Fort Walton Beach — Comprehensive Annual Financial Report September 30, 2013 — reading text

65,855 Transportation 610,149 Economic environment 54,177 Culture and recreation 427,622 Total depreciation/amortization expense - governmental activities $ 1,962,126 Business-Type Activities Utilities Fund $ 1,293,383 Sanitation Fund 245,070 Golf Fund 239,887 Other Proprietary Funds 66,432 Total depreciation/amortization expense - business-type activities $ 1,844,772 50  City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2013 NOTE 5 - CHANGES IN CAPITAL ASSETS (CONTINUED) Construction Commitments In fiscal year 2013, the City began replacing a thirty inch pre-stressed concrete cylinder pressure (PCCP) force main, construction of a four million gallon wet weather storage tank, and upgrades to Pump Station #1. The City spent $14,211,922 during the fiscal year, and has expended $15,178,680 to date on these projects which are expected to be completed in fiscal year 2014. The estimated total cost for these projects is $16 million and is being funded with a State Revolving Fund (SRF) loan from the Florida Department of Environmental Protection (FDEP), available proceeds from the 2005 Utility Improvement Bond, and cost sharing with Okaloosa County for the common portion of the force main. In 2011, the City began the next phase of streetscape and pedestrian crosswalk improvements in the downtown area. To date $18,550 has been spent. These projects are funded by the Community Redevelopment Agency. The Department of Transportation’s (DOT) approval of the plans was received in early fiscal year 2014. Construction is projected to begin in 2014, with completion in either late fiscal year 2014 or early 2015. In fiscal year 2012, the City began a project to consolidate four recreation centers into a new recreation complex. Construction began in late 2013, and $735,909 was expended in fiscal year 2013. To date $859,888 has been spent on the complex with an estimated total cost of $8.1 million dollars. The City is funding the construction with a Capital Improvement Revenue Note and intends to obtain additional funding by applying for grants, obtaining private sponsors, and evaluating current City properties for lease or sale opportunities. In fiscal year 2010, the City accepted grant funds from the Federal Highway Administration (FHWA) and the Florida Department of Transpiration (FDOT) to construct sidewalks on both sides of Wright Parkway between Miracle Strip Parkway and Mary Esther Cutoff. Sidewalk design was completed in fiscal year 2012 and construction began in fiscal year 2013. To date $88,878 has been spent with an estimated total cost of $235,366. Construction is projected to be completed in early 2014. NOTE 6 - SPECIAL ITEMS - LOSS ON IMPAIRMENTS OF CAPITAL ASSETS In fiscal year 2013, the City began construction of a new recreation complex. The existing recreation complex was demolished to allow construction on the current site. The original recreation complex was placed in service in 1987 with an expected life of thirty years. The demolition of the recreation complex resulted in an impairment loss in the governmental activities of $271,287 for the year ended September 30, 2013. 51  City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2013 NOTE 6 - SPECIAL ITEMS - LOSS ON IMPAIRMENTS OF CAPITAL ASSET (CONTINUED) As part of the decommissioning of the Waste Water Treatment Plant (WWTP) in fiscal year 2011, the City determined that the re-use water filtration system located at the WWTP should be maintained in the event re-use water could not be supplied by Okaloosa County. At that time, the City reduced the remaining life of the re-use water filtration system from thirty two years to seventeen years. In fiscal year 2013, it was determined that the re-use water filtration system was no longer viable and it was disposed. The disposal of the re-use water filtration system resulted in an impairment loss in the Utilities Fund of $786,713 for the year ended September 30, 2013. NOTE 7 - 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 also be found in Section E of this note. There is no separate report available for the individual pension plans. A. Basis of Accounting and Method Used to Value Investments Each plan's financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions to the plan are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Administrative costs are financed from each respective fund's investment earnings. 52  City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2013 NOTE 7 - DEFINED BENEFIT PENSION PLANS (CONTINUED) B. Plan Descriptions Membership of each plan consisted of the following as of October 1, 2013, the date of the latest actuarial valuation: GERF PORF FRF Retirees and beneficiaries receiving benefits 130 39 24 Terminated plan members entitled to but not yet receiving benefits 13 11 1 Disabled participants 4 6 - Active plan members 121 39 36 Total 268 95 61 General Employees' Retirement Fund (GERF) - Plan Description Plan Description - The GERF provides retirement, disability, and death benefits to plan members and beneficiaries. Participation in the plan is mandatory for all full- time general municipal employees hired after May 14, 1996 through December 31, 2009. Employees hired after this date are not eligible to participate. Cost-of-living increases of up to 3% are provided to retirees and beneficiaries every year. City ordinance assigns the authority to establish and amend benefit provisions to the City. Police Officers' Retirement Fund (PORF) - Plan Description Plan Description - The PORF is administered by the Police Officers' Pension Fund Board of Trustees. The PORF provides retirement, disability, and death benefits to plan members and beneficiaries. Participation in the plan is mandatory for all certified police officers. Cost-of-living increases of up to 3% are provided to retirees and beneficiaries every year. City ordinance assigns the authority to establish and amend benefit provisions to the Board of Trustees, with final approval resting with City Council. Firefighters' Retirement Fund (FRF) - Plan Description Plan Description - The FRF is administered by the Firefighters' Pension Fund Board of Trustees. The FRF provides retirement, disability, and death benefits to plan members and beneficiaries. Participation in the plan is mandatory for all firefighters. Cost-of-living increases of up to 3% are provided to retirees and beneficiaries every year. City ordinance assigns the authority to establish and amend benefit provisions to the Board of Trustees, with final approval resting with City Council. 53  City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2013 NOTE 7 - DEFINED BENEFIT PENSION PLANS (CONTINUED) C. Contributions, Funding Policy and Annual Pension Cost The contribution requirements of plan members and the City are established annually and amended by City ordinance. Plan members are required to contribute at a set percentage of their annual covered salaries. The City is required to contribute at an actuarially determined rate. The State of Florida also contributes to the Police Officers' Retirement Fund (PORF) and the Firefighters' Retirement Fund (FRF). Contributions from the State for the PORF of $170,885 and $204,226 for the FRF are included in the governmental activities revenue and expenses for the year ending September 30, 2013. None of the three Plans addresses maximum contribution rates. The City's annual pension cost as of the most recent actuarial date and related information for each plan is as follows: GERF PORF FRF Contribution rates (percentage of covered payroll) City and State 27.91 % (1) 44.0 % 40.4 % Plan members 5.0 % 5.0 % (2) 6.6 % Annual pension cost $ 1,278,925 $ 880,475 * $ 812,997 * Contributions made Employer $ 1,318,790 $ 754,704 $ 703,618 State of Florida $ - $ 170,885 $ 204,226 Net pension obligation (asset) $ (152,674) $ (174,368) $ (279,588) Actuarial valuation date for disclosure 10/01/2013 10/01/2013 10/01/2013 Actuarial cost method