253,251) NET CHANGE IN FUND BALANCE (2,398,863) (7,116,651) (442,902) 6,673,749 FUND BALANCE AT BEGINNING OF YEAR 2,398,863 7,116,651 5,232,266 (1,884,385) FUND BALANCE AT END OF YEAR $ - $ - $ 4,789,364 $ 4,789,364 See notes to the required supplementary information. 79  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BEAL MEMORIAL CEMETERY PERPETUAL CARE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL (UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Investment income $ - $ - $ 506,709 $ 506,709 Miscellaneous 300 300 5,767 5,467 Total revenues 300 300 512,476 512,176 EXPENDITURES Current Physical environment 25,574 25,574 11,804 13,770 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (25,274) (25,274) 500,672 525,946 OTHER FINANCING SOURCES Transfers in 32,200 32,200 30,248 (1,952) NET CHANGE IN FUND BALANCE 6,926 6,926 530,920 523,994 FUND BALANCE AT BEGINNING OF YEAR - - 4,667,003 4,667,003 FUND BALANCE AT END OF YEAR $ 6,926 $ 6,926 $ 5,197,923 $ 5,190,997 See notes to the required supplementary information. 80  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE BUDGETARY COMPARISON SCHEDULES SEPTEMBER 30, 2025 Budgetary data reflected in the accompanying schedules of revenues, expenditures, and changes in fund balance – budget and actual 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. 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. 81  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 * 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 Total Pension Liability Service cost $ 245,027 $ 288,828 $ 311,634 $ 330,178 $ 366,197 $ 372,064 $ 446,214 $ 504,055 $ 557,163 $ 569,712 Interest 3,606,688 3,689,920 3,695,597 3,677,931 3,723,744 3,888,510 3,827,379 3,771,606 3,317,396 3,314,990 Differences between expected and actual experience 380,100 (1,541,794) (614,717) 275,286 60,721 (466,270) (265,877) (404,763) 400,221 (1,074,244) 1 Changes of assumptions - - - 1,521,135 618,633 (768,706) - - 4,485,495 - Benefit payments, including refunds of employee contributions (3,644,603) (3,519,769) (3,381,848) (3,366,874) (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) Net change in total pension liability 587,212 (1,082,815) 10,666 2,437,656 1,441,598 (136,214) 850,020 814,454 5,901,386 134,420 Total pension liability – beginning 53,101,382 54,184,197 54,173,531 51,735,875 50,294,277 50,430,491 49,580,471 48,766,017 42,864,631 42,730,211 Total pension liability – ending (a) 53,688,594 53,101,382 54,184,197 54,173,531 51,735,875 50,294,277 50,430,491 49,580,471 48,766,017 42,864,631 Plan Fiduciary Net Position Contributions – employer $ 284,704 $ 314,371 $ 580,847 $ 1,024,247 $ 1,419,339 $ 1,751,654 $ 2,006,925 $ 1,254,097 $ 1,280,082 $ 1,355,041 Contributions – member 100,094 107,036 128,595 136,164 147,885 150,018 158,138 171,869 202,268 209,567 Net investment income 10,432,744 4,095,879 (8,789,933) 10,772,183 4,869,412 1,788,274 4,975,937 4,967,834 4,031,981 (4,390) Benefit payments, including refunds of employee contributions (3,644,603) (3,519,769) (3,381,848) (3,366,874) (3,327,697) (3,161,812) (3,157,696) (3,056,444) (2,858,889) (2,676,038) Administrative expenses (55,871) (50,580) (41,837) (48,305) (50,568) (40,421) (49,518) (42,201) (35,704) (39,535) Net change in plan fiduciary net position 7,117,068 946,937 (11,504,176) 8,517,415 3,058,371 487,713 3,933,786 3,295,155 2,619,738 (1,155,355) Plan fiduciary net position – beginning 49,441,828 48,494,891 59,999,067 51,481,652 48,423,281 47,935,568 44,001,782 40,706,627 38,086,889 39,242,244 Plan fiduciary net position – ending (b) 56,558,896 49,441,828 48,494,891 59,999,067 51,481,652 48,423,281 47,935,568 44,001,782 40,706,627 38,086,889 Net pension liability (asset) – ending (a) – (b) $ (2,870,302) $ 3,659,554 $ 5,689,306 $ (5,825,536) $ 254,223 $ 1,870,996 $ 2,494,923 $ 5,578,689 $ 8,059,390 $ 4,777,742 Plan fiduciary net position as a percentage of the total pension liability 105.35% 93.11% 89.50% 110.75% 99.51% 96.28% 95.05% 88.75% 83.47% 88.85% Covered payroll $ 2,001,875 $ 2,140,710 $ 2,571,886 $ 2,723,263 $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 $ 4,191,304 Net pension liability as a percentage of covered payroll -143.38% 170.95% 221.21% -213.92% 8.60% 62.36% 78.88% 162.30% 199.23% 113.99% 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, 2021, 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. The investment rate of return assumption was lowered from 7.30% to 7.00% for the 2022 reporting date. 82  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 * 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 Total Pension Liability Service cost $ 902,915 $ 784,364 $ 748,564 $ 699,264 $ 546,326 $ 384,431 $ 395,440 $ 334,061 $ 344,958 $ 336,234 Interest 2,280,478 2,284,699 2,230,909 2,142,668 2,143,525 1,976,534 2,112,261 2,084,744 1,948,181 1,953,123 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 1,333,735 (1,184,359) (262,825) 476,947 (211,485) 283,813 (833,418) (343,066) (425,107) (659,966) 2 Changes of assumptions - - - 682,631 46,143 584,615 (251,695) - 1,633,122 - Benefit payments, including refunds of employee contributions (2,138,041) (1,989,100) (1,978,930) (1,900,983) (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) Net change in total pension liability 2,379,087 (104,396) 737,718 2,100,527 1,911,209 1,418,384 (321,094) 262,835 1,756,444 (25,678) Total pension liability – beginning 32,744,351 32,848,747 32,111,029 30,010,502 28,099,293 26,680,909 27,002,003 26,739,168 24,982,724 25,008,402 Total pension liability – ending (a) 35,123,438 32,744,351 32,848,747 32,111,029 30,010,502 28,099,293 26,680,909 27,002,003 26,739,168 24,982,724 Plan Fiduciary Net Position 1 Contributions – employer $ 1,760,809 $ 1,426,703 $ 1,314,250 $ 1,232,753 $ 806,946 $ 732,187 $ 830,613 $ 569,215 $ 577,564 $ 628,975 Contributions – state 288,411 267,370 236,730 223,280 217,473 221,641 202,468 190,399 181,303 175,025 Contributions – member 187,008 176,319 151,799 147,074 132,013 113,192 112,112 104,557 102,214 101,886 Net investment income 5,236,088 2,537,574 (3,684,483) 4,499,980 2,166,715 1,085,486 1,609,609 2,036,244 1,698,093 (538,198) Benefit payments, including refunds of employee contributions (2,138,041) (1,989,100) (1,978,930) (1,900,983) (1,868,482) (1,851,074) (1,764,575) (1,821,727) (1,744,710) (1,655,069) Administrative expenses (74,185) (89,557) (63,679) (52,862) (57,304) (64,930) (54,400) (39,184) (44,882) (25,084) Net change in plan fiduciary net position 5,260,090 2,329,309 (4,024,313) 4,149,242 1,397,361 236,502 935,827 1,039,504 769,582 (1,312,465) Plan fiduciary net position – beginning 25,984,001 23,654,692 27,679,005 23,529,763 22,132,402 21,895,900 20,960,073 19,920,569 19,150,987 20,463,452 Plan fiduciary net position – ending (b) 31,244,091 25,984,001 23,654,692 27,679,005 23,529,763 22,132,402 21,895,900 20,960,073 19,920,569 19,150,987 Net pension liability – ending (a) – (b) $ 3,879,347 $ 6,760,350 $ 9,194,055 $ 4,432,024 $ 6,480,739 $ 5,966,891 $ 4,785,009 $ 6,041,930 $ 6,818,599 $ 5,831,737 Plan fiduciary net position as a percentage of the total pension liability 88.96% 79.35% 72.01% 86.20% 78.41% 78.76% 82.07% 77.62% 74.50% 76.66% Covered payroll $ 3,740,162 $ 3,526,388 $ 3,035,976 $ 2,941,480 $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 $ 2,037,716 Net pension liability as a percentage of covered payroll 103.72% 191.71% 302.84% 150.67% 245.46% 263.57% 213.40% 288.93% 328.89% 286.19% See notes to schedule on the next page. 83  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) – CONTINUED POLICE OFFICERS’ RETIREMENT FUND 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, 2021, 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. The investment rate of return assumption was lowered from 7.20% to 7.00% for the 2022 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. 84  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 * 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 Total Pension Liability Service cost $ 763,298 $ 784,668 $ 768,244 $ 645,171 $ 546,149 $ 513,466 $ 477,930 $ 494,032 $ 453,506 $ 478,365 Interest 2,484,595 2,387,337 2,229,203 2,115,954 2,063,083 1,978,589 1,864,720 1,830,663 1,645,954 1,554,072 Share plan allocation and excess funds 58,611 64,159 - - - - - - - - 2 Changes of benefit terms - - - - - (2,402) - - - 804,097 Differences between expected and actual experiences 70,616 (111,725) 790,469 397,047 231,328 98,199 513,043 (199,349) 261,007 (224,382) Contributions – buy back - 13,921 22,695 - - - - 32,155 - 72,413 1 Changes of assumptions - - 103,378 760,987 66,865 655,972 601,424 258,300 1,243,794 - Benefit payments, including refunds of employee contributions (1,745,932) (1,709,241) (1,633,458) (1,536,000) (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) Net change in total pension liability 1,631,188 1,429,119 2,280,531 2,383,159 1,448,031 1,836,270 2,138,961 981,327 2,366,872 1,544,133 Total pension liability – beginning 35,603,888 34,174,769 31,894,238 29,511,079 28,063,048 26,226,778 24,087,817 23,106,490 20,739,618 19,195,485 Total pension liability – ending (a) 37,235,076 35,603,888 34,174,769 31,894,238 29,511,079 28,063,048 26,226,778 24,087,817 23,106,490 20,739,618 Plan Fiduciary Net Position Contributions – employer $ 1,630,438 $ 1,431,211 $ 1,390,710 $ 1,390,526 $ 1,231,466 $ 1,016,560 $ 1,089,746 $ 794,144 $ 744,019 $ 672,369 Contributions – state 333,611 339,159 256,006 235,435 209,723 219,901 195,017 204,568 201,904 