Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2022 — reading text

dental, and life insurance coverage as a participant in the City’s plan. Plan Membership as of September 30, 2020: Inactive Plan Members or Beneficiaries Current Receiving Benefits 123 Inactive Plan Members Entitled to But Not Yet Receiving Benefits - Active Plan Members 256 379 Benefits Provided The benefits provided are the same as those provided for active employees. Spouses and dependents of eligible retirees are also eligible for medical coverage. All employees of the City are eligible to receive postemployment health care benefits. Contributions Retirees participating in the group insurance plans offered by the City are required to contribute 100% of the active premiums. In future years, contributions are assumed to increase at the same rate as premiums. Total OPEB Liability The City’s total OPEB liability was measured as of September 30, 2021. The total OPEB liability was determined by an actuarial valuation. The measurement period for OPEB expense was October 1, 2020 to September 30, 2021. The reporting period is October 1, 2021 to September 30, 2022. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2020, using the following actuarial assumptions: Inflation 2.50% Salary Increases Service based Discount Rate 2.43% Initial Trend Rate 7.00% Ultimate Trend Rate 4.00% Years to Ultimate 54 71  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Total OPEB Liability – Continued Actuarial Assumptions – Continued For general employees, mortality rates were based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For female lives, the headcount-weighted PubG- 2010 female employee table was used. For male lives, the headcount-weighted PubG-2010 male below median income employee table, set back one year, was used. For disabled female lives, 100% of the Disabled Female table was used, set forward three years. For disabled male lives, 100% of the Disabled Male table was used, set forward three years. For police and fire employees, mortality rates were also based on the Pub-2010 mortality tables with fully generational improvement using Scale MP-2018. For both males and females, the PubS.H-2010 below median income employee table, set forward one year, was used. For both disabled males and females, the 80% PubG.H-2010 and 20%PubS.H-2010 for Disabled Retirees was used. Discount Rate Given the City’s decision not to fund the program, all future benefit payments were discounted using a high-quality municipal bond rate of 2.43%. The high-quality municipal bond rate was based on the week closest but not later than the measurement date of the Bond Buyer 20-Bond Index as published by the Federal Reserve. The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's “Aa2” rating and S&P's “AA” rating. Change in Total OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Total OPEB Liability Net Position Liability (a) (b) (a) – (b) Balances at September 30, 2021 $ 6,986,953 $ - $ 6,986,953 Changes for the year: Service cost 410,684 - 410,684 Interest 155,984 - 155,984 Changes of assumptions (334,427) - (334,427) Contributions – employer - 228,302 (228,302) Benefit payments (218,502) (218,502) - Administrative expense - (9,800) 9,800 Net changes 13,739 - 13,739 Reporting period ending September 30, 2022 $ 7,000,692 $ - $ 7,000,692 72  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Change in Total OPEB Liability – Continued Sensitivity of the Total OPEB Liability to Changes in the Discount Rate Current 1% Decrease Discount Rate 1% Increase 1.43% 2.43% 3.43% Total OPEB liability $ 8,263,053 $ 7,000,692 $ 6,009,965 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Trend Rates Healthcare Cost 1% Decrease Trend Rates 1% Increase 3.00%-6.50% 4.00%-7.50% 5.00%-8.50% Total OPEB liability $ 6,071,113 $ 7,000,692 $ 8,197,225 OPEB Plan Fiduciary Net Position The plan is unfunded, so the OPEB plan’s fiduciary net position is $0. There are no OPEB assets accumulated in a GASB compliant trust to pay for related plan benefits. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended September 30, 2022, the City recognized OPEB expense of $521,802. On September 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between Expected and Actual experience $ - $ 1,009,110 Changes of assumptions 1,554,076 278,689 Employer contributions subsequent to the measurement date 236,797 - Total $ 1,790,873 $ 1,287,799 73  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 11. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – Continued Deferred outflows of resources related to pensions of $236,797 resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending September 30, 2023. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year ended September 30: 2023 $ 73,145 2024 73,145 2025 73,141 2026 102,583 2027 (55,737) $ 266,277 12. UNEARNED REVENUES The composition of unearned revenues as of September 30, 2022, was as follows: General Utilities Fund Fund Totals Federal grant proceeds received in advance of meeting eligibility requirements $ 3,651,981 $ - $ 3,651,981 Unredeemed gift cards 32,057 - 32,057 Charges for services paid in advance - 70,811 70,811 $ 3,684,038 $ 70,811 $ 3,754,849 The American Rescue Plan Act (ARPA) grant documents do not require unspent funds to be held in a separate bank account and since the revenue is not earned, it is not a component of net position at either the fund or government-wide level. The terms of the grant require the funds to be expended by specific dates, and unspent grant funds are not typically considered restricted assets of the governmental unit. Therefore, the City has not reported the unspent proceeds as restricted assets as of September 30, 2022. 74  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2022 13. FINANCED EQUIPMENT The City has entered into contracts for financing the acquisition of fitness equipment for its recreation complex and a ladder fire truck. These agreements qualify as financed purchases for accounting purposes as a result of the transfer of title or bargain purchase option and therefore has been recorded at the present value of the future debt service payments as of the inception date in the General Fund. The assets acquired through financing contracts were as follows: Governmental Assets Activities Fitness equipment $ 75,385 Ladder fire truck 999,320 Accumulated depreciation (136,368) Assets financed, net