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Audit Report - 2005-2006 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2006 ~' FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2006 TABLE OF CONTENTS Independent Auditors' Report ...................................................................................................................... i-ii Management's Discussion and Analysis ........................................................... ........ iii-x Basic Financial Statements Government-wide Financial Statements Statement of Net Assets ...................................................................................................................... ....... 1 Statement of Activities ....................................................................................................................... ....... 2 Fund Financial Statements Balance Sheet -Governmental Funds ................................................................................................ ....... 3 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets .................................................................................................................. ....... 4 Statement of Revenues, Expenditures, and Changes in Fund Balances -Governmental Funds ..................................................................................................... ....... 5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .................................................................................................................... ....... 6 Statement of Net Assets -Proprietary Funds ............................................................................................ 7 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds ............................................................................................................................ ....... 8 Statement of Cash Flows -Proprietary Funds .....................................................................................9-10 Statement of Fiduciary Net Assets -Fiduciary Funds ............................................................................ I 1 Statement of Changes in Fiduciary Net Assets -Fiduciary Funds .................................................... ..... 12 Notes to Financial Statements ....................................................................................................... 13-29 Required Supplementary Information Schedules of Pension Funding Progress ...................................................................................................... 30 Schedules of Contributions from Employer and Other Contributing Entities ................................................................................................................................ 31 Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual -General Fund ...........................................................................32-33 Note to Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual -General Fund ......................................................................................... 34 ~ Supplementary Information Combining Balance Sheet -Nonmajor Governmental Funds ................................................................35-36 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -Nonmajor Governmental Funds ..........................................................37-38 ~" Combining Statement of Fiduciary Net Assets -Fiduciary Funds .............................................................. 39 ~' Combining Statement of Changes in Fiduciary Net Assets - Fiduciary Funds ....................................................................................................................................... 40 ~,,, Historical Revenues and Expenses ............................................................................................................... 41 Major Utility Customers ............................................................................................................................... 42 Summary of Water Usage ............................................................................................................................. 43 Summary of Wastewater Treatment -Atlantic Beach Sewer Division ...................... ................... 44 r FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORH)A SEPTEMBER 30, 2006 TABLE OF CONTENTS (Concluded) Supplementary Information (Concluded) Summary of Wastewater Treatment -Buccaneer Sewer Division .............................................................. 45 Other Bond Covenant Disclosures ............................................................................................................... 46 Schedules of Net Revenues in Accordance with Bond Resolutions Enterprise Funds (Water and Sewer) ...................................................................................................... 47 Additional Elements of Report Prepared in Accordance with Government Auditing Standards, Issued by the Comptroller General of the United States Schedule of Expenditures of Federal Awards ......................................................................................... 48 Note to Schedule of Expenditures of Federal Awards ........................................................................... 49 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards ................................................50-51 Management Letter ............................................................................................................................52-53 1"" E' r INDEPENDENT AUDITORS' REPORT r INDEPENDENT AUDITORS' REPORT Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida G ay gis Company We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Atlantic Beach, Florida (the City), as of and for the year ended September 30, 2006, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the City's 2005 financial statements and, in our report dated December 14, 2005, we expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2006, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated December 13, 2006, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. Certified Public Accountants P.O. Box 23999 • 222 N.E. 1st Street • Gainesville, Florida 32602 • (352) 378-2461 • fAX (352) 378-2505 Laurel Ridge Professional Center • 2347 S.E. 17th Street • Ocala, Florida 34471 (352) 732-3872 FAX (352) 732-0542 443 East College Avenue • Tallahassee, Florida 32301 • {850) 224-7144 FAX (850) 224-1762 2201 Cantu Court, Suite +~ 100 • Sarasota, Florida 34232 (941) 379-2800 FAX (941) 379-2899 MEMBERS OF AMERiUN ANO FLORIDA INSTITUTES OF CERTIFIED PVBUC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PVBUC NCCOVNTANTS PRIVATE COMPANIES ANO S.E_C. PRKTICE SECTIONS 1 Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS' REPORT (Concluded) is The management's discussion and analysis, budgetary .comparison schedules, and the required supplementary information as listed in the table of contents, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining nonmajor fund statements, schedule of expenditures of federal awards and other supplementary information listed in the table of contents is presented for the purpose of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The other supplementary information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly we express no opinion on them. December 13, 2006 `~L~~~ ,t ^ ~''r' ~ Gainesville, Florida oCY l ~~ ~~P ii ~„ CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS As management of the City of Atlantic Beach, we offer readers of our financial statements this narrative overview and analysis for the fiscal year ended September 30, 2006. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The purpose of each of the three components of the basic financial statements is described ~; below. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Atlantic Beach's finances, in a manner similar to a private sector business. They include the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the govemment-wide financial statements distinguish functions of the City that are principally supported by taxes, licenses and permits, and intergovernmental revenues, referred to as "governmental activities," from other functions that are intended to recover all or a significant portion of their costs through user fees and charges, referred to as "business-type activities." The governmental activities of the City include public safety, transportation, parks and recreation, physical environment (i.e., infrastructure), debt, and general government, which include administration and other support functions. The business-type activities of the City include the utility, comprised of the water and sewer systems; the stormwater system; and the sanitation enterprise. The government-wide financial statements can be found on pages 1-2 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been ~ segregated for specific activities or objectives. The City of Atlantic Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be categorized into either governmental funds, proprietary ` funds, or fiduciary funds. iii nw CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) °' Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental ,~ activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of available resources, as well as on balances of available resources at the end of the fiscal year. Such information may be useful in evaluating a City's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for govemmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Reconciliations are provided between the Governmental Fund's Balance Sheet and the Statement of Net Assets and the Governmental Fund's Statement of Revenues, ~, Expenditures, and Changes in Fund Balances and Statement of Activities to facilitate this comparison between governmental funds and governmental activities. The City of Atlantic Beach maintains 15 individual governmental funds. Information is presented ~"" separately in the Governmental Fund's Balance Sheet and in the Governmental Fund's Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, which is considered to be a major fund. Data from the other 14 Governmental Funds are combined into a single, ~r aggregated presentation called Nonmajor Governmental Funds. Individual fund data for each of these Nonmajor Governmental Funds is provided in the form of combining statements. These combining statements can be found on pages 35-38 of this report. The City of Atlantic Beach adopts an annual appropriated budget for all funds but is only required to present a budget comparison for its General Fund. This Schedule of Revenues, Expenditures, and Changes in Fund Balance, Budget and Actual -General Fund budgetary comparison schedule has ~"" been provided to demonstrate compliance with this budget. Proprietary Funds The City of Atlantic Beach maintains only one type of proprietary fund and that is enterprise funds. The enterprise funds are used to account for the activities of the water and sewer (utility), stonnwater, and sanitation activities. The proprietary fund financial statements provide the same type of information as the government- wide financial statements, only in more detail. Separate information of the utility, stormwater and !~ sanitation activities, which are considered to be major funds of the City of Atlantic Beach, can be found in the basic proprietary fund financial statements on pages 7-10 of this report. ~„ Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the City (i.e., pension beneficiaries). Fiduciary funds are not reflected in the government-wide financial "' statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 11-12 of this report. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found on pages 13-29 of this report. iv ,~„ CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's progress in funding its obligation to provide l pension benefits to its employees and a budgetary comparison schedule for the General Fund. Required supplementary information can be found on pages 30-34 of this report. f Government-wide Financial Analysis Net assets may serve over time as a useful indicator of a City's financial position. As can be seen in the !" summarized table below, the City's assets exceeded liabilities by $72,764,000 at the close of the fiscal 4' year ended September 30, 2006. By far the largest portion of the City's net assets, $59,117,000 (81.2 %), reflects its investment in capital assets (i.e., land, buildings, equipment, and infrastructure), less any related, outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The City's capital assets, net of depreciation, were adjusted upward by $34,666,000, due to implementation of GASB Statement No. 34. These accounting guidelines required retroactive reporting of governmental infrastructure assets (i.e., roads, sidewalks, etc.) and primarily affected governmental activities. Further explanation is described in Note 2 to these financial statements found on page 19. This adjustment was offset by the fiscal year net decrease, due to depreciation, of $1,009,000. A portion of the City's. net assets, $2,632,000 (3.6%), represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $11,015,000, is used to meet the government's ongoing obligations to citizens and creditors. City of Atlantic Beach's Net Assets September 30, 2006 and 2005 (In Thousands) Governmental Business-type Activities Activities Totals 2006 2005 2006 2005 2006 2005 Current and other assets $7,886 $6,966 $8,519 $9,1 i8 $16,405 $16,084 Capital assets 42,094 9,241 36,597 35,792 78,691 45,033 ~„ Total Assets 49,980 16,207 45,116 44,910 95,096 61,117 Long-term liabilities outstanding 675 752 18,636 19,331 19,311 20,083 Other liabilities 750 724 2,271 2,414 3,021 3,138 ` Total Liabilities 1,425 1,476 20,907 21,745 22,332 23,221 Net Assets Invested in capital assets, net of related debt 41,608 8,705 17,509 15,776 59,117 24,481 Restricted 1,877 1,796 755 911 2,632 2,706 Unrestricted 5,070 4,230 5,945 6,478 11,015 10,709 Total Net Assets $48,555 $14,731 $24,209 $23,165 $72,764 $37,896 v l r r CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) As illustrated in the schedule below, the City was able to report positive balances in all categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. City of Atlantic Beach's Change in Net Assets For the Years Ended September 30, 2006 and 2005 (ln Thousands) Governmental Business-type Activities Activities Totals 2006 2005 2006 2005 2006 2005 Revenues Program Revenues: Charges for services $1,172 $1,112 $7,887 $7,720 $9,083 $8,832 Operating grants & contributions 979 153 2 7 202 160 Capital grants & contributions 236 849 343 1,820 1,161 2,669 General Revenues: Propertytaxes 3,530 2,990 0 0 3,530 2,990 Sales taxes 1,458 1,385 0 0 1,458 1,385 Franchise and utility taxes 1,718 1,601 0 0 1,718 1,601 State revenue sharing 306 469 0 0 481 469 Discretionary sales surtax 741 688 0 0 741 688 Interest revenue 314 170 310 180 624 350 Miscellaneous 65 389 0 0 63 389 Gain on disposal of fixed assets 0 8 2 0 2 8 Total Revenues 10,519 9,814 8,544 9,727 19,063 19,541 Expenses General government 1,360 1,233 0 0 1,360 1,233 Public safety 4,645 4,553 0 0 4,645 4,553 Transportation 2,101 1,391 0 0 2,101 1,391 Parks&recreation 1,191 1,045 0 0 1,191 1,045 Interest on long-term debt 21 23 0 0 21 23 Utility 0 0 7,273 6,829 7,273 6,829 Stormwater 0 0 1,080 937 1,080 937 Sanitation 0 0 1,190 1,132 1,190 1,132 Total Expenses 9,318 8,245 9,543 8,898 18,861 17,143 Transfers 206 1,782 (206) 1,782 0 0 Change in Net Assets 1,407 (213) (1,205) 2,611 202 2,398 Net Assets-Beginning 14,731 14,944 23,165 20,554 37,896 35,498 Adjustments to Beginning Balance 32,417 0 2,249 0 34,666 0 Net Assets-Ending $48,555 $14,731 $24,209 $23,165 $72,764 $37,896 vi z CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) Fund Financial Analysis As noted earlier, the City of Atlantic Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Following is a summary of fund activity for the fiscal year: ~ ^ Governmental Funds At the end of the current fiscal year, the City's governmental funds reported a combined ending fund balance of $7,493,000, an increase of $971,000 in comparison with the prior year. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance was $5,580,000, which represented 58% of total General Fund expenditures and transfers out. The net result of various revenue and expense items resulted in an increase to the City's General .Fund of $891,000 (18.9%) during the current fiscal year. This increase is chiefly due to a growth in property taxes from soaring property values during this timeframe and rising interest rates resulting in increased interest revenues. Nonmajor governmental funds consisting of Special Revenue Funds and the Debt Service Fund have a combined fund balance of $1,877,000. Of this fund balance, $77,000 is reserved for future debt service payments. The net increase in fund balance after transfers in nonmajor governmental funds was $81,000. ^ Proprietary Funds The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Net assets in the proprietary funds decreased by $1,205,000 during the fiscal year. Depreciation, a noncash expense that is not budgeted or recovered through user charges, significantly contributed to the decrease in net assets. The water and sewer incremental rate adjustments, impacting the Utility Fund, are just keeping up with the rise in operating expenses. The Stormwater Fund is being subsidized by the gas tax, as the $4 per ERU rate is only partially, approximately one-third, covering the operating expenses of that program. An anticipated 25% programmed rate increase in fiscal year 2007 in the Sanitation Fund is expected to cover increased operating costs for fuel and renegotiated hauler charges. Even with these decreases, unrestricted net assets in the Enterprise Funds amounted to $6,208,000 at the end of fiscal year 2006. General Fund Budgetary Highlights The City revised its General Fund budget during the year for additional appropriations necessary to ensure that the actual charges would not exceed appropriations for the respective programs. The difference between the original expenditure budget and the final amended budget was $426,000. Items encumbered for $201,000, but not spent by the end of 2005 were added to the fiscal year 2006 budget. The budget was amended to add $94,000 to the streets division budget for the addition of some pedestrian paths. Funding of $45,000 was included for a consultant to assist with Community Character guidelines. An additional $58,000 was added to the legal division for various settlements related to employment matters. vii I"" ~, CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) Although the City budgeted a decrease in fund balance of $323,000, the fund balance actually increased by $891,000. This was due to positive variances in revenues of $536,000 and expenditures of $680,000. An overall positive variance of $1,213,000 was attributed to conservative budgeting for both revenues and expenditures. In addition to conservative budgeting, the expenditure variance of $680,000 was partially a consequence of encumbered expenditures at fiscal year end of $176,000 that were rebudgeted in fiscal year 2007, but the corresponding budget was not liquidated in fiscal year 2006. Capital Assets As reflected in the schedule of capital assets found below, the City's investment in capital assets for its 1. governmental and business-type activities as of September 30, 2006, totaled $78,690,000 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, utility infrastructure, roads, bike paths and sidewalks. Major capital asset events during the fiscal year include: *' • Retroactive reporting of governmental infrastructure, including roadways and sidewalks, and the underlying land value, in accordance with GASB Statement No. 34, added $32.4 million (net of accumulated depreciation) to the City's governmental capital assets. • Approximately $2.3 million (net of accumulated depreciation) was added to business-type capital assets for storm sewers and related drainage infrastructure originally considered governmental #. activity infrastructure and therefore, not previously accounted for in the City's financial records until implementation of GASB Statement No. 34. Further explanation is described in Note 2 to these financial statements on page 19. City of Atlantic Beach's Capital Assets (Net of Depreciation) (In Thousands) ~- Governmental Business-type Activities Activities Totals 2006 2005 2006 2005 2006 2005 Land $9,844 $1,605 $771 $771 $10,615 $2,376 Building and Improvements 30,909 6,511 35,124 33,945 66,033 40,456 Equipment 1,110 885 579 432 1,689 1,317 Construction in Progress 230 240 123 644 353 884 Total $42,093 $9,241 $36,597 $35,792 $78,690 $45,033 Additional information on the City of Atlantic Beach's capital assets can be found in Note 7 on pages 22- 24 of this report. viii CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Continued) Long-term Debt At the end of the 2006 fiscal year, the City of Atlantic Beach had total bonded debt outstanding of $19,836,000. This amount was comprised of bonds secured solely by specified revenue sources (i.e., revenue bonds). A detailed listing of the City's debt can be found in the table below: 4"" City of Atlantic Beach's Outstanding Debt Revenue Bonds (In Thousands) Utility System Revenue Bonds, Series 2004 Utility System Revenue Bonds, Series 1996 SunTrust Revenue Refunding Bonds, Series 1999 Total Governmental Business-type Activities Activities Totals $0 0 485 $17,453 $17,453 1,301 1,301 597 1,082 $485 $19,351 $19,836 The City has been able to pay for ongoing capital projects related to governmental activities since borrowing funds in 1989 (refunded in 1999 to take advantage reduced interest rates). Therefore, it has a high capacity for additional debt, if needed. The City's scheduled debt outstanding decreased by $715,000 (3.5%) during the current fiscal year. This decrease was due to loan repayments. The Utility System Revenue Refunding Bonds, Series 2004, and the Utility System Revenue Bonds, Series 1996, carry an insured "Aaa" rating from Moody's Investor Services. Additional information on the City's long-term debt can be found in Note 8 on pages 24-25 of this report. Economic Factors ^ Taxable property values in the City of Atlantic Beach continue to grow. However, the housing ~', market and proposed property tax reform legislation could have an impact on this critical source of revenues to the City. ^ The City's utility service jurisdiction had a decline of 141 accounts or 1.7% during the current year. Although the number of accounts went down over the year, the actual volume of water sold '" increased by 1.2%. Part of the decline is attributed to a few mobile home parks being emptied for new development. ~. ^ The City's rate of return on investments in pooled cash rose to 5.39% for the year, up from only 3.20% in the previous year. This represents a 68% increase in rate of return from the State Board Administration. ^ New environmental regulations, Total Maximum Daily Load (TMDL), that limit the amount of nitrogen discharged into the St. John's River from the City's wastewater treatment plants, will require a major investment of resources to comply and the transfer of costs to the water and sewer customers through higher rates. The specific requirements and associated costs are still being studied. tx CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS (Concluded) Budget Highlights ^ The City did not raise the ad valorem millage rate for the 2006/2007 budget year. A rate of 2.9974 mils was maintained, as in the prior year. ^ Water and sewer service rates were increased 3% to keep up with the rising cost of operations. ^ A 16% rate increase in sanitation revenues was budgeted to cover increased costs of the waste hauler, due to fuel and expiration of the current contract. More current information indicates that rates will increase by 25%. Requests for Information The financial report is designed to provide a general overview of the City of Atlantic Beach's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Atlantic Beach, Finance Director, 800 Seminole Road, Atlantic Beach, Florida, 32233. ~/~ ~ / ~ ~ l ~ (~ rcr ~cG~ im Hanso Nelson Van Liere, CPA City M ager Finance Director x BASIC FINANCIAL STATEMENTS These basic financial statements contain Government-wide Financial Statements, Fund Financial Statements and Notes to Financial Statements. r CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 Governmental Business-Type Totals Activities Activities 2006 2005 Assets Equity in Pooled Cash and Cash Equivalents $ 6,703,886 $ 5,132,957 $ 11,836,843 $ 11,480,371 Receivables, Net 2 (,450 504,705 526,155 655,795 ~ Due from Other Governments 1,1 l 3,691 6,497 1, l 20,188 984,654 Inventories 29,231 45,100 74,331 37,449 Special Assessments -Current 2,816 31,503 34,319 38,463 Notes Receivable -Current 760 28,766 29,526 30,517 r Restricted Assets: Equity in Pooled Cash and Cash Equivalents 0 2,227,854 2,227,854 2,214,247 Capital Assets: Land 9,843,717 771,345 10,615,062 2,376,681 Buildings 4,130,312 4,335,149 8,465,461 8,454,227 Improvements Other Than Buildings 37,031,184 55,504;679 92,535,863 52,394,680 Equipment 3,0 (5,495 1,632,089 4,647,584 3,999,992 ~' Accumulated Depreciation (12,157,490) (25,769,940) (37,927,430) (23,077,692) Construction in Progress 230,289 123,235 353,524 884,822 Prepaid Items 7,520 0 7,520 7,520 Special Assessments -Noncurrent 0 65,290 65,290 121,013 Notes Receivable -Noncurrent 6,840 194,278 201,118 216,344 Other Noncurrent Assets 0 18,800 18,800 18,800 Unamortized Loan Costs 0 263,592 263,592 279,189 Total Assets 49,979,701 45,115,899 95,095,600 61,117,072 1; Liabilities Accounts Payable and Other Current Liabilities 354,067 287,873 641,940 834,583 Due to Other Governments 0 5,467 5,467 5,568 Deferred Revenue 37,676 115,891 153,567 191,979 Deposits 1,200 0 1,200 1,750 Compensated Absences -Current 350,000 108,000 458,000 370,000 ~ Accrued Interest Payable 6,814 0 6,814 7,516 Payable from Restricted Assets: Current Maturities of Bonds Payable 0 785,005 785,005 767,150 Accrued Interest Payable 0 432,296 432,296 451,849 ~ Customer Deposits 0 536,040 536,040 535,365 Noncurrent Liabilities: Due Within One Year 44,344 0 44,344 50,066 Due in More Than One Year 441,009 18,566,075 19,007,084 19,734,102 Compensated Absences 189,603 70,138 259,741 270,910 Total Liabilities 1,424,713 20,906,785 22,331,498 23,220,838 Net Assets invested in Capital Assets, Net of Related Debt 41,608,154 17,509,069 59,1(7,223 24,481,391 Restricted for: i Renewal and Replacement 0 500,000 500,000 500,000 Debt Service 77,265 0 77,265 76,101 Road and Street Expenditures 321,384 255,368 576,752 844,139 Tourism and Recreation 192,395 0 192,395 162,376 Tree Replacement 20,913 0 20,913 30,978 Public Safety 7,636 0 7,636 16,480 Police Training 6,982 0 6,982 8,422 Capital Projects 1,249,976 0 1,249,976 1,067,575 Unrestricted 5,070,283 5,944,677 11,014,960 10,708,772 Total Net Assets $ 48,554,988 $ 24,209,114 $ 72,764,102 $ 37,896,234 See accompanying notes. 