Fort Walton Beach — Comprehensive Financial Report September 30, 2015 — reading text

interest rates. The City's policy encourages shorter-term investments for operating funds in order to meet the anticipated cash flow requirements. The investment policies for the pension plans do not specifically address interest rate risk. Credit Rate Risk – State law limits investments of surplus public funds to those investments described above. According to the City's General Employees' Pension Plan investment policy, investment in all domestic corporate fixed income securities is limited to those securities rated "A" or higher by Moody, S&P, or Fitch, except that up to 10% of the fixed income securities may have a rating below "A" but not less than "Baa". As of September 30, 2015, the General Employees' Pension Plan held no investments whose rating was below Baa; the Plan's intent, in compliance with Florida Statutes 112.661(5)(b), is to sell any investment, whose rating falls below the policy threshold, as soon as it is economically feasible. Investments in the General Employees' Pension Plan whose rating was less than "A" at September 30, 2015, comprised 0% of the total cost of fixed income securities in the Plan. The Police Officers' Pension Fund limits investment in fixed income securities to those rated "Baa/BBB" or higher by a major rating service. The Firefighters' Pension Fund limits investment in fixed income securities to those securities rated "Baa/BBB" or higher by a major rating service. All Pension Plans were in compliance with its respective investment policy regarding credit rate risk as of September 30, 2015. 44  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Credit Rate Risk – Continued – The Moody's rating ranges of the different investment classes held by each respective plan at September 30, 2015, are as follows: General Pension Police Pension Plan Plan Fire Pension Plan Money market funds Aaa-A Aaa-A Aaa-A Corporate CMOs Aaa-Aa1 N/A N/A Corporate debt Aaa-Baa3 Aa2-A3 Aa2-Baa2 U.S. Treasury Aaa Aaa Aaa U.S. government agencies Aaa-A2 Aaa Aaa U.S. government pools A1 N/A N/A The Beal Memorial Cemetery investment policy does not limit investments to those with specific credit ratings for domestic or international equities. The overall rating of fixed income investments shall be at least investment grade based on the rating of two of the three Nationally Recognized Statistical Rating Organizations (NRSRO). Concentration Credit Risk – The City places no limit on the amount that may be invested in any one issuer, in regards to its general operations investments. The City encourages portfolio diversification to minimize each of the types of risk related to investments. The General Employees' Pension Fund limits investment of fixed income securities of any single issuer to no more than 10% of the cost of all fixed income securities. As of September 30, 2015, the largest investment in a single corporate issuer of debt was below 1% of the cost of all fixed income securities. No more than 3% of the fair value of the total fixed income portfolio in the Police Officers' Pension Fund may be invested in the securities of any single corporate issuer. As of September 30, 2015, the largest investment in a single corporate issuer of debt was below 1% of the value of all corporate fixed income securities. No more than 10% of the fair value of the total fixed income investments may be held in the Firefighters' Pension Fund may be held in any single corporate issuer. As of September 30, 2015, the largest investment in a single corporate issuer of debt was 1.53% of the fair value of all fixed income securities. 45  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 3. DEPOSITS AND INVESTMENTS – CONTINUED Investments – Continued Concentration Credit Risk – Continued - The Beal Memorial Cemetery investment policy limits investment concentrations as follows:  Domestic Equities – no more than 5% of the total equity portfolio valued at market may be invested in the equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity valued at market may be held in any one sector.  International Equities – no more than 5% of the total equity portfolio valued at market may be invested in the common equity of any one corporation; ownership of the shares of one company shall not exceed 2% of those outstanding and not more than 25% of equity valued at market may be held in any one sector.  Fixed Income Investments – securities of any one issuer shall not exceed 5% of a total bond portfolio at time of purchase. 4. RECEIVABLES Receivables at September 30, 2015, were as follows: Governmental Activities Business-Type Activities Community Other Redevelop- Other Gov't Proprietary General ment Fund Funds Utilities Sanitation Funds Total Taxes $ 17,745 $ - $ - $ - $ - $ - $ 17,745 Accounts 88,604 3,311 178 621,817 205,643 44,649 964,202 Less allowance for doubtful accounts - - - (44,251) (8,660) (2,695) (55,606) Assessments 48,998 - - 7,360 - - 56,358 Other 836,922 - - - - - 836,922 Total receivables, net $ 992,269 $ 3,311 $ 178 $ 584,926 $ 196,983 $ 41,954 $ 1,819,621 During fiscal year 2015, the City sold a building for $462,000 and will receive $442,000 of the proceeds over twelve years ($2,917 monthly payments started November 2014). This note receivable bears interest at 5% per year and includes a balloon payment of $232,362 due to the City in October 2026. The balance of this note receivable is $429,922 as of September 30, 2015. During fiscal year 2014, the City sold a recreational center for $425,000 and will receive the proceeds over twelve years ($1,500 monthly principal only payments started October 2014). The City has calculated imputed interest on the receivable, but it has not been recorded as the imputed amount was deemed to be immaterial to the financial statements. The balance of this note receivable is $407,000 as of September 30, 2015. 46  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 4. RECEIVABLES – CONTINUED Due from Other Governments The City's receivables from other governments for governmental activities as of September 30, 2015, are $118,171. Due from other governments in the governmental activities consists primarily of state proceeds related to the Bud and Dorie Day Trail grant as well as Community Development Block Grant receivables due from the federal government. The City's receivables from other governments for business-type as of September 30, 2015, are $35,542 which consists of charges for services due from another local municipality in the City’s Sanitation Fund. 5. CHANGES IN CAPITAL ASSETS Capital asset activity for the year ended September 30, 2015, was as follows: Beginning Ending Balance Increases Decreases Transfers Balance Governmental activities Capital assets not being depreciated/amortized Land $ 9,936,698 $ 1,112,144 $ - $ - $ 11,048,842 Construction in progress 4,470,218 3,003,879 - (6,669,538) 804,559 Total capital assets not being depreciated/amortized 14,406,916 4,116,023 - (6,669,538) 11,853,401 Capital assets being depreciated/amortized Buildings 16,093,414 839,414 (708,658) 6,876,968 23,101,138 Improvements other than buildings 15,222,216 1,092,171 (12,294) 646,360 16,948,453 Infrastructure 12,664,953 237,632 - (37,909) 12,864,676 Software 513,184 3,000 - - 516,184 Machinery and equipment 9,572,964 1,772,122 (607,405) 380,705 11,118,386 Equipment under capital lease 59,390 67,774 - - 127,164 Total capital assets being depreciated/amortized 54,126,121 4,012,113 (1,328,357) 7,866,124 64,676,001 Less accumulated depreciation/amortization Buildings (8,733,494) (560,569) 708,658 (951,912) (9,537,317) Improvements other than buildings (9,381,957) (621,730) 12,294 (254,572) (10,245,965) Infrastructure (8,615,048) (333,888) - 37,909 (8,911,027) Software (340,310) (107,052) - - (447,362) Machinery and equipment (7,406,861) (620,706) 607,405 (9,448) (7,429,610) Equipment under capital lease (1,436) (6,973) - - (8,409) Total accumulated depreciation/amortization (34,479,106) (2,250,918) 1,328,357 (1,178,023) (36,579,690) Total capital assets being depreciated/amortized, net 19,647,015 1,761,195 - 6,688,101 28,096,311 Governmental activities, net $ 34,053,931 $ 5,877,218 $ - $ 18,563 $ 39,949,712 47  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 5. CHANGES IN CAPITAL ASSETS – CONTINUED