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

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