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

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