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Annual Financial Report - 2014-2015 - v FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORT CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2015 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORT CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2015 TABLE OF CONTENTS Independent Auditors’ Report ..................................................................................................................... i-iii Management’s Discussion and Analysis.................................................................................................... iv-xi Basic Financial Statements Government-wide Financial Statements Statement of Net Position .......................................................................................................................... 1 Statement of Activities .............................................................................................................................. 2 Fund Financial Statements Balance Sheet -Governmental Funds ....................................................................................................... 3 Reconciliation of Balance Sheet of Governmental Funds to the Statement of Revenues, Expenditures, and Changes in Fund Statement of Net Position....................................................................................................................... 4 Balances -Governmental Funds ............................................................................................................ 5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................................................................................... 6 Statement of Net Position -Proprietary Funds ......................................................................................7-8 Statement of Revenues, Expenses, and Changes in Net Position ­ Proprietary Funds ..............................................................................................................................9-10 Statement of Cash Flows -Proprietary Funds ...................................................................................11-13 Statement of Fiduciary Net Position ....................................................................................................... 14 Statement of Changes in Fiduciary Net Position .................................................................................... 15 Notes to Financial Statements ........................................................................................................ 16-44 Required Supplementary Information General Employees’ Pension Plan: Schedule of Changes in Net Pension Liability and Related Ratios ........................................................ 45 Schedule of Contributions ....................................................................................................................... 46 Police Officers’ Pension Plan: Schedule of Changes in Net Pension Liability and Related Ratios ........................................................ 47 Schedule of Contributions ....................................................................................................................... 48 Other Postemployment Benefits Plan -Schedule of Funding Progress ...................................................... 49 Schedule of Revenues, Expenditures, and Changes in Fund Balances ­ Note to Schedule of Revenues, Expenditures, and Changes in Fund Budget and Actual -General Fund .....................................................................................................50-51 Balances -Budget and Actual -General Fund........................................................................................ 52 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORT CITY OF ATLANTIC BEACH, FLORIDA SEPTEMBER 30, 2015 TABLE OF CONTENTS (Concluded) Supplementary Information Combining Balance Sheet -Nonmajor Governmental Funds ................................................................53-54 Combining Statement of Revenues, Expenditures, and Changes Schedules of Net Revenues in Accordance with Bond in Fund Balances -Nonmajor Governmental Funds .........................................................................55-56 Combining Statement of Fiduciary Net Position ......................................................................................... 57 Combining Statement of Changes in Fiduciary Net Position ...................................................................... 58 Historical Revenues and Expenses ............................................................................................................... 59 Resolutions -Enterprise Funds (Water and Sewer) ................................................................................ 60 Other Bond Covenant Disclosures ............................................................................................................... 61 Other Statistical Information Major Utility Customers ............................................................................................................................... 62 Additional Elements of Report Prepared in Accordance With Government Auditing Standards, Issued by the Comptroller General of the United States; the Rules of the Auditor General of the State of Florida; and Other Contract Requirements Schedule of Source and Expenditure of the City Grant Funds ............................................................... 63 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance Independent Accountants’ Report on Compliance with with Government Auditing Standards .......................................................................................... 64-65 Section 218.415, Florida Statutes ....................................................................................................... 66 Management Letter ............................................................................................................................ 67-68 Management Response Letter ................................................................................................................. 69 INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida Report on the Financial Statements 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, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. i Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS’ REPORT (Continued) Opinions 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, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 15 to the financial statements, during the current year, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. These statements require employers participating in defined benefit pension plans to report the net pension liability and other pension related deferred inflows and outflows related to these plans. In connection with the implementation of these statements, the City decreased its beginning net position in the governmental activities by $4,529,366 and decreased beginning net position in the business-type activities by $1,057,204. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and other required information on pages iv–xi and 45–52 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The supplementary information on pages 53–61, the other statistical information section on page 62, and the schedule of expenditures of grant funds per the City of Jacksonville’s Ordinance Code Chapter 118.202(e) are presented for purposes of additional analysis and are not a required part of the basic financial statements. ii Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS’ REPORT (Concluded) Other Matters (Concluded) Other Information (Concluded) The supplementary information and schedule of expenditures of grant funds per the City of Jacksonville’s Ordinance Code Chapter 118.202(e) are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information and schedule of expenditures of grant funds per the City of Jacksonville’s Ordinance Code Chapter 118.202(e) are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The other statistical information section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated June 23, 2016, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Report on Summarized Comparative Information We have previously audited the City’s 2014 financial statements, and our report dated April 20, 2015, expressed an unmodified opinion on those audited financial statements. In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2014, is consistent, in all material respects, with the audited financial statements from which it was derived. June 23, 2016 Gainesville, Florida iii CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 As management of the City of Atlantic Beach, Florida (the City), we offer readers of our financial statements this narrative overview and analysis for the fiscal year ended September 30, 2015. Overview of the Financial Statements This management’s discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The purpose of each of the three components of the basic financial statements is described below. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private sector business. They include the Statement of Net Position and the Statement of Activities. The Statement of Net Position presents information on all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference between reported as net position. Net position is reported as one of three categories: invested in capital assets -net of related debt; restricted; or unrestricted. Restricted net position is further classified as either net position restricted by enabling legislation or net position that is otherwise restricted. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues, referred to as “governmental activities,” from other functions that are intended to recover all or a significant portion of their costs through user fees and charges, referred to as “business-type activities.” The governmental activities of the City include public safety, road maintenance and construction, parks and recreation, conservation and resource management, debt, and general government, which include administration and other support functions. The business-type activities of the City include the utility, comprised of the water and sewer systems, the stormwater system, the sanitation service and the building code enforcement enterprise fund. The government-wide financial statements can be found on pages 1 - 2 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be categorized into either governmental funds, proprietary funds, or fiduciary funds. ■ 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 iv CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) Fund Financial Statements (Concluded) ■ Governmental Funds (Concluded) resources, as well as on balances of available resources at the end of the fiscal year. Such information may be useful in evaluating a City’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for 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. Reconciliations are provided between the Governmental Funds Balance Sheet and the Statement of Net Position and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities to facilitate this comparison between governmental funds and governmental activities. The City maintains twelve individual governmental funds. Information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, which is considered to be a major fund. Data from the other eleven governmental funds are combined into a single, aggregated presentation called Nonmajor Governmental Funds. Fund data for these nonmajor governmental funds is provided in the form of combining statements. These combining statements can be found on pages 53 - 58 of this report. The City adopts an annual appropriated budget for all funds but is only required to present a budget comparison for its General Fund. The Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual -General Fund budgetary comparison schedule and notes on pages 50 - 52 of this report has been provided to demonstrate compliance with this budget. ■ Proprietary Funds The City maintains only one type of proprietary fund and that is enterprise funds. The enterprise funds are used to account for the activities of the water and sewer (utility), stormwater, building code enforcement and sanitation activities. The proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. Separate information of the utility, stormwater, sanitation and building code enforcement activities can be found in the basic proprietary fund financial statements on pages 7 - 13 of this report. ■ Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the City (i.e., pension beneficiaries). Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 14 - 15 of this report. Notes to Financial Statements The notes to financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes begin on page 16 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’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 beginning on page 45 of this report. v CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) Government-wide Financial Analysis Net position may serve over time as a useful indicator of a City’s financial position. As can be seen in the summarized table below, the City’s assets exceeded liabilities by $71,376,000 at the close of the fiscal year ended September 30, 2015. During the year, the City’s net financial position was negatively impacted by the implementation of two GASB reporting changes. The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions; and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. The City has allocated its proportionate share of the General Employee Pension Plan and the Police Pension Plan’s net pension liabilities, deferred outflows of resources, deferred inflows of resources, and pension expenses between the governmental and business-type activities. A restatement to record the effects of the new reporting guidance decreased beginning net position by $4,529,000 in governmental activities and $1,057,000 in business type activities. By far the largest portion of the City’s net position, $58,936,000 (82%), reflects its investment in capital assets (i.e., land, buildings, equipment, and infrastructure), less any related, outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. A portion of the City’s net position, $4,766,000 (7%), represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $7,674,000 (11%), is used to meet the government’s ongoing obligations to citizens and creditors. City of Atlantic Beach’s Net Position September 30, 2015 and 2014 (In Thousands) Governmental Business-type Activities Activities Totals 2015 2014 2015 2014 2015 2014 Current and other assets $11,965 $11,345 $9,466 $8,362 $21,431 $19,707 Capital assets 39,542 39,215 39,607 41,190 79,149 80,405 Total Assets 51,507 50,560 49,073 49,552 100,580 100,112 Deferred Outflow 2,993 0 2,083 1,187 5,076 1,187 Long-term liabilities outstanding 8,374 503 22,235 21,504 30,609 22,007 Other liabilities 707 638 2,924 2,774 3,631 3,412 Total Liabilities 9,081 1,141 25,159 24,278 34,240 25,419 Deferred Inflow 40 0 0 0 40 0 Net Position: Invested in capital assets, net of related debt 39,542 39,214 19,394 20,758 58,936 59,972 Restricted 3,883 4,004 883 798 4,766 4,802 Unrestricted 1,954 6,201 5,720 4,905 7,674 11,106 Total Net Position $45,379 $49,419 $25,997 $26,461 $71,376 $75,880 vi CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) As illustrated in the schedule on page vi, the City was able to report positive balances in all categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. City of Atlantic Beach’s Change in Net Position For the Years Ended September 30, 2015 and 2014 (In Thousands) Governmental Business-type Activities Activities Totals 2015 2014 2015 2014 2015 2014 Revenues: Program Revenues: Charges for Services $1,739 $1,786 $11,114 $11,015 $12,853 $12,801 Operating Grants and Contributions 642 627 0 0 642 627 Capital Grants and Contributions 217 299 342 776 559 1,075 General Revenues: Property Taxes 4,113 3,908 0 0 4,113 3,908 Sales Taxes 1,296 1,208 0 0 1,296 1,208 Business and Utility Taxes 1,109 1,136 0 0 1,109 1,136 State Revenue Sharing 322 300 0 0 322 300 Discretionary Sales Surtax 772 722 0 0 772 722 Investment Earnings (Loss) 3 313 (5) 213 (2) 526 Miscellaneous 53 64 0 0 53 64 Total Revenues 10,266 10,363 11,451 12,004 21,717 22,367 Expenses: General Government 1,935 2,054 0 0 1,935 2,054 Public Safety 5,350 5,184 0 0 5,350 5,184 Road Maintenance and Construction 1,771 1,872 0 0 1,771 1,872 Parks and Recreation 1,299 1,309 0 0 1,299 1,309 Interest/Fiscal Charges on Long-term Debt 0 0 0 0 0 0 Utility 0 0 7,278 7,309 7,278 7,309 Stormwater 0 0 1,092 1,153 1,092 1,153 Sanitation 0 0 1,560 1,869 1,560 1,869 Building Code Enforcement 0 0 350 239 350 239 Total Expenses 10,355 10,419 10,280 10,570 20,635 20,989 Transfers 578 621 (578) (621) 0 0 Change in Net Position 489 565 593 813 1,082 1,378 Net position-Beginning (As Restated) 44,890 48,854 25,404 25,648 70,294 74,502 Net Position-Ending $45,379 $49,419 $25,997 $26,461 $71,376 $75,880 vii CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) Fund Financial Analysis As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Following is a summary of fund activity financial information for the fiscal year, rounded to the nearest thousand dollars: ■ Governmental Funds At the end of the current fiscal year, the City’s governmental funds reported a combined ending fund balance of $11,449,000, an increase of $517,000 in comparison with the prior year. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the unassigned fund balance was $4,633,000, which equated to 44% of total General Fund expenditures without transfers. The net result of various revenue and expense items resulted in an increase to the City’s General Fund of $638,000 or 9% during the current fiscal. The expenditures of the General Fund were lower than expected, mostly from unfilled positions. Nonmajor governmental funds consisting of special revenue funds, the debt service fund, and the capital projects fund have a combined fund balance of $3,890,000. Of this fund balance, $3,326,000 is restricted for capital projects. The net decrease in fund balance after transfers in nonmajor governmental funds was $121,000. ■ Proprietary Funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. During the fiscal year the proprietary funds recorded revenues of $11,020,000, expenses of $9,572,000, net non-operating costs of $(619,000) and net capital contributions, grants and transfers of $(236,000). The net position in the proprietary funds increased $592,000 as a result of the fiscal year’s activities. The unrestricted net position of the enterprise funds amounted to $5,720,000 at the end of fiscal year 2015. Stormwater rates stayed constant in Fiscal year 2015 as there were no rate changes. The $8.39 per ERU is approximately 84%, compared to 79% for the prior year, of the total operating expenses of $1,029,000 needed to fully fund the operation with charges for service. During fiscal year 2015, the Sanitation Fund netted an increase in net position of $43,000. General Fund Budgetary Highlights The final expense budget included a $405,000 increase in appropriations. The portion of the increase in appropriations for the encumbrances rolling forward from 2014 was $347,000. Net Budget The initial budget had a negative variance of $92,000 (page 50). The actual increase in fund balance was $728,000. This resulted in a $820,000 excess variance above the original budget. viii CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) Capital Assets and Debt Administration Capital Assets―The City’s investment in capital assets, net of related depreciation, for its governmental and business-type activities as of September 30, 2015, amounted to $79,149,000. This investment in capital assets includes land, land improvements, land easements, buildings and infrastructure improvements, equipment, and construction in progress. The total change in the City’s capital assets, net of related depreciation, for the current fiscal year was an increase of $328,000 (.4%) for governmental activities and a decrease of $1,583,000 (1.97%) for business- type activities. Capital asset events during the current fiscal year included the following: Governmental Activities Buildings, net of accumulated depreciation, decreased by $36,000 through annual depreciation of the capital assets. Intangible Assets reflected a net increase of $31,000 through annual depreciation of the capital assets. This asset category includes land easements and computer software. Improvements Other Than Buildings reflected a net increase of $233,000. This represents capital asset increase of $920,000, offset by depreciation of $687,000. Major projects in this category include: Rose Park Development, Marsh Overlook and Kayak Launch, Francis Ave. drainage improvements, improvements at Bull Park, and renovations at Russell Park. Equipment reflected a net increase of $121,000. This represents capital asset increase of $414,000, offset by depreciation of $293,000. Some of the assets acquired in this category were: new phone system throughout the City, 3 police interceptors, 2 trailers, and computer hardware. Construction in progress decreased $21,000. Major projects included in this category are the Russell Park Renovation, Marsh Project Pedestrian Path, and the Robert Street ditch design. ■ Business-type Activities Buildings reflected a net decrease in asset value of $10,000 from depreciation. Improvements Other Than Buildings reflected a net decrease of $2,049,000. This represents capital asset increases of $167,000, offset by depreciation of $2,217,000. The largest increases in this category are improvements were the reclaimed water plant project and Francis Avenue Drainage drainage improvements. Equipment reflected a net increase of $89,000. This represents capital asset increase of $176,000, offset by depreciation of $88,000. Some of the assets acquired this year consisted of 4 vehicles being utilized by the Public Works Department. Construction in Progress had a net increase of $388,000, costs incurred were for design of Saltair Sidewalk and Drainage Project and Seminole Streetscape. ix CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Continued) City of Atlantic Beach’s Capital Assets (Net of Depreciation) (In Thousands) Governmental Activities Business-type Activities Totals 2015 2014 2015 2014 2015 2014 Land Intangibles Buildings Improvements-Other Equipment Construction in Progress $10,363 38 2,599 25,151 994 397 $10,363 7 2,635 24,918 874 418 $1,656 214 70 36,577 529 560 $1,656 215 80 38,626 440 173 $12,019 252 2,669 61,728 1,523 957 $12,019 222 2,715 63,544 1,314 591 Total $39,542 $39,215 $39,606 $41,190 $79,148 $80,405 Additional information on the City’s capital assets can be found in Note 5 on pages 27-28 of this report. Long-term Debt At the end of the 2015 fiscal year, the City had total bonded debt outstanding of $20,213,000. This amount was comprised of debt secured solely by specified revenue sources. A detailed listing of the City’s debt can be found in the table below. City of Atlantic Beach’s Outstanding Debt September 30, 2015 (In Thousands) Business-type Activities Utilities System Revenue Bond, Series 2014 $12,881 F.D.E.P. State Revolving Funds Loan, 2010 628 F.D.E.P. State Revolving Funds Loan, 2009 6,704 Total $20,213 Debt service coverage calculations can be found on page 61. Additional information on the City’s long- term debt can be found in Note 6 on pages 28 – 31 of this report. x Revenue Highlights: CITY OF ATLANTIC BEACH, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2015 (Concluded) • Total revenue for 20 15 was $3,000 lower than 2014 revenue (page 2). Mos t 2015 revenue sources were hi g he r than previous year with the exception of Investment Earnings which came in $524,000 higher in 20 14. • The 20 15 taxable property values were about 6. 18 % hi gher than the 20 14 values. The C ity Com mi ssion voted to use the same rate of 3.3285 mills, ins tead of the roll-back rate of 3.1567. The purpose for adopting the mil lage rate of 3.3285 was to maintain a level of ad valorem tax revenue s ufficient to maintain adequate funding for the existing level of services at the estimated cos t and to continue to maintain the C ity 's infrast ructure and adequate reserves. The fin a l gross taxable property value was $1,278,868,000. Ad valorem taxes of $4,11 3,000 represent 40% of th e General Fund revenues for 20 15. • The 20 15 Intergovernme ntal revenues of$1 ,749,000 make up 17 .06% of general fund revenues . This is an increase of $1 14,000 over 20 14. • T he City 's investment portfolio is value d at approximately $15,773,000 a s of September 30, 20 15. The investment s howed a lo ss of$2,000 for the year, compared to a gain of$526,000 in the prior year. Over th e past five years, the City h as recogni zed an overall investm e nt earning s gain of$1, 119,000. Expenditure Highlights: • Expenditures in creased in c urrent year by $143 ,000 w hen compared to pr ior year. This in crease was a res ult of a $543,000 increased investment in capital o utl ay being offset by decreases of $160,000 in General Governme nt and $136,000 in Road M ainte nance and Construction. • In 20 15 a la rger investment in the C ity's infrastructure res ulted in capital expenditu res increasi ng from $893,000 in 20 14 to $1,436,000 in 2015. The major projects in that were completed or started in 20 15 were improve me nt s at Bull Park, improvements at Russel l Park, Francis A venue drainage improvements, a nd Saltair drainage improvements. • Transfers in 20 15 represents the movement of funds from the Public Utility Funds and th e Sanitation Fund to the General Fund and the Half Cent Sales Tax Funds to a project fund. A transfer of $160,000 from the Gas Tax Fund to the General Fund helped fund street maintenance. Requests for Information The financial report is desi g ned to provide a general overview of the C ity 's financ es for all those with a n interest in the City's finance s. Questions concerning any of the inform ation prov id ed in thi s report or requests for additional financial information s hould be add ressed to th e City of Atlantic Beach, Finance Director, 800 Sem in o le Road, Atlanti c Beach, F lorid a 32233. Director of Fin ance xi BASIC FINANCIAL STATEMENTS These basic financial statements contain Government-wide Financial Statements, Fund Financial Statements, and Notes to Financial Statements. CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 2015 Governmental Business-type 2014 Activities Activities Totals Totals Assets Equity in Pooled Cash and Investments $ 10,945,323 $ 7,495,552 $ 