205,007 Contributions – member 243,145 249,844 233,380 226,099 204,865 189,154 182,127 173,480 164,876 150,357 Contributions – buy back - 13,921 22,695 - - - - 32,155 - 72,413 Net investment income 4,748,767 2,141,044 (3,520,580) 3,874,693 1,922,011 564,309 1,430,717 1,401,324 969,107 15,563 Benefit payments, including refunds of employee contributions (1,745,932) (1,709,241) (1,633,458) (1,536,000) (1,459,394) (1,407,554) (1,318,156) (1,434,474) (1,237,389) (1,140,432) Administrative expenses (80,823) (85,891) (64,300) (44,086) (55,253) (66,388) (67,773) (28,449) (43,625) (47,088) Net change in plan fiduciary net position 5,129,206 2,380,047 (3,315,547) 4,146,667 2,053,418 515,982 1,511,678 1,142,748 798,892 (71,811) Plan fiduciary net position – beginning 22,824,393 20,444,346 23,759,893 19,613,226 17,559,808 17,043,826 15,532,148 14,389,400 13,590,508 13,662,319 Plan fiduciary net position – ending (b) 27,953,599 22,824,393 20,444,346 23,759,893 19,613,226 17,559,808 17,043,826 15,532,148 14,389,400 13,590,508 Net pension liability – ending (a) – (b) $ 9,281,477 $ 12,779,495 $ 13,730,423 $ 8,134,345 $ 9,897,853 $ 10,503,240 $ 9,182,952 $ 8,555,669 $ 8,717,090 $ 7,149,110 Plan fiduciary net position as a percentage of the total pension liability 75.07% 64.11% 59.82% 74.50% 66.46% 62.57% 64.99% 64.48% 62.27% 65.53% Covered payroll $ 3,039,311 $ 3,123,046 $ 2,917,251 $ 2,826,544 $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 $ 2,072,260 Net pension liability as a percentage of covered payroll 305.38% 409.20% 470.66% 287.78% 386.56% 444.22% 403.36% 394.54% 422.96% 344.99% See notes to schedule on the next page. 85  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS (UNAUDITED) – CONTINUED FIREFIGHTERS’ RETIREMENT FUND Notes: 1 The investment rate of return assumption was lowered from 7.20% to 7.00% for the 2022 reporting date. 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, 2021, 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. 86  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS (UNAUDITED) FORT WALTON BEACH RETIREE HEALTH CARE PLAN Reporting Date * 2025 2024 2023 2022 2021 2020 2019 2018 2017 Total OPEB Liability Service cost $ 270,609 $ 263,908 $ 399,330 $ 410,684 $ 230,648 $ 190,791 $ 91,714 $ 105,139 $ 85,100 Interest 247,233 231,897 176,997 155,984 228,430 235,597 205,213 187,954 195,814 Differences between expected and actual experience (656,654) - (978,450) - (1,195,507) - (494,909) - - 1 Changes of assumptions 235,921 (65,573) (1,661,244) (334,427) 1,699,860 519,859 288,811 (639,051) 702,672 Benefit payments (229,736) (214,206) (233,797) (218,502) (250,893) (232,308) (151,409) (139,227) (139,227) Net change in total OPEB liability (132,627) 216,026 (2,297,164) 13,739 712,538 713,939 (60,580) (485,185) 844,359 Total OPEB liability - beginning 4,919,554 4,703,528 7,000,692 6,986,953 6,274,415 5,560,476 5,621,056 6,106,241 5,261,882 Total OPEB liability - ending (a) 4,786,927 4,919,554 4,703,528 7,000,692 6,986,953 6,274,415 5,560,476 5,621,056 6,106,241 Plan Fiduciary Net Position Contributions - employer 232,826 224,306 236,797 228,302 253,893 242,108 154,409 148,727 141,727 3 Benefit payments (229,736) (214,206) (233,797) (218,502) (250,893) (232,308) (151,409) (139,227) (139,227) Administrative expenses (3,090) (10,100) (3,000) (9,800) (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) - - - - - - - - - City's total OPEB liability - ending (a) - (b) $ 4,786,927 $ 4,919,554 $ 4,703,528 $ 7,000,692 $ 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% 0.00% 0.00% 0.00% 0.00% Covered-employee payroll (projected) $ 15,504,186 $ 14,407,454 $ 13,747,571 $ 12,653,509 $ 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-employee payroll 30.88% 34.15% 34.21% 55.33% 57.81% 55.08% 51.05% 70.91% 81.20% * 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. 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: 2025: 4.06% 2022: 2.43% 2019: 4.18% 2024: 4.87% 2021: 2.14% 2018: 3.64% 2023: 4.77% 2020: 3.58% 2017: 3.06% 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. 87  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) LAST TEN FISCAL YEARS Reporting Year 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 General Employees' Retirement Fund Actuarially determined contribution $ 228,642 $ 242,563 $ 289,455 $ 580,847 $ 1,024,247 $ 1,419,339 $ 1,602,192 $ 1,771,147 $ 1,120,584 $ 1,197,424 Contributions in relation to the actuarially determined contributions 228,642 284,704 314,371 580,847 1,024,247 1,419,339 1,751,654 2,006,925 1,254,097 1,280,082 Contribution deficiency (excess) $ - $ (42,141) $ (24,916) $ - $ - $ - $ (149,462) $ (235,778) $ (133,513) $ (82,658) Covered payroll $ 1,449,235 $ 2,001,875 $ 2,140,710 $ 2,571,886 $ 2,723,263 $ 2,957,684 $ 3,000,359 $ 3,162,762 $ 3,437,375 $ 4,045,350 Contributions as a percentage of covered payroll 15.78% 14.22% 14.69% 22.58% 37.61% 47.99% 58.38% 63.45% 36.48% 32.33% Police Officers' Retirement Fund Actuarially determined contribution $ 1,711,524 $ 1,578,349 $ 1,643,297 $ 1,429,945 $ 1,456,033 $ 1,024,419 $ 837,623 $ 928,289 $ 650,347 $ 709,037 Contributions in relation to the actuarially determined contributions 1,809,215 2,049,220 1,694,073 1,550,980 1,456,033 1,024,419 913,763 1,033,081 750,791 790,573 Contribution deficiency (excess) $ (97,691) $ (470,871) $ (50,776) $ (121,035) $ - $ - $ (76,140) $ (104,792) $ (100,444) $ (81,536) Covered payroll $ 3,916,530 $ 3,740,162 $ 3,526,388 $ 3,035,976 $ 2,941,480 $ 2,640,254 $ 2,263,844 $ 2,242,245 $ 2,091,146 $ 2,073,208 Contributions as a percentage of covered payroll 46.19% 54.79% 48.04% 51.09% 49.50% 38.80% 40.36% 46.07% 35.90% 38.13% Firefighters' Retirement Fund Actuarially determined contribution $ 1,618,256 $ 1,604,756 $ 1,627,107 $ 1,546,144 $ 1,534,814 $ 1,293,057 $ 1,127,832 $ 1,138,295 $ 899,929 $ 816,138 Contributions in relation to the actuarially determined contributions 1,921,848 1,905,438 1,706,211 1,646,716 1,625,961 1,441,189 1,236,461 1,284,763 998,712 945,923 Contribution deficiency (excess) $ (303,592) $ (300,682) $ (79,104) $ (100,572) $ (91,147) $ (148,132) $ (108,629) $ (146,468) $ (98,783) $ (129,785) Covered payroll $ 2,926,322 $ 3,039,311 $ 3,123,046 $ 2,917,251 $ 2,826,544 $ 2,560,508 $ 2,364,429 $ 2,276,592 $ 2,168,503 $ 2,060,954 Contributions as a percentage of covered payroll 65.67% 62.69% 54.63% 56.45% 57.52% 56.29% 52.29% 56.43% 46.06% 45.90% See notes to the schedule of contributions. 88  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS SEPTEMBER 30, 2025 Measurement Period Ended: 9/30/2024 9/30/2023 9/30/2022 9/30/2021 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 General Employees' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 21.76% 8.68% -14.99% 21.35% 10.25% 3.78% 11.43% 12.45% 10.78% -0.01% Police Officers' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 20.26% 10.85% -13.47% 19.34% 10.01% 5.08% 7.82% 10.52% 9.12% -2.69% Firefighters' Retirement Fund Annual Money-Weighted Rate of Return Net of Investment Expense 20.82% 10.50% -14.84% 19.75% 11.01% 3.33% 9.24% 9.88% 7.25% 0.12% 89  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, 2023 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: Projected generationally with Scale MP-2018 Healthy lives: Female: PubG.H-2010 for Employees Male: PubG.H-2010 (Below Median) for Employees, set back one year Disabled lives: Female: PubG.H-2010 for Disabled Retirees, set forward three years Male: PubG.H-2010 for Disabled Retirees, set forward three years Interest rate: 7.00% 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% 90  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 3.00% 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% Cost of living increase: 2.50% per year beginning at retirement 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. 91  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, 2023 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: Projected generationally with Scale MP-2018 Healthy lives: Female: PubS.H-2010 (Below Median) for Employees, set forward one year Male: PubS.H-2010 (Below Median) for Employees, set forward one year Disabled lives: Female: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Male: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Interest rate: 7.00% per year, compounded annually, net of investment related expenses Retirement age: Member Age Retirement Probability 50-51 5.0% 52-54 25.0% 55-56 10.0% 57 33.3% 58-59 50.0% 60+ 100.0% In addition to the above table, 100% are assumed to retire upon completion of 25 years of service at the age of 60. Early retirement: Service Years Retirement Probability 25 50.0% 26+ 100.0% 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. 92  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) – CONTINUED POLICE OFFICERS’ RETIREMENT FUND Marital assumption: 100% of active members are assumed to be married, with husbands 3 years older than wives. 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 20.0% 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% It is assumed that 75% of disablements are service-related. 