1 1.NQ ~+V OW ~5 MCI Q V W ~ O H H W ~.7 H W d F O~ v O O N O M W W oW N (/~ M A aW aw a W A H A w! 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N ¢~" ~ ~ ~ C ~ ~ ~ ~ d ~ . ~ U ~ c . a u ~ y C ~¢ Q ~ ~ o > ~'.O N> V Y Q ~ d ~ ~, e i , ~ y ~ W tC C Np , ~ y y ~ a° 7 ~ Fa ~ ~ ~ ~ { o C7 C 0. , o .S a 7 H W ~~ c F- e a F '~ 3 r ~ CITY OF ATLANTIC BEACH, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 Assets Equity in Pooled Cash and Cash Equivalents Receivables, Net Due from Other Funds Due from Other Governments Inventories Special Assessment Receivable -Current Notes Receivable -Current Prepaid Items Notes Receivable -Noncurrent Total Assets 2006 Nonmajor Totals Governmental Governmental 2005 General Funds Funds Totals $ 5,019,719 $ 1,684,167 $ 6,703,886 $ 5,875,099 21,450 0 21,450 74,511 116,286 0 116,286 69,776 754,390 359,301 1,113,69 t 984,654 29,231 0 29,231 13,470 2,816 0 2,816 3,313 760 0 760 760 7,520 0 7,520 7,520 6,840 0 6,840 7,600 5,959,012 2,043,468 8,002,480 7,036,703 Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Deposits Deferred Revenue Total Liabilities Fund Balances Reserved for: Debt Service Inventories Prepaids Unreserved, Reported in: General Fund Special Revenue Funds Total Fund Balances Total Liabilities and Fund Balances 303,436 50,631 354,067 364,661 0 116,286 116,286 69,775 1,200 0 1,200 1,750 37,676 0 37,676 78,585 342,312 166,917 509,229 514,771 0 77,265 77,265 76,101 29,231 0 29,231 13,470 7,520 0 7,520 7,520 5,579,949 0 5,579,949 4,705,045 0 1,799,286 1,799,286 1,719,796 5,616,700 1,876,551 7,493,251 6,521,932 $ 5,959,012 $ 2,043,468 $ 8,002,480 $ 7,036,703 See accompanying notes. 3 CITY OF ATLANTIC BEACH, FLORIDA RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 Total Fund Balances of Governmental Funds Amounts Reported for Governmental Activities in the Statement of Net Assets are Different Because: Capital assets used in governmental activities are not financial resources, and therefore are not reported in the funds: Total Capital Assets (Less Accumulated Depreciation) Long-term liabilities are not due and payable in the current period, and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in the governmental funds, but rather is recognized as an expenditure when due. All liabilities, both current and long-term, are reported in the statement of net assets. Long-term liabilities at year end consist of: Revenue Bonds Payable Compensated Absences Accrued Interest Payable Total Net Assets of Governmental Activities 2006 $ 7,493,251 $ 6,521,932 $ 54,250,996 $ 12,560,653 (12,157,489) (3,320,008) 42,093,507 9,240,645 485,353 535,419 539,603 488,085 6,814 7,516 (1,031,770) $ 48,554,988 2005 (1,031,020) $ 14,731,557 "9 See accompanying notes. 4 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, "` WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 Revenues Taxes Licenses and Permits State-shared Revenues Other Intergovernmental Revenues Charges for Services Fines and Forfeitures Interest Income Miscellaneous Revenues Interfund Charges Total Revenues Expenditures Current: General Government Public Safety Transportation Parks and Recreation Debt Service: Principal Interest and Other Capital Outlay (Total Expenditures) Excess of Revenues Over Expenditures Other Financing Sources (Uses) 2006 Nonmajor Totals Governmental Governmental 2005 General Funds Funds Totals $ 5,247,638 $ 1,356,441 $ 6,604,079 $ 5,913,036 455,278 0 455,278 410,434 1,964,668 0 1,964,668 1,877,649 578,334 329,849 908,183 977,257 20,531 0 20,531 17,889 126,439 0 126,439 101,664 242,518 71,090 313,608 170,265 55,975 140 56,115 204,639 1,324,156 0 1,324,156 1,194,535 10,015,537 1,757,520 11,773,057 10,867,368 2,414,267 118,982 2,533,249 2,322,065 4,325,290 126,708 4,451,998 4,334,938 1,335,453 274,121 1,609,574 1,257,933 990,675 31,895 1,022,570 918,228 0 50,066 50,066 48,950 0 21,439 21,439 23,480 528,971 798,287 1,327,258 1,397,534 (9,594,656) (1,421,498) (11,016,154) (10,303,128) 420,881 336,022 756,903 564,240 Transfers in 463,709 70,000 533,709 806,319 Transfers (out) 0 (325,368) (325,368) (2,457,507) Sale of General Fixed Assets 6,075 0 6,075 8,055 Total Other Financing (Uses) 469,784 (255,368) 214,416 (1,643,133) Net Change. in Fund Balances 890,665 80,654 971,319 (1,078,893) Fund Balances, Beginning of Year 4,726,035 1,795,897 6,521,932 7,600,825 Fund Balances, End of Year $ 5,616,700 $ 1,876,551 $ 7,493,251 $ 6,521,932 See accompanying notes. 5 CITY OF ATLANTIC BEACH, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 Net Change in Fund Balances -Total Governmental Funds Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Governmental funds report capital purchases as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives and reported as depreciation expense: Expenditures for Capital Assets (Less Current Year Depreciation) Certain revenues related to the acquisition of capital assets are not reported in governmental funds because they do not represent current financial resources, however, they are reported as capital contributions in the statement of activities. Certain nonexchange revenues reported in the statement of activities. are not considered current financial resources, and therefore are not reported as revenue in the govemmental funds. Certain nonexchange revenues reported in the governmental funds are not reported in the statement of activities due to the revenues being earned in prior years. Repayment oflong-term debt principal is an expenditure in the govemmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Some expenses revenues reported in [he statement of activities do not require the use of or provide current financial resources, and therefore are not reported as expenditures in governmental funds: Debt Interest Expense Compensated Absences Transfer of Capital Assets Change in Net Assets -Governmental Activities 2006 $ 971,319 2005 $ (1,078,893) $ 1,327,258 $ 1,397,534 (952,649) (533,063) 374,609 58,889 0 0 50,066 864,471 0 183,959 (49,980) 48,950 702 665 (51,518) (50,769) 2,434 (130,876) (48,382) (180,980) $ 1,406,501 $ (212,473) See accompanying notes. 6 "~ 3 f CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 Assets Current Assets: Equity in Pooled Cash and Cash Equivalents Accounts Receivable, Net Inventories Due from Other Governments Special Assessments -Current Notes Receivable -Current Restricted Assets: Equity in Pooled Cash and Cash Equivalents Capital Assets: Land Buildings Improvements Other Than Buildings Equipment (Accumulated Depreciation) Construction in Progress Special Assessments -Noncurrent Notes Receivable -Noncurrent Other Noncurrent Assets Unamortized Loan Costs Total Assets Liabilities Current Liabilities Payable from Current Assets: Accounts Payable and Accrued Liabilities Due to Other Governments Deferred Revenue Compensated Absences -Current Curcent Liabilities Payable from Restricted Assets: Current Maturities of Bonds Payable Accrued Interest Payable Customer Deposits Noncurrent Liabilities: Due in More Than One Year Compensated Absences -Noncurrent Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted for Renewal and Replacement Restricted for Road and Street Expenditures Unrestricted Total Net Assets 2006 Business-Type Activities -Enterprise Fuads 2005 Utility Stormwater Sanitation Totals Totals $ 2,002,462 $ 2,650,645 $ 479,850 $ 5,132,957 $ 5,605,272 429,889 16,389 58,427 504,705 581,284 45,100 0 0 45,100 23,979 6,497 0 0 6,497 0 31,503 0 0 31,503 35,150 28,766 0 0 28,766 29,757 2,070,175 157,679 0 2,227,854 2,214,247 749,499 21,846 0 771,345 771,345 4,335,149 0 0 4,335,149 4,332,715 44,200,100 ! 1,304,579 0 55,504,679 48,384,050 1,352,878 253,482 25,729 1,632,089 1,409,776 (20,905,589) (4,848,920) (15,43() (25,769,940) (19,750,206) 39,646 83,589 0 123,235 644,385 65,290 0 0 65,290 121,013 194,278 0 0 194,278 208,744 l 8,800 0 0 18,800 18,800 227,351 36,241 0 263,592 279, l 89 34,891,794 9,675,530 548,575 45,115,899 44,909,500 176,414 19,358 92,101 287,873 469,921 5,467 0 0 5,467 5,568 60,649 i 1,936 43,306 115,891 113,394 108,000 0 0 108,000 70,000 682,951 102,054 0 785,005 767,150 376,671 55,625 0 432,296 451,849 536,040 0 0 536,040 535,365 16,046,374 70,138 2,519,701 0 0 0 18,566,075 70,138 19,248,749 82,825 18,062,704 2,708,674 135,407 20,906,785 21,744,821 13,042,358 4,192,821 10,298 17,245,477 15,776,165 500,000 0 0 500,000 500,000 0 255,368 0 255,368 410,174 3,286,732 2,518,667 402,870 6,208,269 6,478,340 $ 16,829,090 $ 6,966,856 $ 413,168 $ 24,209,114 $ 23,164,679 See accompanying notes. 7 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30,2005 2006 Operating Revenues Charges for Services: Customer Charges Miscellaneous Revenues Total Operating Revenues Operating Expenses Personal Services Contractual Services Supplies Repairs and Maintenance Heat, Light and Power Depreciation Intergovemmental Charges Other Expenses (Total Operating Expenses) Operating (Loss) Income Nonoperating Revenues (Expenses) Connection Charges Intergovemmental Revenue Interest Income Interest Expense Gain on Disposal of Fixed Assets Amortization of Loan Costs Total Nonoperating (Expenses) Revenues (Loss) Income Before Contributions and Transfers Capital Contributions and Grants and Transfers Capital Contributions and Grants Transfers in Transfers (out) Total Capital Contributions and Grants and Transfers Change in Net Assets Net Assets, Beginning of Year Adjustment to Beginning Net Assets Net Assets, Beginning of Year (As Restated) Net Assets, End of Year tsusmess-type Activities - trnterprise Funds 2005 Utility Stormwater Sanitation Totals Totals $ 6,164,141 $ 377,566 $ 1,285,366 $ 7,827,073 $ 7,640,259 59,667 100 110 59,877 42,000 6,223,808 377,666 1,285,476 7,886,950 7,682,259 1,519,868 230,970 4,722 1,755,560 1,640,229 856,407 126,450 !,037,875 2,020,732 1,906,629 293,282 37,252 5,000 335,534 323,439 150,716 23,064 0 173,780 159,039 553,934 0 0 553,934 501,396 1,893,858 337,390 2,180 2,233,428 2,028,443 909,956 172,346 140,5 70 l ,222,8 72 1,097,752 280,811 24,620 0 305,431 277,803 (6,458,832) (952,092) (1,190,347) (8,601,271) (7,934,730) (235,024) (574,426) 95,129 (714,321) (252,471) 20,055 0 0 20,055 37,570 81,736 0 0 81,736 6,620 159,959 (26,344 23,909 310,212 180,034 (798,991) (125,433) 0 (924,424) (947,984) 2,340 0 0 2,340 0 (15,289) (2,384) 0 (17,673) (15,793) (550,190) (1,473) 23,909 (527,754) (739,548) (785,214) (575,899) 119,038 (1,242,075) (992,019) 243,374 0 0 243,374 1,820,549 2,434 255,368 0 257,802 2,457,369 (231,856) 0 (231,853) (463,709) (675,305) 13,952 255,368 (231,853) 37,467 3,602,613 {771,262) (320,531) (112,815) (1,204,608) 2,610,594 17,600,352 5,038,344 525,983 23,164,b79 20,554,085 0 2,249,043 0 2,249,043 0 17,600,352 7,287,387 525,983 25,413,722 20,554,085 $ 16,829,090 $ 6,966,856 $ 413,168 $ 24,209,114 $ 23,164,679 See accompanying notes. S '"~! '" s CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 Cash Flows from Operating Activities Cash Received from Customers Cash Paid to Suppliers Cash Paid to Employees Cash Paid for Interfund Services Net Cash Provided by (Used in) Operating Activities Cash Flows from Noncapital Financing Activities Connection Charges Transfers in Transfers (out) Net Cash Provided by (Used in) Noncapital Financing Activities Capital and Related Financing Activities Intergovernmental Revenues Collections on Notes Receivable Collections on Special Assessments Capital Contributions Proceeds from Sale of Fixed Assets Fixed Asset Additions Principal Payments on Bonds Payable Interest Paid Net Cash Provided by (Used in) Capital and Related Financing Activities Cash Flows from Investing Activities Interest Received Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year 2006 Business-Type Activities -Enterprise Funds 2005 $ 6,292,289 $ 383,571 $ 1,305,766 $ 7,981,626 $ 7,697,531 (2,319,809) (200,988) (1,046,420) (3,567,217) (3,422,155) (1,494,555) (230,970) (4,722) (1,730,247) (1,619,941) (909,956) (172,346) (140,570) (1,222,872) (1,097,752) 1,567,969 (220,733) 114,054 1,461,290 1,557,683 20,055 0 0 20,055 37,570 0 255,368 0 255,368 2,457,369 (231,856) 0 (231,853) (463,709) (675,305) (211,801) 255,368 (231,853) (188,286) 1,819,634 0 20,850 59,370 243,374 2,340 (49 I ,489) (668,999) (727,969) (1,562,523) 159,959 (46,396) 0 0 0 45,442 0 0 20,850 (54,315) 0 0 59,370 40,706 0 0 243,374 371,110 0 0 2,340 0 (263,422) (3,400) (758,311) (1,060,097) (98,559) 0 (767,558) (510,000) (114,020) 0 (841,989) (1,142,350) (476,001) (3,400) (2,041,924) (2,309,504) 180,039 (315,022) (97,290) (458,708) 1,247,852 3,123,346 577,140 7,819,519 6,571,667 $ 4,072,637 $ 2,808,324 $ 479,850 $ 7,360,811 $ 7,819,519 See accompanying notes. 