18,440,875 $ 16,049,275 Receivables - Net 450 548,386 548,836 632,235 Due from Other Governments 936,932 35,244 972,176 1,216,599 Inventories 20,827 12,827 33,654 42,197 Notes Receivable - Current 760 15,759 16,519 15,759 Restricted Assets: Equity in Pooled Cash and Cash Equivalents 0 1,218,056 1,218,056 1,578,519 Capital Assets: Land 10,363,002 1,656,018 12,019,020 12,019,020 Buildings 4,574,646 4,356,384 8,931,030 8,848,043 Improvements Other Than Buildings 40,075,877 79,512,656 119,588,533 118,501,652 Equipment 4,050,946 2,328,381 6,379,327 5,789,079 Intangibles - Easements and Computer Software 381,939 244,709 626,648 585,788 (Accumulated Depreciation and Amortization) (20,301,137) (49,051,642) (69,352,779) (65,929,677) Construction in Progress 396,861 560,408 957,269 590,420 Prepaid Items 58,786 16,105 74,891 45,218 Notes Receivable - Noncurrent 1,520 124,426 125,946 127,828 Total Assets 51,506,732 49,073,269 100,580,001 100,111,955 Deferred Outflows of Resources Unamortized Refunding Loss 0 1,079,432 1,079,432 1,187,375 Pension Related 2,992,625 1,003,201 3,995,826 0 Total Deferred Outflows of Resources 2,992,625 2,082,633 5,075,258 1,187,375 Liabilities Accounts Payable and Other Current Liabilities 491,380 375,992 867,372 1,477,509 Construction Retainages Payable 0 24,819 24,819 56,696 Due to Other Governments 0 11,066 11,066 10,194 Unearned Revenue 22,017 178,289 200,306 187,875 Deposits 2,736 0 2,736 9,199 Compensated Absences - Current 191,157 68,035 259,192 334,127 Payable from Restricted Assets: Current Portion of Bonds Payable 0 1,090,000 1,090,000 0 Current Portion of Loan Payable 0 336,895 336,895 286,174 Accrued Interest Payable 0 252,483 252,483 97,471 Customer Deposits 0 586,894 586,894 952,496 Noncurrent Liabilities: Due in More Than One Year 0 19,865,122 19,865,122 21,332,540 Compensated Absences - Noncurrent 382,074 139,787 521,861 465,720 Other Postemployment Benefits Obligation 178,501 59,798 238,299 208,681 Net Pension Liability 7,813,357 2,170,163 9,983,520 0 Total Liabilities 9,081,222 25,159,343 34,240,565 25,418,682 Deferred Inflow of Resources Pension Related 39,827 0 39,827 0 Net Position Net Investment in Captial Assets 39,542,134 19,394,329 58,936,463 59,972,986 Restricted for: Renewal and Replacement 0 250,000 250,000 250,000 Debt Service 0 381,162 381,162 286,174 Public Safety 180,762 0 180,762 168,310 Road Maintenance and Construction 248,141 0 248,141 159,677 Other Capital Projects 3,325,789 0 3,325,789 3,588,843 Other Purposes 128,595 0 128,595 86,906 Building Code Enforcement 0 251,255 251,255 261,288 Unrestricted 1,952,887 5,719,813 7,672,700 11,106,464 Total Net Position $ 45,378,308 $ 25,996,559 $ 71,374,867 $ 75,880,648 See accompanying notes. 1 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-type 2014 Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals Totals Primary Government Governmental Activities: General Government $ 1,935,146 882,415 $ $ 0 $ 0 $ (1,052,731) $ 0 $ (1,052,731) $ (1,177,176) Public Safety 5,349,726 661,428 76,938 0 (4,611,360) 0 (4,611,360) (4,384,339) Road Maintenance and Construction 1,771,375 119,194 559,281 89,937 (1,002,963) 0 (1,002,963) (1,079,014) Parks and Recreation 1,298,116 75,703 0 127,058 (1,095,355) 0 (1,095,355) (1,075,088) Conservation and Resource Management 1,800 0 6,083 0 4,283 0 4,283 8,180 Interest/Fiscal Charges on Long-term Debt 0 0 0 0 0 0 0 (486) Total Governmental Activities 10,356,163 1,738,740 642,302 216,995 (7,758,126) 0 (7,758,126) (7,707,923) Business-type Activities: Utility 7,277,596 7,988,066 0 341,713 0 1,052,183 1,052,183 1,409,974 Stormwater 1,091,752 859,315 0 0 0 (232,437) (232,437) (293,978) Sanitation 1,560,020 1,825,560 0 0 0 265,540 265,540 (78,798) Building Code Enforcement 350,671 441,588 0 0 0 90,917 90,917 183,984 Total Business-type Activities 10,280,039 11,114,529 0 341,713 0 1,176,203 1,176,203 1,221,182 Total Primary Government $ 20,636,202 $ 12,853,269 642,302 $ 558,708 $ (7,758,126) 1,176,203 (6,581,923) (6,486,741) General Revenues Property Taxes 4,113,476 0 4,113,476 3,908,365 Sales Taxes 1,296,201 0 1,296,201 1,208,547 Business and Utility Taxes 1,109,471 0 1,109,471 1,135,931 State Revenue Sharing 321,521 0 321,521 300,007 Discretionary Sales Surtax 772,098 0 772,098 721,981 Investment Earnings (Loss) 3,170 (5,518) (2,348) 525,970 Miscellaneous 52,293 0 52,293 64,556 Transfers 578,210 (578,210) 0 0 Total General Revenues and Transfers 8,246,440 (583,728) 7,662,712 7,865,357 Change in Net Position 488,314 592,475 1,080,789 1,378,616 Net Position, Beginning of Year 49,419,360 26,461,288 75,880,648 74,502,032 Prior Period Adjustment (4,529,366) (1,057,204) (5,586,570) 0 Net Position, Beginning of Year (as Restated) 44,889,994 25,404,084 70,294,078 74,502,032 Net Position, End of Year 45,378,308 $ 25,996,559 $ 71,374,867 $ 75,880,648 $ See accompanying notes. 2 CITY OF ATLANTIC BEACH, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 2015 Nonmajor Governmental Totals Governmental 2014 General Funds Funds Totals Assets Equity in Pooled Cash and Investments Receivables - Net Due from Other Funds Due from Other Governments Inventories Notes Receivable - Current $ 7,122,799 450 10,781 689,932 20,827 760 3,822,524 $ 0 0 247,000 0 0 10,945,323 $ 450 10,781 936,932 20,827 760 10,312,186 $ 2,730 6,531 988,067 29,370 0 Prepaid Items Notes Receivable - Noncurrent Total Assets 58,786 1,520 7,905,855 0 0 4,069,524 58,786 1,520 11,975,379 13,008 0 11,351,892 Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Deposits Unearned Revenue Total Liabilities 322,756 0 2,625 22,017 347,398 168,624 10,781 111 0 179,516 491,380 10,781 2,736 22,017 526,914 393,083 6,531 9,199 10,905 419,718 Fund Balances Nonspendable: Inventories Prepaids Restricted for: 20,827 58,786 0 0 20,827 58,786 29,370 13,008 Public Safety Road Maintenance and Construction Other Capital Projects Other Purposes Committed to: 10,287 0 0 0 170,475 248,141 3,325,789 128,595 180,762 248,141 3,325,789 128,595 168,310 159,677 3,588,843 86,906 Conservation and Resource Management Assigned to: Operating Reserves Unassigned Total Fund Balances 0 2,836,042 4,632,515 7,558,457 18,956 0 (1,948) 3,890,008 18,956 2,836,042 4,630,567 11,448,465 14,673 2,685,355 4,186,032 10,932,174 Total Liabilities and Fund Balances $ 7,905,855 4,069,524 $ 11,975,379 $ $ 11,351,892 See accompanying notes. 3 CITY OF ATLANTIC BEACH, FLORIDA RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 2015 2014 Total Fund Balances of Governmental Funds $ 11,448,465 $ 10,932,174 Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds: Total Capital Assets (Accumulated Depreciation) 59,843,271 $ (20,301,137) 39,542,134 $ 58,407,187 (19,192,636) 39,214,551 Certain pension related amounts are being deferred and amortized over a period of years or are being deferred as contributions to the pension plan made after the measurement date: Deferred Outflows Related to Pensions Deferred Inflows Related to Pensions 2,992,625 (39,827) 2,952,798 0 0 0 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds: Compensated Absences Other Postemployment Benefits Obligation Net Pension Liability (573,231) (178,501) (7,813,357) (8,565,089) (570,520) (156,845) 0 (727,365) Total Net Position of Governmental Activities $ 45,378,308 $ 49,419,360 See accompanying notes. 4 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Nonmajor Totals Governmental Governmental 2014 General Funds Funds Totals Revenues Property Taxes 4,113,476 $ 0$ 4,113,476 $ 3,908,365 $ Nonproperty Taxes 1,109,470 1,362,169 2,471,639 2,388,508 Permits, Fees, and Special Assessments 858,232 0 858,232 863,978 Intergovernmental Revenues 1,748,737 164,876 1,913,613 1,912,864 Fines and Forfeitures 77,434 12,348 89,782 154,443 Charges for Services 742,416 0 742,416 756,446 Investment Earnings (Loss) 4,435 (2,025) 2,410 312,039 Miscellaneous Revenues 49,909 7,181 57,090 57,870 Interfund Charges 1,545,981 0 1,545,981 1,443,440 Total Revenues 10,250,090 1,544,549 11,794,639 11,797,953 Expenditures Current: General Government 2,845,102 0 2,845,102 3,004,357 Public Safety 4,868,455 103,287 4,971,742 4,973,414 Road Maintenance and Construction 1,317,266 274,068 1,591,334 1,727,874 Parks and Recreation 1,027,605 500 1,028,105 1,060,821 Conservation and Resource Management 0 1,800 1,800 0 Debt Service: Principal 0 0 0 69,203 Interest and Other 0 0 0 1,457 Capital Outlay 575,334 860,752 1,436,086 892,798 (Total Expenditures) (10,633,762) (1,240,407) (11,874,169) (11,729,924) (Deficiency) Excess of Revenues (Under) Over Expenditures (383,672) 304,142 (79,530) 68,029 Other Financing Sources (Uses) Transfers in 1,003,210 85,000 1,088,210 1,342,003 Transfers (out) 0 (510,000) (510,000) (721,208) Sale of General Fixed Assets 17,611 0 17,611 31,654 Total Other Financing Sources (Uses) 1,020,821 (425,000) 595,821 652,449 Net Change in Fund Balances 637,149 (120,858) 516,291 720,478 Fund Balances, Beginning of Year 6,921,308 4,010,866 10,932,174 10,211,696 Fund Balances, End of Year 7,558,457 $ 3,890,008 $ 11,448,465 $ 10,932,174 $ See accompanying notes. 5 CITY OF ATLANTIC BEACH, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 2014 Net Change in Fund Balances - Total Governmental Funds 516,291 $ $ 720,478 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 (Current Year Depreciation) 1,436,084 $ 892,798 $ (1,108,501) (1,099,082) 327,583 (206,284) 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. 0 9,799 Repayment of long-term debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 0 69,203 The changes in net pension liability and pension related deferred outflows and inflows of resources result in an adjustment to pension expense in the statement of activities, but not in the governmental fund statements. (331,193) 0 Some expenses/revenues reported in the statement of activities do not require the use of or provide current financial resources and, therefore, are not reported as expenditures in governmental funds: Debt Interest Expense Compensated Absences Net Pension Asset Other Postemployment Benefits Obligation Change in Net Position - Governmental Activities 0 (2,711) 0 (21,656) 970 (5,719) (2,271) (21,119) (24,367) 488,314 $ $ (28,139) 565,057 See accompanying notes. 6 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 2015 Business-type Activities - Enterprise Funds Building Code 2014 Utility Stormwater Sanitation Enforcement Totals Totals Assets Current Assets: Equity in Pooled Cash and Investments $ 4,914,330 1,779,734 $ 397,201 $ 404,287 $ $ 7,495,552 $ 5,737,089 Accounts Receivable - Net 428,823 53,992 65,571 0 548,386 629,505 Due from Other Governments 35,244 0 0 0 35,244 228,532 Inventories 12,827 0 0 0 12,827 12,827 Notes Receivable - Current 15,759 0 0 0 15,759 15,759 Prepaid Items 16,105 0 0 0 16,105 32,210 Restricted Assets: Equity in Pooled Cash and Cash Equivalents 1,218,056 0 0 0 1,218,056 1,578,519 Capital Assets: Land 749,499 906,519 0 0 1,656,018 1,656,018 Buildings 4,356,384 0 0 0 4,356,384 4,356,384 Improvements Other Than Buildings 63,047,605 16,465,051 0 0 79,512,656 79,345,283 Equipment 1,758,710 337,447 189,877 42,347 2,328,381 2,151,907 Intangibles - Easements and Computer Software 226,394 0 0 18,315 244,709 244,709 (Accumulated Depreciation and Amortization) (40,152,145) (8,659,899) (181,360) (58,238) (49,051,642) (46,737,041) Construction in Progress 253,048 307,360 0 0 560,408 172,514 Notes Receivable - Noncurrent 124,426 0 0 0 124,426 127,828 Total Assets 37,005,065 11,190,204 471,289 406,711 49,073,269 49,552,043 Deferred Outflows of Resources Unamortized Refunding Loss 939,106 140,326 0 0 1,079,432 1,187,375 Pension Related 844,812 43,193 10,153 105,043 1,003,201 0 Total Deferred Outflows 1,783,918 183,519 10,153 105,043 2,082,633 1,187,375 See accompanying notes. 7 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 (Concluded) 2015 Business-type Activities - Enterprise Funds Building Code 2014 Utility Stormwater Sanitation Enforcement Totals Totals Liabilities Current Liabilities Payable from Current Assets: Accounts Payable and Other Current Liabilities $ 207,318 46,939 $ 112,398 $ 9,337 $ $ 375,992 $ 1,084,426 Construction Retainages Payable 6,255 18,564 0 0 24,819 56,696 Due to Other Governments 7,086 0 0 3,980 11,066 10,194 Unearned Revenue 89,038 29,102 60,149 0 178,289 176,970 Compensated Absences - Current 62,125 1,094 0 4,816 68,035 109,167 Current Liabilities Payable from Restricted Assets: Current Portion of Bonds Payable 948,300 141,700 0 0 1,090,000 0 Current Portion of Loans Payable 336,895 0 0 0 336,895 286,174 Accrued Interest Payable 231,341 21,142 0 0 252,483 97,471 Customer Deposits 586,894 0 0 0 586,894 952,496 Noncurrent Liabilities: Due in More Than One Year 18,192,022 1,673,100 0 0 19,865,122 21,332,540 Compensated Absences - Noncurrent 134,869 0 0 4,918 139,787 120,160 Other Postemployment Benefits Obligation 41,896 10,112 0 7,790 59,798 51,836 Net Pension Liability 1,827,529 93,436 21,964 227,234 2,170,163 0 Total Liabilities 22,671,568 2,035,189 194,511 258,075 25,159,343 24,278,130 Net Position Net Investment in Capital Assets 11,701,384 7,682,004 8,517 2,424 19,394,329 20,758,435 Restricted for: Renewal and Replacement 250,000 0 0 0 250,000 250,000 Debt Service 381,162 0 0 0 381,162 286,174 Building Code Enforcement 0 0 0 251,255 251,255 261,288 Unrestricted 3,784,869 1,656,530 278,414 0 5,719,813 4,905,391 Total Net Position $ 16,117,415 9,338,534 $ 286,931 $ 253,679 $ $ 25,996,559 $ 26,461,288 See accompanying notes. 