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% 93  CITY OF FORT WALTON BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTES TO THE SCHEDULE OF PENSION CONTRIBUTIONS (UNAUDITED) FIREFIGHTERS’ RETIREMENT FUND Valuation Date: October 1, 2023 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: Projected generationally with Scale MP-2018 Healthy lives: Female: PubS.H-2010 (Below Median) for Employees,set forward one year. Male: PubS.H-2010 (Below Median) for Employees,set forward one year Disabled lives: Female: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Male: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Interest rate: 7.00% 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 2022. Salary increases: See table below; assumed rates were approved in conjunction with an actuarial experience study dated June 2022. 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 14.00% 1-9 6.00% 10-14 5.50% 15+ 4.75% 94  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% Termination rate: Service Years Termination Rate 0-2 12.00% 3-9 9.00% 10+ 3.00% Retirement age: Member Age Retirement Probability 45 - 54 3.00% 55+ 100.00% 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 2022. 95  CITY OF FORT WALTON BEACH, FLORIDA COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2025 Special Revenue Funds – used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Law Enforcement Trust Fund This fund is used to account for the revenues received from grants or forfeitures that are legally restricted for specific purposes, such as crime prevention, community policing, and drug education. Funds cannot be used for normal operating expenditures. Law Enforcement Trust Training Fund This fund is used to account for the revenues received from traffic fines that are legally restricted for specific purposes, such as school crossing guards and police officer training. Florida Building Code Fund This fund is used to account for the revenues from building permits and inspections, which are legally restricted for enforcing the Florida Building Code, as defined by State statutes. Community Development Block Grant Fund This fund is used to account for grant funds from the U.S. Department of Housing and Urban Development that are legally restricted for specific purposes, primarily assistance to benefit low- and moderate-income families.  CITY OF FORT WALTON BEACH, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2025 Special Revenue Funds Law Total Law Enforcement Florida Community Nonmajor Enforcement Trust Building Development Governmental Trust Training Code Block Grant Funds ASSETS Cash and cash equivalents $ 282,286 $ 40,867 $ 1,674,743 $ - $ 1,997,896 Due from other governments 1,778 - - 6,117 7,895 TOTAL ASSETS $ 284,064 $ 40,867 $ 1,674,743 $ 6,117 $ 2,005,791 LIABILITIES Accounts payable $ - $ - $ 6,656 $ - $ 6,656 Accrued liabilities 111,143 - 26,686 - 137,829 Due to other funds - - - 14,899 14,899 Total liabilities 111,143 - 33,342 14,899 159,384 FUND BALANCE Restricted 172,921 40,867 1,641,401 - 1,855,189 Unassigned - - - (8,782) (8,782) Total fund balance 172,921 40,867 1,641,401 (8,782) 1,846,407 TOTAL LIABILITIES AND FUND BALANCE $ 284,064 $ 40,867 $ 1,674,743 $ 6,117 $ 2,005,791 96  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, 2025 Special Revenue Funds (Formerly Law Non-Major) Total Law Enforcement Florida Community Beal Memorial Nonmajor Enforcement Trust Building Development Cemetery Governmental Trust Training Code Block Grant Perpetual Care Funds REVENUES Permits and fees $ - $ - $ 631,908 $ - $ - $ 631,908 Intergovernmental 1,778 - - 121,027 - 122,805 Fines 17,533 3,651 - - - 21,184 Miscellaneous 7,573 1,179 48,865 - - 57,617 Total revenues 26,884 4,830 680,773 121,027 - 833,514 EXPENDITURES Current Public safety 10,026 - 577,455 - - 587,481 Economic environment - - - 121,027 - 121,027 Total expenditures 10,026 - 577,455 121,027 - 708,508 NET CHANGE IN FUND BALANCE 16,858 4,830 103,318 - - 125,006 FUND BALANCE (DEFICIT) - AS PREVIOUSLY REPORTED 156,063 36,037 1,538,083 (8,782) 4,667,003 6,388,404 ADJUSTMENT - CHANGE FROM NONMAJOR TO MAJOR FUND - - - - (4,667,003) (4,667,003) FUND BALANCE (DEFICIT) - BEGINNING OF YEAR 156,063 36,037 1,538,083 (8,782) - 1,721,401 FUND BALANCE (DEFICIT) AT END OF YEAR $ 172,921 $ 40,867 $ 1,641,401 $ (8,782) $ - $ 1,846,407 97  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, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ - $ 4,766 $ 1,778 $ (2,988) Fines - - 17,533 17,533 Miscellaneous 300 300 7,573 7,273 Total revenues 300 5,066 26,884 21,818 EXPENDITURES Current Public safety 8,202 25,468 10,026 15,442 NET CHANGE IN FUND BALANCE (7,902) (20,402) 16,858 37,260 FUND BALANCE AT BEGINNING OF YEAR 7,902 20,402 156,063 135,661 FUND BALANCE AT END OF YEAR $ - $ - $ 172,921 $ 172,921 98  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, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Fines $ 4,000 $ 4,000 $ 3,651 $ (349) Miscellaneous - - 1,179 1,179 Total revenues 4,000 4,000 4,830 830 EXPENDITURES Current Public safety 4,000 4,000 - 4,000 NET CHANGE IN FUND BALANCE - - 4,830 4,830 FUND BALANCE AT BEGINNING OF YEAR - - 36,037 36,037 FUND BALANCE AT END OF YEAR $ - $ - $ 40,867 $ 40,867 99  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, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Permits and fees $ 711,000 $ 711,000 $ 631,908 $ (79,092) Miscellaneous 500 500 48,865 48,365 Total revenues 711,500 711,500 680,773 (30,727) EXPENDITURES Current Public safety 630,742 630,742 577,455 53,287 Capital outlay 2,180 2,180 - 2,180 Total expenditures 632,922 632,922 577,455 55,467 NET CHANGE IN FUND BALANCE 78,578 78,578 103,318 24,740 FUND BALANCE AT BEGINNING OF YEAR - - 1,538,083 1,538,083 FUND BALANCE AT END OF YEAR $ 78,578 $ 78,578 $ 1,641,401 $ 1,562,823 100  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, 2025 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental $ 134,174 $ 134,174 $ 121,027 $ (13,147) EXPENDITURES Current Economic environment 239,044 239,044 121,027 118,017 NET CHANGE IN FUND BALANCE (104,870) (104,870) - 104,870 FUND BALANCE (DEFICIT) AT BEGINNING OF YEAR 104,870 104,870 (8,782) (113,652) FUND BALANCE (DEFICIT) AT END OF YEAR $ - $ - $ (8,782) $ (8,782) 101 III. STATISTICAL SECTION (UNAUDITED) This section of the City’s annual comprehensive 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 annual comprehensive 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) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Governmental Activities Net investment in capital assets $ 27,791,054 $ 27,347,098 $ 29,375,380 $ 28,280,342 $ 28,266,271 $ 28,034,343 $ 28,661,006 $ 29,022,371 $ 35,708,426 $ 40,721,488 Restricted Debt service 21,156 21,156 26 - 21,156 21,156 21,156 21,156 - - Redevelopment projects 1,437,363 1,552,484 1,812,525 1,691,456 3,060,014 4,133,412 5,234,216 6,225,881 5,232,266 5,171,206 Pension benefits - - - - - - - - - 268,637 Public safety 536,448 426,892 468,331 673,892 879,583 1,060,646 1,343,836 1,566,532 1,730,183 1,855,189 Other purposes 165,895 93,456 66,707 1,370,446 2,248,298 3,784,023 5,776,594 7,243,110 7,983,383 7,509,746 Unrestricted 2,158,813 (1,447,438) (2,667,720) (377,793) 4,171,642 8,279,303 8,070,651 10,278,765 10,115,793 7,393,334 Total governmental activities net position $ 32,110,729 $ 27,993,648 $ 29,055,249 $ 31,638,343 $ 38,646,964 $ 45,312,883 $ 49,107,459 $ 54,357,815 $ 60,770,051 $ 62,919,600 Business-Type Activities Net investment in capital assets $ 12,893,855 $ 13,818,340 $ 13,829,575 $ 13,678,160 $ 14,566,978 $ 14,023,752 $ 13,422,691 $ 15,556,733 $ 20,555,468 $ 23,383,823 Restricted Debt service 157,228 157,228 157,228 157,228 157,228 157,228 157,228 157,228 157,228 157,228 Pension benefits - - - - - - - - - 183,187 System improvements 404,761 452,472 440,212 454,564 465,123 476,154 463,361 434,824 432,439 473,011 Unrestricted 11,118,844 11,731,659 12,252,058 14,010,607 14,639,462 15,561,538 15,699,234 14,439,484 13,254,299 11,842,713 Total business-type activities net position $ 24,574,688 $ 26,159,699 $ 26,679,073 $ 28,300,559 $ 29,828,791 $ 30,218,672 $ 29,742,514 $ 30,588,269 $ 34,399,434 $ 36,039,962 Primary Government Net investment in capital assets $ 40,684,909 $ 41,165,438 $ 43,204,955 $ 41,958,502 $ 42,833,249 $ 42,058,095 $ 42,083,697 $ 44,579,104 $ 56,263,894 $ 64,105,311 Restricted 2,722,851 2,703,688 2,945,029 4,347,586 6,831,402 9,632,619 12,996,391 15,648,731 15,535,499 15,618,204 Unrestricted 13,277,657 10,284,221 9,584,338 13,632,814 18,811,104 23,840,841 23,769,885 24,718,249 23,370,092 19,236,047 Total primary government net position $ 56,685,417 $ 54,153,347 $ 55,734,322 $ 59,938,902 $ 68,475,755 $ 75,531,555 $ 78,849,973 $ 84,946,084 $ 95,169,485 $ 98,959,562 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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: The amounts reported for the 2023 governmental activities net investment in capital assets has been reduced to reflect a restatement to correct an error. 102  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Expenses Governmental activities General government $ 3,285,039 $ 3,581,072 $ 3,799,439 $ 3,559,619 $ 4,182,204 $ 4,222,810 $ 4,318,011 $ 5,321,980 $ 5,612,265 $ 6,893,053 Public safety 10,172,215 11,507,059 11,420,904 11,159,777 12,040,368 13,746,451 14,020,586 19,077,377 15,594,706 16,698,910 Physical environment 430,490 543,287 505,458 519,126 497,072 547,701 531,268 531,784 425,314 401,575 Transportation 1,494,178 1,536,979 1,401,819 1,406,227 1,268,589 1,253,402 1,401,797 1,385,178 1,318,838 1,004,089 Economic environment 1,540,230 1,591,643 1,174,794 1,412,332 1,317,571 1,131,722 1,194,625 1,217,467 1,463,389 1,275,342 Culture and recreation 5,375,183 5,403,198 5,538,881 5,781,339 5,999,273 5,990,714 6,103,857 6,545,449 6,912,043 6,726,220 Debt service interest 323,639 304,331 291,590 664,131 727,034 700,924 716,930 728,062 705,158 668,906 Total government activities 22,620,974 24,467,569 24,132,885 24,502,551 26,032,111 27,593,724 28,287,074 34,807,297 32,031,713 33,668,095 Business-type activities Utilities 10,066,769 9,420,248 9,810,437 9,961,949 9,315,619 10,574,909 10,480,961 10,003,984 11,238,837 11,080,697 Sanitation 3,407,992 3,687,087 3,774,624 3,720,984 3,824,136 3,996,753 4,142,106 4,774,632 4,580,016 4,745,877 Stormwater 611,351 681,541 727,282 762,181 764,925 1,040,698 1,035,826 967,922 1,196,475 1,048,423 Total business-type activities 14,086,112 13,788,876 14,312,343 14,445,114 13,904,680 15,612,360 15,658,893 15,746,538 17,015,328 16,874,997 Total primary government expenses $ 36,707,086 $ 38,256,445 $ 38,445,228 $ 38,947,665 $ 39,936,791 $ 43,206,084 $ 43,945,967 $ 50,553,835 $ 49,047,041 $ 50,543,092 Program Revenues Governmental activities Charges for services General government $ 421,503 $ 448,911 $ 434,820 $ 508,494 $ 532,475 $ 550,688 $ 354,235 $ 291,558 $ 394,970 $ 699,179 Public safety 523,163 570,556 532,536 643,944 1,440,937 1,883,415 2,204,959 2,296,942 934,683 900,575 Physical environment 371,205 399,338 387,821 414,695 415,266 724,582 535,838 486,857 422,578 453,875 Transportation 207,860 240,653 246,164 252,418 258,883 270,779 288,888 198,547 214,127 202,017 Economic environment 392,118 12,000 - 21,300 36,701 51,039 46,413 47,806 48,266 51,201 Culture and recreation 1,805,332 1,846,019 2,078,405 2,171,484 2,095,326 2,572,448 2,787,760 3,076,149 3,085,299 3,133,432 Operating grants and contributions 908,595 825,624 706,094 765,032 4,049,001 2,348,391 1,460,346 1,866,820 1,089,161 1,239,109 Capital grants and contributions 802,809 361,641 1,487,587 37,406 232,491 186,874 125,832 1,251,331 789,571 243,432 Total governmental activities program revenues 5,432,585 4,704,742 5,873,427 4,814,773 9,061,080 8,588,216 7,804,271 9,516,010 6,978,655 6,922,820 Business-type activities Charges for services Utilities 10,141,724 10,970,823 10,737,496 11,390,289 11,356,045 11,856,685 11,944,833 11,790,008 11,580,108 12,484,176 Sanitation 3,599,838 3,663,445 3,774,519 3,871,204 3,934,207 4,381,765 4,824,130 5,018,548 5,177,268 5,433,078 Stormwater 860,644 917,844 975,805 1,027,310 1,035,033 1,035,527 1,037,228 1,036,590 1,046,679 1,053,819 Capital grants and contributions 533,515 1,314,521 151,049 93,282 211,962 89,963 46,063 122,670 3,721,220 1,082,695 Total business-type activities program revenues 15,135,721 16,866,633 15,638,869 16,382,085 16,537,247 17,363,940 17,852,254 17,967,816 21,525,275 20,053,768 Total primary government program revenues $ 20,568,306 $ 21,571,375 $ 21,512,296 $ 21,196,858 $ 25,598,327 $ 25,952,156 $ 25,656,525 $ 27,483,826 $ 28,503,930 $ 26,976,588 Continued… 103  City of Fort Walton Beach, Florida SCHEDULE 2 CHANGES IN NET POSITION Last Ten Fiscal Years (full accrual basis of accounting) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net (Expense)/Revenue Governmental activities $ (17,188,389) $ (19,762,827) $ (18,259,458) $ (19,687,778) $ (16,971,031) $ (19,005,508) $ (20,482,803) $ (25,291,287) $ (25,053,058) $ (26,745,275) Business-type activities 1,049,609 3,077,757 1,326,526 1,936,971 2,632,567 1,751,580 2,193,361 2,221,278 4,509,947 3,178,771 Total primary government $ (16,138,780) $ (16,685,070) $ (16,932,932) $ (17,750,807) $ (14,338,464) $ (17,253,928) $ (18,289,442) $ (23,070,009) $ (20,543,111) $ (23,566,504) General Revenues and Other Changes in Net Position Governmental activities Taxes Property taxes $ 5,617,998 $ 5,807,598 $ 6,041,303 $ 6,416,668 $ 6,573,751 $ 6,608,861 $ 7,025,573 $ 7,618,352 $ 7,750,534 $ 7,693,921 Sales taxes 2,707,153 2,792,840 2,941,301 4,335,114 4,940,279 6,021,460 6,401,055 6,142,151 6,726,844 5,934,715 Utility service taxes 3,931,939 3,962,859 4,182,026 4,045,085 4,024,523 4,136,505 4,294,415 4,515,669 4,681,431 4,716,511 Tax increments for redevelopment district 1,628,439 1,649,589 1,811,121 1,893,803 2,369,529 2,320,213 2,404,122 2,668,386 2,842,113 2,887,289 Franchise fees 2,202,420 2,034,209 2,131,104 2,084,717 2,070,302 2,146,088 2,355,837 2,415,585 2,385,680 2,387,255 Intergovernmental, unrestricted 910,615 981,613 1,009,901 1,034,884 978,949 1,101,020 1,374,067 1,407,882 1,316,824 1,719,563 Gain on sale of assets 873,101 - - 66,523 158,530 740,344 39,877 2,264,170 139,509 586,414 Miscellaneous 27,976 157,806 93,106 77,264 44,913 93,227 83,470 72,967 29,966 35,815 Investment earnings (losses) 444,972 414,160 263,824 1,225,235 1,071,190 743,927 (1,498,120) 1,638,716 3,743,723 2,167,478 Transfers 755,846 761,739 847,373 1,091,579 1,747,686 1,759,782 1,797,083 1,797,765 1,848,670 1,985,575 Total governmental activities 19,100,459 18,562,413 19,321,059 22,270,872 23,979,652 25,671,427 24,277,379 30,541,643 31,465,294 30,114,536 Business-type activities Gain on sale of assets 26,093 32,663 14,258 44,914 16,801 260,579 - 50,435 9,371 10,479 Miscellaneous 5,502 27,727 16,575 17,671 1,551 105,520 4,088 1,580 2,366 2,387 Investment earnings (losses) 165,583 85,567 9,388 713,509 624,999 31,984 (876,524) 370,227 1,138,151 670,706 Transfers (755,846) (761,739) (847,373) (1,091,579) (1,747,686) (1,759,782) (1,797,083) (1,797,765) (1,848,670) (1,985,575) Total business-type activities (558,668) (615,782) (807,152) (315,485) (1,104,335) (1,361,699) (2,669,519) (1,375,523) (698,782) (1,302,003) Total primary government $ 18,541,791 $ 17,946,631 $ 18,513,907 $ 21,955,387 $ 22,875,317 $ 24,309,728 $ 21,607,860 $ 29,166,120 $ 30,766,512 $ 28,812,533 Change in Net Position Governmental activities $ 1,912,070 $ (1,200,414) $ 1,061,601 $ 2,583,094 $ 7,008,621 $ 6,665,919 $ 3,794,576 $ 5,250,356 $ 6,412,236 $ 3,369,261 Business-type activities 490,941 2,461,975 519,374 1,621,486 1,528,232 389,881 (476,158) 845,755 3,811,165 1,876,768 Total primary government $ 2,403,011 $ 1,261,561 $ 1,580,975 $ 4,204,580 $ 8,536,853 $ 7,055,800 $ 3,318,418 $ 6,096,111 $ 10,223,401 $ 5,246,029 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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: The gain on sale of assets reported for 2023 governmental activities has been reduced to reflect a restatement to correct an error. 104  City of Fort Walton Beach, Florida SCHEDULE 3 FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 General Fund Nonspendable $ 240,865 $ 245,181 $ 250,315 $ 269,837 $ 286,427 $ 259,960 $ 284,342 $ 311,357 $ 391,596 $ 556,226 Restricted 163,817 93,456 66,707 4,497,485 2,248,298 5,712,331 6,164,287 7,243,110 7,983,383 7,509,746 Committed 6,009,523 6,687,557 6,663,230 8,019,062 8,045,739 8,649,189 10,409,244 11,556,463 11,158,869 11,214,071 Assigned 1,198,378 1,891,555 1,913,861 2,341,510 2,184,202 3,908,571 3,096,152 9,590,863 6,849,007 6,030,470 Unassigned 4,356,681 3,561,586 2,282,375 3,291,695 8,218,150 8,845,558 7,300,353 4,983,996 5,660,957 2,549,485 Total general fund $ 11,969,264 $ 12,479,335 $ 11,176,488 $ 18,419,589 $ 20,982,816 $ 27,375,609 $ 27,254,378 $ 33,685,789 $ 32,043,812 $ 27,859,998 All Other Governmental Funds Nonspendable $ 1,762 $ - $ - $ - $ - $ - $ - $ - $ - $ - Restricted 1,995,283 2,000,532 2,280,882 2,365,348 3,960,753 5,215,214 6,599,208 7,813,569 6,962,449 6,644,553 Committed 2,467,828 2,739,865 2,974,049 3,120,593 3,451,682 4,154,232 3,435,513 3,814,516 4,667,003 5,197,923 Unassigned - (5,861) (19,270) (31,326) (17,483) (19,782) (19,782) (19,782) (8,782) (8,782) Total all other governmental funds $ 4,464,873 $ 4,734,536 $ 5,235,661 $ 5,454,615 $ 7,394,952 $ 9,349,664 $ 10,014,939 $ 11,608,303 $ 11,620,670 $ 11,833,694 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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. 105  City of Fort Walton Beach, Florida SCHEDULE 4 CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Revenues Taxes $ 11,941,311 $ 12,220,392 $ 12,741,642 $ 13,101,370 $ 13,441,866 $ 13,705,445 $ 14,378,360 $ 15,344,155 $ 15,754,818 $ 15,708,803 Licenses, permits, and fees 2,623,810 2,514,178 2,586,035 2,659,200 3,475,389 4,102,640 4,471,993 4,722,748 3,232,859 3,072,409 Intergovernmental 4,322,696 4,266,425 4,880,937 5,516,224 9,870,743 9,094,488 8,760,009 10,169,568 9,532,937 8,767,447 Charges for services 2,402,801 2,488,384 2,739,021 2,868,887 2,757,191 3,461,193 3,628,960 3,743,367 3,717,283 3,784,813 Fines and forfeits 121,513 127,406 101,378 94,578 93,827 77,476 117,291 237,061 106,837 237,166 Investment income (losses) - - - - - - (1,939,598) 1,102,761 2,482,001 1,509,830 Miscellaneous 935,821 1,042,958 819,264 1,770,325 1,561,538 1,358,329 910,757 1,008,493 1,830,590 1,555,441 Total Revenues 22,347,952 22,659,743 23,868,277 26,010,584 31,200,554 31,799,571 30,327,772 36,328,153 36,657,325 34,635,909 Expenditures General governmental services 3,017,374 3,228,767 3,631,410 3,377,241 3,620,756 3,632,924 3,737,220 4,407,665 4,953,525 6,114,022 Public safety 9,053,178 9,913,344 10,584,430 10,157,745 11,255,650 12,988,274 14,189,424 14,867,714 15,860,992 16,255,424 Physical environment 337,831 372,552 425,472 439,446 440,769 491,526 484,405 445,217 351,655 321,511 Transportation 852,602 890,762 762,058 824,349 723,669 741,097 890,333 938,417 755,644 517,572 Economic environment 1,432,788 1,468,393 1,045,687 1,282,063 1,182,887 945,657 1,006,864 1,026,839 1,294,069 1,074,110 Culture and recreation 4,196,979 4,170,787 4,477,927 4,685,690 4,929,243 4,924,696 4,880,270 5,170,888 5,582,110 5,282,268 Capital outlay 2,105,686 1,598,285 3,574,823 