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Audit Report - 2003-2004 e^ FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2004 ~" FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2004 TABLE OF CONTENTS Independent Auditors' Report ...................................................................................................................... l-2 Management's Discussion and Analysis ....................................................................................................3-15 Basic Financial Statements Government-wide Financial Statements: ~,,, Statement of Net Assets ..................................................................................................................... ......16 Statement of Activities ....................................................................................................................... ......17 Fund Financial Statements: Balance Sheet -Governmental Funds ................................................................................................ ......18 " Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets .................................................................................................................. .. 19 Statement of Revenues, Expenditures, and Changes in Fund .... ~* Balances -Governmental Funds ..................................................................................................... ......20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the ~ Statement of Activities .................................................................................................................... ......21 Statement of Net Assets -Proprietary Funds ..................................................................................... ......22 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds ............................................................................................................................ ......23 "' Statement of Cash Flows -Proprietary Funds ................................................................................... 24-25 Statement of Fiduciary Net Assets -Fiduciary Funds ......................... .............................................. ......26 Statement of Changes in Fiduciary Net Assets -Fiduciary Funds ................................................... ......27 ~ Notes to Financial Statements ........................................................................................................ 28-44 Required Supplementary Information Schedules of Pension Funding Progress .......................................................................................................45 Schedules of Contributions from Employer and Other Contributing Entities ................................................................................................................................46 Schedule of Revenues, Expenditures, and Changes in ~"" Fund Balance -Budget and Actual -General Fund ........................................................................... 47-48 ,. H Notes to Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual -General Fund ..........................................................................................49 ' Supplementary Information '° Combining Balance Sheet -Nonmajor Governmental Funds ................................................................ 50-51 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -Nonmajor Governmental Funds .......................................................... 52-53 ~ Combining Statement of Fiduciary Net Assets ...........................................54 . ................................................. Combining Statement of Changes in Fiduciary Net Assets - Fiduciary Funds ........................................................................................................................................55 Historical Revenues and Expenses ................................................56 Major Utility Customers ................................................................................................................................57 Summary of Water Usage .............................................................................................................................58 Summary of Wastewater Treatment -Atlantic Beach Sewer Division ....................................................................................................................................................59 ~"" FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2004 TABLE OF CONTENTS (Concluded) Supplementary Information (Concluded) ~,,, Summary of Wastewater Treatment -Buccaneer Sewer Division ..............................................................60 Other Bond Covenant Disclosures ................................................................................................................61 Schedules of Net Revenues in Accordance with Bond Resolutions - 1P ( ) ..................................... Ente rise Funds Water and Sewer ..................................................................62 Additional Elements of Report Prepared in Accordance with GovernmentAuditingStandards, Issued by the Comptroller General of the United States Schedule of Expenditures of Federal Awards .........................................................................................63 Notes to the Schedule of Expenditures of Federal Awards .....................................................................64 Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards ....................................................................................................................................... 65-66 Management Letter .................................................................................. ..... 67-68 ..................................... Y (~" INDEPENDENT AUDITORS' REPORT ~ G axis r C~m~i INDEPENDENT AUDITORS' REPORT Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida 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, 2004, 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. 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, 2004, 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 15, 2004, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The management's. discussion and analysis 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 supplementary information. However, we did not audit the information and express no opinion on it. Certified Public Accountants P.O. Sox 23999 • 222 N.E. lst Street • Gainesville, Florida 32602 • (352) 378-2461 • FAX (352) 378-2505 laurel Ridge Professional Center • 2347 S.E. l7th 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 1727 2!'d Street • Sarasota, ftorida 34236 • (941) 365-3774 • FAX (941) 365-0238 MEMBERS Of AMERICAN AND FLORIDA INSTITUTES Of CERTIFIED PUBLIC ACCOUNTANTS ~ MEMBER OF AMERICAN INSTITUTE OF CERTIfR:O PUBLIC KCOUNTANTS PRNATE COMPANIES AND S.E.C. PRKTICE SECTIONS 1 ~,. Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS' REPORT (Concluded) 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. Gainesville, Florida ~ QMa( C~~-I "°` December 15, 2004 ~ 2 CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENTS' DISCUSSION & ANALYSIS As management of the City of Atlantic Beach, we offer readers of the City of Atlantic Beach's financial statements this narrative overview and analysis of the financial activities of the City of Atlantic Beach for the fiscal year ended September 30, 2004. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Atlantic Beach's basic financial statements. The City of Atlantic Beach's basic financial statements comprise 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 City presents prior comparative financial information when available. ~"' 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. 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 (e.g., uncollected franchise fees, special assessments or earned personal leave, etc.). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes, licenses and permits, and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, transportation and parks and recreation. The business-type activities of the City include the utility comprised of the water .and sewer systems, the Storm Water utility and the sanitation enterprise. The government-wide financial statements can be found on pages 16 - 17 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 divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 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 available for spending 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 governmental 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. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. ,~, The City of Atlantic Beach maintains sixteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund that is considered to be a major fund. Data from the other fifteen governmental funds are combined into a single, aggregated presentation. The City of Atlantic Beach adopts an annual appropriated budget for all funds. A General Fund budgetary comparison schedule has been provided to demonstrate compliance with this budget. IA" i. Proprietary funds-The City of Atlantic Beach maintains only one type of proprietary fund and that is the enterprise funds. The enterprise type funds are used to account for the activities of the water, sewer, storm water and sanitation activities. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only "" in more detail. The proprietary fund financial statements provide separate information of the utility, storm ~: water and sanitation activities, which are considered to be major funds of the City of Atlantic Beach. The basic proprietary fund financial statements can be found on pages 22 - 25 of this report. ~ Fiduciary funds-Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The only fiduciary funds the City of Atlantic Beach maintains now are the police and general employee pension funds.. Fiduciary funds are not reflected in the government-wide financial statement 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, which include the pension trust funds, can be found on pages 26 - 27 of this report. Notes to the financial statements-The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 28 - 44 of this report. Other information-In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Atlantic Beach's schedule of contributions and it's progress in funding its obligation to provide pension benefits to its employees, and a budgetary comparison schedule for the General Fund. Required supplementary information can be found on pages 45 - 49 of this report. Combining statements-Referred to earlier in connection with non-major governmental funds, are presented immediately following the required supplementary information. Combining fund statements, including those to assist with State of Florida retirement reporting, can be found on pages 50 - 55 of this report. ~" ~" ~"" Financial Highlights Government-wide Financial Analysis s~ As noted earlier, net assets may serve over time as a useful indicator of a City's financial position. In the case of the City of Atlantic Beach, assets exceed liabilities by $35,498,115 at the close of the most recent ~,,, fiscal year. By far the largest portion of the City's net assets, $22,401,430, reflects its investment in capital assets (e.g. land, buildings, improvements other than buildings, equipment), less any related debt used to acquire ~" those assets that is still outstanding. 