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

Miscellaneous $1,314,521 Income, $145,957 Charges for Services, $15,552,112 Charges for Services Capital Grants Miscellaneous Income FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City of Fort Walton Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of available resources. Such information is useful in assessing the City’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. 10 As of September 30, 2017, the City of Fort Walton Beach’s governmental funds have combined ending fund balances of $17.2 million, an increase of $779,734 in comparison with the prior year. Approximately 86.4% of this amount, or $14.9 million, is available for spending at the discretion of City Council. The remainder of fund balance is non-spendable or restricted. Details of the fund balance classifications can be found on page 17 of this report, as well as in Note 19. The General Fund is the chief operating fund of the City. At the end of this fiscal year, committed, assigned, and unassigned fund balance of the General Fund was $12.1 million, while total fund balance reached $12.5 million. As a measure of the General Fund’s liquidity, it may be useful to compare both committed, assigned, and unassigned fund balance and total fund balance to total expenditures. This amount represents 63.2% of the total General Fund expenditures, while total fund balance represents 65.0% of that same amount. During the 2017 fiscal year, the fund balance of the City’s General Fund increased by $510,071. This increase was primarily related to several personnel vacancies and operating expenditure savings. The Community Redevelopment Agency Fund’s fund balance increased by $115,121. This increase is a direct result of City Council’s strategic planning commitment to halt capital expenditures while the master planning process is taking place. Proprietary Funds The City of Fort Walton Beach’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $11.7 million at September 30, 2017, of which the Utilities Fund amounted to $8.8 million, the Sanitation Fund totaled $2.0 million, and the Stormwater Utility Fund was $1.0 million. The factors concerning the finances of these four funds have already been addressed in the discussion of the City of Fort Walton Beach’s business- type activities. Fiduciary Funds The General Employees’ Retirement Fund’s net position as a percentage of the total pension liability, an indicator of the sustainability of the Plan, was 83.5%, a decrease of 6.0% over the prior year. Employees contribute 5% of pay to the Plan and the City contributed $1.3 million, which was a decrease of $74,959 when compared to the previous fiscal year. The Firefighters’ Pension Trust Fund’s net position as a percentage of the total pension liability was 62.3%, which was decrease of 5.0% over the previous fiscal year. Employees contribute 8.0% of pay to the Plan and the City contributed $744,019, an increase of $71,650. The Police Officers’ Retirement Fund’s net position as a percentage of the total pension liability was 74.5%, a decrease of 2.8% over the previous fiscal year. Employees contribute 5% of pay to the Plan and the City contributed $577,564, a decrease of $51,411. Additional information on the pension plans can be found on pages 51-66 of this report. The General Employees’ Retirement Fund was closed to new entrants in January 2010, and all new hires are required to participate in a defined contribution plan, which is administered by the International City Managers Association Retirement Corporation. Additional information on the defined contribution plan can be found on page 67 of this report. 11  GENERAL FUND BUDGETARY HIGHLIGHTS A statement showing the original budget, the final budget, the actual results and the variance from the final budget to the actual results is included on page 21 of the financial statements. The difference between the original budget and the final budget totaled approximately $1.2 million. Significant information related to this difference is summarized as follows:  The City received donations and added related expenditures in the amount of $100,289.  The City moved forward with a contract to evaluate possible facility renovations in the amount of $70,722.  The City incurred expenditures that were funded by excess unassigned/assigned fund balance in the amount of $180,420 for a lawsuit settlement, a Christmas tree, the workers compensation audit, and various recreation supplies and equipment.  The City Council approved additional expenditures for body and vehicle cameras and additional vehicles for the safety of its Police Officers in the amount of $277,309.  The City was the recipient of several grants during the fiscal year totaling $341,705 in the governmental funds. Actual results, when compared to the final budget, show a variance of $1.8 million for expenditures. This variance is primarily due to amending the budget for expenditures planned, but not yet 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, 2017, was $41.2 million (net of accumulated depreciation and related debt). This represents a net increase of $0.5 million, or 1.2%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City placed into service its new recreation complex in the previous year and realized a full year of depreciation in FY 2017. Table 3 below highlights the overall changes in this category. Table 3 Total Capital Assets Net of Accumulated Depreciation Governmental Activities Business‐Type Activities Total Activities FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 Land $11,048,479 $11,048,842 $709,678 $709,678 $11,758,157 $11,758,520 Buildings 12,779,478 13,459,321 106,653 115,202 12,886,131 13,574,523 Improvements other than Buildings 6,862,641 7,069,522 31,455,011 31,082,318 38,317,652 38,151,840 Infrastructure 3,642,015 3,744,853 - - 3,642,015 3,744,853 Intangible Assets (25,598) 12,427 - 54,486 (25,598) 66,913 Machinery & Equipment 4,050,540 4,123,994 3,657,253 3,755,041 7,707,793 7,879,035 Equipment under Capital Lease 66,701 77,440 - - 66,701 77,440 Easements - - 39,742 34,642 39,742 34,642 Construction in Progress 72,597 86,639 137,482 499,398 210,079 586,037 $38,496,853 $39,623,038 $36,105,819 $36,250,765 $74,602,672 $75,873,803 12  Additional information on the capital assets of the City of Fort Walton Beach can be found in Note 6 of this report on pages 48-50. Long-Term Debt As shown in the following table, as of September 30, 2017, the City had total revenue notes and capital leases outstanding of $33.5 million. All of the City’s debt represents notes secured solely by specified revenue sources (i.e. revenue notes) and capital leases. 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. The debt capacity of the City is contingent upon available resources and existing debt. The current outstanding debt requires a coverage ratio of 1.25 times earnings. The General Fund is at 7.08 and the Utilities Fund is at 6.27. The Sanitation and Stormwater Funds are debt-free. Table 4 Outstanding Debt Governmental Assets Business‐Type Activities Total Activities FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 Revenue Notes 11,073,656 11,725,331 8,387,000 8,794,000 19,460,656 20,519,331 State Revolving Fund - - 13,988,885 14,656,929 13,988,885 14,656,929 Capital Leases 76,099 106,653 - - 76,099 106,653 $11,149,755 $11,831,984 $22,375,885 $23,450,929 $33,525,640 $35,282,913 Additional information on the City of Fort Walton Beach’s long-term debt can be found in Notes 14 and 15 of this report on pages 73-77. 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 1.6% 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 Municipal Cost Index is 1.9% higher than a year ago. This index is prepared by American City & County to show the effects of inflation on the cost of providing municipal services.  The Consumer Confidence Index, prepared by the Conference Board, is 2.9% higher than last year. This indicator measures economic conditions by gauging the future spending of consumers and is a solid indicator of economic recovery.  The Leading Economic Index, also prepared by the Conference Board, is designed to signal turning point patterns in economic data. This index has remained flat over the past year.  The military has a significant presence in our community. These installations are essential to the continued long-term economic vitality of this area. Combined, the military and defense-related industries have a $6.0 billion annual impact on