9 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS ~ PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARAT IVE TOTALS FOR THE YEAR ENDED SEPTEM BER 30, 2005 (Concluded) 2006 y Business-Type Activities -Enterprise Funds 2005 Utility Stormwater Sanitation Totals Totals Reconciliation of Operatine Income to Net Cash Provided by fused in) Operating Activities Operating Income (Loss) $ (235,024) $ (574,426) $ 95,129 $ (714,321) $ (252,473) Adjustments to Reconcile Operating Income to Net Cash Provided by (Used in) Operating Activities: Depreciation 1,893,858 337,390 2,180 2,233,428 2,028,443 Bad Debt Expense 25,588 (106) (128) 25,354 21,556 Change in Assets and Liabilities: ~ Accounts Receivable 67,994 5,442 18,178 91,614 (11,634) ; Inventory (21,121) 0 0 (2 1, 121) (6,917) Compensated Absences 25,313 0 0 25,313 0 Accounts Payable and Accrued Liabilities (189,126) 10,504 (3,527) (182,149) (250,458) Customer Deposits 675 0 0 675 29,506 Deferred Revenue (188) 463 2,222 2,497 (340) Net Cash Provided by (Used in) Operating Activities $ 1,567,969 $ (220,733) $ 114,054 $ 1,461,290 $ !,557,683 Reconciliation of Cash and Cash Eauivalents to Balance Sheet Equity in Pooled Cash and Cash Equivalents in Current Assets $ 2,002,462 $ 2,650,645 $ 479,850 $ 5,132,957 $ 5,605,272 Restricted Equity in Pooled Cash and Cash Equivalents 2,070,175 157,679 0 2,227,854 2,214,247 Total Cash and Cash Equivalents $ 4,072,637 $ 2,808,324 $ 479,850 $ 7,360,811 $ 7,819,519 Noncash Activi Noncash Transfers $ 2,434 $ 0 $ 0 $ 2,434 $ 130,876 Noncash Intergovernmental Revenue $ 75,240 $ 0 $ 0 $ 75,240 $ 0 Proceeds from Issuance of Refunding Bonds $ 0 $ 0 $ 0 $ 0 $ 19,500,000 Defeasance of Bonds $ 0 $ 0 $ 0 $ 0 $ (t9,247,074) "~ Issuance Costs of Refunding Bonds $ 0 $ 0 $ 0 $ 0 $ (252,926) '"~ See accompanying notes. 10 ^I CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 ~ Assets Cash and Cash Equivalents with Trustee Investments with Trustee Total Assets Liabilities Accounts Payable and Accrued Liabilities Total Liabilities Net Assets Held in Trust for Pension Benefits Total Net Assets See accompanying notes. 11 a. Pension Trust Funds 2006 2005 $ 41,498 $ 33,177 12,853,203 11,546,415 12,894,701 11,579,592 3,965 23,698 3,965 23,698 12,890,736 11,555,894 $ 12,890,736 $ 11,555,894 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 Additions Contributions: Employer Employees State of Florida Total Contributions Net Increase in Fair Value of Investments Interest and Dividends Total Additions Deductions Refunds of Contributions Benefits Investment Expenses Administrative Expenses Total Deductions Net Increase Net Assets, Beginning of Year Net Assets, End of Year Pension Trust Funds 2006 2005 $ 741,383 131,232 108,819 981,434 912,393 223,494 2,117,321 $ 673,448 105,721 108,818 887,987 923,131 95,425 1,906,543 13,164 9,532 689,121 597,490 49,473 96,967 30,721 0 782,479 703,989 1,334,842 1,202,554 11,555,894 10,353,340 $ 12,890,736 $ 11,555,894 See accompanying notes. 12 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 Note I - Summary of Significant Accounting Policies The accounting policies of the City of Atlantic Beach, Florida, (the City), conform to accounting principles generally accepted in the United States of America as applicable to governments. The following is a summary of the more significant policies used in the preparation of these financial statements. Reporting Entity ~ The City was incorporated in 1957, under a charter in accordance with the laws of the State of Florida, Florida Statutes Section 57-1126. The City operates under a form of government which comprises an elected City Commission (four Commissioners and a Mayor- Commissioner) and provides, under the administration of an appointed City Manager, the following services: public safety, public works (streets and infrastructure), recreation, t' sanitation, stormwater, planning, zoning, water and sewer, and general government services. As outlined in Governmental Accounting Standards Board (GASB) Statement No. 14, The r Reporting Entity, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units on Amendment to GASB Statement No. 14, the financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations whose exclusions would cause the reporting entity's financial statements to be misleading or incomplete. Each potential component unit is ~., individually evaluated using specific criteria outlined in GASB Statement No. 14, to determine whether the entity is: (1) part of the primary government; (2) a component unit which should be included in the reporting entity (blended or discreetly presented); or (3) an organization ~ which should be excluded from the reporting entity entirely. The principal criteria for classifying a potential component unit include the legal separateness of the organization, the financial accountability of the primary government for the potential component unit resulting from either the primary government's ability to impose its will on the potential component unit, or the potential component unit's fiscal dependency on the primary government. Based upon the application of these criteria, the City has no component units. ~ Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the City. For the most ~,. part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or activity. Indirect costs are included in the program expense reported for individual functions and activities. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, ~"° or privileges provided by a given function or activity; and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity. Taxes and other items not properly included among program revenues are reported instead as general revenues. 13 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) r Note 1 - Summary of Significant Accounting Policies (Continued) Government-wide and Fund Financial Statements (Concluded) Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule the effect of interfund activity has been eliminated from the government- wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's water and sewer function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Taxes, intergovernmental revenue, licenses and permits, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. "' 14 f ^• CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Concluded) Fund Financial Statements (Concluded) The City reports the following major governmental fund: ^ The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The City reports the following major proprietary funds: ^ The Utility Fund accounts for the activities of the City's water and sewer distribution systems. ^ The Sanitation Fund accounts for the activities of the City's sanitation system. ^ The Stormwater Fund accounts for the activities of the City's stormwater system. Additionally, the City reports the following fund types: ^ Special Revenue Funds-The special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. ^ Debt Service Funds-The debt service fund is used to account for the accumulation of resources for, and the payment of, long-term general obligation debt principal, interest and related costs other than obligations payable from the operations of the proprietary funds. ^ Capital Projects Funds-'The capital projects funds are used to account for the financial resources to be used for the acquisition or construction of major capital facilities and improvement projects (other than those financed by proprietary funds or special revenue funds). ^ Pension Trust Funds-These funds account for the activities of the Employees Retirement System, which accumulates resources for pension benefit payments to qualified police officers and general employees. Proprietary Funds Private sector standards of accounting and financial reporting issued prior to December 1, ~. 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of GASB. Governments also have the option of following subsequent private sector guidance for ~,,, their business-type activities and enterprise funds, subject to this same limitation. The City i, has elected not to follow subsequent private sector guidance. 15 CITY OF ATLANTIC BEACH, FLORIDA ,,,,~ NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) _ Note 1 - Summary of Significant Accounting Policies (Continued) Proprietary Funds (Concluded) Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Budgets General governmental revenue and expenditures accounted for in budgetary funds are controlled by a budgetary accounting system in accordance with various legal requirements which govern the City's operations. Budgets are monitored at varying levels of classification detail; however, expenditures cannot legally exceed total appropriations at the individual fund level. The City uses encumbrance accounting. All appropriations lapse at year end. Unexpended items which are encumbered at year end are reappropriated in the subsequent year. Encumbrances of governmental funds at September 30, 2006, were $608,554. Budgets are adopted for all governmental funds (general, special revenue, debt service and capital projects). The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that increase the total expenditures of any department or fund must be approved by the City Commission. All necessary supplemental appropriations are adopted by the City Commission and are included in the reported budgetary data. The budget presented in the accompanying required supplemental information is prepared in conformity with accounting principles generally accepted in the United States of America. Cash and Investments Except where prohibited, cash resources of the individual funds are combined to form a pool of cash and investments. Investments in the pooled cash fund consist primarily of cash invested with the State Board of Administration. Interest income earned on the pooled cash and investments is distributed to the appropriate funds based on the average monthly balance of investments in each fund. Investments are valued at fair market value (see note 3). For the purposes of the statement of cash flows, the City's proprietary funds consider cash and cash equivalents to include cash and investments with an original maturity of three months or less. 16 -~s u CITY OF ATLANTIC BEACH, FLORIDA '~ NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Receivables Receivables are recorded at their net realizable value. The allowance for uncollectible accounts and assessments at September 30, 2006, in the enterprise funds is $42,731. Interfund Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Inventories !