8 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Business-type Activities - Enterprise Funds Building Code 2014 Utility Stormwater Sanitation Enforcement Totals Totals Operating Revenues Charges for Services: Customer Charges $ 7,892,897 859,315 $ 1,756,608 $ 441,588 $ $ 10,950,408 $ 10,897,732 Franchise Permits 0 0 7,500 0 7,500 2,500 Miscellaneous Revenues 62,419 0 0 0 62,419 60,333 Total Operating Revenues 7,955,316 859,315 1,764,108 441,588 11,020,327 10,960,565 Operating Expenses Personal Services 1,968,049 190,302 25,736 299,145 2,483,232 2,186,305 Contractual Services 638,961 127,173 1,386,682 965 2,153,781 2,664,229 Supplies 388,737 40,291 1,115 2,745 432,888 402,441 Repairs and Maintenance 120,049 18,015 5,858 3,780 147,702 170,509 Utilities 372,361 0 0 0 372,361 367,452 Depreciation 1,835,798 474,295 2,892 1,616 2,314,601 2,289,758 Intergovernmental Charges 1,113,777 160,883 137,737 35,027 1,447,424 1,345,224 Other Expenses 194,619 18,033 0 7,393 220,045 254,643 (Total Operating Expenses) (6,632,351) (1,028,992) (1,560,020) (350,671) (9,572,034) (9,680,561) Operating Income (Loss) 1,322,965 (169,677) 204,088 90,917 1,448,293 1,280,004 Nonoperating Revenues (Expenses) Connection Charges 32,750 0 0 0 32,750 9,189 Franchise Fees 0 0 61,452 0 61,452 45,699 Investment Earnings (Loss) (11,976) (2,166) 491 8,133 (5,518) 213,172 Interest Expense (556,635) (48,040) 0 0 (604,675) (861,481) Gain on Disposal of Fixed Assets 9,897 0 0 0 9,897 24,685 Amortization of Refunding Loss (98,507) (14,720) 0 0 (113,227) (52,843) Total Nonoperating Revenues (Expenses) (624,471) (64,926) 61,943 8,133 (619,321) (621,579) See accompanying notes. 9 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) 2015 Income (Loss) Before Contributions and Transfers $ Utility 698,494 Building Code Stormwater Sanitation Enforcement (234,603) $ 266,031 $ 99,050 $ Business-type Activities - Enterprise Funds $ Totals 828,972 $ 2014 Totals 658,425 Capital Contributions and Grants and Transfers Capital Contributions and Grants Transfers in Transfers (out) Total Capital Contributions and Grants and Transfers 341,713 0 (615,167) (273,454) 0 260,000 0 260,000 0 0 (223,043) (223,043) 0 0 0 0 341,713 260,000 (838,210) (236,497) 775,929 285,000 (905,795) 155,134 Change in Net Position 425,040 25,397 42,988 99,050 592,475 813,559 Net Position, Beginning of Year 16,582,663 9,358,655 254,643 265,327 26,461,288 25,647,729 Prior Period Adjustments (890,288) (45,518) (10,700) (110,698) (1,057,204) 0 Net Position, Beginning of Year (As Restated) 15,692,375 9,313,137 243,943 154,629 25,404,084 25,647,729 Net Position, End of Year $ 16,117,415 9,338,534 $ 286,931 $ 253,679 $ $ 25,996,559 $ 26,461,288 See accompanying notes. 10 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Business-type Activities - Enterprise Funds Building Code 2014 Utility Stormwater Sanitation Enforcement Totals Totals Cash Flows from Operating Activities Cash Received from Customers $ 8,027,673 855,370 $ 1,764,044 $ 441,588 $ $ 11,088,675 $ 11,325,520 Cash Paid to Customer for Return of Deposit 0 0 0 (355,732) (355,732) 0 Cash Paid to Suppliers (2,146,833) (178,164) (1,719,936) (23,857) (4,068,790) (2,957,201) Cash Paid to Employees (1,894,067) (179,444) (24,625) (271,071) (2,369,207) (2,210,303) Cash Paid for Interfund Services (1,113,777) (160,886) (137,737) (35,027) (1,447,427) (1,345,224) Net Cash Provided by (Used in) Operating Activities 2,872,996 336,876 (118,254) (244,099) 2,847,519 4,812,792 Cash Flows from Noncapital Financing Activities Connection Charges 32,750 0 61,452 0 94,202 9,189 Franchise Fees 0 0 0 0 0 45,699 Transfers in 0 260,000 0 0 260,000 285,000 Transfers (out) (615,167) 0 (223,043) 0 (838,210) (905,795) Net Cash Provided by (Used in) Noncapital Financing Activities (582,417) 260,000 (161,591) 0 (484,008) (565,907) Capital and Related Financing Activities Capital Grants 535,001 0 0 0 535,001 547,397 Proceeds from Loan 0 0 0 0 0 13,960,000 Fixed Asset Additions (456,090) (275,650) 0 0 (731,740) (2,399,801) Proceeds from Sale of PPE 9,897 0 0 0 9,897 24,685 Principal Payments on Long-term Debt (326,697) 0 0 0 (326,697) (16,087,763) Issuance Costs Paid 0 0 0 0 0 (52,843) Interest Paid (419,577) (27,585) 0 0 (447,162) (1,187,382) Net Cash Provided by (Used in) Capital and Related Financing Activities (657,466) (303,235) 0 0 (960,701) (5,195,707) See accompanying notes. 11 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Continued) 2015 Cash Flows from Investing Activities Sale (Purchase) of Investments Interest Received Net Cash Provided by (Used in) Investing Activities $ Utility (865,804) (11,976) (877,780) Building Code Stormwater Sanitation Enforcement (91,667) $ 286,614 $ 247,968 $ (2,166) 491 8,841 (93,833) 287,105 256,809 Business-type Activities - Enterprise Funds $ Totals (422,889) (4,810) (427,699) $ 2014 Totals (435,976) 213,985 (221,991) Net Increase (Decrease) in Cash and Cash Equivalents 755,333 199,808 7,260 12,710 975,111 (1,170,813) Cash and Cash Equivalents, Beginning of Year 489,017 161,326 73,338 69,326 793,007 1,963,820 Cash and Cash Equivalents, End of Year 1,244,350 $ 361,134 $ 80,598 $ 82,036 $ $ 1,768,118 $ 793,007 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation Change in Assets and Liabilities: Accounts Receivable Inventory Prepaids Compensated Absences OPEB Obligation Accounts Payable and Accrued Liabilities Customer Deposits Unearned Revenue Change in Deferred Outflow Change in Net Pension Liability Net Cash Provided by (Used in) Operating Activities 1,322,965 $ (169,677) $ 204,088 $ 90,917 $ $ 1,835,798 474,295 2,892 1,616 88,923 (4,415) 13 0 0 0 0 0 16,105 0 0 0 (24,817) 0 0 3,176 6,370 636 0 956 (448,211) 30,706 (326,281) 3,475 (17,492) 136 0 (355,732) 926 470 (77) 0 (514,144) (26,287) (6,179) (63,928) 606,573 31,012 7,290 75,421 2,872,996 $ 336,876 $ (118,254) $ (244,099) $ $ 1,448,293 2,314,601 84,521 0 16,105 (21,641) 7,962 (740,311) (373,088) 1,319 (610,538) 720,296 2,847,519 $ $ 1,280,004 2,289,758 (8,188) 50,049 148,937 (31,762) 7,764 703,087 378,617 (5,474) 0 0 4,812,792 See accompanying notes. 12 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 (Concluded) 2015 Reconciliation of Cash and Cash Equivalents to Balance Sheet Utility Building Code Stormwater Sanitation Enforcement Business-type Activities - Enterprise Funds Totals 2014 Totals Equity in Pooled Cash and Cash Equivalents in Current Assets Restricted Equity in Pooled Cash and Cash Equivalents Equity in Pooled Investments Total Cash and Cash Equivalents $ $ 4,914,330 1,218,056 (4,888,036) 1,244,350 1,779,734 $ 397,201 $ 404,287 $ 0 0 0 (1,418,600) (316,603) (322,251) 361,134 $ 80,598 $ 82,036 $ $ $ 7,495,552 1,218,056 (6,945,490) 1,768,118 $ $ 5,737,089 1,578,519 (6,522,601) 793,007 See accompanying notes. 13 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 Pension Trust Funds 2015 2014 Assets Cash and Cash Equivalents 137,107 $ $ 37,480 Interest Receivable 8,921 64,250 Investments at Fair Value 23,355,432 23,066,411 Total Assets 23,501,460 23,168,141 Liabilities Accounts Payable and Accrued Liabilities 0 114 Total Liabilities 0 114 Net Position Net Position Restricted for Pensions 23,501,460 $ $ 23,168,027 See accompanying notes. 14 CITY OF ATLANTIC BEACH, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Pension Trust Funds 2015 2014 Additions Contributions: Employer 1,437,627 $ 1,514,183 $ Employees 248,545 260,478 State of Florida 103,528 96,217 Total Contributions 1,789,700 1,870,878 Net (Decrease) Increase in Fair Value of Investments 189,300 792,566 Interest and Dividends 139,274 441,637 Total Additions 2,118,274 3,105,081 Deductions Refunds of Contributions 28,505 70,596 Benefits 1,555,728 1,222,239 Investment Expenses 122,714 101,021 Administrative Expenses 77,894 54,272 Total Deductions 1,784,841 1,448,128 Change in Net Position 333,433 1,656,953 Net Position, Beginning of Year (as Restated) 23,168,027 21,511,074 Net Position, End of Year 23,501,460 $ 23,168,027 $ See accompanying notes. 15 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 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 preparation of these financial statements. Reporting Entity The City was incorporated in 1957, under a charter in accordance with the laws of the State of Florida, Florida Statutes Section 57-1126. The City operates under a form of government which comprises an elected City Commission (four Commissioners and a Mayor-Commissioner) and provides, under the administration of an appointed City Manager, the following services: public safety, public works (streets and infrastructure), recreation, sanitation, stormwater, reuse, planning, zoning, water and sewer, and general government services. In accordance with the Codification of Governmental and Financial Reporting Standards, the financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations whose exclusions would cause the reporting entity’s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria for consideration in determining financial accountability. These criteria include appointing a majority of an organization’s governing body and: (1) the ability of the City to impose its will on that organization; or (2) the potential for that organization to provide specific benefits to or impose specific financial burdens on the City. Other considerations are whether the organization is legally separate, whether the City holds the corporate powers of the organization, and whether there is fiscal dependency by the organization on the City. 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 position 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 is 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. 16 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (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. The major exception to this general rule is 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. General revenues include all taxes. Net position is reported as one of three categories: (1) Net Investment in Capital Assets; (2) Restricted; or (3) Unrestricted. Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, other postemployment benefits, pension expense, 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. All other revenue items are considered to be measurable and available only when cash is received by the City. 17 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 1 -Summary of Significant Accounting Policies (Continued) 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 distribution, sewer collection and treatment systems, and reuse 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. ■ The Building Code Enforcement Fund accounts for the activities of the City’s Building Department. Additionally, the City reports the following fund types: ■ Special Revenue Funds—The special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. ■ Debt Service Funds—The debt service fund is used to account for the accumulation of resources for, and the payment of, long-term general obligation debt principal, interest, and related costs other than obligations payable from the operations of the proprietary funds. ■ Capital Projects Funds—The capital projects funds are used to account for the financial resources to be used for the acquisition or construction of major capital facilities and improvement projects (other than those financed by proprietary funds or special revenue funds). ■ Pension Trust Funds—These funds account for the activities of the Employees’ Retirement System, which accumulates resources for pension benefit payments to qualified police officers and general employees. Fund Balance Classification Fund Balance is reported in five components – nonspendable, restricted, committed, assigned, and unassigned: ■ Nonspendable Fund Balance—amounts that are not in spendable form (such as inventory) or are required to be maintained intact. ■ Restricted Fund Balance—amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. 18 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 1 -Summary of Significant Accounting Policies (Continued) Fund Balance Classification (Concluded) ■ Committed Fund Balance—amounts constrained to specific purposes by the City itself, using its highest level of decision-making authority (i.e., ordinance passed by City Commission). To be reported as committed, amounts cannot be used for any other purpose unless the City takes the same highest level action to remove or change the constraint. ■ Assigned Fund Balance—amounts the City intends to use for a specific purpose. Intent can be expressed by the City Commission or by an official or body to which the City Commission delegates the authority. ■ Unassigned Fund Balance—amounts that are available for any purpose. Positive amounts are reported only in the General Fund. When both restricted and unrestricted resources are available for use, it is the City’s practice to use restricted resources first, then unrestricted resources as they are needed. When unrestricted resources (committed, assigned, and unassigned) are available for use in any governmental fund, it is the City’s practice to use committed resources first, then assigned, and then unassigned as needed. The City Commission establishes (and modifies or rescinds) fund balance commitments by passage of an ordinance. This is typically done through adoption and amendment of the budget. A fund balance commitment is further indicated in the budget document as a designation or commitment of the fund. Assigned fund balance is established by City Commission through adoption or amendment of the budget as intended for specific purpose (such as the purchase of fixed assets, construction, debt service, or for other purposes). In the General Fund, the City strives to maintain a fund balance operating reserve to be used for unanticipated emergencies of approximately 25% of the subsequent year’s budgeted General Fund payroll and operating expenditures. Proprietary Funds 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. 