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

$786,652 , 4.6% Municipal Revenue Sharing, $818,039 , Capital Grants & 4.8% Contributions, $80,936 , 0.5% Tax Increments for Redevelopment, Property Taxes, $1,311,101 , 7.7% $4,175,136 , 24.4% Other Taxes, Sales Tax, $3,761,437 , 22.0% $2,241,242 , 13.1% 8 Current Year Impacts – Business-Type Activities Business-type activities increased the City’s net position by $4.3 million for the fiscal year ended September 30, 2013. Key elements of this change are as follows:  Capital Grants and Contributions increased $1.5 million, or 464.3% due to funding received for a joint project with Okaloosa County.  Other Revenue decreased by $115,010, or 75.0%, the majority of which is related to a decline in investment earnings.  Expenses throughout the enterprise funds increased by $1.2 million, or 9.6%. This increase was primarily due to the reclassification of the expense reimbursements related to the cost allocation plan from transfers out to expenses; transfers saw a related increase, a portion of which is attributable to the forgiveness of an advance made to the Golf Fund.  The Utilities Fund recognized an impairment loss of $786,713, due to the disposition of a re-use water filtration system that was no longer viable. Chart 3 Expenses and Program Revenue – Business-Type Activities $10,000,000 $8,000,000 Expenses $6,000,000 Revenues $4,000,000 $2,000,000 $‐ Utilities Sanitation Golf Stormwater 9  Chart 4 Revenues by Source – Business-Type Activities Miscellaneous Income, $38,273 , 0.2% Operating Grants & Contributions, $1,071 , 0.0% Charges for Services, $14,472,546 , 88.3% Capital Grants & Contributions, $1,871,295 , 11.4% 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. As of September 30, 2013, the City of Fort Walton Beach’s governmental funds have combined ending fund balances of $22.1 million, an increase of $5.9 million in comparison with the prior year. Approximately 43.6% of this amount, or $9.6 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 16 of this report, as well as in Note 18. The General Fund is the chief operating fund of the City. At the end of this fiscal year, unrestricted fund balance of the General Fund was $7.6 million, while total fund balance reached $15.7 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unrestricted fund balance and total fund balance to total expenditures. Unrestricted fund balance represents 38.0% of the total General Fund expenditures, while total fund balance represents 78.6% of that same amount. During the 2013 fiscal year, the fund balance of the City’s General Fund increased by $5.7 million. This increase was primarily related to the issuance of an $8.5 million Capital Improvement Revenue Note to 10  finance the construction of a new recreation complex and purchase golf equipment and a lift truck. This increase was offset by the forgiveness of an advance to the City’s golf fund. The Community Redevelopment Agency Fund increased by $97,330. This increase is due to lower than anticipated spending levels. 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 $5.9 million at September 30, 2013, of which the Utilities Fund amounted to $3.6 million, the Sanitation Fund totaled $2.1 million, and the Stormwater Utility Fund was $511,359. The Golf Fund had negative unrestricted net position of $316,714 as a result of an improper chemical application that substantially impacted course play. In total, net position of the proprietary funds increased $4.3 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. GENERAL FUND BUDGETARY HIGHLIGHTS A schedule comparing the original to the final budget and the variance from the final budget to the actual results is included on page 20 of the financial statements. Differences between the original budget and the final amended budget were $12.7 million. Significant information related to this difference is summarized as follows:  The City issued the 2013A Capital Improvement Revenue Note to finance the construction of a new recreation complex in an amount of $8.5 million.  The City refunded its 2001 Capital Improvement Revenue Bond with the $4.4 million proceeds from the issuance of the 2013 Capital Improvement Revenue Note. Actual results, when compared to the final budget, show a variance of $9.0 million for expenditures. This variance is primarily due to amending the budget for grant revenue received and capital debt issued, but not yet expended. 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, 2013, was $44.3 million (net of accumulated depreciation and related debt). This represents a net increase of $4.0 million, or 9.9%. Highlights are summarized as follows:  Fewer assets were purchased that were over the GASB 34 threshold.  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  An impairment loss of $271,287 and $786,713, due to the demolition of an outdated recreation complex and the disposition of a re-use water filtration system that was no longer viable were recorded.  The City began construction of a new force main and pump station. Of the $16.0 million project, $14.2 million was expended during the fiscal year and added to Construction in Progress, a portion of which was financed through existing reserves and a contribution from Okaloosa County. 11  Table 3 Total Capital Assets Net of Accumulated Depreciation Governmental Activities Business-Type Activities Total Activities FY 2013 FY 2012 FY 2013 FY 2012 FY 2013 FY 2012 Land $ 9,961,261 $ 9,961,261 $ 765,078 $ 765,078 $ 10,726,339 $ 10,726,339 Buildings 6,434,774 7,057,626 1,926,888 2,052,313 8,361,662 9,109,939 Improvements Other Than Buildings 5,926,341 6,110,056 17,212,291 16,783,482 23,138,632 22,893,538 Infrastructure 4,121,764 4,431,266 - - 4,121,764 4,431,266 Intangible Assets 281,928 393,935 18,277 23,253 300,205 417,188 Machinery & Equipment 1,713,565 2,026,331 2,455,379 2,618,635 4,161,944 4,644,966 Equipment under Capital Lease 58,565 397 - 12,429 58,565 12,826 Easements - - 34,642 28,532 34,642 28,532 Construction in Progress 979,617 488,118 15,421,355 2,616,944 16,400,972 3,105,062 $ 29,477,815 $ 30,468,990 $ 37,833,910 $ 24,900,666 $ 67,311,725 $ 55,369,656 Additional information on the capital assets of the City of Fort Walton Beach can be found in Note 5 of this report on page 48. Long-Term Debt As shown in the following table, as of September 30, 2013, the City had total bonded debt, revenue notes, and capital leases outstanding of $30.7 million. All of the City’s debt represents bonds and notes secured solely by specified revenue sources (i.e. revenue bonds/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. Table 4 Outstanding Debt Governmental Activities Business-Type Activities Total Activities FY 2013 FY 2012 FY 2013 FY 2012 FY 2013 FY 2012 Revenue Bonds $ - $ 4,428,144 $ 9,925,055 $ 10,199,963 $ 9,925,055 $ 14,628,107 Revenue Notes 13,535,936 661,796 73,533 61,221 13,609,469 723,017 State Revolving Fund - - 7,068,522 - 7,068,522