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

information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $11.8 million on September 30, 2025, of which the Utilities Fund reported $8.0 million, the Sanitation Fund reported $2.7 million, and the Stormwater Fund reported $1.1 million. The factors concerning the finances of these funds have already been addressed in the discussion of the City’s business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS A schedule showing the original budget, the final budget, the actual results, and the variance from the final budget to the actual results is included for the General Fund on page 78 of the financial statements. The difference between the original budget and the final budget for expenditures was an increase of $1.5 million. Significant information related to this difference is summarized below.  Decrease of $1.1 million for capital outlay related to not being awarded anticipated grant funding.  Increase of $924,709 for capital outlay to purchase 15 vehicles for the City’s Police Department and two vehicles for the Parks and Recreation Department. 11   Increase of $500,000 for capital outlay to building a performance stage at the Fort Walton Beach Landing Park.  Increase of $386,200 for capital outlay to reconfigure fields and install synthetic turf at the Preston Hood Athletic Complex.  Increase of $300,000 for public safety expenditures to engage a contractor to perform a comprehensive traffic safety action plan that is partially funded by a federal grant award. Actual results, when compared to the final budget, show a variance of $3.4 million for expenditures. This variance is primarily due to amending the budget for expenditures planned but not yet commenced or completed. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities, as of September 30, 2025, was $96.5 million (net of accumulated depreciation). This represents a net increase of $7.0 million, or 7.8%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City expended $2.3 million for replacement vehicles for the City’s fleet.  Fort Walton Beach Landing boardwalk improvements expenditures were $1.8 million.  The City purchased artificial turf and soccer goals at Oakland Park for a total cost of $1.1 million.  The Heritage Park and Cultural Center museum addition expenditures were $594,934.  The City spent $613,710 to re-grass The Pines Course at Fort Walton Beach Golf Club. Table 3 Total Capital Assets, Net of Accumulated Depreciation As of September 30 Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Land $ 8,826,730 $ 8,826,730 $ 709,678 $ 709,678 $ 9,536,408 $ 9,536,408 Buildings 19,375,732 20,342,371 35,530 65,247 19,411,262 20,407,618 Improvements Other Than Buildings 13,522,680 12,293,660 32,430,183 26,466,498 45,952,863 38,760,158 Machinery & Equipment 6,355,377 4,955,772 2,854,666 2,750,377 9,210,043 7,706,149 Easements - - 39,742 39,742 39,742 39,742 Right-of-Use Assets 558,895 407,943 33,304 97,676 592,199 505,619 Subscription Assets 1,803,404 1,385,212 200,930 - 2,004,334 1,385,212 Construction in Progress 9,604,571 6,362,741 197,505 4,845,796 9,802,076 11,208,537 $ 60,047,389 $ 54,574,429 $ 36,501,538 $ 34,975,014 $ 96,548,927 $ 89,549,443 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 44- 47. Long-Term Debt As shown in the table on the next page, as of September 30, 2025, the City had total outstanding long- term debt of $31.7 million, which represents a decrease of $1.9 million, or 5.6% from the prior fiscal year. The City’s debt consists of notes and bonds secured solely by specified revenue sources (i.e., revenue notes and bonds); a loan from a State Revolving Fund; and various financing contracts, leases, and subscription liabilities. The City has no general obligation or special assessment debt. The State of Florida does not place a legal limit of debt on municipalities. For general obligation debts greater than one year, the City is required to conduct a voter referendum. 12  Table 4 Outstanding Debt As of September 30 Governmental Activities Business-Type Activities Total Primary Government 2025 2024 2025 2024 2025 2024 Revenue Notes & Bonds $ 15,905,768 $ 17,457,771 $ 4,673,000 $ 5,185,000 $ 20,578,768 $ 22,642,771 State Revolving Fund Loan - - 8,164,380 8,941,531 8,164,380 8,941,531 Financing Contracts 380,874 222,785 - - 380,874 222,785 Lease Obligations 594,073 421,986 35,817 102,468 629,890 524,454 Subscription Liabilities 1,804,986 1,298,973 179,838 - 1,984,824 1,298,973 $ 18,685,701 $ 19,401,515 $ 13,053,035 $ 14,228,999 $ 31,738,736 $ 33,630,514 Additional information on the City’s long-term debt can be found in Notes 13 and 14 of this report on pages 68-74. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES Economic indicators and factors that are useful for evaluating the framework within which the City operates are discussed below.  The Consumer Price Index (CPI) is 2.7% higher than a year ago for the Southern Region. This indicator is a widely used gauge of inflation and translates into a higher cost of providing services to residents.  The local unemployment rate was 4.1%, which represents an approximate 1.0% increase from September 2024. The State of Florida’s unemployment rate was 3.9%, which represents an approximate 0.6% increase from September 2024. The unemployment rate will impact the City’s fee and usage-based revenues and shared portions of the State of Florida’s usage-based taxes.  The Florida Department of Revenue’s Office of Tax Research has updated its estimates of tax distributions the City is expected to receive for the upcoming fiscal year. The table below summarizes the fiscal year 2026 revenue estimates compared to the actual revenues reported for the current fiscal year. FY2026 FY2025 Revenue Source Estimate Actual Variance ($) Variance (%) Communications Service Taxes $ 1,256,258 $ 1,227,012 $ 29,246 2.4% Half-Cent Sales Taxes 2,385,072 2,440,791 (55,719) -2.3% Local Option Fuel Taxes 949,160 933,849 15,311 1.6% Municipal Revenue Sharing Program 1,163,642 1,182,145 (18,503) -1.6%  The military has a significant presence in our community with Eglin Air Force Base, Hurlburt Field, and Duke Field. Combined, these three installations employ over 72,000 military and civilian personnel. The military and defense-related industries have a $22 billion annual impact on Northwest Florida’s economy, according to the Florida Defense Industry Economic Impact Analysis. These financial policies, as well as other indicators, were considered when adopting the City’s budget for fiscal year 2026. The City’s budget for fiscal year 2026 totals $75.9 million, which is $2.7 million more than the fiscal year 2025 adopted budget. The 2026 budget allocates $41.4 million to the General Fund, a 2.8% increase as compared to the fiscal year 2025 budget; $27.5 million to the enterprise funds; and $7.0 million to other funds. For the fiscal year 2026 budget, the City Council adopted the millage rate of 4.3282 mills, which is the same rate as the previous fiscal year. Personnel expenses account for approximately 46.3% of the City’s budget. The City’s fiscal year 2026 budget remains relatively stable in this category, at 320.19 full-time equivalent (FTE’s) positions, an increase of only 3.3 FTE’s from the prior year. 13 REQUESTS FOR INFORMATION This financial report is designed to provide citizens, taxpayers, customers, and creditors with a general overview of the City of Fort Walton Beach’s finances and to demonstrate the City’s accountability for the money it receives. Questions concerning any of the information provided in this report, or requests for additional information, should be addressed to the City Manager, 107 Miracle Strip Parkway S.W., City of Fort Walton Beach, Florida, 32548. This document and other financial information are available on the City’s website at www.fwb.org. Inquiries may also be sent via email to the Finance Department at finance@fwb.org. 14  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2025 Primary Government Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 4,646,205 $ 719,992 $ 5,366,197 Investments 26,956,232 11,440,724 38,396,956 Receivables, net 460,496 1,278,177 1,738,673 Due from other governments 1,937,232 1,056,144 2,993,376 Inventory, at cost 556,226 19,858 576,084 Prepaid items - 4,534 4,534