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. City of Atlantic Beach's Net Assets (In Thousands) !`~" Governmental activities Business-type activities Total 2004 2003 2004 2003 2004 2003 Current and other assets $ 8,369 $ 8,184 $ 7,282 $ 8,688 $ 15,651 $ 16,872 #"' Capital assets 8,323 8,078 35,899 35,641 44,222 43,719 Total Assets 16,692 16,262 43,181 44,329 59,873 60,591 Long-term liabilities "` outstanding 584 1,025 20,033 20,648 20,617 21,673 Other liabilities 1,164 573 2,594 3,441 3,758 4,014 Total Liabilities 1,748 1,598 22,627 24,089 24,375 25,687 Net Assets: Invested in capital assets, net of related debt 7,739 7,448 14,663 14,955 22,402 22,403 ~°" Restricted 1,857 1,777 1,101 895 2,958 2,672 Unrestricted 5,348 5,439 4,790 4,390 10,138 9,829 Total Net Assets $ 14,944 $ 14,664 $ 20,554 $ 20,240 $ 35,498 $ 34,904 ~+"" A portion of the City's net assets, $2,958,199, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets $10,138,486 may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is 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. During the current fiscal year, the City of Atlantic Beach's net assets increased by $594,503. This amount represents a $280,317 increase in the net assets as a result of the governmental activities in addition to a $314,186 increase in the net assets of the business type activities. ~`" 5 $. ~,. It should be noted that the City of Atlantic Beach's total bonded debt decreased by $554,972 or {2.56%) during the current fiscal year. The decrease was made up of the scheduled retirement of the Utility System Revenue Bonds, series 1996 of $452,508 and the scheduled principal payments of the 1999 SunTrust refunding revenue bonds of $102,464. The operations of the City are funded using pooled cash shared and allocated by both the governmental fund types and the business fund types. In line with other cities using pooled cash investments, the City's rate of return on investments in pooled cash went from 1.52% last year to only 1.33% in the current year. This represents a .125% decrease in rate of return. The following is a summary of activities for the City during the fiscal year ended September 30, 2004: City of Atlantic Beach's Change in Net Assets (In Thousands) Governmental Business-type activ ities activities Total 2004 2003 2004 2003 2004 2003 "" Revenues: _ Program revenues: Charges for services $ 1,156 $ 1,144 $ 7,218 $ 7,133 $ 8,374. $ 8,277 ~,,. Operating grants and contributions 209 b 13 203 60 412 673 Capital grants and contributions 785 427 686 713 1,471 1,140 ~'"" General Revenues: Property taxes 2,719 2,528 - - 2,719 2,528 Sales Taxes 1,314 1,263 - - 1,314 1,263 ~, Franchise and utility taxes 1,470 1,514 - - 1,470 1,514 i State Revenue Sharing 356 346 - - 356 346 Discretionary Sales Surtax 599 584 - - 599 584 Interest revenue 81 98 65 87 146 185 ~' Miscellaneous 173 41 - 277 173 318 Loss on disposition of fixed assets (10) - 119) - 129 - ~„ Total Revenues $ 8,852 $ 8,558 $ 8,053 $ 8,270 $ 16,905 $ 16,828 Expenses: General Government 1,043 873 - - 1,043 873 "" Public Safety 4,392 4,168 - - 4,392 4,168 Transportation 1,373 1,393 - - 1,373 1,393 Parks and Recreation 940 1,003 - - 940 1,003 ,,,, Interest on long-term debt 25 33 - - 25 33 Utility - - 6,484 6,685 6,484 6,685 Storm Water - - 839 988 839 988 Sanitation - - 1,215 1,028 1,215 1,028 ~" Total Expenses 7,773 7,470 8,538 8,701 16,311 16,171 Increase (decrease) in net assets before transfers 1,079 1,088 (485) (431) 594 657 ~. Transfers (799) 279 799 279 - - Increase in net assets 280 1,367 314 (710) 594 657 ' Net assets-beginning of year 14,664 13,297 20,240 20,950 34,904 34,247 Net assets-end of year $ 14,944 $ 14,664 $ 20,554 $ 20,240 $ 35,498 $ 34,904 ~* "' 6 Operating Revenues and Expenses by Function -Governmental Activities 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 General Government Revenues by Source -Governmental Activities Sate Revenue Sharing OU>er lJiscre5orrary Sales Tax 4% 3% 7% Franchise 8 Uti 17% Sales 1: for Services 3% Jperating Grants & Catitributions 2% Capital Grants & Contributions 9% Property Taxes 30% 7 Public Safety Transportation Parks & Recreation Interest on long-term debt - - ^Expenses ^Operating Program_Revenues Governmental activities--Crovernmental activities increased the City of Atlantic Beach's net assets by $280,317 this year. Revenues were $8,852,293, exceeding expenses of $7,773,247 by $1,079,046. Of that excess, the City transferred $798,729 to the Storm Water Utility for the purchase of Land to build a ~,,, storm water retention pond and for two small storm water drainage projects that would otherwise be unfunded. One of the most significant reasons for the excess revenues is the $598,876 of discretionary sales taxes, most of which were used to acquire capital assets. In addition to these proceeds, the City also received grant funds, interest and other miscellaneous revenues, some of which were also used to increase net assets. Business-type activities-Business-type activities increased the City of Atlantic Beach's net assets by $314,186. Key elements of this increase are as follows: The business type activities resulted in an operating loss of $431,872. This is primarily the result of a $3$3,020 operating loss in the storm water utility. The storm water utility revenue is generated from a $4.00 per ERU of impervious surface charge and only covers about a half of the utilities operating expenses. The General Fund and the Local Option Gas Tax Fund help to subsidize the operations of the Storm Water Utility. The Water and Sewer Utilities also generated an operating loss in the amount of $117,092. The single largest operating expense contributing to the loss is depreciation. This non-cash expense was $1,637,737 for the year. The Sanitation Fund had operating income of only $68,240 for fiscal year 2004. Last year the Sanitation operating income was $222,625. The reason for the reduced income is the $166,320 paid for hurricane debris removal in September of 2004. • The revenue generated from customer charges for the business-type activities remained relatively constant from the previous fiscal year. The overall increase in customer charges for the business type activities was 1.2%. Miscellaneous revenues are dramatically lower than the. prior fiscal year due to a categorization change. Service and delinquent charges are included in customer charges in the current year's report. The 3% decrease in operating revenues is due to a slight increase in customer base and a 1.5% rate increase for water and sewer charges, offset by lower than ±"' expected consumption. • In August of 2004, the City implemented a water conservation rate structure. The new rate ~* structure imposed inclining block rates designed to encourage a reduction in excess consumption by the residential users. The implementation of the new rates is also expected to enhance revenues by about 5% for next year assuming that consumption remains relatively constant. • While both the storm water and sanitation charges for services came in over projections by a small margin, the water and sewer revenues did not achieve their projected targets. Water and sewer charges for services fell $233,801 below expectations. • Capital contributions are also a major revenue source for the Utility Fund during the current fiscal year, producing $685,598 in revenue. This increase is the direct result of utility impact fees and '"'R capital improvement charges. Impact fees must be used for utility system capital expansion. An additional $203,141 in intergovernmental revenue was derived from the enterprise funds mostly as a result of F.E.M.A. reimbursements for hurricanes Jeanne, Charlie and Frances. • Interest revenue decreased in the business-type activities by $22,185 (25%). The decrease is consistent with the market interest rate decline and lower cash balances. +~* 1~"' Operating Expenses and Program Revenues -Business Activities ~,ooo,ooo s,ooo,ooo 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Utility Storm water Sanitation Expenses Operating Program Revenues Revenue by Source -Business-type Activities ae i pia 2~io ~ pia ^ Charges for Services ^ Interest Revenue ^ Loss on Disposition of Assets ^ Capital Grants & Contributions ^ Operating Grants & Contributions 9 ( Financial Analysis of the City's Funds-As noted earlier, the City of Atlantic Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. E Governmental Funds-The focus of the City's governmental funds is to provide information on near- term inflows, outflows, and balances of available resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a City's ne# resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $7,600,825, a decrease of $16,815 in comparison with the prior year. Approximately 75% of this total amount, $5,722,850, constitutes unreserved General Fund balance. Another $1,782,417 (23%) is unrestricted mostly in Special Revenue Funds with a small amount of that in the Capital Project Fund. The remainder of the governmental fund balance $95,558, is reserved to indicate that it is not available for spending because it has already been committed to pay debt service, or that it exists in the form of inventory. The General Fund is the chief operating fund of the City. At the. end of the current fiscal year, unreserved fund balance of the General Fund was $5,722,850. Unreserved fund balance represents 62% of total General Fund expenditures and transfers out. The fund balance of the City's General Fund decreased by $96,590 during the current fiscal year. Key factors in this change are as follows: ~,,, • Property taxes of $2,719,203 increased by $191,181 (7.6%) during the year, despite the 3 percent cap in Florida on homesteaded property. This increase is based on an increase in the taxable property value of approximately $92.4 million, of which $9.75 million of that increase is the result of new construction. The operating properly tax millage for the fiscal year was ~ 3.0394 mills, the same as last year. Property Tax proceeds account for approximately 32.1% of the general fund revenues. ~" • Franchise and utility service taxes of $1,469,978 