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. 19 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 1 -Summary of Significant Accounting Policies (Continued) Budgets (Concluded) Budgets are adopted for all governmental funds (general, special revenue, debt service, and capital projects). The City Manager is authorized to transfer budgeted amounts within departments within any fund; however, any revisions that increase the total expenditures of any department or fund must be approved by the City Commission. All necessary supplemental appropriations are adopted by the City Commission and are included in the reported budgetary data. The budget presented in the accompanying required supplemental information is prepared in conformity with accounting principles generally accepted in the United States of America. Cash and Investments Except where prohibited, cash resources of the individual funds are combined to form a pool of cash and investments. Investment earnings and losses on the pooled cash and investments are 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. Receivables Receivables are recorded at their net realizable value. Interfund Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans). 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 considered nonspendable fund balance, 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 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. Use of Restricted Funds When both restricted and unrestricted resources are available for use in the City’s enterprise funds, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. 20 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 1 -Summary of Significant Accounting Policies (Continued) 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. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and Improvements 10 – 40 Improvements Other Than Buildings 10 – 50 Infrastructure 25 – 100 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 position. Bond premiums, discounts, and refunding losses are deferred and amortized over the life of the bonds using the effective interest method. Issuance costs, whether or not withheld from the actual debt proceeds, are reported as debt service expenditures. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Compensated Absences Accumulated unpaid vacation and sick pay are accrued when incurred in the government-wide and proprietary fund financial statements. 21 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 1 -Summary of Significant Accounting Policies (Concluded) Deferred Inflows/Outflows of Resources Deferred inflows of resources reported on applicable governmental fund types represent revenues which are measureable but not available in accordance with the modified accrual basis of accounting. The deferred inflows will be recognized as revenue in the fiscal year they are earned or become available. Deferred outflows of resources represent consumption of net position that is applicable to a future reporting period. Deferred outflows have a positive effect on net position, similar to assets. Pension Related -Pension Related Deferred Inflows and Outflows represent the difference between expected and actual experience with regard to economic or demographic factors and changes to assumptions in the measurement of total pension liability, and the differences between expected and actual earnings on pension plan investments. These amounts are reported as deferred inflows or outflows of resources, to be recognized in expense over time. Also included in deferred outflows are amounts contributed to the pension plans subsequent to the measurement date. See Note 7 for information on Pension Related Deferred Inflows and Outflows. Revenue Recognition Utility revenues are reported on the accrual basis in the accompanying financial statements. Grant revenues are recorded using the modified accrual basis in governmental funds and the accrual basis in the proprietary funds. Restricted grant revenues, which are received but not expended, are recorded as unearned revenues. Property Taxes The assessment of all properties and the collection of all property taxes are made through the Property Appraiser and Tax Collector of the City of Jacksonville, Florida. General property taxes are recorded as received, in cash, which approximates taxes levied less discounts for the current fiscal year. Taxes are levied on November 1 of each year. All taxes become delinquent on April 1 of the following year. Discounts are allowed for early payment. On or prior to June 1, interest-bearing certificates are sold for all uncollected real property taxes. Unsold certificates are held by the City of Jacksonville, Florida. Interfund Transactions During the course of normal operations, the City has various transactions between funds to construct assets and comply with local ordinances and other legal restrictions. These transactions are reflected as transfers. In addition, certain transfers have been made between systems and accounts of the utility enterprise fund as required by bond covenants. Prior Period Information The financial statements include certain prior year summarized comparative information in total. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the City’s financial statements for the year ended September 30, 2014, from which the summarized information was derived. 22 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 2 -Cash and Investments The City maintains a cash and investment pool that is designed for use by all funds, except for those monies which are periodically transferred for pension investment purposes. In addition, investments are separately held and individually accounted for where contractual arrangements and bond covenants provide for and require such arrangements. At September 30, 2015, the carrying amount of cash on hand and on deposit with banks, including interest-bearing deposits was $4,022,717, and the related bank balance was $4,369,095. 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 (the 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 25% to 125% depending upon the depository’s financial condition and establishment period. All collateral must be deposited with an approved financial institution. Any losses to public depositors are covered by applicable deposit insurance, sale of securities pledged as collateral and, if necessary, assessments against other qualified public depositories of the same type as the depository in default. The City elected to adopt a written investment policy as authorized under Florida Statutes. Under the City’s investment policies, general investments’ activities are authorized to invest in obligations of the U.S. Treasury, demand deposits, U.S. government agency securities, certificates of deposit, U.S. government sponsored enterprises, government and corporate fixed income mutual funds, corporate notes and bonds, and local government investment pools. Pension trust funds can invest in the aforementioned and, additionally, authorized investments include domestic and foreign equity securities, domestic and foreign fixed income securities, and cash equivalent securities. Following are the investments, credit ratings, and maturities of the City’s governmental and business-type activities at September 30, 2015: 23 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 2 -Cash and Investments (Continued) Investment Maturities Less More Investment Credit Fair Than 1-5 6-10 Than Type Rating Value 1 Year Years Years 10 Years Total Money Market Funds: Morgan Stanley, N.A. Unrated $ 7,168 $ 7,168 $ 0 $ 0 $ 0 $ 7,168 Mutual Funds: Alliance Limited Duration High Income Mutual Fund Unrated 1,189,005 1,189,005 0 0 0 1,189,005 Delaware Diversified Income A Unrated 2,483,596 2,483,596 0 0 0 2,483,596 Guggenheim Floating Rate Strategy Class A Unrated 4,165,322 4,165,322 0 0 0 4,165,322 Invesco Floating Rate Income Class A Unrated 727,801 727,801 0 0 0 727,801 Lord Abbett Short Duration Income Class A Mutual Fund Unrated 3,011,218 3,011,218 0 0 0 3,011,218 Voya Floating Rate A Unrated 4,166,004 4,166,004 0 0 0 4,166,004 Florida PRIME A-1 22,817 22,817 0 0 0 22,817 Total $ 15,772,931 $ 15,772,931 $ 0 $ 0 $ 0 $ 15,772,931 Listed below are the investments and maturities in the City’s pension trust funds at September 30, 2015: Investment Maturities Investment Fair Less Than 1-5 6-10 More Than Type Value* 1 Year Years Years 10 Years Total Cash Deposits and Money Markets $ 7,381,526 $ 7,381,526 $ 0 $ 0 $ 0 $ 7,381,526 Common Stocks 14,302,996 14,302,996 0 0 0 14,302,996 Corporate Bonds 1,011,304 119,447 364,489 527,368 0 1,011,304 Government and GSE Bonds 151,447 0 110,387 41,060 0 151,447 ICMA Self Directed 517,080 517,080 0 0 0 517,080 Total $ 23,364,353 $ 22,321,049 $ 474,876 $ 568,428 $ 0 $ 23,364,353 * Fair value balances reported include interest receivable. The total pension investment balances of the City at September 30, 2015, are comprised of the following items: 24 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 2 -Cash and Investments (Continued) Moody’s Percent Investment Credit of Type Rating Total Corporate Bonds A1 0.32% Corporate Bonds A2 0.21% Corporate Bonds A3 0.74% Corporate Bonds AA1 0.11% Corporate Bonds AA3 0.21% Corporate Bonds AAA 0.10% Corporate Bonds BAA1 1.64% Corporate Bonds BAA2 0.63% Corporate Bonds BAA3 0.39% Government and GSE Bonds AAA 0.64% Stocks NR 61.21% Cash and Money Market NR 31.59% ICMA Self Directed NR 2.21% Credit Risk—It is the City’s Police Officers’ Retirement System Trust Fund’s and the City’s General Employees’ Retirement System Trust Fund’s investment policies to, at a minimum, limit 80% of the total fixed income portfolio to those that are rated investment grade of higher. The Police Officers’ Retirement System Trust Fund’s investment policy defines investment grade as “BBB”, Baa”, or their equivalent. Also, no more than 10% (at cost) of the fixed income portfolio total value can be invested in the securities of any single corporate issuer. The maximum allocation to International Equities is 25%. Custodial Credit Risk—For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Finance Director may execute a third party Custodial Safekeeping Agreement with a commercial bank having trust powers or a trust company which is chartered by the United States government or the State of Florida. All securities purchased and/or collateral obtained by the City shall be properly designated as an asset of the City and held in safekeeping by the trust department or trust company, and no withdrawal of such securities, in whole or in part, shall be made from safekeeping, except by an authorized City staff member. The third party Custodial Safekeeping Agreement shall include letters of authority from the City with details as to responsibilities of parties, notification of security purchases, sales, deliver, repurchase agreements, wire transfers, safekeeping and transaction costs, procedures in case of wire failure or other unforeseen mishaps, including liability of each party. 