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

$ 7,592,268 $ 7,902,214 Ratio of UAAL to covered payroll 77.29% 56.16% For the October 1, 2014 valuation date, the funded status is broken out by plan as follows: General Police Fire Total Actuarial accrued liability (AAL) $ 3,045,188 $ 939,212 $ 453,130 $ 4,437,530 Actuarial value of assets (AVA) - - - - Unfunded actuarial accrued liability (UAAL) $ 3,045,188 $ 939,212 $ 453,130 $ 4,437,530 Funded ratio 0.0% 0.0% 0.0% 0.0% The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three years, were as follows: Three-Year Trend Information Net OPEB Annual OPEB City Percentage Obligation Cost Contributions * Contributed (Asset) October 1, 2015 $ 353,941 $ 167,728 47.39% $ 1,280,931 October 1, 2014 503,210 275,495 54.75% 1,094,718 October 1, 2013 484,115 275,935 57.00% 867,004 Funded Status and Funding Progress 嘃㔥 of October 1, 2014, the most recent actuarial valuation date, the plan funded status was as follows: Actuarial Accrued UAAL as a Actuarial Liability Unfunded Annual % of Valuation Actuarial Value (AAL) Entry AAL (UAAL) Funded Covered Payroll Date of Assets (a) Age (b) (b-a) Ratio (a/b) Payroll (c) [c/(b-a)] October 1, 2014 N/A $ 4,437,530 $ 4,437,530 0.00% $ 7,902,214 56.16% October 1, 2013 N/A N/A N/A N/A N/A N/A October 1, 2012 N/A $5,651,699 5,651,699 0.00% 7,300,258 77.42% 68  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 10. OTHER POST EMPLOYMENT BENEFITS (OPEB) – CONTINUED Required Supplementary Information The Schedule of Funding Progress immediately following the notes to the financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the latest actuarial valuation as of October 1, 2014, the Individual Entry Age Normal Cost Method (level percentage of pay) was used. The actuarial assumptions included a 4% investment rate of return and an annual healthcare costs trend rate of 8.0% in FY15, which will be decreased to an ultimate rate of 4.50% beginning in fiscal year ending September 30, 2020. The investment rate of return included a 3% inflation assumption. The unfunded actuarial accrued liability is being amortized in a closed amortization, calculated as a level percent of payroll over a thirty year period. 11. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee medical benefits and natural disasters. The City purchases insurance through commercial carriers. Insurance coverage for workers’ compensation, liability, casualty, inland marine, flood, police accidental death, public officials’ bonds, fiduciary and fuel tanks were purchased from several commercial carriers during the year ended September 30, 2015. There has been no significant reduction in insurance coverage from the prior year. Commercial insurance coverage has been sufficient to cover all claims made in the prior three fiscal years. 69  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 12. OPERATING LEASES Lessor The City receives rental income from leasing various parcels of land under cancelable operating agreements. The lease periods vary from one to forty years. Income for the year ended September 30, 2015, was $313,425 in the General Fund, $5,000 in the Community Redevelopment Fund, and $17,395 in the Utilities Funds. In addition, the City also leases a portion of its Golf Clubhouse for retail and food service operations. The rent received for this lease for the fiscal year ended September 30, 2015, totaled $73,289. Future minimum lease payments are as follows: Governmental Business-Type Year Ending September 30 Activities Activities 2016 $ 347,296 $ 17,911 2017 322,119 18,448 2018 297,634 19,001 2019 311,110 19,571 2020 362,337 20,157 Total minimum lease payments $ 1,640,496 $ 95,088 Lessee The City leases golf course equipment and golf carts in the General Fund through operating leases. The lease term began January 1, 2013 and terminates June 30, 2016. Monthly lease payments are $9,128. Lease expense for the fiscal year ending September 30, 2015 was $108,506. Future minimum lease payments are as follows: Governmental Year Ending September 30 Activities 2016 $ 80,829 Total minimum lease payments $ 80,829 The City leases copiers in the General, Utilities, and Sanitation Funds through Xerox and Great American Financial Services. During the fiscal year 2015, a four year operating lease was signed with Great American Financial Services for copiers. The lease term began October 1, 2015 and terminates September 30, 2019. Under the existing Xerox leases, which expire December 31, 2015, monthly lease payments in each fund are as follows: General Fund: $3,248; Utilities Fund: $177; and Sanitation Fund: $63. Under the Great American Financial Services lease, monthly lease payments in each fund will be: General Fund: $1,383, Utilities fund: $74, and Sanitation Fund: $38 Lease expense for the year ending September 30, 2015 was as follows: General Fund: $35,931; Utilities Fund: $1,951; and Sanitation Fund: $695. 70  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2015 12. OPERATING LEASES – CONTINUED Lessee – Continued Future minimum lease payments are as follows: Business-Type Activities Governmental Year Ending September 30 Activities Utilities Sanitation 2016 $ 19,375 $ 889 $ 461 2017 16,590 889 461 2018 16,590 889 461 2019 16,590 889 461 Total minimum lease payments $ 69,145 $ 3,556 $ 1,844 13. CAPITAL LEASES The City has entered into a lease agreement as lessee for financing the acquisition of a telephone system and fitness equipment for its recreation complex. The lease agreements qualify as capital leases 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 minimum lease payments as of the inception date in the General Fund. The assets acquired through capital leases are as follows: Governmental Assets Activities Telephone system $ 103,784 Fitness equipment 67,774 Accumulated depreciation (26,270) Assets acquired by lease, net $ 145,288 The future minimum lease obligations and net present value of these minimum lease payments as of September 30, 2015, are as follows: