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

Miscellaneous Contributions , Income , $169,699 $87,797 Charges for Services , $13,510,406 Charges for Services Capital Grants & Contributions Miscellaneous Income 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, 2015, the City of Fort Walton Beach’s governmental funds have combined ending fund balances of $14.5 million, a decrease of $5.2 million in comparison with the prior year. Approximately 80.4% of this amount, or $11.6 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 18 of this report, as well as in Note 17. The General Fund is the chief operating fund of the City. At the end of this fiscal year, committed, assigned, and unassigned fund balance of the General Fund was $9.4 million, while total fund balance reached $9.8 million. As a measure of the General Fund’s liquidity, it may be useful to compare both committed, assigned, and unassigned fund balance and total fund balance to total expenditures. This amount represents 41.3% of the total General Fund expenditures, while total fund balance represents 43.2% of that same amount. During the 2015 fiscal year, the fund balance of the City’s General Fund decreased by $3.0 million. This decrease was primarily related to the use of prior year restricted fund balance to complete the new City of Fort Walton Beach Recreation Complex using the Capital Improvement Revenue Note funds that were designated for the construction of the new recreation complex. 11  The Community Redevelopment Agency Fund’s fund balance decreased by $2.2 million. This decrease is a direct result of City Council’s ongoing mission to improve and stimulate economic development through public-private partnerships and development grants. 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 $10.4 million at September 30, 2015, of which the Utilities Fund amounted to $7.7 million, the Sanitation Fund totaled $2.1 million, and the Stormwater Utility Fund was $687,429. 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. Fiduciary Funds For the fiscal year ended September 30, 2015, the General Employees’ Retirement Fund’s funded ratio, an indicator of funding status, remained constant at 92.8% based on the 2015 measurement date. Employees’ contribute 5% of pay to the Plan and the City contributed $1.4 million, or 31.5% of payroll. The Firefighters’ Pension Trust Fund’s funded ratio decreased from 68.5% to 67.7% over the previous fiscal year based on the 2015 measurement date. Employees’ contribute 8.0% of pay to the Plan and the City contributed $672,369, or 32.7% of payroll. The Police Officers’ Retirement Fund’s funded ratio increased from 81.4% to 83.5% over the previous fiscal year based on the 2015 measurement date. Employees’ contribute 5% of pay to the Plan and the City contributed $597,269, or 27.4% of payroll. Additional information on the pension plans can be found on pages 50-64 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 65 of this report. 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 22 of the financial statements. Differences between the original budget and the final amended budget were $945,440. Significant information related to this difference is summarized as follows:  The City added expenditures for the construction of a new recreation complex, which were offset by donations received in the amount of $283,904.  City Council approved a loan from the Sanitation Fund to the General Fund, which enable the City to purchase a new Fire Pumper, the first payment of which was recorded in FY 2014-15 in the amount of $78,419.  In April 2014, the City experiences a natural disaster in the form of intense flooding. The City received Federal Emergency Management funds to offset a portion of the cost of the repairs related to this disaster in the amount of $77,430. 12   The City received State pension contributions in excess of what was originally budgeted in the amount of $77,615, for both the police and fire defined benefit pension plans.  The City incurred expenses that were funded by excess unassigned fund balance in the amount of $360,374 for police vehicles, emergency management generator, final changes to the Police Department’s pay and classification study, closing costs and commission fees related to the sell and/or lease of vacant City property, and fitness equipment for the new Recreation Complex.  The City was the recipient of several grants during the fiscal year totaling $153,417. Actual results, when compared to the final budget, show a variance of $1.2 million for expenditures. This variance is primarily due to amending the budget for grant revenue received and capital expenditures planned, 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, 2015, was $40.3 million (net of accumulated depreciation and related debt). This represents a net increase of $1.7 million, or 4.4%. 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,  The City’s Community Redevelopment Agency (CRA) purchased land to be used for parking and/or future development.  The City completed construction of a new recreation complex and placed the building into service in the fiscal year. Table 3 Total Capital Assets Net of Accumulated Depreciation Governmental Activities Business-Type Activities Total Activities FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 Land $11,048,842 $9,936,698 $709,678 $709,678 $11,758,520 $10,646,376 Buildings 13,563,822 7,359,920 129,335 143,929 13,693,157 7,503,849 Improvements other than Buildings 6,702,488 5,840,259 30,585,879 31,197,741 37,288,367 37,038,000 Infrastructure 3,953,649 4,049,905 - - 3,953,649 4,049,905 Intangible Assets 68,821 172,874 63,824 66,414 132,645 239,288 Machinery & Equipment 3,688,776 2,166,103 4,049,933 4,460,910 7,738,709 6,627,013 Equipment under Capital Lease 118,755 57,954 - - 118,755 57,954 Easements - - 34,642 34,642 34,642 34,642 Construction in Progress 804,559 4,470,218 399,860 548,914 1,204,419 5,019,132 $39,949,712 $34,053,931 $35,973,151 $37,162,228 $75,922,863 $71,216,159 Additional information on the capital assets of the City of Fort Walton Beach can be found in Note 5 of this report on pages 47-49. 13  Long-Term Debt As shown in the following table, as of September 30, 2015, the City had total bonded debt, revenue notes, and capital leases outstanding of $36.6 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. The debt capacity of the City is contingent upon available resources and existing debt. The current outstanding debt requires a coverage ratio of 1.25 times earnings. The General Fund is at 10.92 and the Utilities Fund is at 1.38. The Sanitation and Stormwater Funds are debt-free. Table 4 Outstanding Debt Governmental Assets Business-Type Activities Total Activities FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 Revenue Bonds - - - $9,640,146 - $9,640,146 Revenue Notes 12,371,587 13,008,515 8,794,000 - 21,165,587 13,008,515 State Revolving Fund - - 15,312,458 14,004,706 15,312,458 14,004,706 Capital Leases 134,249 89,654 - - 134,249 89,654 $12,505,836 $13,098,169 $24,106,458 $23,644,852 $36,612,294 $36,743,021 Additional information on the City of Fort Walton Beach’s long-term debt can be found in Note 13 and 14 of this report on pages 71-75. 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 0.10% lower than a year ago. This indicator translates into a lower cost of providing services to residents.  The Municipal Cost Index is 0.68% lower than a year ago. This index is prepared to show the effects of