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

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 45.00% 7.50% International equity 15.00% 8.50% Broad market fixed income 30.00% 2.50% Real estate 10.00% 4.50% Total 100.00% Discount Rate The discount rate used to measure the total pension liability was 8.00%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 62  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Changes in Net Pension Liability – FRF Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset) (a) (b) (a) – (b) Balances at September 30, 2016 (Valuation Date of 10/01/2015) $ 20,739,618 $ 13,590,508 $ 7,149,110 Changes: Service cost 453,506 - 453,506 Interest 1,645,954 - 1,645,954 Contributions – employer - 744,019 (744,019) Contributions – state - 201,904 (201,904) Contributions – employee - 164,876 (164,876) Net investment income - 969,107 (969,107) Changes of assumptions 1,243,794 - 1,243,794 Differences between Expected and Actual experience 261,007 - 261,007 Benefit payments, including refunds of employee contributions (1,237,389) (1,237,389) - Administrative expenses - (43,625) 43,625 Net changes during 2015-16 2,366,872 798,892 1,567,980 Balances at September 30, 2017 (Measurement Date of 9/30/2016) $ 23,106,490 $ 14,389,400 $ 8,717,090 Sensitivity of the Net Pension Liability to changes in the Discount Rate: Current Discount 1% Decrease Rate 1% Increase 7.00% 8.00% 9.00% Sponsor's Net Pension Liability $ 11,641,297 $ 8,717,090 $ 6,309,000 Pension Plan Fiduciary Net Position Detailed information about the pension Plan's fiduciary net position is available in a separately issued Plan financial report. A separate audited financial report of the Plan is not available. 63  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions – FRF For the year ended September 30, 2017, the City recognized a pension expense of $351,668. On September 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources City and State contributions subsequent to measurement date $ 998,712 $ - Net difference between Projected and Actual earnings on pension Plan investments 652,358 - Changes of assumptions 995,036 - Differences between Expected and Actual experience 208,805 134,628 Total $ 2,854,911 $ 134,628 Deferred outflows of resources related to pensions of $998,712 resulting from the City’s and State’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended September 30: 2018 $ 452,606 2019 452,605 2020 493,135 2021 323,225 $ 1,721,571 64  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements The following are the financial statements for the individual pension trust funds (GERF, PORF and FRF) for the year ended September 30, 2017: COMBINING STATEMENT OF PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ASSETS Cash and cash equivalents $ 1,181,483 $ 500,939 $ 227,060 $ 1,909,482 Accounts receivable 1,945 2,054 (3,999) - Due from State of Florida - - 238 238 Investments, at market U.S. Government and Agency obligations 5,342,842 4,722,197 2,664,968 12,730,007 Corporate obligations 2,738,795 2,542,854 1,463,758 6,745,407 Corporate equity 10,982,853 - 1,728,118 12,710,971 Mutual and exchange-traded funds 18,798,846 13,199,893 7,870,870 39,869,609 Commingled real estate investment funds 4,955,917 - 1,581,135 6,537,052 Total investments, at market 42,819,253 20,464,944 15,308,849 78,593,046 TOTAL ASSETS 44,002,681 20,967,937 15,532,148 80,502,766 LIABILITIES Accounts payable 35,927 31,734 9,650 77,311 NET POSITION RESTRICTED FOR PENSIONS $ 43,966,754 $ 20,936,203 $ 15,522,498 $ 80,425,455 65  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2017 8. DEFINED BENEFIT PENSION PLANS – CONTINUED Fund Financial Statements – Continued COMBINING STATEMENT OF CHANGES IN PLAN NET POSITION Employee Retirement Funds Total General Police Employee Employees' Officers' Firefighters' Retirement Retirement Retirement Retirement Funds ADDITIONS Contributions Employer $ 1,254,097 $ 569,215 $ 794,144 $ 2,617,456 Plan members 171,869 104,557 205,635 482,061 State of Florida - 190,399 204,568 394,967 Total contributions 1,425,966 864,171 1,204,347 3,494,484 Investment income (loss) 5,231,810 2,060,509 1,469,622 8,761,941 Less investment expense (203,647) (18,216) (36,686) (258,549) Net investment income (loss) 5,028,163 2,042,293 1,432,936 8,503,392 Miscellaneous revenue 5,179 32,050 837 38,066 TOTAL ADDITIONS 6,459,308 2,938,514 2,638,120 12,035,942 DEDUCTIONS Benefits and refunds paid Retirement payments 2,982,337 1,660,690 1,387,739 6,030,766 Disability payments 46,851 141,418 5,894 194,163 Other 26,357 19,618 24,612 70,587 Total benefits and refunds paid 3,055,545 1,821,726 1,418,245 6,295,516 Administrative expenses Legal 2,408 7,550 4,275 14,233 Contractual 67,148 41,338 34,697 143,183 Other 31,720 18,342 18,393 68,455 Total administrative expenses 101,276 67,230 57,365 225,871 TOTAL DEDUCTIONS 3,156,821 1,888,956