decreased by $44,231 (-2.9%) from prior year. • State Sales Tax of $1,313,798 increased by only $51,330 (4.i%) from prior year receipts. The state revenue analysts anticipated this small increase and the City budgeted accordingly. • Building permits, application review fees and construction inspection fees totaled $294,581 and decreased by $51,090 or (15%) from prior year receipts. ~,. • Last year the City moved all of the revenues and expenses related to the now eliminated internal service funds to the General Fund. The activities previously reported in the internal service fund included City Manager, Finance and Administration, Information Technology, ~ Human Resources, Public Works Administration and Fleet Maintenance. Interfund charges included in the General Fund revenues this year are $1,240,615 and represent an allocation of costs associated with the business type activities. The expenses of City Manager, Finance and Administration, Information Technology and Human Resources are now reported as General "` Government expenses. The Public Works Administration and Fleet Maintenance are also new divisions reported in Transportation expenses in General Fund. ~"" • Interest earnings in the Governmental Funds decreased by $16,464 or (17%). The decrease in i' interest revenue is reflected throughout the City's portfolio and the direct result of the economy's interest rate decline. • For the most part, the increase in expenses closely paralleled growth and demand for services except for personal service expenditures. Specifically, the cost for personal services within the ,~,,, various departments across the City increased due to wage increases and rising health care costs. Total personal services expenditures in the departments within the General Fund increased by $117,594 (2.24%) from the prior year. 10 x. Non-major Governmental Funds consisting of special revenue funds, debt service funds, and capital ~ project funds have a combined fund balance of $1,857,049. Of this fund balance, $74,632 is reserved for future debt service payments. Total revenues in the amount of $1,569,650 decreased by $881,564 in ~,,,, expenses, mostly from capital outlay, resulted in an excess of revenues over expenses of $688,086. Of that amount, $608,311 was transferred to other funds. The net increase in fund balance during the current year in non-major governmental funds was $79,775. Proprietary funds-The City of Atlantic Beach's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. ~"" Unrestricted net assets of the Utility Fund at the end of the year amounted to $3,531,830. The total decrease in net assets was $1,169,952. Other factors concerning the financial position of these funds have already been addressed in the discussion of the City's business-type activities. General Fund Budgetary Highlights ~» Over the course of the year, the City revised its General Fund budget only three times. The additional appropriations were 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 $123,151. The increase in appropriations is primarily the result of the following items. Other ~` small amounts were adjusted that account for the difference. $10,000 Funding for a study for a roundabout at the five points intersection on Seminole Road. $13,583 Increase in the Streets Maintenance budget for town center to include repairs to columns and the replacement of a medjool palm tree. $10,500 Increase in the Public Works Fleet Maintenance Division for non-contract work related to accidents. This expense is offset by insurance reimbursements. $57,500 To Transfer funds to the storm water utility fund to cover unexpected repairs of $15,000 to W.6~' Orchard Street, $13,500 at Royal Palms and Cutlass, $19,000 for the 800 block of Sailfish and $10,000 to replace 560 ft of storm water pipe on Country Club Drive. $55,090 To increase the fiscal year 2004 appropriations for items encumbered with the fiscal year 2003 budget but were not paid for as of September 30, 2004. <$30,000> Reduction of the transfers to the Police and General Employee pension funds for administrative expenses in exchange for funding the expenses directly from the pension funds with future higher employer contributions. Having made those adjustments, the actual revenues and expenditures resulted in positive variances. In total, actual revenues exceeded budgeted revenues by $219,556. The primary reasons for this are as follows: $70,445 was received from Blue Cross Blue Shield as a refund of premiums paid previous to switching to a new health insurance provider, Aetna. This item was not budgeted. ~„ • The state shared revenues combined of $1,694,432 exceeded budgeted estimates by a total of $89,917. The budget estimates used by the city for state shared revenues is estimated by the state and is typically conservative. ~ 11 • Building permit fees were budgeted based on historical trends at $196,267 and what was actually received was $240,387. Low interest rates coupled with increasing equity due to rising property values is most likely the reason for increased building permits from improvements as well as new construction. Other General Fund Revenues tracked close to budgeted amounts as expected revealing minor variances. The expenditures of the General Fund also resulted in a positive variance of $495,450. Across the board, conservative budgeting left small amounts in every program at the end of the year. This averages to a 5.1 % variance across all programs. By expenditure category, the following are noteworthy: • Salary expense was $88,080 under budget. The majority of this was in the Public Safety Department and was the result of unfilled positions. In conjunction with the above surplus in salary, there is a deficit in overtime expenses of $69,086. This also is attributable to the Public Safety Department. • Special Pay expenses are over budget by $70,821 due to the cash in of leave balances when employees leave the City and for those that cash in accumulated leave balances in excess of minimum levels. Of that overage, $49,612 can be attributed to the Public Safety Department. • Health Insurance expenses ended the year with a surplus of $141,362 positive variance. This +~• is the fiscal year savings attributable to changing from Blue Cross Biue Shield to Aetna as the City's health care provider. This savings impacted all departments. • Worker Compensation expense tine item also resulted in a positive variance of 62,524 for the General Fund. This was due to over estimating the premiums at budget time. '~'"" • The professional. services line item expense came in under budget by $67,031 in the General Fund. The most significant portions of this budget unspent were legal fees of $32,961 and $14;805 in the Planning Division. • Contract services came in under budget by $91,161. Public Works Department was responsible for the largest portion of this variance in the amount of 52,302. This includes items such as Town Center and Fly-Over maintenance, grounds maintenance. The rest of this variance is made up of small amounts in various departments. • Repairs and maintenance in the general fund came in under budget by $55,855. The largest portion of this surplus was the result of postponing some maintenance items on City Hall, such as new carpet and tile, so as to be done later in connection with the City Hall construction. Both Parks and Recreation and Public Works left over $8,000 each of unspent funds. • Operating Supplies budget was over funded this year by $50,486 in the general Fund. The '~'" variance was not attributable to any one significant item, but spread out between City _ Administration, Public Safety and Public Works. Although the City budgeted a decrease in fund balance of $801,754, the fund balance actually only decreased by $96,590 due to positive variances in revenues, expenditures, transfers and other financing sources totaling $705,164. 12 !~ Capital Asset and Debt Administration Capital Assets-The City of Atlantic Beach's investment in capital assets for its governmental and ~,,, business-type activities as of September 30, 2004 amounted to $43,544,324 (net of accumulated depreciation). This net investment in capital assets includes land, buildings, improvements other than buildings, and equipment. The total decrease in the City of Atlantic Beach's investment in capital assets for the current fiscal year was $174,631, less than,l%. Major Capital Asset events during the current fiscal year included the following: • The Core City project to improve drainage in Old Atlantic Beach was completed using Gas Tax, Water and Sewer Utility and Storm Water Utility funds, at a cost of $7,187,116. • Anew sludge holding tank at wastewater treatment ptant No. 2 was constructed at a cost of $506,741. ~• • Continued reconstruction of the elevated water tank relocated from central Florida; various sewer and well rehabilitations; and the cost to relocate utilities to facilitate the Wonderwood Connector accounts for $1,452,403 of the construction in progress in the ~ Utility Fund as of the end of the year. • Security enhancements at the treatment plants were completed at a cost of $166,890; construction in progress related to additional security improvements amounted to $75,134. • Construction began on the addition of 1,417 square feet and remodeling of office space at the City Hall building. Construction in progress at the end of the year amounted to $55,685. ~"" • Costs associated with the City's unsuccessful bid to acquire the Navy's water and sewer facilities at Mayport Naval Station, amounting to $117,872, were removed from construction in progress and were reported as a loss on disposal of fixed assets. CITY OF ATLANTIC BEACH'S CAPITAL ASSETS (Net of Depreciation) (In Thousands) Business- Governmental type Land Buildings and improvements other than buildings Equipment Construction in progress Total Activities Activities Total $ 1,604 $ 750 $ 2,354 5,417 32,523 37,940 966 410 1,376 336 1,538 1,874 $ 8,323 $ 35,221 $ 43,544 ~" Additional information on the City of Atlantic Beach's capital assets can be found in Note 6 on pages 37 - 39 of this report. 13 Long-term debt At the end of the 2004 fiscal year, the City of Atlantic Beach had total bonded debt outstanding of $21,142,894. Of this amount, $1,302,997 comprises debt backed by the utility services taxes. The remaining $19,839,897 of the City of Atlantic Beach's debt represents the utility revenue ~,., bonds secured by the revenues of the water and sewer utility systems. CITY OF ATLANTIC BEACH'S OUTSTANDING DEBT Revenue Bonds Business- Governmental type Activities Activities Total ~"" Utility System Revenue Bonds, Series 1996 $ $ 19,839,897 $ 19,839,897 SunTrust Revenue Refunding Bonds, Series 1999 584,369 718,628 1,302,997 Total $ 584,369 $ 20,558,525 $ 21,142,894 The City's total debt decreased by $554,972 or (2.5%) during the current fiscal year. The Utility Revenue System Revenue Bonds Series 1996 carries an insured "AAA" rating and an underlying rating of "Aaa" from Moody's. Under Florida statues, no debt limit margin is placed on local governments. rJ Additional. information on the City's long-term debt can be found in Note 7 on pages 39 - 40 of this report. Economic Factors and Next Year's Budgets and Rates Taxable property values in The City of Atlantic Beach continue to grow. The growth would have been much more, if not for the State of Florida's 3 percent cap on homesteaded property. The 2004 taxable value is 92.4 million more than the previous year bringing the total value to $1,022,068,128 and representing a 9.9% increase. The City was able to adopt a balanced budget and keep the millage rate the same as the previous year at 3.0394 mills. • The City's utility service jurisdiction grew by 3% in the number of accounts during the current !~"' year. Total number of active accounts went from approximately 7,935 to 8,195. Although the number of accounts grew over the year, the actual volume of water sold decreased by 1% resulting in lower than expected sales. The city has concluded that this is most likely due to ~ the conservation efforts of our customers. Per the St. Johns Water Management District's requirements, the city adopted water conservation rates for residential customers late in the year. The rate structure put into place is an inclining block structure charging a premium for high consumption and irrigation. The new rate structure is also expected to generate from 5% to 6% in additional revenues for the water and sewer utilities. Addressing the Water Managements concerns is a part of the process of renewing the City's consumptive use permit for drawing water from the aquifer. • The City's rate of return on pooled short-term investments has declined from 1.52% last year to 1.33% in the current year. This represents a .125% decrease from the State Board Administration. '~ 14 • The City receives allocations of revenues collected by the state and county for sales taxes; local option gas taxes state revenue sharing, convention development taxes and discretionary sales taxes. All of these sources are forecasted by the Florida Legislative Committee on Intergovernmental Relations and have been consistent with their predictions. These revenue sources represent approximately 29% of the governmental revenues and have been steady overall for the last few years. The sum total of these revenue sources grew by only 5.7% from ~„ the previous year. All of these factors were considered in preparing the City of Atlantic Beach's budget for the 2004/2005 fiscal year. Some budgetary highlights for next year are as foilows: • During the current fiscal year, unreserved fund balance in the General Fund decreased to $5,722,850 plus an additional $20,926 reserved for inventory, totaling $5,743,776. In the 2004/2005 fiscal year budget the City of Atlantic Beach has appropriated $1,758,384 of expenditures in excess of budgeted revenues to be transferred to the storm water utility fund for purposes of constructing a storm water retention pond and for some small local drainage projects. The property tax millage rate for the 2004/2005 budget was adopted at 3.0394, the same as the previous year. • Water and sewer service rates were restructured as mentioned above also incorporating about *• a 5% increase in revenues as a result. This increase is reflected in the 2004/2005 budget and is needed to fund capital improvements to the system. The rates were last increased October 1, 2003 by 1.5%. • The 1996 Utility Revenue Bond Construction Fund has no budget for 2004/2005. All funds have now been expended on the systems .and the City has set a policy of funding future projects on a "pay as we go" basis. Requests for Information ~"' k This 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, 800 Seminole Road, Atlantic Beach, Florida, 32233. ~~ ~~w Jim Han n Nelson Van Liere, CPA City nager Finance Director 15 ~" 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, 2004 Assets Equity in Pooled Cash and Cash Equivalents Receivables, Net Due from Other Governments Inventories Special Assessments -Current Note 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 Accounts Payable and Other Current Liabilities Due to Other Governments Deferred Revenue Deposits Compensated Absences Accrued Interest Payable Payable from Restricted Assets: Current Maturities of Bonds Payable Accrued Interest Payable Customer Deposits Noncurrent Liabilities: Due Within One Year Due in More Than One Year Total Liabilities Net Assets Invested in Capital Assets, Net of Related Debt Restricted for: Renewal and Replacement Debt Service Road and Street Expenditures Tourism and Recreation Tree Replacement Public Safety Police Training Capital Projects Unrestricted Total Net Assets Governmental Business-Type Activities Activities Total $ 7,266,458 $ 4,447,478 $ 11,713,936 137,675 464,147 601,822 941,241 144,325 1,085,566 20,926 17,062 37,988 2,515 56,020 58,535 0 28,992 28,992 0 2,124,189 2,124,189 1,604,311 3,605,833 3,175,690 2,471,454 (2,870,537) 336,324 0 0 0 0 16,691,890 651,372 0 60,798 5,825 437,315 8,181 0 0 0 48,950 535,419 1,747,860 7,738,706 0 74,632 376,030 174,879 17,201 28,480 14,848 1,170,979 5.348.275 $ 14,944,030 749,499 4,332,715 45,045,03b 1,296,905 (17,741,504) 1,538,598 140,849 155,194 18,800 362.792 43,181,097 718,751 5,706 112,822 0 132,537 0 525,518 592,812 505,859 45,646 19,987,361 22,627,012 14,662,724 500,000 0 601,150 0 0 0 0 0 4.790.211 $ 20,554,085 2,353,810 7,938,548 48,220,726 3,768,359 (20,612,041) 1,874,922 140,849 155,194 18,800 362.792 59,872,987 1,370,123 5,706 173,620 5,825 569,852 8,181 525,518 592,812 505,859 94,596 20,522,780 24,374,872 22,401,430 500,000 74,632 977, 180 174,879 17,201 28,480 14,848 1,170,979 10.13 8.486 $ 35,498,115 See accompanying notes. +"" 16 er O N O O M ~a o~~ U(~,F WSW ~ ~ O A ~'z~ ~~a H ~I ~ ',y O F ~ a 0 d d z h ~ d = ~ ~ c=a E U ~ d L' OC d ~ 7 C L R d ~ ' x a`. .. d H G a Y! 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O U td N { g CITY OF ATLANTIC BEACH, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2004 Assets Equity in Pooled Cash and Cash Equivalents Receivables, Net Due from Other Funds Due from Other Governments Inventories Special Assessment Receivable -Current Total Assets Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Deposits ~"" Deferred Revenue Total Liabilities Nonmajor Governmental General Funds Total Governmental Funds $ 5,562,182 $ 1,704,276 $ 7,266,458 137,675 0 137,675 122,105 0 122,105 588,713 352,528 941,241 20,926 0 20,926 2,515 0 2,515 6,434,116 2,056,804 8,490,920 575,597 0 5,825 108,9 i 8 !AA ~1 A A 75,775 651,372 122,105 122, i OS 0 5,825 1,875 110,793 199.755 890,095 Fund Balances Reserved for: Debt Service Inventories Unreserved, Reported in: General Fund Special Revenue Funds Capital Projects Fund Total Fund Balances 0 74,632 74,632 20,926 0 20,926 5,722,850 0 5,722,850 0 1,754,767 1,754,767 0 27,650 27,650 5,743,776 1,857,049 7,600,825 Total Liabilities and Fund Balances $ 6,434,116 $ 2,056,804 $ 8,490,920 See accompanying notes. ~ 18 CITY OF ATLANTIC BEACH, FLORIDA RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2004 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 $ 11,193,612 (2,870,537) $ 7,600,825 8,323,075 Nonexchange receivables that do not provide current financial resources and, therefore, are not reported as revenues in the funds. 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 liabitities, 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 49,995 584,369 437,315 8,181 (1,029,865) $ 14,944,030 See accompanying notes. 19 ~" as CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 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 General Nonmajor Governmental Funds Total Governmental Funds 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) Transfers in Transfers out Sale of General Fixed Assets Total Other Financing (Uses) Net Change in Fund Balances Fund Balances, Beginning of Year Fund Balances, End of Year $ 4,189,181 $ 1,200,713 $ 5,389,894 410,933 0 410,933 1,694,432 0 1,694,432 558,750 346,556 905,306 17,787 0 17,787 142,503 0 142,503 63,5?1 17,725 81,296 159,456 4,656 164,112 1,240,615 0 1,240,615 8,477,228 1,569,650 10,046,878 2,105,943 58,323 2,164,266 4,011,868 159,091 4,170,959 1,224,843 43,815 1,268,658 825,327 11,746 837,073 0 45,550 45,550 0 25,542 25,542 222,057 537,497 759,554 (8,390,038) (881,564) (9,271,602) 87,190 688,086 775,276 620,878 116,568 737,446 (811,296) (724,879) (1,536,175) 6,638 0 6,638 (183,780) (608,311) (792,091) (96,590) 79,775 (16,815) 5,840,366 1,777,274 7,617,640 $ 5,743,776 $ 1,857,049 $ 7,600,825 See accompanying notes. 20 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, 2004 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 $ 759,554 Less: Current Year Depreciation (505,734) $ (16,815) 253,820 In the statement of activities, only the loss on the sale/disposal of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold/disposed. Certain nonexchange revenues reported in the statement of activities are not considered current financial resources and, therefore, are not reported as revenue in the governmental funds. Repayment oflong-term debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Debt Interest Expense 661 Compensated Absences (42,292) Change in Net Assets -Governmental Activities (17,025) 56,418 45,550 (41,631) $ 280,317 ""4 See accompanying notes. 21 "' ~' CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2004 Assets Current Assets: Equity in Pooled Cash and Cash Equivalents Accounts Receivable, Net Inventories Due from Other Governments Special Assessments -Current Note 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 Note 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 Liabilities Payable from Restricted Assets: Current Maturities of Bonds Payable Accrued Interest Payable Customer Deposits Noncurrent Liabilities: Due Within One Year Due in More Than One Year Total Liabilities Business-Type Activities -Enterprise Funds Utility Stormwater Sanitation Total $ 2,551,168 $ 1,199,540 $ 696,770 $ 4,447,478 393,948 15,398 54,801 464,147 17,062 0 0 17,062 38,269 553 105,503 144,325 56,020 0 0 56,020 28,992 0 0 28,992 1,976,401 147,788 0 2,124,189 749,499 0 0 4,332,715 0 0 40,028,460 5,016,576 0 1,084,817 190,630 21,458 (17,265,270) (462,115) (14,119) 1,496,576 42,022 0 140,849 0 0 155,194 0 0 18,800 0 0 312,857 49,935 0 36,116,357 6,200,327 864,413 749,499 4,332,715 45,045,036 i ,29b,905 (17,741,504) 1,538,598 140,849 155,194 18,800 362,792 43.181.097 436,925 41,539 240,287 718,751 5,706 0 0 5,706 60,381 i 1,493 40,948 112,822 132,537 0 0 132,537 454,220 71,298 0 525,518 516,322 76,490 0 592,812 505,859 0 0 505,859 45,646 0 0 45,646 17,285,041 2,702,320 0 19,987,361 19,442,637 2,903,140 281,235 22,627,012 Net Assets Invested in Capital Assets, Net of Related De bt 12,641,890 2,013,495 7,339 14,662,724 Restricted for Renewal and Replacement 500,000 0 0 500,000 Restricted for Road and Street Expenditures 0 601,150 0 601,150 Unrestricted 3,531,830 682,542 575,839 4,790,211 Total Net Assets $ 16,673,720 $ 3,297,187 $ 583,178 $ 20,554,085 See accompanying notes. 