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

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