Fort Walton Beach — Comprehensive Financial Report September 30, 2017 — reading text

and Jet Stadium lighting upgrades were completed in 2017. The upgrades to the sand volleyball courts at the recreation complex began in fiscal year 2016. At September 30, 2017, the remaining project costs are approximately $90,000, and the project is expected to be completed in 2018. 50  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 7. DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES As of September 30, 2017, the City had various components of deferred outflows of resources and deferred inflows of resources as follows: Governmental activities: Community General Redevelopment Governmental Fund Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ - $ - $ 2,689,792 Net difference between projected and actual earnings on pension plan investments - - 2,211,907 Differences between expected and actual experience with regard to economic or demographic assumptions - - 394,085 Changes in assumptions on pension plan investments - - 4,296,406 Changes in assumptions related to OPEB plan - - 443,296 Total deferred outflows $ - $ - $ 10,035,486 Deferred inflows Differences between expected and actual experience with regard to economic or demographic assumptions $ - $ - $ 1,032,099 Unavailable revenue – special assessments 44,824 331,795 - Unavailable revenue – long-term receivable from sale of buildings 737,809 - - Total deferred inflows $ 782,633 $ 331,795 $ 1,032,099 Business-type activities: Utilities Sanitation Stormwater Business-Type Fund Fund Fund Activities Deferred outflows City pension contributions made subsequent to the measurement date $ 215,286 $ 86,830 $ 20,515 $ 322,631 Deferred loss on refunding 88,406 - - 88,406 Net difference between projected and actual earnings on pension plan investments 170,597 68,806 16,257 255,660 Differences between expected and actual experience with regard to economic or demographic assumptions 54,407 21,943 5,184 81,534 Changes in assumptions on pension plan investments 609,765 245,934 58,103 913,802 Changes in assumptions related to OPEB plan 61,628 41,045 16,169 118,842 Total deferred outflows $ 1,200,089 $ 464,558 $ 116,228 $ 1,780,875 Deferred inflows Differences between expected and actual experience with regard to economic or demographic assumptions $ 73,017 $ 29,450 $ 6,958 $ 109,425 51  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS The City of Fort Walton Beach, Florida sponsors three single–employer defined benefit pension plans: the General Employees' Retirement Fund (GERF), Police Officers' Retirement Fund (PORF) and the Firefighters' Retirement Fund (FRF). These plans provide benefits for all qualifying employees of the City. The financial activity of each plan is reported as a Pension Trust Fund in the City of Fort Walton Beach, Florida's internal combined financial statements and can be found under subheading “Fund Financial Statements” of this note. There is no separate report available for the individual pension plans. Plan Description – General Employees’ Retirement Fund (GERF) Plan Administration The authority and responsibility for the establishment, amendment and administration of this Plan is vested in the City Council, and the Members thereof shall be designated as trustees of the fund. The trustees are authorized to adopt reasonable rules and regulations for the administration of the fund created by this Plan. The Plan is a single-employer defined benefit pension plan administered by the City’s Finance Director. The Finance Director shall administer this Plan for the trustees and participants, subject at all times to the limitations and conditions specified in or imposed by provisions of this Plan and the rules and regulations adopted by the City Council. The trustees and the plan administrator shall serve without additional compensation beyond that already provided by the City for their respective duties. All full-time City employees including the City Manager, Finance Director, and the Chief of Police, if they elect to participate, but not including City Council Members, police officers other than the Chief of Police, and firefighters. Effective January 1, 2010, the plan is closed to new entrants. Plan Membership as of October 1, 2016: Inactive Plan Members or Beneficiaries Current Receiving Benefits 155 Inactive Plan Members Entitled to But Not Yet Receiving Benefits 44 Active Plan Members 85 284 Benefits Provided The plan provides retirement, termination, disability and death benefits. A member may retire at age 52 with 10 years of credited service (early retirement) or at age 62 and 10 years of credited service (normal retirement). Benefits become 100% vested upon completion of 10 years of credited service. For the City Manager, Finance Director, or Department Heads, including the Chief of Police, the Member becomes vested at 20% per year, except that credited service other than that as a Charter Officer or Department Head will accrue at a rate of 10% per year. Retirement benefits are a percentage (2.75% or 2.50%) of final average earnings times the years of credited service with maximum of 75% or 100% of current compensation depending on vested status at April 5, 1999. Benefits are reduced by 3% for each year by which the early retirement date precedes the age of 62. Varied benefits exist for service and non-service connected disabilities as well as death in the line of duty or other pre-retirement death. In accordance with the annual increase in CPI-U as measured in December, all retirees are entitled to an adjustment payable each April 1, subject to a minimum of 0% and a maximum of 3%. The adjustment does not apply to members who retire following a vested terminated status or disability retirees. 52  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Plan Description – GERF – Continued Funding Policy and Contributions Both the City and the employees (at a rate of 5.0% of payroll) make contributions to the Plan. For fiscal year 2017, employees contributed $171,869 to the Plan. The City is required to contribute at an actuarially determined rate: the contribution rate for 2017 was 32.6% of payroll. The annual required contributions for the current fiscal year was determined as part of the October 1, 2015 actuarial valuation updated to September 30, 2016 using the entry age normal actuarial cost method. Net Pension Liability – GERF Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2015 updated to September 30, 2016 using the following actuarial assumptions: Inflation 3.00% Salary Increases 3.50% - 6.50% Discount Rate 7.90% Investment Rate of Return 7.90% Mortality rates for healthy lives were obtained from the RP-2000 Fully Generational with Scale BB mortality table, with collar and annuitant adjustments as follows: Males – 50% Annuitant White Collar, 50% Annuitant Blue Collar. Females – 100% Annuitant White Collar. Mortality rates for disable lives were obtained from the RP-2000 mortality table without projection, with the following adjustments: Males – 100% Disabled Male with four year setback Females – 100% Disabled Female with two year set forward. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. For 2016, the inflation rate assumption of the investment advisor was 2.50% 53  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Net Pension Liability – GERF – Continued Actuarial Assumptions – Continued Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2016 are summarized in the following table: Long Term Expected Asset Class Target Allocation Real Rate of Return Domestic Equity 55.00% 7.50% International Equity 10.00% 8.50% Broad Market Fixed Income 25.00% 2.50% Real Estate 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 7.90%. The projection of cash flows used to determine the discount rate assumed that Plan Member contributions will be made at the current contribution rate