22 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 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 Intergovernmental Charges Loss on Disposal of Fixed Assets Other Expenses (Total Operating Expenses) Operating. Income (Loss) Nonoperating Revennes (Expenses) Connection Charges Intergovernmental Revenue Interest Income Interest Expense Amortization of Loan Costs Total Nonoperating (Expenses) (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 1,776,268 619,959 20,239,899 Net Assets, End of Year $ 16,673,720 $ 3,297,187 $ 583,178 $ 20,554,085 See accompanying notes. 23 Business-Type Activities -Enterprise Funds Utility Stormwater Sanitation Totals $ 5,513,210 $ 372,845 $ 1,282,852 $ 7,168,907 15,828 340 0 16,168 5,529,038 373,185 1,282,852 7,185,075 1,392,181 216,638 4,463 1,613,282 594,194 156,388. 1,075,270 1,825,852 266,231 29,483 3,250 298,964 115,966 28,710 0 144,676 454,750 0 0 454,750 1,637,737 167,422 1,510 1,806,669 841,332 153,860 127,197 1,122,389 119,125 0 0 119,125 224,614 3,704 2,922 231,240 (5,646,130) (756,205) (1,214,612) (7,616,947) (117,092) (383,020) 68,240 (431,872) 32,520 0 0 32,520 79,791 17,846 105,504 203,141 48,288 8,970 8,020 65,278 (939,746) (79,498) 0 (1,019,244) (16,817) (3,147) 0 (19,964) (795,964) (55,829) 113,524 (738,269) (913,056) (438,849) 181,764 (1,170,141) 685,598 0 0 685,598 295,961 2,255,729 0 2,551,690 (1,238,455) (295,961) (218,545) (1,752,961) (256,896) 1,959,768 (218,545) 1,484,327 (1,169,952) 1,520,919 (36,781) 314,186 17,843,672 ~. """ CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 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 Cash Flows from Capital and Related Financing Activities Intergovernmental Revenues Collections on Note Receivable Collections on Special Assessments Capital Contributions Fixed Asset Additions Principal Payments on Bonds Payable Interest Paid Net Cash Provided by (Used in) Capita! and Related Financing Activities Cash Flows from Investing Activities Business-Tvae Activities - Enterarise Funds Utility Stormwater Sanitation Totals $ 5,562,707 $ 373,954 $ 1,282,094 $ 7,218,755 {2,141,608) (863,600) (909,928) (3,915,136) (1,392,181) (216,638) (4,463) (1,613,282) (841,332) {153,860) (127,197) (1,122,389) 1,187,586 (860,144) 240,506 567,948 32,520 0 0 32,520 79,191 1,371,865 0 1,451,056 (354,591) (79,191) (218,545) (652,327) (242,880) 1,292,674 (218,545) 831,249 76,172 33,210 0 109,382 10,362 0 0 10,362 59,091 0 0 59,091 537,683 0 0 537,683 (1,081,399) (278,942) (5,747) (1,366,088) (474,112) (67,803) 0 (541,915) (982,806) (154,539) 0 (1,137,345) (1.,855,009) {468,074) (5,747) (2,328,830) Interest Received 48,288 8,970 8,020 65,278 Net Increase (Decrease) in Cash and Cash Equivalents (862,015) (26,574) 24,234 (864,355) Cash and Cash Equivalents, Beginning of Year 5,389,584 1,373,902 672,536 7,436,022 Cash and Cash Equivalents, End of Year $ 4,527,569 $ 1,347,328 $ 696,770 $ 6,571,667 See accompanying notes. 24 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 (Concluded) Reconciliation of Operating Income to Net Cash Provided by (Used in) Operating Activities Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided by (Used in) Operating Activities: Depreciation Bad Debt Expense Loss on Disposal of Capital Assets Change in Assets and Liabilities: Accounts Receivable Inventory Accounts Payable and Accrued Liabilities Customer Deposits Deferred Revenue Net Cash Provided by (Used in) Operating Activities Reconciliation of Cash and Cash Equivalents to Balance Sheet Equity in Pooled Cash and Cash Equivalents in Current Assets Restricted Equity in Pooled Cash and Cash Equivalents Total Cash and Cash Equivalents Noncash Activity Net Capitalized Interest Expense Business-Type Activities -Enterprise Funds Utility Stormwater Sanitation Totals $ (117,092) $ (383,020) $ 68,240 $ (431,872) 1,637,737 167,422 1,510 1,806,669 8,543 654 2,922 12,119 119,125 0 0 119,125 18,504 1,257 1,184 20,945 (7,342) 0 0 (7,342) {491,923) (645,969) 168,592 (969,300) 32,288 0 0 32,288 (12,254) (488) (1,942) (14,684) $ 1,187,586 $ (860,144) $ 240,506 $ 567,948 $ 2,490,469 $ 1,171,108 $ 1,976,340 147,788 $ 4,466,809 $ 1,318,896 $ 696,770 $ 4,358,347 0 2,124,128 696,770 $ 6,482,475 $ 74,132 $ 79,191 $ 0 $ 153,323 Noncash Transfers $ (667,094) $ 667,094 $ 0 $ 0 See accompanying notes. 25 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2004 r` Pension Trust Funds g Assets Cash and Cash Equivalents with Trustee $ 39,512 ~""' Investments with Trustee 10,335,058 Total Assets 10,374,570 Liabilities Accounts Payable and Accrued Liabilities 21,230 Net Assets Held in Trust for Pension Benefits ~'" See accompanying notes. 26 $ 10,353,340 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 Pension Trust Funds Additions Contributions: Employees $ 87,540 Employer 553,866 State of Florida 95,429 Total Contributions 736,835 Net Increase in Fair Value of Investments 749,823 Interest and Dividends 27,963 Total Additions 1,514,621 Deductions Refunds of Contributions 11,122 Benefits 491,285 Investment Expenses 109,932 Total Deductions 612,339 Net Increase 902,282 Net Assets, Beginning of Year 9,451,058 Net Assets, End of Year $ 10,353,340 See accompanying notes. 27 i CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS ~" SEPTEMBER 30, 2004 Note 1- 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 f 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- Comrnissioner) and provides, under the administration of an appointed City Manager, the following services: public safety, public works (streets and infrastructure), recreation, sanitation, stormwater, planning, zoning, water and sewer, and general government services. As outlined in Governmental Accounting Standards Board (GASB) Statement No. 14, The Reporting Entity, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units an Amendment to GASB Statement No. I4, the financial reporting entity consists of the primary government, organizations for which the primary governments 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: (a) part of the primary government; (b) a component unit which should be included in the reporting entity (blended or discreetly presented); or (c) 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. 28 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 "" (Continued) 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 ftnancial 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 i measurable and available only when cash is received by the City. 29 "'~' A l w CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note I - 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 and for the use of bond construction proceeds for capital projects related to the utility system. ^ 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). p" ^ 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 the Governmental Accounting Standards Board. 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 has elected not to follow subsequent private-sector guidance. 30 ~4 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (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, 2004, were $369,285. 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. 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 2). 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. 31 s; CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS ""' SEPTEMBER 30, 2004 (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, 2004, in the enterprise funds is $90,370. ~„ 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 non-current 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 Governmental Accounting Standard Board's ` Statement Number 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 will be ..added to the current and prospective values to arrive at total estimated ~"'"` cost prior to the fiscal year ending September 30, 2007. For business-type activities, z infrastructure assets have been capitalized at cost. Utility improvements are being depreciated over their useful lives. ~'"" 32 *,~ CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 1- Summary of Significant Accounting Policies (Continued) Capital Assets (Concluded) Major outlays for capital assets and improvements are capitalized as projects aze 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 aze 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. ,,,,~ 33 1'" CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS '"` SEPTEMBER 30, 2004 (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. Note 2 - Deposits 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, 2004, the carrying amount of cash on hand and on deposit with banks, including interest-bearing deposits was $1,368,229, and the related bank balance was $1,608,617. Monies which are placed on deposit with financial institutions in the form of demand deposit 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 SO% 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. Accordingly, all deposits are considered '~"' category one credit risk under GASB Statement No. 3. "' 34 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 2 - Deposits and Investments (Continued) 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. Cash and investments at September 30, 2004, are categorized in accordance with GASB Statement No. 3 to indicate the level of risk assumed by the City. The pension investments held by SunTrust Trust Department and Merrill Lynch are considered to be category one credit risk investments, which means that they are fully insured ($100,000 per participant). 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. Funds that have not been transferred to the state investment 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. The total cash and cash equivalents and investment balances of the City at September 30, 2004, are comprised of the following items: Cash and Cash Equivalents Petty Cash on Hand Checking and Repurchase Agreement Investment with State Board of Administration Total Cash and Cash Equivalents Less Cash and Cash Equivalents, Restricted, Including $39,512 of Cash and Cash Equivalents with Trustee Total Cash and Cash Equivalents, Unrestricted Pension Trust Investments SunTrust Retirement Reserve Fund SunTrust Small Cap Equity Fund SunTrust Mid Cap Equity Fund SunTrust High-grade Intermediate Bond Fund SunTrust High-grade Bond Fund Marketable Equity Securities Merrill Lynch American Euro Pacific Growth Merrill Lynch Ready Assets Total Pension Trust Investment 35 $ 2,050 1,368,551 12,507,036 13,877,637 (2,163,640) 11.713.997 $ 833,829 779,936 183,801 1,678,597 3,376,655 2,454,979 1,027,191 70 10.335.058 '' ~. CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 ~ (Continued) Note 2 - Deposits and Investments (Concluded) Restricted cash and investments at September 30, 2004, in the enterprise funds follows: Enterprise Fund Customer Renewal and Deaosits Realacement Debt Service Total Utility Fund $ S05 8S9 $ 500 000 $ 970 542 1.976A01 Stormwater Fund $ 0 $ 0 $ 147.788 $ t47 788 Note 3 - 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 azea. 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 azeas 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, 2004. Special Assessment Receivable, September 30, 2004 "' Less Current Portion Total Special Assessment Receivable - Noncurrent Note 4 - Receivables Beach Section H Avenue Other Assessment Assessments Assessments Total $ 175,457 $ 14,794 $ 9,133 $ 199,384 (47,542) (3,773) (7,294) (58,609) $ 127.915 $ 11 021 $ 1 839 $ 140 775 Receivables, net of the allowance for doubtful accounts at September 30, 2004, consists of the following: ~"' 36 3 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 4 - Receivables (Concluded) Fund Genera! Utility Stormwater Sanitation Total Less Total Allowance Accounts Accounts for Doubtful Receivable Receivable Accounts Net $ 137,675 $ 0 $ 137,675 472,743 (78,795) 393,948 17,424 (2,026) 15,398 64,350 . (9,549) 54,801 $ 692 192 $ (90,370) $ 601,822 Included in accounts receivable are $167,447 of water and sewer revenues earned but not billed as of September 30, 2004. Note 5 - 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, 2004: Note Receivable, September 30, 2004 $ 184,186 Less Current Portion (28,992) Total Note Receivable -Noncurrent $ i 55 194 Note 6 - Capital Assets Capital asset activity for the fiscal year ended September 30, 2004, is as follows: Governmental Activities Capital Assets Not Being Depreciated: Land Construction in Progress Tota( Capital Assets Not Being Depreciated Capital Assets Being Depreciated: Buildings .Improvements Other Than Buildings Machinery and Equipment Total Capital Assets Being Depreciated Beginning Ending Balance Increases Decreases Balance $ 1,604,311 $ 0 $ 0 $ 1,604,3ll 725.730 471.463 860.869 336.324 2,330,041 471.463 860,869 1.940.635 3,590,418 15,415 0 3,605,833 2,312,398 863,292 0 3,175,690 2.355.314 285.072 168.932 2.471.454 8.258,130 1.163.779 168.932 9.252.977 37 ~" hh4~ f, }; `ry' IA ~' F- CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 6 - Capital Assets (Continued) Beginning Ending Balance Increases Decreases Balance Governmental Activities, Concluded Less Accumulated Depreciation for: Buildings $ 781,050 $ 80,03 i $ 0 $ 861,081 Improvements Other Than Buildings 374,164 129,751 0 503,915 Machinery and Equipment 1.355.065 295.952 (45.476 1.505.541 Total Accumulated Depreciation 2.510.279 505.734 145.476 2.870,537 Total Capital Assets Being Depreciated, Net 5.747.851 658.045 23.456 6.382.440 Governmental Activities Capital Assets, Net $ 8 077 892 ~ 1 129,508 884325 $ 8 323 075 8asiness-type Activities Capital Assets Not Being Depreciated: Land $ 749,499 $ 0 $ 0 $ 749,499 Construction in Progress 8,027,392 1.336.202 7.824,996 1.538.598 Total Capital Assets Not Being Depreciated 8,776.891 1.336202 7,824,996 2.288,097 Capital Assets Being Depreciated: Buildings 4,332,715 0 0 4,332,715 Improvements Other Than Buildings 37,337,911 7,707,125 0 45,045,036 Machinery and Equipment 1.199,800 165.851 68.746 1.296.905 Total Capital Assets Being Depreciated 42.870,426 7.872.976 b8.746 50,674,656 Less Accumulated Depreciation for: Buildings 2,944,281 148,750 0 3,093,031 Improvements Other Than Buildings 12,220,501 1,541,488 0 13,761,989 Machinery and Equipment 841,472 116.431 71,419 886,484 Total Accumulated Depreciation 16.006.254 1.806.669 71.419 17.741,504 Total Capital Assets Being Depreciated, Net 26.864,172 6.066,307 (2.673) 32.933,152 Business-type Activities Capital Assets, Net S 35 641 063 7.402.509 $ 7,822,323 $ 35.221 249 38 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 6 - Note 7 - Capital Assets (Concluded) Depreciation expense was charged to functions/programs as follows: Governmental Activities General Governmental $ 108,772 Public Safety 182,961 Transportation 103,096 Parks and Recreation 110,905 Total Depreciation Expense -Governmental Activities $ 505,734 Business-type Activities Utility $ 1,b37,737 Stormwater 167,422 Sanitation 1,510 Total Depreciation Expense -Business-type Activities x.806.669 Long-Term Debt Revenue bonds payable are comprised of the following: 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 $ 20,210,000 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 1,3.14,542 Total Revenue Bonds Payable 21,524,542 Less Unamortized Discount (370,103) Less Unamortized Refunding Loss (11,545) Total Long-term Debt, Net ~ 21,142.894 The annual requirements to amortize all revenue bonds payable outstanding at September 30, 2004, are as follows: 39 -~ : ~°' CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 7 - Long-Term Deb# {Concluded) Year Ending Governmental Activities Long-Term Debt Business-Type Activities Long-Term Debt September 30, Principal Interest Total Principal Interest Total 2005 $ 48,950 $ 23,480 $ 72,430 $ 571,164 $ 1,111,628 $ 1,682,792 2006 50,066 21,439 71,505 592,557 1,084,373 1,676,930 2007 53,213 19,270 72,483 621,490 1,055,346 1,676,836 2008 53,930 17,046 70,976 652,386 1,024,052 1,676,438 2009 56,686 14,673 71,359 685,829 990,179 1,676,008 2010 - 2014 321,523 34,866 356,389 4,001,747 4,357,200 8,358,947 2015 - 2019 0 0 0 4,710,000 3,179,000 7,889,000 2020 - 2024 0 0 0 6,145,000 1,695,513 7,840,513 2025 - 2027 0 0 0 2,960,000 165,000 3,125,000 Total $ 584,368 $ 130,774 $ 715,142 $ 20,940,173 $ 14,662,291 $ 35,602,464 Interest incurred during the year ended September 30, 2004, was $24,880 in the debt service fund and $1,172,567 in the enterprise funds. Of the amount incurred in the enterprise funds, $153,323 was capitalized. The City is also required to maintain certain debt service coverage ratios in accordance with bond resolutions. As of September 30, 2004, 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, 2004: Balance Balance Due October 1, September 30, Within 2003 Additions Reductions 2004 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 $ 629,918 $ 0 $ 45,549 $ 584,369 $ 48,950 395,023 329.605 287.313 437.315 437,315 $ L024 941 $ 329.605 $ 332,$62 $ 1.021.684 $ 486,265 $21,482,088 $ 0 $ 541,915 $ 20,940,173 $ 571,164 401,312 0 31,209 370,103 0 12,828 0 1.283 11,545 0 21.067,948 0 509.423 20,558,525 571,164 122,461 69.691 59,615 132.537 132.537 21.190.409 $ 69 691 $ 569 038 $ 20,¢11 062 $ 703 701 +~* 40 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 8 - 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 ail 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, 2004, the date of the latest actuarial valuation: 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 Pian General Employees Police 28 8 2 3 11 2 84 22 125 35 • Plan Description The General Employees' Retirement Ptan 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. Plan members are required to contribute 2.0% of their 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 provides retirement, disability and death benefits to plan members and their beneficiaries. The Police Retirement 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. 1 41 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Continued) Note 8 - Defined Benefit Pension Plans (Concluded) Annual Pension Costs and Net Pension Asset The City's annual pension cost and net pension asset to the General Employee's and Police Retirement Plans for the current year were as follows: General Employees Police Total Annual Required Contribution (ARC) $ 381,518 $ 242,b37 $ 624,155 Contributions Made (381,518) (267,777) (649,295) Net Pension Obligation, End of Year $ 0 (25.140) $ (25.140) ~. The City has funded the Police Retirement Plan in excess of the computed ARC for 2004 based upon the 2003 actuarial valuation. No pension asset has been recorded in the accompanying financial statements pending computation of the 2004 actuarial valuation. Other Pension Plan Information The annual required contributions for the current year were determined as part of the September 30, 2003, 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 post retirement 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: i Annual Percentage Fiscal Year Ended Pension Cost of APC Net Pension September 30, (APC) Contributed Asset General Employees 2002 $ 288,070 100% $ 0 2003 315,106 100% 0 2004 381,518 100% 0 ~'"' Police 2002 $ 240,242 100% $ 0 2003 225,991 100% 0 2004 242,637 104% 25,140 42 CITY OF ATLANTIC BEACH, FLORIDA t NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 "' (Continued) Note 9 - Interfund Accounts Individual fund itrterfund receivables and payables, at September 30, 2004, consist of the following: Due From Due to Other Other Funds Funds General $ 122, i OS $ 0 Nonmajor Governmental 0 122,105 Note 10 - 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, 2004: Nonmajor .Utility General Governmental Stormwater Total Fund Fund Funds Fund Transfers Out General Fund $ 0 $ 0 $ 40,482 $ 770,814 $ 811,296 Nonmajor Govern- mental Funds 0 47,742 76,086 601,051 724,879 Utility Fund 0 354,591 0 883,864 1,238,455 Sanitation Fund 0 218,545 0 0 218,545 Stormwater 295.961 _0 0 0 295.961 Total Transfers in 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 11- Commitments As of September 30, 2004, the City .had outstanding commitments on contracts in progress as follows: Unexpended Contract Proiect Type Amounts Utility System Improvements $ 78,807 Stormwater System Improvements 2,042 ,,,,~ General Government Improvements 296,564 `' 43 *'~! ~" CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2004 (Concluded) Note 11- Commitments (Concluded) 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 Atlantic Beach. 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, 2004, the City incurred $770,503 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. Note 12 - 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 A ever be payable as a result of these proceedings. Note 13 - 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. 