10,498,028 4,546,491 2,823,402 3,827,661 6,018,951 8,694,881 10,126,129 Debt service Principal 673,851 682,229 718,320 698,381 1,084,666 1,203,619 1,871,562 2,488,022 2,471,280 2,461,192 Interest and other costs 336,835 316,629 297,245 547,165 734,680 708,959 725,016 682,916 726,419 676,668 Total expenditures 22,007,124 22,641,748 25,517,372 32,510,108 28,518,811 28,460,154 31,612,755 36,046,629 40,690,575 42,828,896 Excess (deficiency) of revenues over (under) expenditures 340,828 17,995 (1,649,095) (6,499,524) 2,681,743 3,339,417 (1,284,983) 281,524 (4,033,250) (8,192,987) Other Financing Sources (Uses) Proceeds from financing contracts - - - 350,000 74,135 - - 304,825 - 242,000 Proceeds from issuance of leases - - - - - - 31,944 - 428,276 320,094 Proceeds from issuance of subscription liabilities - - - - - - - 971,904 126,694 1,183,284 Transfers in 1,798,184 1,794,419 1,868,634 2,353,906 3,620,644 3,723,288 4,217,403 4,239,244 1,892,427 2,015,823 Transfers out (1,042,338) (1,032,680) (1,021,261) (1,262,327) (1,872,958) (1,963,506) (2,420,320) (2,441,479) (43,757) (30,248) Sale of general capital assets 850,000 - - - - 748,986 - 4,668,757 - 491,244 Debt issuance - - - 12,520,000 - 2,499,320 - - - - Total other financing sources (uses) 1,605,846 761,739 847,373 13,961,579 1,821,821 5,008,088 1,829,027 7,743,251 2,403,640 4,222,197 Net change in fund balance $ 1,946,674 $ 779,734 $ (801,722) $ 7,462,055 $ 4,503,564 $ 8,347,505 $ 544,044 $ 8,024,775 $ (1,629,610) $ (3,970,790) Debt service as a percentage of noncapital expenditures 5.08% 4.75% 4.63% 5.66% 7.59% 7.46% 9.35% 10.56% 9.99% 9.60% Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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 FY22, the City implemented GASB Statement No. 87, Leases Note: Beginning in FY22, the City began separately reporting investment income (losses) from other miscellaneous revenues Note: Beginning in FY23, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements 106  City of Fort Walton Beach, Florida SCHEDULE 5 REVENUES AND OTHER SOURCES (1) Last Ten Fiscal Years Unaudited Investment Income Other Fiscal Licenses, Fees, Intergovernmental Charges for Fines and (Losses) and Financing Year Taxes and Permits Revenues Services Forfeitures Other Revenues Sources TOTAL 2025 $ 15,708,803 $ 3,072,409 $ 8,767,447 $ 3,784,813 $ 237,166 $ 3,065,271 $ 4,252,445 $ 38,888,354 2024 15,754,818 3,232,859 9,532,937 3,717,283 106,837 4,312,591 2,447,397 39,104,722 2023 15,344,155 4,722,748 10,169,568 3,743,367 237,061 2,111,254 7,743,251 44,071,404 2022 14,378,360 4,471,993 8,760,009 3,628,960 117,291 (1,028,841) 1,829,027 32,156,799 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 (1) Includes General Fund, LETFs, CDBG Fund, FBC Fund, CRA Fund, Debt Service Fund, and Beal Memorial Cemetery Fund Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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 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 2025 $ 2,851,733,248 $ 200,915,720 $ 3,052,648,968 $ 630,796,562 $ 2,421,852,406 4.3282 2024 2,631,355,774 166,865,535 2,798,221,309 596,827,402 2,201,393,907 4.3282 2023 2,491,514,381 165,274,982 2,656,789,363 572,446,316 2,084,343,047 4.6116 2022 2,284,074,540 134,039,029 2,418,113,569 531,246,048 1,886,867,521 4.9999 2021 2,029,638,016 127,094,869 2,156,732,885 519,837,310 1,636,895,575 5.3293 2020 1,932,732,538 121,764,835 2,054,497,373 509,515,431 1,544,981,942 5.3293 2019 1,824,002,582 118,539,677 1,942,542,259 493,474,028 1,449,068,231 5.6395 2018 1,717,941,745 113,382,574 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 (1) Florida State Law requires all property to be assessed at current fair market. The 2024 tax roll is the basis for fiscal year 2025 revenues Source: Okaloosa County Property Appraiser 108  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 Total Direct Okaloosa County School Water Overlapping Year (1) Basic Rate Rate County Board Management Rates 2025 4.3282 4.3282 3.8308 5.3770 0.0207 9.2285 2024 4.3282 4.3282 3.8308 5.3790 0.0218 9.2316 2023 4.6116 4.6116 3.8308 5.4770 0.0234 9.3312 2022 4.9999 4.9999 3.8308 5.5790 0.0261 9.4359 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 (1) As of levy date, November 1 of each year listed. The 2024 millage rate is the basis for fiscal year 2025 tax revenues * Overlapping rates are those of local and county governments that apply to property owners within the City of Fort Walton Beach Source: Okaloosa County Tax Collector 109  City of Fort Walton Beach, Florida SCHEDULE 8 PRINCIPAL TAXPAYERS Unaudited 2025 2016 Total Total Assessed Assessed Taxpayer Value Percentage Rank Value Percentage Rank Florida Power & Light Co. $ 50,501,089 2.09% 1 $ 20,358,644 1.66% 1 Florida Power & Light Co. (Gulf Power Co.) U S GOVT/HOME2SUITES 44,207,505 1.83% 2 14,339,454 1.17% 2 Suso 2 Uptown, LP Suso 2 Uptown, LP 24,286,599 1.00% 3 7,005,455 0.57% 3 Cox Communications Gulf Coast, LLC KAGR Fort Walton 1005 LLC 12,125,074 0.50% 4 6,077,028 0.50% 4 99 Eglin, LTD Extra Space Properties Two LLC 11,702,804 0.48% 5 5,651,258 0.46% 5 DRS Training and Control WIM-FWB RI LLC 11,480,152 0.47% 6 5,553,541 0.45% 6 Pacifica Walton Beach, LLC Cox Communications Gulf Coast, LLC 11,428,682 0.47% 7 5,183,838 0.42% 7 Embarq Corp. FWB Greens LLC 10,596,466 0.44% 8 5,154,076 0.42% 8 PSH of Okaloosa, LLC Pacifica Walton Beach LLC 10,593,534 0.44% 9 4,897,391 0.40% 9 FNBT.com Bank Retreat at Fort Walton Beach Propco LLC 8,811,970 0.36% 10 4,330,150 0.35% 10 Fort Walton Machining, Inc. Total Taxable Assessed Value of Principal Taxpayers 195,733,875 8.08% 78,550,835 6.42% Total Taxable Assessed Value of Other Taxpayers 2,226,118,531 91.92% 1,145,869,258 93.58% Total Taxable Assessed Value $ 2,421,852,406 100.00% $ 1,224,420,093 100.00% (1) The 2025 tax roll is the basis for fiscal year 2026 tax revenues. Source: Okaloosa County Property Appraiser 110  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 2025 The 2025 tax levy is the basis for fiscal year 2025-26 tax revenues. 2024 $ 9,545,443 $ 9,197,456 96.4% $ 13,876 $ 9,211,332 96.5% $ 5,488 0.06% 2023 9,636,641 9,283,765 96.3% 7,456 9,291,221 96.4% 6,039 0.06% 2022 9,451,861 9,105,332 96.3% 19,389 9,124,721 96.5% 4,244 0.04% 2021 8,739,154 8,419,880 96.3% 21,315 8,441,195 96.6% 9,958 0.11% 2020 8,245,481 7,939,074 96.3% 13,594 7,952,668 96.4% 6,029 0.07% 2019 8,186,794 7,900,798 96.5% 18,327 7,919,125 96.7% 7,490 0.09% 2018 7,822,441 7,526,583 96.2% 20,747 7,547,330 96.5% 3,469 0.04% 2017 7,387,081 7,119,876 96.4% 8,632 7,128,508 96.5% 8,122 0.11% 2016 7,080,530 6,826,718 96.4% 18,798 6,845,516 96.7% 9,696 0.14% (1) Includes discount taken for early payment of taxes (maximum of 4%). Source: Okaloosa County Tax Collector 111  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 Subscription Financing Revenue Revenue Obligation Lease Subscription Revenue Revolving Primary of Personal Per Year Bonds Liabilities Liabilities Contracts Notes Bonds Bonds Liabilities Liabilities Notes Loans Government Income (1) Capita (2) 2025 $ - $ 594,073 $ 1,804,986 $ 380,874 $ 5,932,701 $ 9,973,067 $ - $ 35,817 $ 179,838 $ 4,673,000 $ 8,164,380 $ 31,738,736 0.22% 1,472.59 2024 - 421,986 1,298,973 222,785 6,937,626 10,520,145 - 102,468 - 5,185,000 8,941,531 33,630,514 0.25% 1,594.62 2023 - 193,047 1,714,631 536,581 7,922,834 10,950,732 - 166,017 - 5,683,000 9,704,126 36,870,968 0.28% 1,745.78 2022 - 393,186 - 600,745 8,888,359 11,365,436 - 190,610 - 6,167,000 10,452,433 38,057,769 0.30% 1,811.33 2021 - - - 944,447 9,828,934 11,764,842 - - - 6,637,000 11,186,723 40,361,946 0.35% 1,926.77 2020 - - - 67,035 9,025,971 12,149,516 - - - 7,093,000 11,907,259 40,242,781 0.38% 1,910.50 2019 - - - 6,681 9,726,372 12,520,000 - - - 7,537,000 12,614,297 42,404,350 0.42% 2,025.04 2018 - - - 42,217 10,408,945 - - - - 7,968,000 13,308,089 31,727,251 0.33% 1,523.15 2017 - - - 76,099 11,073,656 - - - - 8,387,000 13,988,885 33,525,640 0.37% 1,605.17 2016 - - - 106,653 11,725,331 - - - - 8,794,000 14,656,929 35,282,913 0.40% 1,689.88 Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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: Beginning in FY22, the City implemented GASB Statement No. 87, Leases Note: Beginning in FY23, the City implemented GASB Statement No. 96, Subscription-Based Information Technology Arrangements Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 112  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) 2025 $ - 0.00% $ - 2024 - 0.00% - 2023 - 0.00% - 2022 - 0.00% - 2021 - 0.00% - 2020 - 0.00% - 2019 - 0.00% - 2018 - 0.00% - 2017 - 0.00% - 2016 - 0.00% - Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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. 113  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 2025 $ 43,698,865 $ 44,354,058 $ 3,881,584 $ 997,297 $ 4,878,881 9.09 2024 45,009,250 44,633,809 3,795,424 1,079,247 4,874,671 9.16 2023 44,258,368 41,571,494 3,780,566 1,045,404 4,825,970 8.61 2022 38,884,619 39,790,234 3,107,726 1,102,464 4,210,190 9.45 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 (1) Non-Ad Valorem Revenues of General 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, Financing Contracts, Leases, and Subscription Liabilities. See Financial Statement Notes for detail. Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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. 