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

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