44 ;; ~* REQUIRED SUPPLEMENTARY INFORMATION a CITY OF ATLANTIC BEACH FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF PENSION FUNDING PROGRESS SEPTEMBER 30, 2004 Genera! Employees' Retirement Plan UAAL as Valuation Funded Annual Covered Percentage of Date AVA AAL UAAL Ratio Payroll Payroll 9/30/99 $ 4,650,000 $ 5,796,000 $ 1,146,000 80.2% $ 2,185,000 52.4% 9/30/00 5,229,000 6,462,000 1,233,000 80.9% 2,330,000 52.9% 9130/01 5,587,000 6,986,000 1,399,000 80.0% 2,462,000 56.8% 9/30/02 5,747,OOfl 7,479,000 1,732,000 76.8% 2,768,000 62.6% 9/30/03 5,951,000 8,186,000 2,235,000 72.7% 2,856,000 78.3% Police Retirement Plan UAAL as Valuation Funded Annual Covered Percentage of Date AVA AAL UAAL Ratio Payroll Payroll 9/30/99 $ 3,393,000 $ 4,089,000 $ 696,000 83.0% $ 1,018,000 68.4% 9/30/00 3,791,000 4,615,000 824,000 82.1% 1,213,000 67.9% 9/30/01 4,Ob$,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% 1,195,000 92.4% 9/30/03 4,373,000 5,986,000 1,613,000 73.1% 1,129,000 142.9% 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. ~" 45 1^ ~; CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF CONTRIBUTIONS FROM EMPLOYER AND OTHER CONTRIBUTING ENTITIES SEPTEMBER 30, 2004 General Employees' Retirement Plan Annual Required Year Ended Contributed Percentage September 30, (ARC) Contributed 2000 $ 259,414 100% 2001 266,148 100% 2002 288,070 100% 2003 315,106 100% 2004 381,518 100% Police Retirement Plan Annual w Required Year Ended Contributed Percentage ,~.~ September 30 (ARC) Contributed 2000 $ 179,988 100% 2001. 183,091 100% ~ 2002 240,242 100% 2003 225,991 100% 2004 242,637 104% 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, 2003 Entry-Age Actuarial Cost Method Level Percent of Payroll, Closed 5 to 30 Years Funding Value 8.00% 5.50% 5.00% ~' ~'" 46 ~: , 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, 2004 Revenues Property Taxes Nonproperty 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: Legislative ~,., Legal Counsel Planning and Zoning City Clerk City Manager r°1 Finance and Accounting Human Resources Information Technology s~ Other Total General Government Public Safety: Law Enforcement Lifeguards Fire Control Code Enforcement Building Total Public Safety Transportation: Public Works Administration Streets and Roads Fleet Maintenance Total Transportation Parks and Recreation ~ (Total Expenditures) Budgeted Amounts Original Final Actual Amounts Variance With Final Budget - Positive (Negative) $ 2,714,050 $ 2,714,050 $ 2,719,203 $ 5,153 1,482,368 1,482,368 1,469,978 (12,390) 386,933 386,933 410,933 24,000 1,604,515 1,604,515 1,694,432 89,917 548,108 561,108 558,750 (2,358) 1,200 1,200 17, 78 7 16, 5 8 7 164,597 164,597 142,503 (22,094) 87,426 87,426 63,571 (23,855) 27,830 42,630 159,456 116,826 1,212,845 1,212,845 1,240,615 27,770 8,229,872 8,257,672 8,477,228 219,556 44,484 44,484 43,456 1,028 105,971 105,971 72,944 33,027 128,521 142,256 129,190 13,066 277,132 280,169 259,934 20,235 220,920 220,920 207,696 13,224 880,887 880,994 856,342 24,652 177,269 177,269 160,273 16,996 264,532 265,168 230,989 34,179 246,869 254,619 212,449 42,170 2,346,585 2,371,850 2,173,273 198 577 , 2,859,431 2,875,135 2,808,929 66,206 162,958 162,958 159,389 3,569 792,465 792,465 790,985 1,480 56,237 56,237 53,518 2,719 335,878 338,123 314,062 24,061 4,206,969 4,224,918 4,126,883 98,035 424,249 431,849 416,282 15,567 665,904 695,229 595,106 100,123 226,252 236,752 231,665 5,087 1,316,405 1,363,830 1,243,053 120,777 921,089 924,890 846,829 78,061 (8,791,048) (8,885,488) (8,390,038) 495,450 ~"" 47 "' t ~.. 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, 2004 (Concluded) Excess of Revenues Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Sale of General Fixed Assets Total Other Financing (Uses) Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses Fund Balances, Beginning of Year Fund Balances, End of Year ~" Variance With Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) $ (561,176) $ (627,816) $ 87,190 $ 715,006 620,775 620,878 620,878 0 (782,585) (811,296) (811,296) 0 16,480 16,480 6,638 (9,842) (145,330) (173,938) (183,780) (9,842) (706,506) (801,754) (96,590) 5,840,36b 5,840,366 5,840,366 $ 5,133,860 $ 5,038,612 $ 5,743,776 $ 48 705,164 0 705,164 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2004 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. 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. 49 #""' SUPPLEMENTARY INFORMATION ~. CITY OF ATLANTIC BEACH, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 Assets Equity in Pooled Cash and Cash Equivalents Due from Other Governments Total Assets Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Deferred Revenue Due to Other Funds Total Liabilities Fund Balances Reserved for: Debt Service Unreserved Reported in: Special Revenue Funds Capital Projects Fund Total Fund Balances Special Revenue Convention Tree Local Option Miscellaneous Development Half-Cent Replacement Gas Tax Grants Tax Sales Tax $ 17,201 $ 297,935 $ 0 $ 168,539 $ 1,071,829 0 92,212 54,308 6,340 109,454 17,201 390,147 54,308 174,879 1,181,283 0 14,117 0 0 38,116 0 0 0 0 0 0 0 54,146 0 0 0 14,117 54,146 0 3 8,116 0 0 0 0 0 17,201 376,030 162 174,879 1,143,167 0 0 0 0 0 17,201 376,030 162 174,879 1,143,167 Total Liabilities and Fund Balances $ 17,201 $ 390,147 $ 54,308 $ 174,879 $ 1,181,283 50 Special Revenue Total Nonmajor ~ Court Cost Radio Contraband Police Debt Capital Governmental Training Communication Forfeiture Grants Totai Service Projects Funds $ 9,677 $ 20,222 $ 4,373 $ 12,218 $ 1,601,994 $ 74,632 $ 27,650 $ 1,704,276 798 3,063 0 86,353 352,528 0 0 352,528 10,475 23,285 4,373 98,571 1,954,522 74,632 27,650 2,056,804 0 0 0 0 0 0 23,542 75,775 0 0 75,775 0 0 1,875 1,875 0 0 1,875 0 0 67,959 122,105 0 0 122,105 0 0 93,376 199,755 0 0 199,755 0 0 p 0 0 74,632 0 74,632 10,475 23,285 4,373 5,195 1,754,767 0 0 1,754,767 ~,, 0 0 0 0 0 0 27,650 27,650 10,475 23,285 4,373 5,195 1,754,767 74,632 27,650 1,857,049 $ 10,475 $ 23,285 $ 4,373 $ 98,571 $ 1,954,522 $ 74,632 $ 27,b50 $ 2,056,804 ~* ~" 51 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 Special Revenue Funds Revenues Taxes Other Intergovernmental Revenues Interest income Miscellaneous Revenues Total Revenues Expenditures Current: General Government Public Safety Parks and Recreation Debt Service: Principal Interest and Other Capital Outlay (Total Expenditures) (Deficiency) Excess of Revenues (Under) Over Expenditures Other Financing Sources (Uses) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances, Beginning of Year Fund Balances, End of Year Convention Tree Local Option Miscellaneous Development Half-Cent Replacement Gas Tax Grants Tax Sales Tax $ 0 $ 520,810 $ 0 $ 81,027 $ 598,876 0 0 69,911 0 59,094 0 4,790 0 1,348 10,175 3,481 0 0 0 175 3,481 525,b00 69,911 82,375 668,320 0 0 57,585 738 0 0 0 0 0 0 11,746 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 106,807 12,326 1,444 330,760 (11,746) (150,622) (69,911) (2,182) (330,760) (8,265) 374,978 0 0 0 (719,776) 0 80,193 337,560 0 5,000 0 0 0 (5,000) 0 5,000 (5,000) 0 85,193 332,560 162 89,686 810,607 (8,265) (344,798) 25,466 720,828 $ 17,201 $ 376,030 $ 52 162 $ 174,879 $ 1,143,167 e~ Special Revenue Funds Total ~ Nonmajor Court Cost Radio Contraband Police Debt Capital Governmental Training Communication Forfeiture Grants Total Service Projects Funds $ 0 $ 0 $ 0 $ 0 $ 1,200,713 $ 0 $ 0 $ 1,200,713 6,819 27,488 403 182,841 346,556 0 0 346,556 69 213 45 li0 16,750 662 313 17,725 0 0 0 0 3,656 0 1,000 4,656 6,888 27,701 448 182,951 1,567,675 662 1,313 1,569,650 A,a, 0 0 0 0 58,323 0 0 58,323 0 16,537 0 142,554 159,091 0 0 159,091 0 0 0 0 11,746 0 0 11,746 0 0 0 0 0 45,550 0 45,550 0 0 0 0 0 25,542 0 25,542 0 0 0 75,683 527,020 0 10,477 537,497 0 (16,537) 0 {218,237) (799,995) (71,092) (10,477) (881,564) 1 "'" 6,888 11,164 448 {35,286) 767,680 (70,430) (9,164) 688,086 0 0 0 40,482 45,482 71,086 0 116,568 0 0 0 {103) (724,879) 0 0 (724,879) 0 0 0 40,379 (679,397) 71,086 0 (608,311) } 6,888 11,164 448 5,093 88,283 656 {9,164) 79,775 ~"" 3,587 12,121 3,925 102 1,666,484 73,976 36,814 1,777,274 $ 10,475 $ 23,285 $ 4,373 $ 5,195 $ 1,754,767 $ 74,632 $ 27,650 $ 1,857,049 ~ 53 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2004 Assets Cash and Cash Equivalents with Trustee Investments with Trustee Total Assets Liabilities Accounts Payable and Accrued Liabilities Net Assets Held in Trust for Pension Benefits Police General Total Employees' Employees' Pension Retirement Retirement Trust Plan Plan Funds $ 16,980 $ 22,532 $ 39,512 4,321,628 6,013,430 10,335,058 4,338,608 6,035,962 10,374,570 9,465 i 1,765 21,230 $ 4,329,143 $ 6,024,197 $ 10,353,340 54 °"~" CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2004 Police General Total Employees' Employees' Pension Retirement Retirement Trust ~" Plan Plan Funds Additions Contributions: +'~" Employees $ 26,393 $ 61,147 $ 87,540 Employer 172,348 381,518 553,866 State of Florida 95,429 0 95,429 ~,,, Total Contributions 294,170 442,665 736,835 Net Increase in Fair Value of Investments 308,839 440,984 749,823 Interest and Dividends 10,535 17,428 27,963 ~ Total Additions 613,544 901,077 1,514,621 Deductions '~"'' Refunds of Contributions 5,667 5,455 11,122 Benefits 235,311 255,974 491,285 Investment Expenses 47,658 62,274 109,932 Total Deductions 288,636 323,703 612,339 Net Increase 324,908 577,374 902,282 Net Assets, Beginning of Year 4,004,235 5,446,823 9,451,058 Net Assets, End of Year $ 4,329,143 $ 6,024,197 $ 10,353,340 ~. 55 CITY OF ATLANTIC BEACH, FLORIDA HISTORICAL REVENUES AND EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2000 THROUGH 2004 (UNAUDITED) 2000 2001 2002 2003 2004 Revenues Operating Revenues: Water: Customer Charges $ 1,835,015 $ 1,913,167 $ 2,064,123 $ 2,012,087 $ 2,256,905 Miscellaneous Charges 363,435 231,298 248,894 337,224 15,828 Total Water 2,198,450 2,144,465 2,313,017 2,349,311 2,272,733 Sewer: Customer Charges 3,193,566 3,413,108 3,602,415 3,372,934 3,25b,305 Total Operating Revenues 5,392,016 5,557,573 5,915,432 5,722,245 5,529,038 Nonoperating Revenues: Interest Income: Water 135,249 123,274 50,487 29,161 20,184 Sewer 277,093 236,332 68,075 42,806 28,104 Total Nonoperating Revenues 412,342 359,60b 118,562 71,967 48,288 Total Revenues 5,804,358 5,917,179 6,033,994 5,794,212 5,577,326 Expenses Operating Expenses: Water 989,235 1,051,904 1,110,478 1,110,532 1,023,734 Sewer 1,574,226 1,836,399 1,732,289 1,964,887 1,918,713 Total Operating Expenses 2,563,461 2,888,303 2,84.2,767 3,075,419 2,942,447 Administrative, Nondivisional and Other: Water 378,966 381,287 424,162 548,905 526,729 Sewer 712,948 702,681 642,329 619,b35 539,217 Total Administrative, Nondivisional and Other 1,091,914 1,083,968 1,066,491 1,168,540 1,065,946 Total Expenses 3,655,375 3,972,271 3,909,258 4,243,959 4,008,393 Net Revenue 2,148,983 1,944,908 2,124,736 1,550,253 1,568,933 Capital Improvement Charges Sewer 135,465 137,965 145,471 153,878 112,311 Net Revenues Available for Debt Service 2,284,448 2,082,873 2,270,207 1,704,131 1,681,244 Nonoperating Income (Expense) Interest Expense (764,757) (874,231) (883,468) (890,937) (939,746) Loan Amortization (16,006) (16,618) (16,680) (16,818) (16,817) Total Nonoperating {Expense) Income (780,763) (890,849) (900,148) (907,755) (956,563) Net Income Before Depreciation and Operating Transfers $ 1,503,685 $ 1,192,024 $ 1,370,059 $ 796,376 $ 724,681 56 "~ ^I a ~' ~: CITY OF ATLANTIC BEACH, FLORIDA MAJOR UTILITY CUSTOMERS FOR THE YEAR ENDED SEPTEMBER 30, 2004 (UNAUDITED) Annual Billings Navy (Federal Government) Fleet Landing (Retirement Community) City of Atlantic Beach, Florida Hannah (Regional) Park Oaks of Atlantic Beach (Mobile Home Park) Sea Turtle Inn (Hotel) John Creek Estate (Mobile Home Park) Canterbury Court (Apartment Complex) Buccaneer Trail (Mobile Home Park) Atlantic Arms (Apartment Complex) Total 57 $ 431,373 191,143 115,582 85,769 80,3 51 72,968 67,721 61,037 60,836 55,486 $ 1,222,266 "' 3 d E E W e O p < e U ~' C d N G ~ d U ~ F Ez''O~ d~''~ ..a~L H G d ~ O ~ G ',y ~ Z H G F.1 U t ~W A~ ~p ~d 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O .