25 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 2 -Cash and Investments (Concluded) Restricted cash and investments at September 30, 2015, in the enterprise funds follows: Renewal Enterprise Customer and Debt Funds Deposits Replacement Service Totals Utility Fund $ 586,894 $ 250,000 $ 381,162 $ 1,218,056 Note 3 -Receivables Receivables, net of the allowance for doubtful accounts at September 30, 2015, consist of the following: Less Total Allowance Accounts Accounts for Doubtful Receivable Fund Receivable Accounts Net General $ 1,210 $ 0 $ 1,210 Utility 447,683 (18,860) 428,823 Stormwater 69,589 (15,597) 53,992 Sanitation 119,173 (53,602) 65,571 Total $ 637,655 $ (88,059) $ 549,596 Included in accounts receivable are $203,390 of water and sewer revenues earned, but not billed as of September 30, 2015. Note 4 -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, 2015: Notes Receivable $ 140,185 (Current Portion) (15,759) Total Notes Receivable -Noncurrent $ 124,426 26 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 5 -Capital Assets Capital asset activity for the fiscal year ended September 30, 2015, is as follows: Beginning Ending Balance Increases (Decreases) Balance Governmental Activities Capital Assets Not Being Depreciated: Land $ 10,363,002 $ 0 $ 0 $ 10,363,002 Construction in Progress 417,906 898,463 (919,508) 396,861 Total Capital Assets Not Being Depreciated 10,780,908 898,463 (919,508) 10,759,863 Capital Assets Being Depreciated: Buildings 4,491,659 82,987 0 4,574,646 Intangible Assets 341,079 40,860 0 381,939 Improvements Other Than Buildings 39,156,369 919,508 0 40,075,877 Machinery and Equipment 3,637,172 413,774 0 4,050,946 Total Capital Assets Being Depreciated 47,626,279 1,457,129 0 49,083,408 Less Accumulated Depreciation for: Buildings (1,856,760) (118,933) 0 (1,975,693) Intangible Assets (334,215) (9,741) 0 (343,956) Improvements Other Than Buildings (14,238,285) (686,756) 0 (14,925,041) Machinery and Equipment (2,763,376) (293,071) 0 (3,056,447) Total Accumulated Depreciation (19,192,636) (1,108,501) 0 (20,301,137) Total Capital Assets Being Depreciated, Net 28,433,643 348,628 0 28,782,271 Governmental Activities Capital Assets, Net $ 39,214,551 $ 1,247,091 $ (919,508) $ 39,542,134 Business-type Activities Capital Assets Not Being Depreciated: Land $ 1,656,018 $ 0 $ 0 $ 1,656,018 Construction in Progress 172,514 555,267 (167,373) 560,408 Total Capital Assets Not Being Depreciated 1,828,532 555,267 (167,373) 2,216,426 Capital Assets Being Depreciated: Buildings 4,356,384 0 0 4,356,384 Intangible Assets 244,709 0 0 244,709 Improvements Other Than Buildings 79,345,283 167,373 0 79,512,656 Machinery and Equipment 2,151,907 176,474 0 2,328,381 Total Capital Assets Being Depreciated 86,098,283 343,847 0 86,442,130 Less Accumulated Depreciation for: Buildings (4,275,987) (9,903) 0 (4,285,890) Intangible Assets (30,282) (190) 0 (30,472) Improvements Other Than Buildings (40,718,977) (2,216,682) 0 (42,935,659) Machinery and Equipment (1,711,795) (87,826) 0 (1,799,621) Total Accumulated Depreciation (46,737,041) (2,314,601) 0 (49,051,642) Total Capital Assets Being Depreciated, Net 39,361,242 (1,970,754) 0 37,390,488 Business-type Activities Capital Assets, Net $ 41,189,774 $ (1,415,487) $ (167,373) $ 39,606,914 27 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 5 ­Capital Assets (Concluded) Depreciation expense was charged to functions/programs as follows: Governmental Activities General Governmental Public Safety Road Maintenance and Construction Parks and Recreation Total Depreciation Expense -Governmental Activities $ $ 141,838 193,301 535,805 237,557 1,108,501 Business-type Activities Utility Stormwater Sanitation Building Code Enforcement Total Depreciation Expense -Business-type Activities $ $ 1,835,798 474,295 2,892 1,616 2,314,601 Note 6 ­Long-term Debt Revenue Bonds and Loans payable are comprised of the following: Revenue Bond Payable Utilities System Revenue Refunding Bond, Series 2014, Payable in Annual Installments of Principal and Semiannual Installments of Interest Through October 1, 2025, Bearing Coupon Rates of 2.330%, Secured Solely by a Pledge of and Lien on Net Water and Sewer System Revenues and Certain Other Revenues as Defined in the Bond Ordinance Loans Payable $ 13,960,000 Florida Department of Environmental Protection, Disbursements and Capitalized Interest for a $773,030 State of Florida Revolving Loan #DW160710, Issued to Finance the Construction Costs to Replace a Well at Water Treatment Plant No. 1 and a Transmission Main on Ocean Boulevard, Payable in Semiannual Installments of Principal and Interest Through November 15, 2030, with Financing Rates of 2.71%, Secured Solely by a Pledge of Net Water and Sewer System Revenues, After Payment of all Yearly Payment Obligations on Account of the Senior Revenue Obligations, as Defined in the Loan Agreement 627,866 Florida Department of Environmental Protection, Disbursements, Service Fee, and Capitalized Interest for a Combined $9,368,576 State of Florida Revolving Loan #WW160700, Issued to Finance the Construction of Treatment and Transmission Facilities for the Buccaneer WWTP Phase-out Improvements and TMDL Compliance Program WWTP #1, Payable in Semiannual Installments of Principal and Interest Through May 15, 2032, with Financing Rates of 3.14% and 2.88%, Secured Solely by a Pledge of Net Water and Sewer System Revenues, After Payment of all Yearly Payment Obligations on Account of the Senior Revenue Obligations, as Defined in the Loan Agreement 6,704,151 Total Revenue Bonds and Loans Payable $ 21,292,017 28 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 6 -Long-term Debt (Continued) The annual requirements to amortize all revenue bonds and loans payable outstanding at September 30, 2015, are as follows: Business-type Activities Year Ending Long-term Debt September 30 Principal Interest Total 2016 $ 1,426,895 $ 537,506 $ 1,964,401 2017 1,507,413 500,776 2,008,189 2018 1,543,259 462,611 2,005,870 2019 1,584,443 423,466 2,007,909 2020 1,620,979 383,330 2,004,309 2021-2025 8,735,952 1,278,514 10,014,466 2026-2030 3,863,525 387,235 4,250,760 2031-2032 1,009,551 39,294 1,048,845 Total $ 21,292,017 $ 4,012,732 $ 25,304,749 Interest and amortization incurred during the year ended September 30, 2015, amounted to $717,902. Of the amount incurred, no interest was capitalized. The City is also required to maintain certain debt service coverage ratios in accordance with bond resolutions. As of September 30, 2015, 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, 2015: Balance Balance Due October 1, September 30, Within 2014 Additions Reductions 2015 One Year Governmental Activities Compensated Absences $ 570,520 $ 377,045 $ (374,334) $ 573,231 $ 191,157 OPEB Obligation 156,845 21,656 0 178,501 0 Net Pension Liability 5,747,103 2,066,254 0 7,813,357 0 Total Governmental Activities ­ Long-term Liabilities $ 6,474,468 $ 2,464,955 $ (374,334) $ 8,565,089 $ 191,157 29 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 6 -Long-term Debt (Continued) Balance Balance Due October 1, September 30, Within 2014 Additions Reductions 2015 One Year Business-type Activities State Revolving Fund Loans $ 7,658,714 $ 0 $ (326,697) $ 7,332,017 $ 336,895 Revenue Bonds Payable 13,960,000 0 0 13,960,000 1,090,000 Less Deferred Amounts: Loss on Bond Refunding (1,187,375) 0 107,943 (1,079,432) 0 Total Revenue Bonds Payable 12,772,625 0 107,943 12,880,568 1,090,000 Total Bonds/Loans Payable 20,431,339 0 (218,754) 20,212,585 1,426,895 Compensated Absences 229,327 123,786 (145,291) 207,822 68,035 OPEB Obligation 51,836 7,962 0 59,798 0 Net Pension Liability 1,449,865 720,298 0 2,170,163 0 Total Business-type Activities ­ Long-term Liabilities $ 22,162,367 $ 852,046 $ (364,045) $ 22,650,368 $ 1,494,930 Conduit Debt The City has issued Health Facility Revenue and Refunding Bonds to provide financial assistance to private sector entities for the acquisition and construction of health care facilities deemed to be in the public interest. These bonds are secured by the financed property and are payable solely from the payments received on the underlying mortgage loans. There is no obligation on the part of the City or any political subdivision for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2015, there are two series of Health Facility Revenue and Refunding Bonds outstanding, with an aggregate principal amount payable of $56,080,000. Pledged Revenue The City has pledged certain revenues to repay certain bonds and notes outstanding as of September 30, 2015. The following table reports the revenues, sometimes net of related operating expenses, pledged for each debt issue, the amounts of such revenues received in the current year, the current year principal and interest paid on the debt, the approximate percentage of each revenue which is pledged to meet the debt obligation, and the date through which the revenue is pledged under the debt agreement, and the total pledged future revenues for each debt, which is the amount of the remaining principal and interest on the bonds and notes at September 30, 2015: 30 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 6 -Long-term Debt (Concluded) Outstanding Net Principal Estimated Principal Pledged Revenue and Interest Percentage and Pledged Description Revenue Received Paid Pledged Interest Through 2014 – Utility System Utility Refunding Bonds Revenues $ 3,180,693 $ 206,907 * 6.51% $ 15,828,426 2026 Florida Department of Environmental Utility Protection, SRF Loan Revenues 3,180,693 49,879 1.57% 773,121 2031 Florida Department of Environmental Utility Protection, SRF Loan Revenues 3,180,693 511,953 16.10% 8,703,202 2032 * First principal payment was not due until October 1, 2015. Note 7 -Defined Benefit Pension Plans Plan Descriptions The City maintains two separate single-employer defined benefit pension plans, one for police officers and one for general employees, which cover substantially all full-time City employees hired before September 1, 2008. The general employees’ defined benefit plan is closed to new entrants. Full-time general employees hired on or after September 1, 2008, are covered by the defined contribution plan disclosed in Note 8. The pension plans do not issue separate stand­ alone financial statements. Combining statements are included in the supplementary information to the basic financial statements. General Employees’ Retirement Plan Plan Description The General Employees’ Retirement Plan (Plan) provides retirement, disability, and death benefits to Plan members and their beneficiaries. The City Commission has the authority to establish and amend the benefit provisions of the Plan. The Plan is governed by a Retirement Plan Board appointed by the City Commission and comprised of five members, two of which will be eligible legal residents of the City, two of which will be general employees elected by the majority of general employees who are members of the Plan, and one of which will be elected by the other four members. Plan membership in the General Employees’ Retirement Plan as of September 30, 2015 and 2014, is as follows: 31 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) General Employees’ Retirement Plan (Continued) Plan Description (Concluded) September 30, September 30, Retirees and Beneficiaries 2015 2014 Inactive Plan Members or Beneficiaries Currently Receiving Benefits 59 56 Inactive Plan Members Entitled to but Not Yet Receiving Benefits 12 11 Active Plan Members 48 56 Total 119 123 Plan Benefits Normal retirement is available upon the attainment of age sixty and the completion of five years of credited service. Early retirement is available with a reduced benefit upon the attainment of age fifty-five and the completion of five years of credited service. For members hired before April 24, 2005, the normal retirement benefit shall equal 2.85% of average final compensation for each year of credited service. For members hired on or after April 24, 2005, the normal retirement benefit shall equal 2.50% of average final compensation for each year of credited service. The Plan includes a deferred retirement option program (DROP) under which members eligible for normal retirement may have their monthly pension benefit credited to an account while continuing to be actively employed for up to five years. As of September 30, 2015, Plan net position included $29,039 of DROP account balances. Contributions The City is required to contribute at an actuarially determined rate (32.67%) of valuation payroll for the year ended September 30, 2015. City contributions to the Plan were $863,613 for the year ended September 30, 2015. Plan members are required to contribute 6.0% of their annual covered salary. Contribution requirements are established by City code, which may be amended by the City Commission. Measurement Date As described in Note 15, the City implemented GASB 68 during the current year for its pension plans. As permitted by the standard, the City elected to use a measurement date to value the net pension liability and related deferred inflows and outflows as of September 30, 2014, one year prior to the reporting date. The City’s Pension Plans do no issue separate financial statements. Therefore, the disclosures required by GASB 67 as of September 30, 2015, are also included below. Total Pens ion Plan Fiduciary Net Pens ion Liability Net Pos ition Liability Balances at S eptember 30, 2013 17,282,101 $ 13,770,711 $ 3,511,390 $ Changes for the Year: Service Cos t 399,576 0 399,576 In teres t 1,386,245 0 1,386,245 Changes in As s umptions 1,814,460 0 1,814,460 Contributions - Employer 0 950,980 (950,980) Contributions - State 0 0 0 Contributions - Employee 0 157,383 (157,383) Net Inves tment Income 0 778,981 (778,981) Benefit Payments , Including Refunds of Contributions (707,218) (707,218) 0 Adminis trative Expens es 0 (31,529) 31,529 Net Changes 2,893,063 1,148,597 1,744,466 Balances at S eptember 30, 2014 20,175,164 $ 14,919,308 $ 5,255,856 $ 32 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) General Employees’ Retirement Plan (Continued) Measurement Date (Concluded) September 30, 2015 Total Pension Liability $ 20,788,102 Plan Net Position (15,008,338) Net Pension Liability $ 5,779,764 General Employees’ Retirement Plan Net Position as a Percentage of Total Pension Liability 72.20% For the year ended September 30, 2015, the City recognized total pension expense of $1,129,434. The City reported deferred outflows of resources and deferred inflows of resources related to the General Employees’ Pension Plan from the following sources: Deferred Outflows of Resources Changes in Assumptions $ 1,296,043 Differences Between Project and Actual Earnings 269,969 Contributions Made Subsequent to Measurement Date 863,613 Total Deferred Outflows of Resources $ 2,429,625 Contributions made after the measurement date (shown above) will be recognized in the fiscal year ended September 30, 2016. Other amounts reported as deferred outflows of resources related to pensions will be recognized in pension expense as follows: Year Ended September 30 Amount 2016 $ 585,909 2017 585,909 2018 326,701 2019 67,493 2020 0 Thereafter 0 Total $ 1,566,012 Plan Investments The Retirement Plan Board is responsible for establishing and amending the Plan’s investment policies. The Plan’s current investment policy gives the Board discretion to allocate assets with assistance of the Plan’s investment consultant. No formal targets are stated in the investment policy although the maximum allocation to international equities is 25%. 