~ Inventories consisting principally of expendable materials, supplies and fuel are determined by physical count at the City's year end on an annual basis and are valued at the lower of cost (first-in, first-out) or market. On the balance sheet -governmental funds, the inventory balance reported is offset by a fund balance reserve which indicates that it does not constitute "available spendable resources" even though it is a component of net current assets. The cost of governmental fund-type inventories is recorded as an expenditure when consumed. Restricted Assets Certain enterprise fund assets are required to be segregated from other current assets due to various bond indenture agreements and City ordinances. These assets are legally restricted for specific purposes, such as debt service, new construction, and renewals and replacements. Capital Assets ~"" Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, drainage improvements, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Property, plant, and equipment with initial, individual costs that equal or exceed $1,000 and estimated useful lives of over one year are recorded as capital assets.. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. ~„ Donated capital assets are recorded at estimated fair market value at the date of donation. The City has implemented the provision of GASB Statement No. 34. In this process, infrastructure assets are being accounted for using different methods. For governmental activities, the cost or estimated cost of roads, sidewalks and drainage are presented currently and prospectively. After a complete inventory, valuation, and determination of cost, or estimated cost of donated roads, sidewalks and drainage, infrastructure was added to the current and prospective values to arrive at total estimated cost during the fiscal year ended September 30, 2006. For business-type activities, infrastructure assets have been capitalized at cost. Utility improvements are being depreciated over their useful lives. 17 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 1 - Summary of Significant Accounting Policies (Continued) Capital Assets (Concluded) Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and Improvements 10 - 40 Improvements Other Than Buildings 10 - 50 Machinery and Equipment 3 - 40 Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Compensated Absences Accumulated unpaid vacation and sick pay are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported. The computed liability is in accordance with GASB Statement No. 16, Accounting for Compensated Absences. Revenue Recognition Utility revenues are reported on the accrual basis in the accompanying financial statements. Restricted grant revenues, which are received but not expended, are recorded as deferred revenues. Grant revenues receivable are recorded when reimbursable expenditures on those grants have been incurred but not reimbursed. 18 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 1 - Summary of Significant Accounting Policies (Concluded) Property Taxes The assessment of all properties and the collection of all property taxes are made through the Property Appraiser and Tax Collector of the City of Jacksonville, Florida. General property taxes are recorded as received, in cash, which approximates taxes levied less discounts for the current fiscal year. Taxes are levied on November 1 of each year. All taxes become delinquent on April 1 of the ~"" following year. Discounts are allowed for early payment. On or prior to June 1, interest- . bearing certificates are sold for all uncollected real property taxes. Unsold certificates are held by the City of Jacksonville, Florida. Interfund Transactions During the course of normal operations, the City has various transactions between funds to construct assets and comply with local ordinances and other legal restrictions. These transactions are reflected as transfers. In addition, certain transfers have been made between systems and accounts of the utility enterprise fund as required by bond covenants. Prior Period Information The financial statements include certain prior year summarized comparative information in total. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City's financial statements for the year ended September 30, 2005, from which the summarized information was derived. Note 2 - Prior Period Adiustment Pursuant to GASB Statement No. 34, the City was required to record its historical ~ infrastructure assets in the year ended September 30, 2006. Additionally, the City had the option to use the depreciation method or the alternative (maintenance of service condition) method in relationship to certain long-lived infrastructure assets. The City has elected to use ~ the depreciation method for reporting infrastructure assets. The resulting adjustment to beginning net assets on the statement of activities was $34,665,975, consisting of $32,416,930 in governmental activities for roads and sidewalks and $2,249,043 in business-type activities related to stormwater infrastructure assets. Note 3 - Cash and Investments ~. The City maintains a cash and investment pool that is designed for use by all funds, except for those monies which are periodically transferred to the pension custodian. In addition, investments are separately held and individually accounted for by several of the City's funds where contractual arrangements and bond covenants provide for and require such arrangements. The deposits and investments of the pension trust funds which have been transferred to the pension custodian are held separately from those of other City funds and are required to be administered by an investment manager. At September 30, 2006, the carrying amount of cash on hand and on deposit with banks, including interest-bearing deposits was $173,516, and the related bank balance was $793,574. ~„ Monies which are placed on deposit with financial institutions in the form of demand deposit 19 !~" ~~ CITY OF ATLANTIC BEACH, FLORIDA .,~ NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 3 - Cash and Investments (Continued) accounts, time deposit accounts, and certificates of deposit are defined as public deposits. All of the City's public deposits are held in qualified public depositories pursuant to Florida Statutes, Chapter 280, "Florida Security for Public Deposits Act." Under the Act, all qualified public depositories are required to pledge eligible collateral having a market value equal to or greater than the average daily or monthly balance of all public deposits, times the depository's collateral pledged level. The pledging level may range from 50% to 125% depending upon the depository's financial condition and establishment period. All collateral must be deposited with an approved financial institution. Any losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral and, if necessary, assessments against other qualified public depositories of the same type as the depository in default. The City's investment practices are also governed by Florida Statutes, which allow the City to invest in certificates of deposit, money market certificates, obligations of the U.S. Treasury, its agencies and instrumentalities, repurchase and reverse repurchase agreements collateralized by U.S. securities, and the State Board of Administration. The pension trust funds are also authorized to invest in corporate bonds, preferred stocks, common stocks, and mutual funds. The total cash and cash equivalents and investment balances of the City at September 30, 2006, are comprised of the following items: Cash and Cash Equivalents Petty Cash on Hand $ 2,550 Cash in Banks (Including Repurchase Agreement) 170,966 State Board of Administration Investment Pool 13,932,679 Total Cash and Cash Equivalents 14,106,195 Less Cash and Cash Equivalents, Restricted, Including $41,498 of Cash and Cash Equivalents with Trustee (2,269,352) Total Cash and Cash Equivalents, Unrestricted 11.836.843 Pension Trust Investments Merrill Lynch Money Market $ 994 Merrill Lynch American Euro Pacific Growth 1,647,866 Merrill Lynch American Growth Fund 2,365,276 Merrill Lynch American Washington Mutual 2,394,716 Pimco Fund - Bond Mutual Fund 5,219,721 Baron Fund -Stock Mutual Fund 63b,427 Royce Fund -Pennsylvania Mutual Fund 588.203 Total Pension Trust Investment $ 12.853.203 Restricted cash and investments at September 30, 2006, in the enterprise funds follows: Customer Renewal and Deposits Realacement Debt Service Totals Enterprise Fund Utility Fund $ 536 040 $ 500 000 $ 1 034 135 $ 2.070 175 '"' Stormwater Fund $ 0 $ 0 $ 157,479 $ 157 679 20 ,,,~ A ~ CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 3 - Cash and Investments (Concluded) Credit Risk-The deposits and investments with state agencies (State Board of Administration) are not classified by credit risk since they are held by independent agencies. The City is a member of the Local Government Surplus Funds Trust Fund Investment Pool (the Pool) that is administered by the State Board of Administration of Florida (SBA). This pool is a " 2a-7 like" pool which has the characteristics of a money market fund. Therefore, the fair value of the City's position in the Pool is the same as the value of the Pool shares. The City's investment in the SBA Pool is not rated by a nationally recognized statistical rating ~, agency as of the date of these financial statements. Funds that have not been transferred to the Pool are placed in a money market fund. The Bank of America Repurchase Agreement is ~ invested in treasury funds and is not classified by credit risk since this is a mutual fund. There were no violations of the legal or contractual provisions for deposits and investments. It is the City's Police Officers' Retirement System and General Employees' Retirement System Pension Trust Fund's policy to limit its investment in corporate debt issues to those that meet or exceed a credit rating of "A" by Moody's or Standard & Poor's rating services, and no more than 10% (at cost) of the fixed income portfolio total value can be invested in the securities of ,1~' any single corporate issuer. At September 30, 2006, the City's retirement systems' fixed income security portfolio consisted of only mutual funds and other pooled investments, and therefore were not rated by a nationally recognized rating agency. Note 4 - Special Assessments During 1991, the City imposed a special assessment on residents in a certain area of the City known as "Section H" to recover a portion of the costs of water and wastewater improvements constructed by the City in that area. Assessments are payable in equal annual installments through 2011 plus interest at 5.35% (reduced from 8% in 1999). During 1993, the City imposed other special assessments on residents in certain areas of the ""` City known as "Ocean Grove Unit 2," "Dewees," and "Seminole" (shown below as Other Assessments) to recover the cost of water and wastewater improvements constructed by the City in those areas. Assessments are payable in equal monthly installments through 2007 plus ~" interest at 5.91 %. During 1998, the City imposed a special assessment on residents in a certain area of the City known as "Beach Avenue" to recover the costs of sewer improvements constructed by the City in that area. Assessments are payable in equal monthly installments through 2010 plus interest at 6.00%. Following is a summary of the outstanding balances at September 30, 2006: ~; 21 !r CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 4 - Special Assessments (Concluded) Beach Section H Avenue Other Assessment Assessments Assessments Totals Special Assessment Receivable, September 30, 2006 $ 86,778 $ 8,31 Z $ 4,519 $ 99,609 (Less Current Portion) (26,800) (3,000) (4,519) (34,319) Total Special Assessment Receivable - Noncurrent $ 59 978 $ 5,312 $ 0 $ 65 290 Note 5 - Receivables Receivables, net of the allowance for doubtful accounts at September 30, 2006, consists of the following: Less Total Allowance Accounts Accounts for Doubtful Receivable Fund Receivable Accounts Net General $ i 72,950 $ (151,500) $ 21,450 Utility 463,861 (33,972) 429,889 Stormwater 17,662 (1,273) 16,389 Sanitation 65.914 (7,487) 58,427 Total $ 720.387 $ (194.232) $ 526155 Included in accounts receivable are $201,559 of water and sewer revenues earned, but not billed as of September 30, 2006. Note 6 - Notes Receivable It is the City's policy to allow its water and sewer customers to pay connection fees over an extended period. Following is a summary of the outstanding balance at September 30, 2006: Notes Receivable, September 30, 2006 (Less Current Portion) Total Note Receivable -Noncurrent $ 230,644 (29,526) $ 201 118 Note 7 - Capital Assets Capital asset activity for the fiscal year ended September 30, 2006, is as follows: Governmental Activities Capital Assets Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Beginning Ending Balance Increases Decreases Balance $ 9,843,717 $ 0 $ 0 $ 9,843,717 240.437 889.573 899.721 230289 ]0.084.154 889.573 899.721 10,074.006 22 f '~ s "" x t ~ CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 7 - Capital Assets (Continued) >rw ~: Beginning