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

or $29.7 million, is restricted, committed, or assigned for specific purposes. Unassigned fund balance of $7.3 million is available for spending at the discretion of the City Council. Details of the fund balance classifications can be found on page 17 of this report, as well as in Note 18 to the financial statements. The General Fund is the chief operating fund of the City. At the end of fiscal year 2022, assigned and unassigned fund balance of the General Fund was $10.4 million, while total fund balance reached $27.3 million. As a measure of the General Fund’s liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total expenditures. Total assigned and unassigned fund balance represents 38.3% of the total General Fund expenditures, while total fund balance represents 100.4% of that same amount. During the 2022 fiscal year, the fund balance of the City’s General Fund decreased by $121,231. This decrease is primarily attributable to investment losses of $1.0 million. The CRA’s fund balance increased by $1.1 million. This is primarily attributable to delays in the commencement of planned capital projects. Proprietary Funds The City’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 $15.7 million on September 30, 2022, of which the Utilities Fund reported $12.5 million, the Sanitation Fund reported $2.2 million, and the Stormwater Utility Fund reported $965,484. The factors concerning the finances of these funds have already been addressed in the discussion of the City’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 110.8%, an increase of 11.2% over the prior year. Employees contribute 5% of pay to the Plan and the City contributed $580,847 million, which was a decrease of $443,400 when compared to the previous fiscal year. The Police Officers’ Retirement Fund’s net position as a percentage of the total pension liability was 86.2%, an increase of 7.8% over the previous fiscal year. Employees contribute 5% of pay to the Plan and the City and State contributed $1.6 million, an increase of $94,947 when compared to the previous fiscal year. 11  The Firefighters’ Pension Trust Fund’s net position as a percentage of the total pension liability was 74.5%, which was an increase of 8.0% over the previous fiscal year. Employees contribute 8.0% of pay to the Plan and the City and State contributed $1.6 million, an increase of $20,755 when compared to the previous fiscal year. Additional information on the pension plans can be found on pages 53-69 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 70 of this report. 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 for the General Fund on page 21 of the financial statements. The difference between the original budget and the final budget for expenditures was an increase of $2.1 million. Significant information related to this difference is summarized as follows:  Increase of $1.4 million for a capital project to replace the golf course irrigation system.  Increase of $500,000 for planned expenditures of federal grant awards received during the fiscal year. Actual results, when compared to the final budget, show a variance of $2.8 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, 2022, was $79.7 million (net of accumulated depreciation and related debt). This represents a net decrease of $1.3 million, or 1.6%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City expended $1.4 million to replace the golf irrigation system.  The kitchen was renovated at Fire Station #6 for a total cost of $58,479.  The replaced 11 Police Department vehicles for a total cost of $368,012. 12  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 2022 2021 2022 2021 2022 2021 Land $11,131,840 $10,935,286 $709,678 $709,678 $11,841,518 $11,644,964 Buildings 21,475,978 22,459,386 73,487 77,608 21,549,465 22,536,994 Improvements other than Buildings 10,593,661 9,402,876 26,274,574 27,614,642 36,868,235 37,017,518 Machinery & Equipment 5,710,368 4,762,167 2,864,717 3,228,809 8,575,085 7,990,976 Easements - - 39,742 39,742 39,742 39,742 Right-of-use assets 378,049 534,957 188,083 - 566,132 534,957 Construction in Progress 231,143 1,084,543 22,113 111,042 253,256 1,195,585 $49,521,039 $49,179,215 $30,172,394 $31,781,521 $79,693,433 $80,960,736 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 49-51. Long-Term Debt As shown in the following table, as of September 30, 2022, the City had total outstanding long- term debt of $37.5 million. All the City’s debt represents notes and bonds secured solely by specified revenue sources (i.e., revenue notes) and financing contracts. 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 Assets Business-Type Activities Total Activities 2022 2021 2022 2021 2022 2021 Revenue Notes & Bonds $20,253,795 $21,593,776 $6,167,000 $6,637,000 $26,420,795 $28,230,776 State Revolving Fund - - 10,452,433 11,186,723 10,452,433 11,186,723 Financing Contracts 600,745 944,447 - - 600,745 944,447 $20,854,540 $22,538,223 $16,619,433 $17,823,723 $37,473,973 $40,361,946 Additional information on the City’s long-term debt can be found in Notes 14 and 15 of this report on pages 75-80. 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 8.7% 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. 13   The local unemployment rate was 2.2%, which represents an approximate 1.5% decrease from September 2021. The State of Florida’s unemployment rate was 2.5%, which represents an approximate 2.5% decrease from September 2021. The unemployment rate will impact the City’s fee and usage-based revenues, and shared portions of the State of Florida’s usage-based taxes.  The published state revenue sharing distribution estimate is up by 7.8% over the prior year, the half-cent sales tax distribution estimate is up by 6.0% over the prior year, and the communication services tax distribution estimate is up by 4.0% compared to the prior year.  The military has a significant presence in our community with Eglin Air Force Base, Hurlburt Field, and Duke Field. Combined, these three installations employ over 72,000 military and civilian personnel. The military and defense-related industries have a $22 billion annual impact on Northwest Florida’s economy, according to the Florida Defense Industry Economic Impact Analysis. These financial policies, as well as other indicators, were considered when adopting the City’s budget for fiscal year 2023. The City’s budget for fiscal year 2023 totals $56.8 million, which is $3.9 million higher than the fiscal year 2022 approved budget. The 2023 budget allocates $28.5 million to the General Fund, a 3.0% increase as compared to the fiscal year 2022 budget, $20.8 million to the enterprise funds, and $7.5 million to other funds. For the Fiscal Year 2023 budget, the City Council adopted the millage rate of 4.9999 mills, which is down 6.2% from the previous fiscal year. Personnel expenses account for approximately 46.6% of the City’s budget. The City’s fiscal year 2023 budget remains relatively stable in this category, at 311.79 full time equivalent (FTE’s) positions, a decrease of only 5.4 FTE’s from the prior year. REQUESTS FOR INFORMATION This financial report is designed to provide citizens, taxpayers, customers, and creditors with a general overview of the City of Fort Walton Beach’s finances and to demonstrate the City’s accountability for the money it receives. Questions concerning any of the information provided in this report, or requests for additional information, should be addressed to the City Manager, 107 Miracle Strip Parkway S.W., City of Fort Walton Beach, Florida, 32548. This document and other financial information are available on the City’s website at www.fwb.org. Inquiries may also be sent via email to the Finance Department at finance@fwb.org. 14  CITY OF FORT WALTON BEACH, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2022 Primary Government