33 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) General Employees’ Retirement Plan (Continued) Actuarial Assumptions The total pension liability was determined by actuarial valuations for the Plan as of September 30, 2014, rolled forward to September 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation: 2.50% Salary Increases: Age based ranging from 5.00% - 13.50% Investment Rate of Return: 7.00%, net of investment expenses, including inflation Mortality: RP2000 Combined Health Participant Mortality Table for males and females with generational projections from the Year 2000 Projection Scale AA Date of Experience Study: Other significant actuarial assumptions used in the September 30, 2013 valuation were based on the results of an actuarial experience study for the period October 1, 2001 - September 30, 2010. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense of 0.50% and inflation of 2.50%) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation (see the discussion of the pension plans’ investment policy) are summarized in the following table: Target Long-term Expected Asset Class Allocation Real Net Rate of Return US Large-Cap Growth Stocks 13% 7.4% US Large-Cap Value Stocks 12% 7.0% US Mid-Cap Growth Stocks 3% 8.6% US Mid-Cap Value Stocks 4% 7.8% US Mid-Cap Core Stocks 3% 6.9% US Small-Cap Growth Stocks 5% 9.6% US Small-Cap Value Stocks 5% 8.6% International Equities 5% 7.2% US Investment Grade Bonds 40% 1.8% Cash (US 90-day T-bill) 10% 0.2% 34 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) General Employees’ Retirement Plan (Concluded) Actuarial Assumptions (Concluded) Discount rate. A single discount rate was used to measure the total pension liability. The single discount rate was based on the expected rate of return on Plan investments of 7.00%. The projection of cash flows used to determine the single discount rate assumed that plan member contributions will be made at the current contribution rate and that City contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on Plan investments (7.00%) was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the City, calculated using the discount rate of 7.00%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1­ percentage-point lower (6.00%) or 1-percentage-point higher (8.00%) than the current rate: As of September 30, 2015: Net Pension Liability General Employees’ Pension Plan 1% Decrease (6.00%) $ 8,074,170 Current Discount Rate (7.00%) $ 5,779,764 1% Increase (8.00%) $ 3,819,787 As of September 30, 2014: Net Pension Liability General Employees’ Pension Plan 1% Decrease (6.00%) $ 7,489,269 Current Discount Rate (7.00%) $ 5,255,856 1% Increase (8.00%) $ 3,344,704 Police Officers’ Retirement Plan Plan Description The Police Officers’ Retirement Plan (Police Plan) provides retirement, disability, and death benefits to Police Plan members and their beneficiaries. The Police 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 Police Plan. The Policemen’s Pension Board of Trustees is appointed by the City Commission and comprised of five members, two of which will be eligible legal residents of the City, two of which will be police officers elected by the majority of police officers who are members of the Police Plan, and one of which will be elected by the other four trustees. Membership in the Police Officers’ Retirement Plan as of September 30, 2015 and 2014, is as follows: 35 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) Police Officers’ Retirement Plan (Continued) Plan Description (Concluded) Retirees and Beneficiaries Inactive Plan Members or Beneficiaries Currently Receiving Benefits Inactive Plan Members Entitled to but Not Yet Receiving Benefits Active Plan Members Total September 30, 2015 20 5 21 46 September 30, 2014 20 4 22 46 Plan Benefits For members hired before January 1, 2013, normal retirement is available upon the attainment of age fifty and the completion of twenty years of credited service, the attainment of age fifty- five and the completion of ten years of credited service, the completion of twenty-five years of credited service regardless of age, or the attainment of age sixty and the completion of five years of credited service. For members hired on or after January 1, 2013, normal retirement is available upon the attainment of age fifty-five and the completion of ten years of credited service or the attainment of age fifty-two and the completion of twenty-five years of credited service. Early retirement is available with a reduced benefit upon the attainment of age fifty and the completion of ten years of credited service. For members hired before January 1, 2013, the normal retirement benefit shall equal 3.00% of average final compensation for each year of credited service. For members hired on or after January 1, 2013, the normal retirement benefit shall equal 2.00% of average final compensation for each year of credited service. The Police Plan includes a DROP under which members eligible for normal retirement may have their monthly pension benefit credited to an account while continuing to be actively employed for up to five years. As of September 30, 2015, Police Plan net position included $488,041 of DROP account balances. Contributions The City is required to contribute, at actuarially determined rates, if State of Florida contributions are not sufficient (combined City and State contributions were 41.48% of valuation payroll for the year ended September 30, 2015). City and State contributions to the Police Plan were $677,542 for the year ended September 30, 2015. Police Plan members are required to contribute 7.0% of their annual covered salary. Per City Code, the City Commission may amend established contribution requirements. Measurement Date As described in Note 15, the City implemented GASB 68 during the current year for its pension plans. As permitted by the standard, the City elected to use a measurement date to value the net pension liability and related deferred inflows and outflows as of September 30, 2014, one year prior to the reporting date. The City’s Pension Plans do no issue separate financial statements. Therefore, the disclosures required by GASB 67 as of September 30, 2015, are also included below: 36 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) Police Officers’ Retirement Plan (Continued) Measurement Date (Concluded) Total Pens ion Plan Fiduciary Net Pens ion Liability Net Pos ition Liability Balances at S eptember 30, 2013 11,017,205 $ 7,331,627 $ 3,685,578 $ Changes for the Year: Service Cos t 269,182 0 269,182 Interes t 879,486 0 879,486 Changes of As s umptions 1,275,669 0 1,275,669 Contributions - Employer 0 563,203 (563,203) Contributions - State 0 96,217 (96,217) Contributions - Employee 0 103,095 (103,095) Net Inves tment Income 0 642,480 (642,480) Benefit Payments , including Refunds of Contributions (585,616) (585,616) 0 Adminis trative Expens es 0 (22,742) 22,742 Net Changes 1,838,721 796,637 1,042,084 Balances at S eptember 30, 2014 12,855,926 $ 8,128,264 $ 4,727,662 $ September 30, 2015 Total Pension Liability $ 13,402,655 Plan Net Position (8,493,122) Net Pension Liability $ 4,909,533 Police Officers’ Retirement Plan Net Position as a Percentage of Total Pension Liability 63.37% For the year ended September 30, 2015, the City recognized total pension expense of $749,144. The City reported deferred outflows of resources and deferred inflows of resources related to the Police Officers’ Pension Plan from the following sources: Deferred Outflows of Resources Differences Between Project and Actual Earnings $ 992,187 Contributions Made Subsequent to Measurement Date 574,014 Total Deferred Outflows of Resources $ 1,566,201 Deferred Inflows of Resources Differences Between Project and Actual Earnings $ 39,827 Total Deferred Outflows of Resources $ 39,827 37 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Continued) Police Officers’ Retirement Plan (Continued) Deferred Inflows of Resources (Concluded) Contributions made after the measurement date (shown above) will be recognized in the fiscal year ended September 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended September 30 Amount 2016 $ 273,525 2017 273,525 2018 273,525 2019 131,785 2020 0 Thereafter 0 Total $ 952,360 Plan Investments The Policemen’s Pension Board of Trustees is responsible for establishing and amending the Police Plan’s investment policies. The Police Plan’s current investment policy gives the Board discretion to allocate assets with assistance of the Police Plan’s investment consultant. No formal targets are stated in the investment policy although the maximum allocation to international equities is 25%. Actuarial Assumptions The total pension liability was determined by actuarial valuations for the Plan as of September 30, 2014, rolled forward to September 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation: 2.50% Salary Increases: Age based ranging from 4.50% - 22.50% Investment Rate of Return: 7.00%, net of investment expenses, including inflation Mortality: RP2000 Combined Health Participant Mortality Table for males and females with generational projections from the Year 2000 Projection Scale AA Date of Experience Study: Other significant actuarial assumptions used in the September 30, 2014, valuation were based on the results of an actuarial experience study for the period October 1, 2001 -September 30, 2010. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense of 0.50% and inflation of 2.50%) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation (see the discussion of the pension plans’ investment policy) are summarized in the following table: 38 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 7 -Defined Benefit Pension Plans (Concluded) Police Officers’ Retirement Plan (Concluded) Actuarial Assumptions (Concluded) Long-term Expected Asset Class Target Allocation Real Net Rate of Return US Large-Cap Growth Stocks 13% 7.4% US Large-Cap Value Stocks 12% 7.0% US Mid-Cap Growth Stocks 3% 8.6% US Mid-Cap Value Stocks 4% 7.8% US Mid-Cap Core Stocks 3% 6.9% US Small-Cap Growth Stocks 5% 9.6% US Small-Cap Value Stocks 5% 8.6% International Equities 5% 7.2% US Investment Grade Bonds 40% 1.8% Cash (US 90-day T-bill) 10% 0.2% Discount rate. A single discount rate was used to measure the total pension liability. The single discount rate was based on the expected rate of return on Police Plan investments of 7.00%. The projection of cash flows used to determine the single discount rate assumed that plan member contributions will be made at the current contribution rate and that City contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the Police Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current Police Plan members. Therefore, the long-term expected rate of return on Police Plan investments (7.00%) was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the City, calculated using the discount rate of 7.00%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1­ percentage-point lower (6.00%) or 1-percentage-point higher (8.00%) than the current rate: September 30, 2015 Net Pension Liability Police Officers’ Pension Plan 1% Decrease (6.00%) $ 6,525,880 Current Discount Rate (7.00%) $ 4,909,533 1% Increase (8.00%) $ 3,565,056 September 30, 2014 Net Pension Liability Police Officers’ Pension Plan 1% Decrease (6.00%) $ 6,321,181 Current Discount Rate (7.00%) $ 4,727,662 1% Increase (8.00%) $ 3,399,917 39 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 8 -Defined Contribution Plan The City passed an ordinance in 2013 closing the General Employees’ defined benefit plan to new entrants and creating the City of Atlantic Beach Defined Contribution Plan. The City’s 457 defined contribution plan is administered through ICMA, which covers all eligible employees employed with the City on or after September 1, 2008, who are not covered by the City’s Police Officers’ defined benefit plan. Under the 457 Plan, the City contributes an employer matching contribution of up to 6% of earnings during the first ten years of service. Following ten years of service, the City contributes a fixed contribution of 4% of earnings. Employees have the option to voluntarily contribute to the 457 Plan. Employer matching contributions from the City were $57,604 and $44,268 for the years ended September 30, 2015 and 2014, respectively. Under the 457 Plan, an employee is considered fully vested after 5 years of completed service. Note 9 -Postemployment Benefits Other Than Pensions Plan Description The City of Atlantic Beach administers a single-employer defined benefit health care plan (Plan) that provides medical insurance benefits to its employees and their eligible dependents. In accordance with Section 112.0801 of the Florida Statutes, because the City provides a medical plan to active employees of the City and their eligible dependents, the City is also required to provide retirees with the opportunity to participate in this Plan. Benefit provisions for the Plan are established by the City Commission and may be amended by the City