Ending Governmental Activities (Concluded) Balance Increases Decreases Balance Capital Assets Being Depreciated: Buildings $ 4,121,512 $ 11,234 $ 2,434 $ 4,130,312 Improvements Other Than Buildings 36,155,980 886,752 11,548 37,031,184 Machinery and Equipment 2.582.738 538,021 105,264 3.015,495 Total Capital Assets Being Depreciated 42,860.230 1.436.007 119,246 44,176,991 Less Accumulated Depreciation for: Buildings 951,291 98,686 0 1,049,977 Improvements Other Than Buildings 8,637,198 569,400 4,440 9,202,158 Machinery and Equipment 1.698321 284.563 77529 1,905355 Total Accumulated Depreciation 11286,810 952,649 81.969 12,157.490 Total Capital Assets Being Depreciated, Net 31573,420 483.358 37277 32.019.501 Governmental Activities Capital Assets, Net $ 41 657 574 $ 1 372 ~ x_236.998 $ 42,093.507 Business-type Activities Capital Assets Not Being Depreciated: Land $ 771,345 $ 0 $ 0 $ 771,345 Construction in Progress 644,385 530,390 1.051540 123.235 Total Capital Assets Not Being Depreciated 1.415.730 530.390 1,051540 894,580 Capital Assets Being Depreciated: Buildings 4,332,715 2,434 0 4,335,149 Improvements Other Than Buildings 54,457,507 1,047,172 0 55,504,679 Machinery and Equipment 1.409.776 260.420 35.884 1.634312 Total Capital Assets Being Depreciated 60.199,998 1.310,026 35.884 61,474,140 Less Accumulated Depreciation for: Buildings 3,241,172 147,653 0 3,388,825 Improvements Other Than Buildings 19,355,457 1,972,329 0 21,327,786 Machinery and Equipment 977,990 113.446 35,884 1,055552 Total Accumulated Depreciation 23574.619 2233.428 35.884 25.772,163 Total Capital Assets Being Depreciated, Net 36.625,379 (923,402) 0 35,701,977 Business-type Activities Capital Assets, Ne[ $ 38,041,109 $ (393012) $ 1051,E $ 36596557 Depreciation expense was charged to functions/programs as follows: Governmental Activities General Governmental $ 125,253 Public Safety 184,883 Transportation 482,847 Parks and Recreation 159,666 Total Depreciation Expense -Governmental Activities $ 952,649 23 CITY OF ATLANTIC BEACH, FLORIDA ,,,,~ NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 7 - Capital Assets (Concluded) Business-type Activities Utility $ 1,893,858 Stormwater 337,390 Sanitation 2,180 Total Depreciation Expense -Business-type Activities 2.233.428 Note 8 - Long-term Debt Revenue bonds payable are comprised of the following: Utilities System Revenue Refunding Bonds, Series 2004, Payable in Annual Installments of Principal and Semiannual Installments of Interest Through October 1, 2025, Bearing Coupon Rates of 2.00% to 4.50%, Secured Solely by a Pledge of and Lien on Net Water and Sewer System Revenues and Certain Other Revenues as Defined in the Bond Ordinances $ 19,324,999 Utilities System Revenue Bonds, Series 1996, Payable in Annual Installments of Principal and Semiannual Installments of Interest Through October 1, 2025, Bearing Coupon Rates of 3.90% to 5.50%, Secured Solely by a Pledge of and Lien on Net Water and Sewer System Revenues and Certain Other Revenues as Defined in the Bond Ordinances 1,330,000 SunTrust Revenue Refunding Bonds, Series 1999, Payable in Annual Installments of Principal and Semiannual Installments of Interest at a Rate of 4.20%; the Note is Secured by the City's Utility Service Taxes 1,091,804 Total Revenue Bonds Payable 21,746,803 (Less Unamortized Discount) (224,761) (Less Unamortized Refunding Loss) (1,685,609) Total Long-term Debt, Net 19.836.433 The annual requirements to amortize all revenue bonds payable outstanding at September 30, 2006, are as follows: Year Ending Governmental Activities Long-term Debt Business-Type Activities Long-term Debt September 30, Principal Interest Total Principal Interest Total 2007 $ 53,213 $ 19,270 $ 72,483 $ 796,490 $ 804,509 $ 1,600.999 2008 53,930 17,046 70,976 832,386 777,882 1,610,268 2009 56,686 14,673 71,359 850,829 756,801 1,607,630 2010 59,304 12,262 71,566 874,102 732,854 1,606,956 2011 61,620 9,723 71,343 901,993 705,627 !,607,620 2012 - 2016 200,600 12,881 213,481 4,800,650 3,038,877 7,839,527 2017 - 2021 0 0 0 5,475,000 2,060,316 7,535,316 2022 - 2026 0 0 0 6,730,000 774,259 7,504,259 Total $ 485,353 $ 85,855 $ 571,208 $ 21,261,450 $ 9,651,125 $ 30,912,575 "*! 24' CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS i SEPTEMBER 30, 2006 (Continued) Note 8 - Long-term Debt (Concluded) Interest and amortization incurred during the year ended September 30, 2006, was $20,737 in the debt service fund and $924,424 in the enterprise funds. Of the amount incurred in the enterprise funds, $0 was capitalized. The City is also required to maintain certain debt service coverage ratios in accordance with bond resolutions. As of September 30, 2006, and during the year then ended, the City was in compliance with those ratios. The following is a summary of the changes in long-term debt of the City for the year ended September 30, 2006: Balance Balance Due October 1, September 30, Within 2005 Additions Reductions 2006 One Year Governmental Activities Revenue Bonds Payable Compensated Absences Total Governmental Activities - Long-term Liabilities Business-type Activities Revenue Bond Payable Less Deferred Amounts: For Issuance Discounts Loss on Bond Refunding Total Revenue Bonds Payable Compensated Absences Total Business-type Activities - Long-term Liabilities $ 535,419 $ 0 $ 50,066 $ 485,353 $ 44,344 488.085 448,057 396.539 539,603 350,000 $ 1,023,x(14 $ 448 057 $ 446 605 $ 124 956 $ 394 344 $ 22,029,009 $ 0 $ 767,559 $ 21,261,450 $ 785,005 237,972 0 13,211 224,761 13,2 ( i 1.775.136 0 89.527 1,685,609 89,527 20,015,901 0 664,821 19,351,080 682,267 152,825 133,551 108,240 178,136 108,000 *` Advanced Refunding The City issued $19,500,000 of Series 2004 Utilities System Revenue Refunding Bonds to refund a portion of the City's outstanding Series 1996 Utilities System Revenue Bonds. The refunded portion is considered to be defeased and the liability has been removed from the City's financial statements. The outstanding balance of the defeased Series 1996 Utilities System Revenue Bonds is $17,840,000 at September 30, 2006. Note 9 - Defined Benefit Pension Plans Plan Descriptions and Contribution Information The City maintains two separate single-employer pension plans, one for police officers and one for general employees, which cover substantially all full-time City employees. The pension plans do not issue separate stand-alone financial statements. Membership of each plan consists of the following at September 30, 2005, the date of the latest actuarial valuation: ~: 25 Note 9 - CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Defined Benefit Pension Plans (Continued) Plan Descriptions and Contribution Information (Concluded) Retirees and Beneficiaries Receiving Benefits Disabled Members and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to but Not Yet Receiving Benefits Active Plan Members Total ^ ^ General Employees' Retirement Plan General Employees Police 30 10 13 5 82 26 127 44 • Plan Description The General Employees' Retirement Plan (Plan) provides retirement, disability and death benefits to Plan members and their beneficiaries. The City Commission has the authority to establish and amend the benefit provisions of the Plan. • Contributions The City is required to contribute at an actuarially determined rate. At the beginning of the audit period, Plan members were required to contribute 3.0% of their annual covered salary. On May 7, 2006, the City Commission amended the contribution rate to 4.0% of Plan members' annual covered salary. On September 24, 2006, the City Commission again amended the contribution rate to 5.0% of Plan members' annual covered salary. Contribution requirements are established by City code, which may be amended by the City Commission. Police Retirement Plan • Plan Description The Police Retirement Plan (Plan) provides retirement, disability and death benefits to Plan members and their beneficiaries. The Plan is governed by the Policemen's Pension Board of Trustees, although the City Commission retains the authority to establish and amend the benefit provisions of the Plan. • Contributions Plan members are required to contribute 1.0% (4.815% for nonunion participants) of their annual covered salary. The City is required to contribute at actuarially determined rates, if State of Florida contributions are not sufficient. Per City Code, the City Commission may amend established contribution requirements. Annual Pension Costs and Net Pension Asset The City's annual pension cost and net pension asset to the General Employees' and Police Retirement Plans for the current year were as follows: 26 "t CITY OF ATLANTIC BEACH, FLORIDA ~"" NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 9 - Defined Benefit Pension Plans (Concluded) Annual Pension Costs and Net Pension Asset (Concluded) General Employees Police Totals Annual Required Contribution (ARC) $ 480,029 $ 350,161 $ 830,190 (Contributions Made) (480,029) (370,172) f 850,201) l~Tet Pension Obligation, End of Year $ 0 (20.011) (20.011) The City has funded the Police Retirement Plan in excess of the computed ARC for 2006 based upon the 2005 actuarial valuation. No pension asset has been recorded in the accompanying financial statements pending computation of the 2006 actuarial valuation. Other Pension Plan Information The annual required contributions for the current year were determined as part of the September 30, 2005, actuarial valuations for the General Employees' and Police Retirement Plans using the individual entry-age actuarial cost method. The actuarial assumptions include an 8.0% rate of return on investments and projected salary increases, which range from 5.5% to 8.5% for both plans. The assumptions did not include postretirement benefit increases. The actuarial value of assets was determined using market value and a funding value ~"' adjustment for both plans. The unfunded actuarial accrued liabilities are being amortized over remaining amortization periods of 5 to 30 years. Three-year trend information: Annual Percentage of Net Pension Fiscal Year Ended Pension Cost APC Asset/ ( September 30, (APC) Contributed (Liability) General Employees 2004 $ 381,518 100% $ 0 2005 464,893 100% 0 2006 480,029 100% 0 Police 2004 242,637 100% 0 2005 297,361 100% 0 (~ 2006 35fl,161 106% 20,011 Note 10 - Interfund Accounts Individual fund Interfund receivables and payables at September 30, 2006, consist of the following: Due From Due to Other Other Funds Funds General $ 116,286 $ 0 Nonmajor Governmental 0 116,286 27 ~'" CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Continued) Note 11 - Interfund Transfers Transfers of resources from a fund receiving revenue to the fund through which the resources "" are to be expended are recorded as transfers and are reported as other financing sources (uses) in the governmental funds and as transfers in (out) in the proprietary funds. Following is a summary of Interfund transfers for the year ended September 30, 2006: ~ Nonmajor Utility General Governmental Stormwater Total Fund Fund Funds Fund Transfers (Out) Nonmajor Govern- mental Funds $ 0 $ 0 $ 70,000 $ 255,368 $ 325,368 Utility Fund 0 231,856 0 231,856 Sanitation Fund 0 231,853 0 0 231,853 Govemmental Activities 2 434 0 0 0 2.434 Total Transfers in $ Z 434 $ 463 709 $ 70 QQQ $ 255 ~ $ 791.511 Transfers are used to move revenues from the fund that ordinance or budget requires to collect them to the fund that ordinance or budget requires to expend them. Note 12 - Commitments As of September 30, 2006, the City had outstanding commitments on contracts in progress as follows: Unexpended Contract Project Tvpe Amounts Utility System Improvements $ 347,842 Stormwater System Improvements 115,730 General Government Improvements 406,617 On June 2, 1999, the City entered into an agreement with the City of Jacksonville, Florida, whereas the City of Jacksonville will provide advanced life support and fire services to the residents and businesses located in the City. The term of the agreement shall be from the effective date and continuing for a period of 25 years unless terminated earlier by the parties (such parties must provide a one year notice). For the year ended September 30, 2006, the City incurred $817,427 in services under this agreement. The amount will be adjusted annually by an amount equal to 103% of the previous year's amount for all services provided by the City of Jacksonville. Over the next several years, the City will be making utility system improvements to meet the Total Maximum Daily Load (TMDL) of nitrogen being discharged into the St. Johns River. The allowable load will be allocated between the industrial and wastewater point sources and the City's Stormwater systems which discharge to the river or its tributaries. The new nitrogen limit will require the City to upgrade at least one, and possibly both wastewater treatment plants. Building a reclaimed water facility that will eliminate a portion of our discharge to the "" river is also being considered. 