~ L]. vi C U O O O N a 0 ~' CITY OF ATLANTIC BEACH, FLORIDA OTHER BOND COVENANT DISCLOSURES FOR THE YEARS ENDED SEPTEMBER 30, 2000 THROUGH 2004 (UNAUDITED) Utility Service Tax Collections (Unaudited) (Last Five Years) Year Electricity Telecom Gas 2000 $ 330,139 $ 203,206 $ 40,721 $ 2001 344,198 189,139 45,056 2002 339,138 680,595 26,959 2003 355,151 581,898 32,567 2004 351,752 552,716 26,850 Ad Valorem Tax Collections (Unaudited) (Last Five Years) Year Current Delin quent 2000 $ 1,875,702 $ 748 2001 2,132,923 1,466 2002 2,256,475 6,781 2003 2,530,175 (4,220) 2004 2,719,108 95 Fuel Oil 165 194 224 236 126 Total $ 1,876,450 2,134,389 2,263,256 2,525,955 2,719,203 Total $ 574,231 578,587 1,046,916 969,852 931,444 61 <i i SCHEDULES OF NET REVENUES IN ACCORDANCE WITH BOND RESOLUTIONS (UNAUDITED) ENTERPRISE FUNDS (WATER AND SEWER) FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 2004 2003 ,,, Gross Revenues Utility $ 5,513,210 $ 5,465,381 Connection Charges 188,384 410,742 interest 48,288 71,967 Total Gross Revenues 5,749,882 5,948,090 Operating Expenses Personal Services 1,377,156 1,342,843 Contractual Services 594,194 842,425 Supplies 266,231 311,419 .,~ Repairs and Maintenance 187,130 108,994 , Heat, Light and Power 454,750 469,732 Intergovernmental Charges 841,332 0 Loss on Disposal of Fixed Assets 119,125 0 Other Expenses 229,232 1,168,547 (Total Operating Expenses) (4,069,150) (4,243,960) Total Net Revenues in Accordance with Bond Resolutions 1,680,732 1,704,130 ''''~ Capital Facilities Charges 625,353 319,040 Special Assessments -New 0 0 Net Revenues Plus Capital Facilities Charges and Special Assessments 2,306,085 2,023,170 g Total Debt Service 1,590,431 1,592,047 Debt Service Coverage Ratio 145.00% 127.08% Debt Service Coverage Ratio Excluding Capital Facilities Charges 105.68% 107.04% Required Debt Service Coverage Ratio 110.00% 110.00% S Required Debt Service Coverage Ratio, Excluding Capital Facilities Charges 105.00% 105.00% a 62 ADDITIONAL ELEMENTS OF REPORT PREPARED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, ISSUED BY THE COMPTROLLER GENERAL OF THE UNITED STATES ~" CITY OF ATLANTICE BEACH, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS '"'°' FOR THE YEAR ENDED SEPTEMBER 30, 2004 Federal Pass-Through Entity CFDA Contract/Grant Program Program Federal Program Title Number Number Award Expenditures* U.S. Department of Housing and `~ Urban Development Passed Through City of Jacksonville, Florida Community Development Block Grant 14.218 5629-26 $ 179,475 $ 69,912 U.S. Department of Justice Passed Through Florida Department of Law Enforcement Byrne Grant -Crime Suppression 16.579 04-CJ-J3-04-26-02-194 101,490 98,008 „ U.S. Department of Justice Passed Through Office of Justice Programs Local Law Enforcement Block Grant - Fiscat Year 2003 16.592 2003-LB-BX-1828 15,840 13,636 ~"' Local Law Enforcement Block Grant - Fiscal Year 2003 16.592 2003-LB-BX-1521 10,899 9,024 ~,,, U.S. Department of Justice Passed Through Bureau of Justice Assistance Project Safe Neighborhood 16.609 N/A 12,000 4,707 ~'"' U.S. Department of Transportation Passed Through Florida Department of Transportation ~,,,, DUI Enforcement Initiative 20.600 AL-04-OS-10 71,337 57,465 U.S. Department of Environmental Protection Passed Through Florida ~"' Department of Environmental Protection Nonpoint Source Implementation - 319Program 66.460 C9994515-99-0 428,450 17,293 ~- U.S Department of Homeland Security Passed Through Florida Department ~"" of Community Affairs State of Emergency Relief Fund 97.036 N/A 0 161,947 s Total Federal Awards $ 819.491 $ 431.992 * Includes Grant Expenditures Only (Matching Funds not Reported) 63 Y CITY OF ATLANTIC BEACH, FLORIDA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS *"' FOR THE YEAR ENDED SEPTEMBER 30, 2004 (1) Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the Federal award activity of the City of Atlantic Beach, Florida, and is presented on the modified accrual basis of accounting. 64 Purvis GComp~ INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDiT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOI~ERNMENTAUDITING STANDARDS Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida We have audited the basic financial statements of City of Atlantic Beach, Florida, as of and for the year ended September 30, 2004, and have issued our report thereon dated December 15, 2004. 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. Compliance As part of obtaining reasonable assurance about whether City of Atlantic Beach, Florida's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions ~,,,, of laws, regulations, contracts, and grants, 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 that are required to be reported ~"~ under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Atlantic Beach, Florida'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 assurance 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 over financial reporting that might be material weaknesses. A material weakness is a 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 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. Certified Public Accountants P.O. Box 23999 • 222 N.E. 1st Street • Gainesville, Florida 32602 • (352) 378-2461 • FAX (352) 378-2505 ~ i.aurel Ridge Professional Cuter • 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 1727 2"d Street • Sarasota, Florida 34236 • (94i) 365-3774 • FAX (941) 365-0238 MEMBERS OF AMERIGN AND FlORIQ4 INSTITUTES OF CERTIFIED PUBLIC ACCOi1NTAN7S MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES AND S.E.C. PRACTK:E SECTIONS 65 ~' ~' Honorable Mayor, City Commissioners and City Manager ""`~ Atlantic Beach, Florida INDEPENDENT AUDITORS' REPORT ON COMPLIANCE r` AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING 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. Gainesville, Florida ~~~ J1~ December 15, 2004 ~ ~,~ ~o 66 G~rPay gis MANAGEMENT LETTER Honorable Mayor, City Commissioners and City Manager Atlantic Beach; Florida We have audited the basic financial statements of City of Atlantic Beach, Florida, as of and for the fiscal year ended September 30, 2004, and have issued our report thereon dated December 15, 2004. 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. We have issued our Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting dated December 15, 2004. Disclosures in that report, if any, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with 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)(g)1.(a)J, require that we comment as to whether or not inaccuracies, shortages, defalcations, fraud, and/or violations of laws, rules, regulations, and contractual provisions reported in the preceding annual financial audit report have been corrected. There ~, were no comments made in the preceding annual financial audit report. The Rules of the Auditor General [Section 10.554(i)(g)1.(b)], require that we comment as to whether or not recommendations made in the preceding annual financial audit report have been followed. There ~"`' were no recommendations made in the preceding annual financial audit report. As required by the Rules of the Auditor General [Section 10.554(1)(g)2.], the City of Atlantic Beach, Florida has complied with Section 218.415, Florida Statutes, regarding the investment of public funds. The Rules of the Auditor General [Sections 10.554(1)(g)3., and 4.], require disclosure in the management letter of the following matters if not already addressed in the auditors' report on compliance and internal control or schedule of findings and questioned costs: (1) recommendations to improve financial management, accounting procedures, and internal controls; (2) violations of laws, rules, regulations, and contractual provisions that have occurred, or were likely to have occurred, and were discovered within the scope of the audit; (3) illegal or improper expenditures discovered within the scope of the financial audit that may or may not materially affect the financial statements; (4) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (5) failures to properly record financial transactions; and, (6) other inaccuracies, shortages, defalcations and instances of fraud discovered by, or that came 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 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 1727 2"d Street • Sarasota, Florida 34236 • (941) 365-3774 • FAX (941) 365-0238 MEMBERS Of AMERIGN AND FUJR10,4 INSTITUTES OF CERTffIED PUBLK ACCOUNTANTS MEMBER OF AMERKAN MSTffUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES AND S.E_C. PRACTICE SECTIONS 67 .., Honorable Mayor, City Commissioners and City Manager Atlantic Beach, Florida MANAGEMENT LETTER (Concluded) The Rules of the Auditor General [Section 10.554(1)(g)S.j, also require that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. The City of Atlantic Beach, Florida, was established by Florida Statutes Section 165.031(4), Chapter 57-1126. There are no component units related to the City of Atlantic Beach, Florida. As required by the Rules of the Auditor General [Section 10.554(1)(g)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 of Atlantic Beach, Florida, is not in a state of financial emergency as a consequence of the conditions described in Section 2i 8.503(1), "" Florida Statutes. As required by the Rules of the Auditor General [Section 10.554(1)(g}6.(b)], we determined that the annual financial report for the City of Atlantic Beach, Florida, for the fiscal year ended September 30, 2004, was filed with the Department of Banking 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, 2004. As required by the Rules of the Auditor General [Section 10.554(1)(g)6.(c)j, the scope of our audit included application of financial condition assessment procedures pursuant to Ruie 10.556(8) of the Auditor General. It is management's responsibility to monitor the City of Atlantic Beach Florida's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. 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. Gainesville, Florida December 15, 2004 ~~~ , ~~ 68