114  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 $ 113,108,435 9.59% (2) $ 10,845,484 Revenue Notes 13,617,857 9.59% (2) 1,305,758 Financing Contracts 11,597 9.59% (2) 1,112 Okaloosa County School District Certificates of Participation 2,161,000 25.45% (1) 550,073 Financing Contracts 249,758,726 25.45% (1) 63,574,948 Lease and Subscription Liabilities 59,802,829 25.45% (1) 15,222,538 Subtotal: Overlapping Debt 438,460,444 91,499,913 Direct Debt City of Fort Walton Beach Revenue Bonds & Notes 15,905,768 100.00% 15,905,768 City of Fort Walton Beach Financing Contracts 380,874 100.00% 380,874 City of Fort Walton Beach Lease Liabilities 594,073 100.00% 594,073 City of Fort Walton Beach Subscription Liabilities 1,804,986 100.00% 1,804,986 Subtotal: Direct Debt 18,685,701 18,685,701 Total Direct and Overlapping Debt $ 457,146,145 $ 110,185,614 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. 115  City of Fort Walton Beach, Florida SCHEDULE 14 MAJOR EMPLOYERS Unaudited 2025 2016 Percentage Percentage of Total of Total Employer Product Employees Employment Ranking Employees Employment Ranking USAF - Eglin AFB (1) Air Force Development Test Center 19,040 17.29% 1 21,500 18.81% 1 (2) USAF - Hurlburt AFB Air Force Special Ops Command 13,255 12.04% 2 10,651 9.32% 2 Okaloosa County School District Education Services 4,428 4.02% 3 3,521 3.08% 3 Walmart Consumer Products 1,386 1.26% 4 HCA FL Fort Walton-Destin Hospital Medical Services 1,252 1.14% 5 1,000 0.87% 5 (3) Okaloosa County BCC Local Government Services 1,127 1.02% 6 1,501 1.31% 4 Publix (Okaloosa Combined) Consumer Products 910 0.83% 7 Reliance Test & Technology Government Contractor 770 0.70% 8 Lockheed Martin Defense Contractor 730 0.66% 9 800 0.70% 7 North Okaloosa Medical Center Medical Services 725 0.66% 10 Jacobs Technology - TEAS Group Military Technical Support 1,000 0.87% 5 InDyne Inc. Military Technical Support 800 0.70% 7 Northwest Florida State College Education Services 752 0.66% 9 L-3 Crestview Aerospace Military Technical Support 600 0.52% 10 43,623 39.61% 42,125 36.86% (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. Source: One Okaloosa Economic Development Council (oneokaloosa.org/employers) 116  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 2025 21,553 224,778 9.59% $ 14,601,665 $ 64,960 4.1% 2024 21,090 220,603 9.56% 13,596,268 61,632 2.8% 2023 21,120 217,882 9.69% 12,981,628 59,581 2.7% 2022 21,011 215,751 9.74% 12,663,927 58,697 2.2% 2021 20,948 213,204 9.83% 11,626,309 54,531 3.2% 2020 21,064 203,951 10.33% 10,680,336 52,367 5.2% 2019 20,940 201,514 10.39% 10,194,990 50,592 2.6% 2018 20,830 198,152 10.51% 9,678,184 48,842 2.8% 2017 20,886 195,488 10.68% 9,151,339 46,813 3.0% 2016 20,879 192,925 10.82% 8,925,717 46,265 4.2% OKALOOSA COUNTY EDUCATION FY 2025 FY 2024 FY 2023 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 13,991 15,185 15,737 Grades 6-8 7,185 7,834 7,997 Grades 9-12 9,051 11,002 9,596 Adult Students 770 761 779 Exceptional Children 6,699 7,287 7,207 Personnel: 1,712 1,807 1,867 Source: Office of Economic & Demographic Research, FL Research & Economic Information Database, Okaloosa County School Board 117  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 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 General Government City Manager 3.00 4.00 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Human Resources 4.00 4.00 4.00 4.00 4.00 4.00 4.70 4.70 4.70 3.60 Information Technology 4.00 4.00 5.00 5.00 4.00 4.00 4.00 4.00 3.80 2.00 City Clerk 3.00 3.00 2.00 2.00 2.00 2.00 2.40 2.40 2.40 2.50 Finance 7.00 8.00 8.00 8.00 7.00 6.00 6.00 6.00 6.00 6.00 Purchasing 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Administration 1.60 2.50 - - - - - - - - Public Safety Police 75.32 73.67 71.17 71.34 75.95 74.82 74.82 74.90 70.90 64.90 Fire 43.25 43.25 44.25 44.25 44.00 43.00 37.00 37.00 37.00 37.00 Recreation & Cultural Services Administration 12.68 13.00 12.70 12.70 12.70 12.70 12.70 11.50 11.50 12.90 Parks Maintenance 13.10 13.00 13.00 13.00 13.00 13.00 12.00 10.25 10.25 10.00 Right-of-Way Maintenance - - - - - - 1.00 1.00 2.00 1.00 Golf Club 27.41 13.35 13.43 13.43 13.42 13.42 13.96 13.81 13.81 14.26 Golf Grounds Maintenance - 14.00 14.00 14.00 15.75 15.75 15.75 15.75 15.75 15.75 Library 9.22 9.40 9.40 9.40 9.22 9.22 8.72 8.72 8.72 8.02 Museum 4.10 4.10 4.10 4.10 4.10 4.10 3.60 4.00 4.00 4.60 Cemetery 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Growth Management Administration 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Planning & Zoning 3.00 3.00 3.00 3.00 3.00 4.00 4.00 4.00 4.00 3.00 Building & Permitting 6.50 6.50 6.50 6.50 5.00 5.00 5.00 5.00 4.00 4.00 Code Enforcement 2.75 2.75 2.75 2.75 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 9.00 Facilities Maintenance 6.00 6.00 6.00 6.00 6.00 6.00 6.00 7.00 7.00 7.00 Streets Maintenance 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 6.00 Utility (Water/Sewer) Enterprise Administration 5.00 5.00 6.00 6.00 6.00 5.00 6.00 5.00 5.00 8.00 Customer Service 5.00 5.00 4.50 4.50 4.50 5.50 5.50 5.50 5.50 5.50 GIS 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 - Water Operations 10.00 10.00 9.00 9.00 8.00 8.00 8.00 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 12.00 12.00 13.00 13.00 13.00 13.00 13.00 13.00 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 1.00 1.00 Stormwater Enterprise Stormwater 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Total 316.93 317.52 311.80 310.97 312.64 310.51 306.15 304.53 300.33 292.03 Source: City of Fort Walton Beach adopted budget for the subsequent year. 118  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 2025 333 667 428 426 21 2024 271 677 326 409 13 2023 410 627 203 376 12 2022 287 533 195 247 17 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 BUSINESS TAX RECEIPTS ISSUED (formerly referred to as occupational licenses) Year Number Sold 2025 758 2024 136 2023 196 2022 152 2021 166 2020 212 2019 406 2018 628 2017 1,769 2016 2,115 MUNICIPAL RECREATIONAL FACILITIES 2 18-hole Golf Courses 1 Library 1 18-hole Disc Golf Course 4 Museums 1 Auditorium 23 Playgrounds 8 Baseball-Softball Fields 2 Racquetball Court Facilities 1 BMX/Skateboard Facility 1 Recreation Center 4 Boat Ramps 4 Soccer Field Facilities 8 Exercise/Walking Tracks 16 Tennis Courts 4 Beach Volleyball Courts 7 Undeveloped Parks 21 Pickleball Courts 7 Waterfront Parks Sources: City of Fort Walton Beach Customer Service, Building & Permitting, and Recreation departments. 119  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 2,951 255 2,216 425 55 02 BLACKMON 754 65 587 93 9 03 MILLIGAN 1,500 158 1,026 272 44 04 HOLT 1,546 164 1,097 241 44 05 LAUREL HILL 1,279 168 887 197 27 06 GARDEN CITY 5,144 708 3,238 1,021 177 07 DORCAS 2,244 298 1,403 476 67 08 HONEY CREEK 4,841 821 2,842 1,037 141 09 YELLOW RIVER 4,441 727 2,548 1,017 149 10 WEST WRIGHT 6,176 1,378 2,948 1,613 237 11 EAST CRESTVIEW 13,416 2,706 6,394 3,810 506 12 WEST CRESTVIEW 1,023 469 291 228 35 13 NORTH CRESTVIEW 4,504 783 2,656 913 152 14 WEST NICEVILLE 3,085 478 1,785 690 132 15 VALPARAISO 3,353 497 1,961 771 124 16 SHALIMAR 2,998 569 1,662 666 101 17 CENTRAL WRIGHT 2,924 745 1,342 715 122 18 OCEAN CITY 2,652 521 1,379 661 91 19* EAST FWB 1,831 484 786 489 72 20 WEST DESTIN 2,893 412 1,809 587 85 21 MARY ESTHER 2,776 532 1,501 639 104 22* S CENTRAL FWB 2,194 515 1,087 517 75 23 EGLIN AFB 849 163 346 295 45 24* WEST FWB 2,905 738 1,332 726 109 25 N CENTRAL NICEVILLE 2,096 338 1,208 474 76 26 SEMINOLE 2,760 337 1,815 552 56 27 CINCO BAYOU 296 57 143 83 13 28* GARNIERS 347 62 208 66 11 29* GOLF COURSE 2,031 288 1,227 463 53 30 OKALOOSA ISLAND 1,584 227 954 352 51 31 LONGWOOD 2,151 312 1,434 364 41 32* FERRY PARK 2,462 413 1,508 483 58 33 ROCKY BAYOU 5,146 607 3,391 1,035 113 34 FLOROSA 3,760 734 1,877 996 153 35 NORTH DESTIN 3,364 432 2,176 638 118 36 SOUTH NICEVILLE 2,833 347 1,833 573 80 37 LAKE LORRAINE 2,731 369 1,737 559 66 38 NORTHGATE 2,155 449 1,141 493 72 39 EAST WRIGHT 2,224 507 1,130 514 73 40 SOUTH BLUEWATER 3,038 331 2,022 601 84 41* N CENTRAL FWB 1,394 268 834 262 30 42* NEW HEIGHTS 2,302 668 991 569 74 43 S CENTRAL NICEVILLE 2,364 397 1,379 510 78 44 CENTRAL DESTIN 1,926 314 1,067 469 76 45 SOUTH CRESTVIEW 4,540 938 2,232 1,199 171 46 NORTH BLUEWATER 4,625 634 2,860 1,004 127 47 WYNNEHAVEN BEACH 2,028 345 991 608 84 48* WESTWOOD RETIREMENT 113 21 74 17 1 49 EAST DESTIN 3,287 335 2,247 622 83 50 SOUTH DESTIN 2,757 276 1,941 459 81 51 AIRPORT ROAD 2,349 329 1,412 534 74 52 LIVE OAK 4,502 754 2,464 1,144 140 Countywide Total 149,444 25,443 85,419 33,742 4,840 *City Precinct City Total 15,579 3,457 8,047 3,592 483 Source: Okaloosa County Supervisor of Elections 120  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 2025 $ 2,751 $ 468 1.19% $ 38,897 2024 2,507 468 1.26% 36,614 2023 2,262 211,291 85.94% 34,575 2022 2,157 25,702 9.54% 243,604 2021 1,490 25,052 8.57% 267,149 2020 766 31,086 9.66% 290,711 2019 925 31,912 9.04% 321,031 2018 755 27,180 7.17% 352,018 2017 660 25,807 6.38% 378,443 2016 380,571 27,804 6.45% 403,590 (1) Assessments are payable over a 15-20 year period. Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year. 121  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 2025 $ 7,693,921 14.2% $ 15,925,770 29.3% $ 7,958,934 14.7% $ 5,433,078 10.0% $ 4,414,012 8.1% $ 2,561,477 4.7% 2024 7,750,534 13.9% 16,636,068 29.9% 7,501,498 13.5% 5,177,268 9.3% 3,978,315 7.2% 2,486,342 4.5% 2023 7,618,352 14.0% 15,741,791 28.9% 7,469,849 13.7% 5,018,548 9.2% 4,210,867 7.7% 2,553,563 4.7% 2022 7,025,573 14.5% 15,455,429 32.0% 7,382,498 15.3% 4,748,512 9.8% 4,482,309 9.3% 2,286,970 4.7% 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% Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive 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. 122  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) $12.37 $15.46 $12.37 $15.46 Monthly Base Charge(5), Meter Size: 3/4" $12.37 $15.46 $12.37 $15.46 9,119 1.0" $12.37 $15.46 $12.37 $15.46 344 1.5" $16.81 $21.01 $16.81 $21.01 116 2.0" $28.58 $35.73 $27.20 $35.73 242 3.0" $43.55 $54.44 $43.55 $54.44 13 4.0" $54.41 $68.01 $54.41 $68.01 32 6.0" $86.57 $108.21 $86.57 $108.21 0 8.0" or 10.0" $129.74 $162.18 $129.74 $162.18 1 Multi-Residential, Addt'l per Unit $9.16 $11.45 $9.16 $11.45 9,867 Residential Customers (6) 8,593 Commercial Customers (6) 1,274 Total Customers 9,867 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) $3.69 $4.61 Block 3 (4,001 - 8,000) $4.51 $5.64 Block 4 (8,001 +) $6.77 $8.46 Monthly Wastewater Rates(2) Residential Commercial Lifeline Rate(4) $28.18 $33.84 Monthly Base Charge $28.18 $33.84 Gallonage Rate (per 1,000 gallons per unit)(5) Block 1 (0 - 2,000) Included in monthly base charge Block 2 (2,001 +) $8.86 $10.64 (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 123  City of Fort Walton Beach, Florida SCHEDULE 22 SANITATION AND RECYCLING SERVICE RATES Unaudited Basic Garbage Rates Garbage Tipping Total Residential One Container $ 20.13 $ 7.00 $ 27.13 Two Containers 10.06 7.00 17.06 Residential Dumpsters, Individual Meters 20.13 7.00 27.13 Commercial One Container 38.88 7.83 46.71 Two Containers 77.75 15.71 93.46 Shared Dumpster (minimum charge) 38.88 7.83 46.71 Garbage and Trash Collection Garbage Tipping Total 2 Cubic Yards 2 times per week $ 82.53 $ 56.49 $ 139.02 3 times per week 123.77 84.64 208.41 4 times per week 165.11 112.73 277.84 5 times per week 206.29 140.92 347.21 6 times per week 247.55 169.07 416.62 4 Cubic Yards 2 times per week 116.50 112.73 229.23 3 times per week 174.76 169.07 343.83 4 times per week 233.00 225.41 458.41 5 times per week 291.24 281.69 572.93 6 times per week 349.49 338.03 687.52 6 Cubic Yards 2 times per week 152.94 169.07 322.01 3 times per week 229.39 253.60 482.99 4 times per week 305.79 338.03 643.82 5 times per week 382.25 422.50 804.75 6 times per week 458.71 507.09 965.80 8 Cubic Yards 2 times per week 184.47 225.41 409.88 3 times per week 276.71 338.03 614.74 4 times per week 368.93 450.70 819.63 5 times per week 461.15 563.39 1,024.54 6 times per week 553.39 671.01 1,224.40 One-time fee to change dumpster size $25.00 Compactor Commercial Rate x 3 x Bulk Container(s) Commercial Recycling Garbage Tipping Total 4 Cubic Yards 2 times per week $ 125.43 $ - $ 125.43 3 times per week 188.10 - 188.10 4 times per week 250.82 - 250.82 5 times per week 313.54 - 313.54 6 Cubic Yards 2 times per week 188.10 - 188.10 3 times per week 282.15 - 282.15 4 times per week 376.20 - 376.20 5 times per week 470.25 - 470.25 8 Cubic Yards 2 times per week 250.82 - 250.82 3 times per week 376.20 - 376.20 4 times per week 501.63 - 501.63 5 times per week 627.02 - 627.02 Contaminated Load Fee (per dump) 4 CY 22.26 36.11 58.37 6 CY 22.26 64.94 87.20 8CY 22.26 100.94 123.20 Source: City of Fort Walton Beach Comprehensive Fee Schedule 124  City of Fort Walton Beach, Florida SCHEDULE 23 OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function Fiscal Year 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 Public Safety Police Arrests 699 447 730 608 643 627 611 660 757 921 Traffic citations 1,827 1,822 3,693 2,097 1,973 1,327 1,404 1,632 2,436 2,693 Fire Emergency medical responses 5,296 3,800 3,823 3,698 3,159 1,265 3,123 3,310 2,994 3,067 Fire responses 71 72 1,571 1,568 1,407 2,825 1,406 1,324 1,249 1,210 Inspections 412 886 854 885 944 643 1,008 966 932 2,409 Code Enforcement Code violations 1,051 793 780 1,392 1,129 965 1,251 1,446 1,825 1,807 Engineering Services Building permits issued 2,910 2,845 2,846 2,728 2,741 2,288 2,095 2,006 332 n/a Residential building permits issued 2,273 2,302 2,299 1,870 2,266 1,692 1,942 1,855 483 23 Commercial building permits issued 637 543 547 858 475 596 153 151 178 5 Value of permits (in millions) $128.00 $33.04 $80.21 $115.13 $70.86 $81.98 $65.80 $41.00 $27.00 $5.00 Value of residential permits (in millions) $26.00 $18.30 $26.85 $42.05 $30.59 $28.76 $41.50 $26.00 $12.00 $4.00 Value of commercial permits (in millions) $102.00 $14.00 $53.35 $73.08 $40.27 $53.21 $24.30 $15.00 $15.00 $1.00 Business Tax Receipts Sold 758 136 196 152 166 212 406 628 1,769 2,115 Street resurfacing (lane miles) 2.50 2.04 0.72 1.49 1.06 1.27 0.00 0.18 0.00 1.01 Pot holes (hours spent repairing) 358 359 272 538 422 494 557 166 213 163 Sanitation Refuse collected (tons) 25,430 26,450 25,883 26,457 27,749 27,854 26,498 26,317 26,151 25,203 Recyclables collected (tons) 1,891 2,014 2,051 2,161 2,204 2,030 2,048 2,032 1,811 1,507 Culture and Recreation Parks and Recreation Recreation program participants 533 462 397 311 212 191 206 199 102 154 Recreation program registrations n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Adult athletic participants 783 671 221 1,051 857 1,042 820 770 530 n/a Adult athletic registrations n/a n/a n/a n/a n/a n/a n/a n/a n/a 621 Youth athletic participants 2,489 1,877 1,775 2,005 1,791 1,496 2,264 2,123 2,394 n/a Youth athletic registrations n/a n/a n/a n/a n/a n/a n/a n/a n/a 2,086 Library Circulation volume 155,250 133,575 128,806 113,022 121,287 127,507 157,554 147,760 139,980 144,474 Museum Number of visitors/participants(1) 9,111 13,644 14,667 14,515 9,636 13,662 30,050 23,012 24,522 22,437 Water System New connections 21 13 12 12 26 22 25 37 45 81 Water customers 9,867 9,895 10,246 9,698 9,777 9,677 9,642 9,639 9,620 9,618 Water produced (million gallons) 977 964 957 958 947 940 912 895 866 883 Source: City of Fort Walton Beach Performance Measures. 125  City of Fort Walton Beach, Florida SCHEDULE 24 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM Last Ten Fiscal Years Unaudited Function/Program Fiscal Year 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Sworn Officers 56 55 54 52 52 45 45 47 45 39 Engineering Services Miles of roads 93.34 93.34 93.34 93.12 93.12 93.12 93.12 93.12 93.12 93.12 Miles of sidewalks 65.76 65.71 65.19 63.79 63.79 63.79 63.79 63.67 63.67 64.73 Signs fabricated and installed 189 435 423 448 391 531 461 286 614 854 Culture and Recreation Parks and Recreation Recreational Amenities 116 116 116 116 116 116 129 129 129 129 Parks (acres) 448.54 448.54 448.54 448.54 448.54 448.54 (1) 206.00 206.00 206.00 206.00 Library Inventoried collection 55,867 54,101 51,461 48,335 47,216 51,398 56,973 62,513 67,881 70,353 Water and Sewer System Potable water lines (miles) 148.95 149.62 148.48 146.89 146.77 146.48 146.40 146.33 146.10 144.91 Sanitary sewer lines (miles) 131.46 131.37 131.34 129.97 129.82 129.44 129.49 129.49 129.62 129.51 Reuse water lines (miles) 7.74 7.74 7.74 7.10 7.10 7.10 7.10 7.10 7.10 7.10 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) 44.15 44.14 44.14 44.14 44.14 44.14 43.33 43.18 42.10 42.03 (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. 126  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 12/6/25 to 12/6/26 Wright National 1151306332 Fisher-Brown Agency / Flood $ 500,000 B #7 Hollywood Boulevard Marsh & McLennan Agency $ 500,000 C Police Department 10/12/25 to 10/12/26 Wright National 1152207555 Fisher-Brown Agency / Flood $ 500,000 B #5 Hollywood Boulevard Marsh & McLennan Agency $ 300,000 C Fire Department 10/12/25 to 10/12/26 Wright National 1151292103 Fisher-Brown Agency / Flood $ 403,000 B 107 Miracle Strip Parkway Marsh & McLennan Agency $ 129,000 C Auditorium 10/12/25 to 10/12/26 Wright National 1151291796 Fisher-Brown Agency / Flood $ 403,000 B 107 Miracle Strip Parkway Marsh & McLennan Agency $ 383,000 C City Hall 10/12/25 to 10/12/26 Wright National 1151292114 Fisher-Brown Agency / Flood $ 178,000 B 107 Miracle Strip Parkway Marsh & McLennan Agency $ 25,000 C Council Chamber 10/12/25 to 10/12/26 Wright National 1151292125 Fisher-Brown Agency / Flood $ 377,000 B 107 Miracle Strip Parkway Marsh & McLennan Agency $ 359,000 C Annex Building 10/12/25 to 10/12/26 Wright National 1151292120 Fisher-Brown Agency / Flood $ 390,000 B 107 Miracle Strip Parkway Marsh & McLennan Agency $ 17,000 C Bathrooms Building 10/12/25 to 10/12/26 Wright National 1151291389 Fisher-Brown Agency / Flood $ 500,000 B 141 Miracle Strip Parkway Marsh & McLennan Agency $ 100,000 C City Museum 10/12/25 to 10/12/26 Wright National 1152207556 Fisher-Brown Agency / Flood $ 350,000 B 22 McGriff Street Marsh & McLennan Agency $ 50,000 C Child Care Facility 12/2/25 to 12/2/26 Wright National 1150164378 Fisher-Brown Agency / Flood $ 39,000 B 338 Miracle Strip Parkway Marsh & McLennan Agency Restroom, East of Pavilion Liza Jackson Park 12/2/25 to 12/2/26 Wright National 1150164379 Fisher-Brown Agency / Flood $ 39,000 B 338 Miracle Strip Parkway Marsh & McLennan Agency Restroom Near Ditch Liza Jackson Park 05/17/25 to 05/17/26 Wright National 1150342974 Fisher-Brown Agency / Flood $ 98,000 B 55 Ferry Road Marsh & McLennan Agency Boy Scout Hut 07/23/25 to 07/23/26 Wright National 1152199654 Fisher-Brown Agency / Flood $ 363,000 B 118 Hollywood Blvd Marsh & McLennan Agency $ 53,000 C Pump Station #1 06/23/25 to 06/23/26 Wright National 1150458831 Fisher-Brown Agency / Flood $ 55,000 B 168 Coral Drive SW Marsh & McLennan Agency City Hall Ball Field Restrooms 10/01/25 to 10/01/26 