28 CITY OF ATLANTIC BEACH, FLORIDA ~"" NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2006 (Concluded) Note 12 - Commitments (Concluded) ~„ The Florida Department of Environmental Protection (FDEP) will determine individualized timelines for completing plant and stormwater upgrades. The FDEP will be allowing 2-to-4- year time periods to complete plant upgrades. Stormwater improvements may be granted a ~„ longer compliance period. The estimated range of costs for the treatment plant upgrades and a reclaimed water facility will be from $5 to $11 million. The City anticipates some grant funds to be available for the reclaimed water facility and stormwater improvements related to TMDL. The point-source improvements will be less expensive than stormwater improvements to remove similar amounts of nitrogen, so trading point-source projects that go beyond the TMDL requirements to offset stormwater needs may save the City a considerable amount. It is undetermined, at this time, what the net cost will be to the City. Note 13 - Contingencies The City is a defendant in several lawsuits which arose in the ordinary course of the City's business. It is the City's position that the probability is unlikely that material amounts will ever be payable as a result of these proceedings. Note 14 - 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; and natural disasters for which the City carries commercial insurance. Insurance against losses are provided through the Florida League of Cities, Inc. and Risk Management Associates, Inc. for the following types of risk: ^ Workers' Compensation and Employer's Liability ^ Automobile Liability ^ Automobile Physical Damage ^ Accidental Death and Dismemberment ^ General Liability ^ Public Officials' Liability ^ Property Coverage The City's coverage for workers' compensation is under a retrospectively rated policy. Premiums are accrued based on the ultimate cost to-date of the City's experience for this type of risk. Note 15 - Subsequent Event Subsequent to year end, the City acquired a parcel of land for future stormwater improvements in the amount of $870,573. 29 r REQUIRED SUPPLEMENTARY INFORMATION r CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF PENSION FUNDING PROGRESS SEPTEMBER 30, 2006 General Employees' Retirement Plan ~" UAAL as Valuation Funded Annual Covered Percentage of Date AVA AAL UAAL Ratio Payroll Payroll 9/30/01 $ S,S87,000 $ 6,986,000 $ 1,399,000 80.0% $ 2,462,000 56.8% 9/30/02 5,747,000 7,479,000 1,732,000 76.8% 2,768,000 62.6% 9130/03 5,951,000 8,186,000 2,235,000 72.7% 2,856,000 78.3% 9/30/04 6,273,000 9,OOS,000 2,732,000 69.7% 3,OS 1,000 89.5% 9/30/OS 6,802,000 9,822,000 3,020,000 69.3% 3,182,000 94.9% Police Retirement Plan UAAL as Valuation Funded Annual Covered Percentage of Date AVA AAL UAAL Ratio Payroll Payroll 9/30/01 $ 4,068,000 $ 5,016,000 $ 948,000 81.1% $ 1,155,000 82.1% 9/30/02 4,230,000 5,334,.000 1,104,000 79.3% t,19S,000 92.4% 9/30/03 4,373,000 5,986,000 1,613,000 73.1% 1,129,000 142.9% 9/30/04 4,534,000 6,405,000 1,871,000 70.8% 1,360,000 137.6% 9l30/OS 4,775,000 6,997,000 2,222,000 68.2% 1,402,000 1S8.S% Analysis of the dollar amounts of actuarial value of assets, actuarial accrued liability, or unfunded actuarial accrued liability in isolation can be misleading. Expressing the actuarial value of assets as a percentage of the actuarial accrued liability provides one indication of the system's funded status on a going concern basis. Analysis of this percentage over time indicates whether the system is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the plan. The unfunded actuarial accrued liability and annual covered payroll are both affected by inflation. Expressing the unfunded actuarial accrued liability as a percentage of covered payroll approximately adjusts for the effects of inflation and aids analysis of the progress being made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage, the stronger the plan. 30 l CITY OF ATLANTIC BEACH, FLORIDA ~ REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF CONTRIBUTIONS FROM EMPLOYER " AND OTHER CONTRIBUTING ENTITIES SEPTEMBER 30, 2006 General Employees' Retirement Plan ~, Annual Required Year Ended Contributed Percentage September 30, (ARC) Contributed 2002 $ 288,070 100% 2003 315,106 100% ~, 2004 381, 518 100% c 2005 464,893 100% ~ 2006 480,029 100% f Police Retirement Plan Annual ~" Required Year Ended Contributed Percentage September 30 (ARC) Contributed 2002 $ 240,242 100% f` 2003 225,991 100% 2004 242,637 100% 2005 297,361 100% 2006 350,161 106% "' u The information presented in the required supplementary schedules was determined as part of the actuarial valuation at the dates indicated. Additional information for the general employees' and police retirement plans as of the latest actuarial valuation follows: Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Asset Valuation Method Actuarial Assumptions Investment Rate of Return Projected Salary Increases Inflation September 30, 2005 Entry-Age Actuarial Cost Method Level Percent of Payroll, Closed 5 to 30 Years Funding Value 8.00% 5.50% 5.00% 31 s CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2006 ~+ Variance With Final Budget - _ Budgeted Amounts Actual Positive Original Final Amounts (Negative) Revenues Property Taxes $ 3,410,968 $ 3,410,968 $ 3,529,832 $ 118,864 Nonproperty Taxes 1,553,170 1,553,170 1,717,806 164,636 Licenses and Permits 478,650 478,650 455,278 {23,372) State-shared Revenues 1,838,489 1,838,489 1,964,668 126,179 Other Intergovernmental Revenues 572,044 572,044 578,334 6,290 Charges for Services 15,400 15,400 20,531 5,131 Fines and Forfeitures 153,917 153,917 126,439 (27,478) Interest Income 90,000 90,000 242,518 152,518 Miscellaneous Revenues 50,970 50,970 55,975 5,005 [nterfund Charges 1,315,661 1,315,661 1,324,156 8,495 Total Revenues 9,479,269 9,479,269 10,015,537 536,268 Expenditures General Government: Legislative 45,938 53,538 52,454 1,084 Legal Counsel 100,569 161,571 155,706 5,865 Planning and Zoning 191,026 271,060 213,873 57,187 City Clerk 228,270 241,993 212,859 29,134 City Manager 229,880 229,880 219,334 10,546 Finance and Accounting 874,047 875,784 803,844 71,940 Human Resources 187,448 187,448 172,733 14,715 Information Technology 473,070 481,257 369,887 111,370 Other 410,866 434,104 349,674 84,430 Total General Government 2,741,114 2,936,635 2,550,364 386,271 Public Safety: Law Enforcement 3,217,539 3,221,970 3,107,135 114,835 Lifeguards 176,969 176,969 172,338 4,631 Fire Control 874,171 882,471 870,127 12,344 Code Enforcement 59,579 59,579 58,846 733 Building 233,523 255,144 245,904 9,240 Total Public Safety 4,561,781 4,59b,133 4,454,350 141,783 Transportation: Public Works Administration 469,649 479,151 439,647 39,504 Streets and Roads 801,717 973,625 906,299 67,326 Fleet Maintenance 266,900 266,900 241,395 25,505 Total Transportation 1,538,266 1,719,676 1,587,341 132,335 Parks and Recreation 1,007,580 1,022,247 1,002,601 19,646 (Total Expenditures) {9,848,741) (10,274,691) (9,594,656) 680,035 32 1'* CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2006 (Concluded) Excess of Revenues Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Sale of General Fixed Assets Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses Fund Balances, Beginning of Year Fund Balances, End of Year Budgeted Amounts Original Final $ (369,472) $ (795,422) $ 463,709 463,709 463,709 0 0 0 0 0 9,000 9,000 6,075 (2,925) 472,709 472,709 469,784 (2,925) 103,237 (322,713) 890,665 1,213,378 4,726,035 4,726,035 4,726,035 0 $ 4,829,272 $ 4,403,322 $ 5,616,700 $ 1,213,378 33 ~* P ~' Variance With Final Budget - Actual Positive Amounts (Negative) 420,881 $ 1,216,303 CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTE TO SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2006 Budgets and Budgetary Accounting General governmental revenue and expenditures accounted for in budgetary funds are controlled by a budgetary accounting system in accordance with various legal requirements which govern the City's operations. Budgets are monitored at varying levels of classification detail; however, expenditures cannot legally exceed total appropriations at the individual fund level. Encumbrances are recorded. Unexpended items which are unencumbered at year end must be reappropriated in the subsequent year. Budgets are adopted for all governmental funds (general, special revenue, debt service and capital projects funds). The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that increase the total expenditures of any department or fund must be approved by the City Commission. Ali necessary supplemental appropriations are adopted by the City Commission and are included in the reported budgetary data. The budget presented in the accompanying required supplemental information is prepared in conformity with accounting principles generally accepted in the United States of America. A 34 aiw ~. ~; L.i SUPPLEMENTARY INFORMATION 3 CITY OF ATLANTIC BEACH, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, .~ WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 2006 Special Revenue Funds Convention Tree Local Option Development Half-Cent Court Cost Replacement Gas Tax Tax Sales Taz Training Assets Equity in Pooled Cash and Cash x Equivalents $ 20,913 $ 266,143 $ 184,732 $ 1,126,899 $ 2,016 Due from Other Governments 0 86,660 12,193 123,077 1,425 Total Assets 20,913 352,803 196,925 1,249,976 3,441 Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Total Liabilities Fund Balances Reserved for: Debt Service Unreserved Reported in: Special Revenue Funds Total Fund Balances 0 31,419 0 31,419 0 0 4,530 0 0 0 0 0 4,530 0 0 0 0 0 192,395 1,249,976 3,441 192,395 1,249,976 3,441 Total Liabilities and Fund Balances $ 20,913 $ 352,803 $ 196,925 $ 1,249,976 $ 3,441 35 "~ '~ .. g, 2006 Special Revenue Funds Totals 1~r Totals Nonmajor Radio Contraband Police Miscellaneous Special Debt Governmental 2005 Communication Forfeiture Grants Grants Revenue Service Funds Totals $ 2,658 $ 3,541 $ 0 $ 0 $ 1,606,902 $ 77,265 $ 1,684,167 $ 1,618,989 4,978 0 42,963 88,005 359,301 0 359,301 297,905 ~" 7,636 3,541 42,963 88,005 1,966,203 77,265 2,043,468 1,916,894 0 0 14,682 0 50,631 0 50,631 51,222 0 0 28,281 88,005 116,286 0 116,286 69,775 0 0 42,963 88,005 166,917 0 166,917 (20,997 3, 0 0 0 0 0 77,265 77,265 76,101 7 636 3 41 , t ,5 0 0 1,799,286 0 1,799,286 1,719,796 7,636 3,541 0 0 1,799,286 77,265 1,876,551 1,795,897 w ` $ 7,636 $ 3,541 $ 42,963 $ 88,005 $ 1,966,203 $ 77,265 $ 2,043,468 $ 1,916,894 36 ~! CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 2006 Special Revenue Funds Convention Tree Local Option Development Half-Cent Court Cost Replacement Gas Tax Taz Sales Tax Training Revenues Taxes S 0 S 525,296 $ 89,810 S 74t,335 S 0 Other Intergovernmental Revenues 0 0 0 0 8,409 Interest Income 0 17,187 7,075 43,805 32 Miscellaneous Revenues 0 0 0 140 0 Total Revenues 0 542,483 Expenditures Current: General Government 0 0 58,852 0 0 Public Safety 0 0 0 0 9,500 Debt Service: Principal 0 0 0 0 0 Interest and Other 0 0 0 0 0 Capital Outlay 0 55,681 8,014 582,773 0 (Total Expenditures) (10,065) (329,696) (66,866) (602,879) (9,500) (Deficiency) Excess of Revenues (Under) Over Expenditures (10,065) 212,787 Other Financing Sources (Uses) Transfers in 0 0 Transfers (out) 0 (325,368) _ Total Other Financing Sources (Uses) 0 (325,368) Net Change in Fund Balances (10,065) (112,581) Fund Balances, Beginning of Year 30,978 433,965 Fund Balances, End of Year S 20,913 $ 321,384 S 30,019 182,401 (1,059) 0 0 0 0 0 0 0 0 0 30,019 182,401 (1,059) 162,376 1,067,575 4,500 192,395 S 1,249,976 $ 3,441 "~ s "! 