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

$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