Commerce & Industry Ins. Co. FPL012896318 Risk Management Associates Petroleum $ 1,000,000/inc Golf Course, Police, City Yard, Fuel Station Liability $ 1,000,000/agg Pump Station - Fire, Recreation Center 127  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 10/01/25 to 10/01/26 PGIT PKFL10462003 25-21 Risk Management Associates 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 $ 52,765 6M | Contractor's / Mobile Equipment $ 97,373 6M | Contractor's / Mobile Equipment $ 35,808 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 $ 56,432 6M | Contractor's / Mobile Equipment $ 37,735 6M | Contractor's / Mobile Equipment $ 690,193 127 - 2024 Yamaha Golf Carts $ 93,150 Electronic Data Processing Equipment - RC $ 730,000 Museum Ceramic Stone Comparative $ 6,500 Other Inland Marine (Street Signs) $ 250,000 Unscheduled Items $ 135,417 Rented, Borrowed, Leased Equipment - ACV $ 111,683 Rented, Borrowed, Leased Equipment - ACV $ 4,010,683 Total All Inland Marine 1/17/26 to 1/17/27 Nicole Nabors - Travelers 107774436 Fisher-Brown Agency / Public Official $ 50,000 Finance Director Marsh & McLennan Agency Bond 5/3/23 to TBD Markus Schumacher - Travelers 107832461 Fisher-Brown Agency / Public Official $ 50,000 Comptroller, Finance Department Marsh & McLennan Agency Bond 128  City of Fort Walton Beach, Florida SCHEDULE 25 INSURANCE COVERAGE Unaudited Agent, Broker, or Effective Dates Company Policy Number Company Rep. Type Location 5/3/23 to TBD Cassandra Hodys - Travelers 107832448 Fisher-Brown Agency / Public Official $ 50,000 Utility Billing Supervisor, Marsh & McLennan Agency Bond Finance Department 2/18/21 to TBD Kim Barnes - Travelers 107222946 Fisher-Brown Agency / Public Official $ 50,000 City Clerk Marsh & McLennan Agency Bond 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Auto $ 1,000,000 CSL Liability 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Forgery $ 250,000 Alteration 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Money & $ 10,000 Securities (theft) 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Crime $ 250,000 Public Employees (Employee dishonesty) Blanket Fidelity Bond 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates General $ 1,000,000 Occurence Liability 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Property $ 63,121,310 Blank Real & Personal Property 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Property $ 2,000,000 Business Income (Interruption) $ 2,000,000 Additional Expense 10/1/25 to 10/1/26 PGIT WC-FL10462003 25-16 Risk Management Associates Worker's $ 1,000,000 Each Accident Comp $ 1,000,000 Disease (Policy Limit) $ 1,000,000 Disease (Each Employee) 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Public Officials $ 5,000,000/inc Claims Made Empl. Practice $ 5,000,000/agg Claims Made 10/1/25 to 10/1/26 Ace American ADD N16744931 Chubb AD&D $ 75,000 Line of Duty Coverage $ 75,000 Fresh Pursuit Coverage $ 225,000 Unlawful/Unintentional 10/1/25 to 10/1/26 PGIT PKFL10462003 25-21 Risk Management Associates Boiler & $ 70,556,018 Equipment Breakdown Machinery 5/1/24 to 5/1/27 Travelers 105927344 Fisher-Brown Agency / Fiduciary $ 2,000,000 Retirement Fund for General Liability Marsh & McLennan Agency Employees and Police 10/1/25 to 10/1/26 Ace American PTP N1793868A Chubb Group Cancer $ 25,000 First Diagnosis Cancer Benefit $ 25,000 First Diagnosis Benefit Continuation $ 75,000 Cancer Death Benefit Source: City of Fort Walton Beach Risk Management Department 129 IV. COMPLIANCE SECTION • COMPLIANCE MATTERS • MANAGEMENT LETTER  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 City Council City of Fort Walton Beach, Florida We have audited, in accordance with the 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 the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Fort Walton Beach, Florida (the City), as of and for the year ended September 30, 2025, 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 27, 2026. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, 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. 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 City’s financial statements will not be prevented, or detected and corrected, on a timely basis. 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 130 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from 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. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fort Walton Beach, Florida March 27, 2026 131  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 Section 218.415, Florida Statutes, in regard to the investments for the year ended September 30, 2025: 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. We are required to be independent and to meet our ethical responsibilities in accordance with relevant ethical requirements relating to the examination engagement. 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 specified requirements for the year ended September 30, 2025. This report is intended solely for the information and use of the City, the Florida Auditor General, and the State of Florida, and is not intended to be, and should not be, used by anyone other than these specified parties. Fort Walton Beach, Florida March 27, 2026 132  MANAGEMENT LETTER To the Honorable Mayor and City Council 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 fiscal year ended September 30, 2025, and have issued our report thereon dated March 27, 2026. 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 the Financial Statements Performed in Accordance with Government Auditing Standards; Schedule of Findings and Responses; and Independent Accountants’ Report on an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule, which are dated March 27, 2026, 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 financial audit 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 has been disclosed in Note 1 to the financial statements. The City included the following component units: Fort Walton Beach Community Redevelopment Agency (the “CRA”). The legal authority that established the CRA is disclosed in Note 1 to the financial statements. 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. 133 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 no recommendations to improve financial management other than those discussed in the schedule of findings and responses. Property Assessed Clean Energy (PACE) Programs As required by Section 10.554(1)(i)6.a., Rules of the Auditor General, the City did not operate within its geographical boundaries, a PACE program authorized pursuant to Section 163.081 or Section 163.082, Florida Statutes, during the fiscal year under audit. As required by Section 10.554(1)(i)6.b., Rules of the Auditor General, there were no program administrators or third-party administrators for a PACE program operating within the City’s geographical boundaries. Therefore, no contact information has been provided for each such program administrator or third-party administrator, as there were no applicable PACE programs. Special District Component Units Section 10.554(1)(i)5.c., Rules of the Auditor General, requires, if appropriate, that we communicate the failure of a special district that is a component unit of a county, municipality, or special district, to provide the financial information necessary for proper reporting of the component unit within the audited financial statements of the county, municipality, or special district in accordance with Section 218.39(3)(b), Florida Statutes. In connection with our audit, we did not note any special district component units that failed to provide the necessary information for proper reporting in accordance with Section 218.39(3)(b), Florida Statutes. Specific Information As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)6, Rules of the Auditor General, the Fort Walton Beach Community Redevelopment Agency (the CRA) reported: a) The total number of CRA employees compensated in the last pay period of the CRA’s fiscal year as 4. b) The total number of independent contractors to whom nonemployee compensation was paid in the last month of the CRA’s fiscal year as 3. c) All compensation earned by or awarded to employees, whether paid or accrued, regardless of contingency as $520,280. d) All compensation earned by or awarded to nonemployee independent contractors, whether paid or accrued, regardless of contingency as $2,714,784. e) Each construction project with a total cost of at least $65,000 approved by the CRA that is scheduled to being on or after October 1 of the fiscal year being reported, together with the total expenditures for such project as:  Crime Prevention Through Environmental Design (CPTED) improvements – $75,000  Wayfinding Signage System - $75,000  Brooks Street Lighting Upgrades - $175,000 f) A budget variance based on the budget adopted under Section 189.016(4), Florida Statutes, before the beginning of the fiscal year being reported if the CRA amends a final adopted budget under Section 189.016(6), as $4,717,788. 134 The specific information reported in the previous paragraph has 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 it. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have 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, we did not note any such findings. 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, 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 to us during our audit. Fort Walton Beach, Florida March 27, 2026 135