37 r 2006 opcun~ a~cvcuuc ruuua Y~Ota1S Totals Nonmajor Radio Contraband Police Miscellaneous Special Debt Governmental 2005 Communication Forfeiture Grants Grants Revenue Service Funds Totals ~' $ 0 $ 0 $ 0 $ 0 $ 1,356,441 $ 0 $ 1,356,441 $ 1,321,972 29,003 0 137,450 154,987 329,849 0 329,849 366,505 1 153 169 0 0 68,421 2,669 71,090 38,633 0 0 0 0 140 0 140 79,137 29,156 169 137,450 154,987 1,754,851 2,669 1,757,520 l ,806,247 0 0 0 60,130 118,982 0 118,982 68,596 38,000 550 78,658 0 126,708 0 126,708 150,460 0 0 0 0 0 50,066 50,066 48,950 0 0 0 0 0 21,439 21,439 23,480 0 0 58,792 93,027 798,287 0 798,287 1,157,718 ~ (38,000) (550) (137,450) (154,987) (1,349,993) (71,505) (1,421,498) (1,449,204) (8,844) (381) 0 0 404,858 (68,836) 336,022 357,043 ~ 0 0 0 0 0 70,000 70,000 97,989 ~"' 0 0 0 0 (325,368) 0 (325,368) (516,184) 0 0 0 0 (325,368) 70,000 (255,368) (418,195) (8,844) (381) 0 0 79,490 1,164 80,654 (61,152) 16,480 3,922 0 0 1,719,796 76,101 1,795,897 !,857,049 $ 7,636 $ 3,541 $ 0 $ 0 $ 1,799,286 $ 77,265 $ 1,876,551 $ 1,795,897 38 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2005 Pension Trust Funds Police General Officers' Employees' Retirement Retirement 2006 2005 Plan Plan Totals Totals Assets Cash and Cash Equivalents with Trustee $ 33,607 $ 7,891 $ 41,498 $ 33,177 Investments with Trustee 5,152,102 7,701,101 12,853,203 11,546,415 Total Assets 5,185,709 7,708,992 12,894,701 11,579,592 Liabilities Accounts Payable and Accrued Liabilities 2,041 1,924 3,965 23,698 Total Liabilities 2,041 1,924 3,965 23,698 Net Assets Held in Trust for Pension Benefits 5,183,668 7,707,068 12,890,736 11,555,894 Total Net Assets $ 5,183,668 $ 7,707,068 $ 12,890,736 $ 11,555,894 39 CITY OF ATLANTIC BEACH, FLORIDA COMBININ G STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS ~ FOR THE YEAR ENDED S EPTEMBER 30, 2006, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2005 Pension Trust Funds Police General Officers' Employees' Retirement Retirement 2006 2005 Plan Plan Totals Totals w Additions Contributions: Employees $ 18,721 $ 112,511 $ 131,232 $ 673,448 ~, Employer 261,354 480,029 741,383 105,721 State of Florida 108,819 0 108,819 108,818 Total Contributions 388,894 592,540 981,434 887,987 Net Increase in Fair Value of Investments 350,293 562,100 912,393 923, t 31 Interest and Dividends 89,504 133,990 223,494 95,425 Total Additions 828,691 1,288,630 2,117,321 1,906,543 Deductions Refunds of Contributions 350 12,814 13,164 9,532 Benefits 346,586 342,535 689,121 597,490 Investment Expenses 22,342 27,131 49,473 72,775 Administrative Expenses 16,080 14,641 30,721 24,192 Total Deductions 385,358 397,121 782,479 703,989 Net Increase 443,333 891,509 1,334,842 1,202,554 Net Assets, Beginning of Year 4,740,335 6,815,559 11,555,894 10,353,340 Net Assets, End of Year $ 5,183,668 $ 7,707,068 $ 12,890,736 $ t 1,555,894 40 CITY OF ATLANTIC BEACH, FLORIDA ,,,,e HISTOR ICAL REVEN UES AND EXPENSES i 7 FOR THE YEARS ENDED SEPTEMBER 30, 2002 THROUGH 2006 (UNAUDITED) 2002 2003 2004 2005 2006 .,~ Revenues Operating Revenues: Water: Customer Charges $ 2,064,123 $ 2,012,087 $ 2,256,905 $ 2,459,456 $ 2,554,325 Miscellaneous Charges 248,894 337,224 15,828 22,567 59,667 Total Water 2,313,017 2,349,311 2,272,733 2,482,023 2,613,992 Sewer: Customer Charges 3,602,415 3,372,934 3,256,305 3,524,134 3,609,816 Total Operating Revenues 5,915,432 5,722,245 8,829,038 6,006,157 6,223,808 Nonoperating Revenues: Interest Income: Water 50,487 29,161 20,184 50,946 83,149 ., Sewer 68,075 42,806 28,104 57,008 76,810 { Total Nonoperating Revenues 118,562 71,967 48,288 107,954 159,959 Total Revenues 6,033,994 5,794,212 5,577,326 6,114,11 t 6,383,767 Expenses Operating Expenses: Water 1,110,478 1,110,532 1,023,734 945,643 1,067,498 "'4 Sewer 1,732,289 1,964,887 1,918,713 1,827,176 1,977,608 Total Operating Expenses 2,842,767 3,075,419 2,942,447 2,772,819 3,045,106 Administrative, Nondivisional and Other: Water 424,162 548,905 526,729 538,189 582,858 ,~ Sewer 642,329 619,635 539,217 883,224 937,010 Total Administrative, Nondivisional and Other 1,066,491 1,168,540 1,065,946 1,421,413 1,519,868 (Total Expenses) (3,909,258) (4,243,959) (4,008,393) (4,194,232) (4,564,974) Net Revenue 2,124,736 1,550,253 1,568,933 1,919,879 1,818,793 Capital Improvement Charges Sewer 145,471 153,878 112,311 0 0 244 1 681 879 1 919 793 1 818 Net Revenues Available for Debt Service 2,270,207 1,704,131 , , , , , , Nonoperating Income (Expense) Interest Expense (883,468) (890,937) (939,746) (819,620) (798,991) Loan Amortization (16,680) (16,818) (16,817) (13,672) (15,289) Total Nonoperating (Expense) (900,148) (907,755) (956,563) (833,292) (814,280) Net Income Before Depreciation and Operating Transfers $ 1,370,059 $ 796,376 $ 724,681 $ 1,086,587 $ 1,004,513 41 '~ CITY OF ATLANTIC BEACH, FLORIDA MAJOR UTILITY CUSTOMERS FOR THE YEAR ENDED SEPTEMBER 30, 2006 (UNAUDITED) Navy (Federal Government) °` Fleet Landing (Retirement Community) Oaks of Atlantic Beach (Mobile Home Park) Hannah (Regional) Park s- R Lakes of Mayport (Apartment Complex) John Creek Estate (Mobile Home Park) Sea Turtle Inn (Hotel) City of Atlantic Beach, Florida Atlantic Arms (Apartment Complex) "" Canterbury Court (Apartment Complex) Total 42 Annual Billings $ 390,538 150,200 117,447 104,324 89,543 87,785 64,590 60,890 57,196 54,994 $ 1,177,507 A ~ C OC7~ ~ ~ c vxc w ~ c R F~'" ~'' C a c d ~ c E w G }I ~ G H G -.i U o h o ~ o o~~ o ~ 0 p~ ~t O p~ N ~ N M [~ qp C0 ~ ~--~ O ~ O vl M M ~!1 ~D O ~ i.i a+ [ i i ~ ~ ~ i ~ ~ ~ s d a+ U 00 ~p O~ Q~ O O O~ M Ul M y b ~--~ N N N O p~ [~ t~ ~ CC ~ A M M 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FOR THE YEAR ENDED SEPTEMBER 30, 2006 Federal Pass-Through Entity CFDA Contract/Grant Program Program Federal Program Title Number Number Award Exoenditures* U.S. Department of Housing and Urban Development Passed Through City of Jacksonville, Florida Community Development Block Grant 14.218 5629-31 $ 163,575 $ 154,986 U.S. Department of Housing and Urban Development Passed Through Habitat for Humanity of the Jacksonville Beaches Self-Help Homeownership Opportunity Program 14.247 SH04-001 156,008 4,830 U.S. Department of Justice, Bureau of Justice Assistance, Passed Through City of Jacksonville Byrne Grant -Crime Suppression 16.738 5629-33 73,760 73,760 U.S. Department of Justice, Department of Homeland Security, Passed Through City of Jacksonville, Florida Urban Area Security [nitiative (UASI Program) 97.008 5629-37 137,810 137,810 U.S. Department of Justice Passed Through Florida Department of Law Enforcement JAG - CSU Video 16.738 2006-JAGD-DUVA-3-M9-076 6,536 6,420 JAG - AB -CAD 16.738 2006-JAGD-DUVA-4-M8-227 65,000 40,215 State Homeland Security - ODP SWAT 97.004 2006-SHSP-DUVA-3-N9-027 20,000 17,056 U.S. Department of Justice Passed Through Bureau of Justice Assistance Bulletproof Vest Partnership Grant 16.607 03018357 4,550 4,550 Total Federal Awards $ 627.239 $_ 439.627 * [ncludes Grant Expenditures Only (Matching Funds Not Reported)- 48 ~: CITY OF ATLANTIC BEACH, FLORIDA NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS i FOR THE YEAR ENDED SEPTEMBER 30, 2006 (1) Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal awards activity of the City of Atlantic Beach, Florida, and is presented on the modified accrual basis of accounting. •+ 49 A Purvis r GC ~~nv r F INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida We have audited the basic financial statements of the City of Atlantic Beach, Florida (the City), as of and for the year ended September 30, 2006, and have issued our report thereon dated December 13, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Certified Public Accountants P.O. Box 23999 • 222 N.E. 1st Street • Gainesville, Florida 32602 • (352) 378-2461 • FAX (352) 378-2505 ~ Laurel Ridge Professional Center • 2347 S.E. 17th Street • Ocala, Florida 34471 • (352) 732-3872 • FAX (352) 732-0542 443 East College Avenue • Tallahassee, Florida 32301 • (850) 224-7144 FAX {850) 224-1762 2201 Cantu Court, Suite #100 • Sarasota, Florida 34232 • {941) 379-2800 • FAX (941) 379-2899 MEMBERS OF AMERICAN ANO f~OR10A INSTITVTES OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERCAN INSTITUTE Of CERi1FiE0 PUBEK ACCOUNTANTS PRIVATE COMPANIES AND S.E.C. PRACTKE SECTIONS 50 ~ Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (Concluded) This report is intended solely for the information and use of management, the City Commissioners, and the office of the Auditor General, State of Florida and agencies providing state and federal financial assistance and is not intended to be and should not be used by anyone other than these specified parties. December 13, 2006 ~ f~~ ~ ~~ ~~ ~ ~-~-~ Gainesville, Florida j' -° ~ ~. 51 G ay gis MANAGEMENT LETTER IA Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida We have audited the basic financial statements of the City of Atlantic Beach, Florida (the City), as of and for the fiscal year ended September 30, 2006, and have issued our report thereon dated December 13, 2006. We have issued our independent auditors' report on compliance and on internal control over financial reporting dated December 13, 2006. Disclosures in that report, if any, should be considered in conjunction with this management letter. We conducted our audit in accordance with auditing standards generally accepted in the United States of !"' America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-i 33, Audits of States, Local Governments, and Non-Profit Organizations. Additionally, our audit was conducted in accordance with err the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida and require that certain items be addressed in this letter. The Rules of the Auditor General [Section 10.554(1)(h)1.] require that we address in the management letter, if not already addressed in the independent auditors' report on compliance and internal controls, whether or not recommendations made in the preceding annual financial audit reports have been followed. There were no comments made in the preceding annual financial audit reports. The Rules of the Auditor General [Section 10.554(1)(h)2.] require that we determine whether the City !"" complied with Section 218.415, Florida Statutes, regarding investment of public funds. Our audit disclosed no matters requiring comment as outlined in Section 218.415, Florida Statutes. The Rules of the Auditor General [Section 10.554(1)(h)3.] require disclosure in the management letter any findings or recommendations to improve financial management, accounting procedures, and internal controls. Our audit disclosed no matters required to be disclosed by the Rules of the Auditor General [Section 10.554(1)(h)3.]. The Rules of the Auditor General [Sections 10.554(1)(h)4.] require disclosure in the management letter of the following matters if not already addressed in the auditors' report on compliance and internal control: violations of laws, rules, and regulations which may or may not materially affect the financial statements; iiiegal or improper expenditures that may or may not materially affect the financial statements; improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); failures to properly record financial transactions; and other inaccuracies, shortages, and defalcations and instances of fraud discovered by, or that come to the attention of the auditor .None of the aforementioned was discovered within the scope of our audit. Certified Public Accountants P.O. Box 23999 • 222 N.E. 1st Street • Gainesville, Florida 32602 • (352) 378-2461 • FAX (352) 378-2505 Laurel Ridge Professional Censer • 2347 S.E. 17th Street • Ocala, Florida 34471 • (352) 732-3872 • FAX (352) 732-0542 443 East College Avenue • Tallahassee, Florida 32301 • (850) 224-7144 FAX {850) 224-1762 K 2201 Cantu Court, Suite #100 • Sarasota, Florida 34232 • (941) 379-2800 • FAX (941) 379-2899 MEMBERS OF AMERICAN AND FU7RIOA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS MEMBER OF AMERICAN INSTITUTE Of CERTIfIED PUBLK ACCOUNTANTS PRIVATE COMPANIES AND S.E.C. PRACTICE SECTIONS 52 ~, Honorable Mayor, City Commissioners '~~ and City Manager Atlantic Beach, Florida MANAGEMENT LETTER (Concluded) As required by the Rules of the Auditor General [Section 10.554(1)(h)6.(a)], the scope of our audit included a review of the provisions of Section 218.503 (1), Florida Statutes, Determination of Financial Emergency. In connection with our audit, we determined that the City does not meet the conditions of a financial emergency as a consequence of the conditions described in Section 218.503(1), Florida Statutes. Also, as required by the Rules of the Auditor General, we applied financial condition assessment procedures pursuant to Rule 10.556(7). The application of such procedures did not reveal evidence of "deteriorating financial condition" as the term is defined in Rule 10.554(1){h)6.(c). As required by the Rules of the Auditor General [Section 10.554(i)(h)6.(b)], we determined that the annual financial report for the City for the fiscal year ended September 30, 2006, was filed with the Department of Banking and Finance pursuant to Section 218.32 (1) (a), Florida Statutes, and is in agreement with the annual financial audit report for the fiscal year ended September 30, 2006. This. report is intended solely for the information and use of the Auditor General of the State of Florida, management, and the City Commissioners, and is not intended to be and should not be used by anyone other than these specified parties. December 13, 2006 Gainesville, Florida ~(.~,~~,,~ ..„ ~+' 1 ~d ~ l ~'L~ ~~ " r "" 53