Commission. The City does not issue stand-alone financial statements for the Plan. Membership in the Plan consisted of the following, as of October 1, 2012, the date of the latest actuarial valuation: Retirees and Beneficiaries Receiving Benefits 2 Active Plan Members 90 Total 92 Funding Policy Contribution rates for the Plan are established on an annual basis by the City Commission. Eligible retirees and their covered dependents receiving benefits contribute 100% of the blended (active and retiree combined) equivalent premium rates. While the City does not directly contribute towards the costs of retiree premiums via an explicit subsidy, the ability of retirees to obtain health insurance coverage at a blended, group rate constitutes a significant economic benefit to retirees, or an “implicit” subsidy. This implicit subsidy is considered to be another postemployment benefit (OPEB) obligation of the City. The City is currently funding this OPEB obligation on a pay-as-you-go basis. Annual Required Contribution (ARC) amounted to $49,705 for the current fiscal year. The ARC is based on a rate of 1.0% of projected payroll of $4,204,177 or an average $486 per active participant. For the year ended September 30, 2015, the City estimated it implicitly subsidized $19,740 of health care costs for its retirees and covered dependents. This implied subsidy reduced the annual OPEB cost to a net expense of $29,617 after interest on the Net OPEB Obligation and adjustments to ARC. 40 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 9 -Postemployment Benefits Other Than Pensions (Continued) Annual OPEB Cost and Net OPEB Obligation The City’s annual OPEB cost (expense) is calculated based on the ARC of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the City’s net OPEB obligation to the retiree health plan: Annual Required Contribution $ 49,705 Interest on Net OPEB Obligation 8,347 Adjustment to Annual Required Contribution (8,695) Annual OPEB Cost (Expense) 49,357 Employer Contribution (19,740) Increase in Net OPEB Obligation 29,617 Net OPEB Obligation -Beginning of Year 208,681 Net OPEB Obligation -End of Year $ 238,298 The City reflected the $29,617 increase in net OPEB obligation at September 30, 2015, by recording an obligation of $21,655 for governmental activities and $7,962 for business-type activities in its government-wide statement of net position. The utility fund reported a net OPEB obligation of $41,896, while the stormwater fund, sanitation fund, and building code enforcement fund reported $10,112, $0, and $7,790, respectively. The OPEB obligation is a function of ARCs, interest, adjustments to the ARC, annual pension costs, and actual employers’ contributions made to the Plan. No trust or agency fund has been established for the Plan. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation as of September 30, 2015, are presented below. Percentage Fiscal Annual of Annual Net Year OPEB OPEB Cost OPEB Ended September 30, 2013 September 30, 2014 September 30, 2015 Cost $ 43,987 46,487 49,357 Contributed 28.5% 37.9% 20.7% Obligation $ 179,798 208,681 238,298 Funded Status and Funding Progress As of October 1, 2012, the date of the latest actuarial valuation, the actuarial accrued liability for benefits was $360,584, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the Plan) was $4,204,177, and the ratio of the unfunded actuarial accrued liability to the covered payroll was 8.58%. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Amounts determined regarding the funded status of the Plan and the ARCs of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of Plan assets is increasing or decreasing over time, relative to the actuarial accrued liabilities for benefits. 41 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 9 -Postemployment Benefits Other Than Pensions (Concluded) Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. In the actuarial valuation as of October 1, 2012, the date of the latest actuarial valuation, the Entry-Age Normal Actuarial Cost Method was used, which spreads the costs evenly as a percent of pay throughout the collective careers of those in the covered workforce. The unfunded actuarial accrued liability is being amortized using a level (principal and interest combined) percent of payroll over a 26-year period. Other significant actuarial assumptions include a 4% discount rate, an annual health care cost trend rate of -17%, followed by 11% for the next year, followed by 7.5% for the next year, reduced by decrements of 0.5% each year to the ultimate value of 5%, projected salary increases of 4% annually (including general price inflation of 3%), and future participation rates of 15% up to Medicare eligibility with a 2% participation rate thereafter. Note 10 -Interfund Accounts Individual fund interfund receivables and payables at September 30, 2015, consist of the following: Due Due from Other to Other Funds Funds General $ 10,781 $ 0 Nonmajor Governmental 0 10,781 Interfund receivable/payables are due to timing differences associated with grant reimbursements. The receivable/payables are expected to be received/paid within one year. Note 11 -Interfund Transfers Transfers of resources from a fund receiving revenue to the fund through which the resources are to be expended are recorded as transfers and are reported as other financing sources (uses) in the governmental funds and as transfers in (out) in the proprietary funds. Following is a summary of interfund transfers for the year ended September 30, 2015: Transfers In Nonmajor Stormwater General Governmental Total Transfers Out Fund Fund Funds Transfers Nonmajor Governmental Funds $ 260,000 $ 165,000 $ 85,000 $ 510,000 Utility Fund 0 615,167 0 615,167 Sanitation Fund 0 223,043 0 223,043 Total Transfers $ 260,000 $ 1,003,210 $ 85,000 $ 1,348,210 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. 42 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Continued) Note 12 -Commitments As of September 30, 2015, the City had outstanding commitments on contracts in progress as follows: Unexpended Project Type Contract Amounts Utility System Improvements $ 225,819 Stormwater System Improvements 82,399 General Government Improvements 578,207 On June 2, 1999, the City entered into an agreement with the City of Jacksonville, Florida, whereas the City of Jacksonville will provide advanced life support and fire services to the residents and businesses located in the City. The term of the agreement shall be from the effective date and continuing for a period of 25 years unless terminated earlier by the parties (such parties must provide a one-year notice). For the year ended September 30, 2015, the City incurred $1,066,557 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 13 -Contingencies The City is a defendant in several lawsuits which arose in the ordinary course of the City’s business. To the extent the outcome of such litigation has been determined to result in probable loss to the City, an estimated loss has been accrued in the accompanying financial statements. The outcome of the remaining claims cannot be determined at this time. Note 14 -Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. Insurance against losses are provided through the Public Risk Insurance Agency and LB Bryan and Company for the following types of risk: ■ Workers’ Compensation and Employer’s Liability ■ General Liability ■ Automobile Liability ■ Public Officials’ Liability ■ Automobile Physical Damage ■ Property Coverage ■ Accidental Death and Dismemberment 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. 43 CITY OF ATLANTIC BEACH, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2015 (Concluded) Note 15 -Other Disclosures New Accounting Pronouncements During the year, the City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. GASB 68 establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures related to the City’s pension plans. For defined benefit pensions, GASB 68 identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their present value, and attribute that present value to periods of employee service. GASB 68 also addresses note disclosure and required supplementary information. As permitted by the standard, the City chose to use a measurement date of the net pension liability one year prior to the reporting date. GASB 71 requires a government that is transitioning to the new standards to recognize a beginning deferred outflow of resources to its pension contributions made subsequent to the measurement date of the beginning net pension liability of the initial fiscal year of implementation. As a result of these statements, beginning Net Position was reduced as follows: Governmental Activities Governmental Activities $ 4,529,366 Business-type Activities Utility 890,288 Stormwater 45,518 Sanitation 10,700 Building Code Enforcement 110,698 Total Business-type Activities – Enterprise Funds 1,057,204 Total Restatement of Net Position $ 5,586,570 Components of the restatement consist of the following: Net Pension Liability 7,196,968 Deferred Outflows – Contributions Made During Fiscal Year Ended September 30, 2015 (1,610,398) Total Restatement of Net Position $ 5,586,570 44 REQUIRED SUPPLEMENTARY INFORMATION 0 CITY OF ATLANTIC BEACH, FLORIDA GENERAL EMPLOYEES' PENSION PLAN SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS September 30, 2015 September 30, 2014 Total Pension Liability Service Cost $ 402,093 $ 399,576 Interest 1,404,316 1,386,245 Difference Between Actual and Expected Experience (162,280) Changes in Assumptions 0 1,814,460 Benefit Payments (1,031,191) (697,702) Refunds 0 (9,516) Net Change in Total Pension Liability 612,938 2,893,063 Total Pension Liability - Beginning 20,175,164 17,282,101 Total Pension Liability - Ending (a) 20,788,102 20,175,164 Plan Fiduciary Net Position Contributions - Employer 863,613 950,980 Contributions - Employee 136,191 157,383 Net Investment Income 162,326 778,981 Benefit Payments (1,031,191) (697,702) Refunds 0 (9,516) Administrative Expenses (41,909) (31,529) Net Change in Plan Fiduciary Net Position 89,030 1,148,597 Plan Fiduciary Net Position - Beginning 14,919,308 13,770,711 Plan Fiduciary Net Position - Ending (b) 15,008,338 14,919,308 Net Pension Liability - Ending (a) - (b) $ 5,779,764 $ 5,255,856 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 72.20% 73.95% Covered Employee Payroll $ 2,643,589 $ 3,026,642 Net Pension Liability as a Percentage of Covered Employee Payroll 218.63% 173.65% The data presented above was measured using actuarial methods prescribed by GASB 67/68. Additional years will be added to this schedule annually, until 10 years of data is presented. 45 CITY OF ATLANTIC BEACH, FLORIDA GENERAL EMPLOYEES' PENSION PLAN SCHEDULE OF CONTRIBUTIONS September 30, 2015 September 30, 2014 Actuarially Determined Contribution 863,613 $ 950,980 $ Contributions in Relation to the Actuarially Determined Contribution 863,613 950,980 Contribution Deficiency (Excess) $ 0 $ 0 Covered Employee Payroll 2,643,589 $ 3,026,642 $ Contributions as a Percentage of Covered Employee Payroll 32.67% 31.42% Additional years will be added to this schedule annually until 10 years of data is presented. NOTES TO SCHEDULE Valuation Date: October 1, 2013 Actuarially determined contribution rates are calculated as of September 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Funding Method: Entry Age Normal Cost Method Amortization Method: Closed, Level Dollar Method Remaining Amortization Period: 10 years Asset Valuation Method: 4-year Smoothed Market Value: Difference between the expected and actual return on market value of assets phased in over a period of four (4) years (at the rate of 25% per year), adjusted to be no greater than 120% and no less than 80% of the fair market value. Inflation: 3.0% per year Salary Increases: 5.5% - 14.0% Interest Rate: 7.0% per year compounded annually, net of investment related expenses. Members' Contribution Rate: 6.00% Retirement Age: Experience-based table of rates that vary by age. Post Retirement COLA: None Mortality: RP2000 Combined Healthy Participant Mortality Table for males and females with generational projections from the year 2000 Projection Scale AA. Date of the Most Recent Experience Study: Other significant actuarial assumptions used in the September 30, 2013 valuation were based on the results of an actuarial experience study for the period October 1, 2001 ­ September 30, 2010. 46 CITY OF ATLANTIC BEACH, FLORIDA POLICE OFFICERS' PENSION PLAN SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS September 30, 2015 September 30, 2014 Total Pension Liability Service Cost 291,761 $ 269,182 $ Interest on the Total Pension Liability 900,982 879,486 Difference Between Actual and Expected Experience (213,426) 0 Changes in Assumptions 0 1,275,669 Benefit Payments (524,537) (524,537) Refunds (28,505) (61,079) Other (Excess Premium Tax Liability) 120,454 0 Net Change in Total Pension Liability 546,729 1,838,721 Total Pension Liability - Beginning 12,855,926 11,017,205 Total Pension Liability - Ending (a) 13,402,655 12,855,926 Plan Fiduciary Net Position Contributions - Employer 574,014 563,203 Contributions - State 103,528 96,217 Contributions - Member 112,354 103,095 Net Investment Income 43,534 642,480 Benefit Payments (524,537) (524,537) Refunds (28,505) (61,079) Administrative Expenses (35,984) (22,742) Other (Excess Premium Tax Liability) 120,454 0 Net Change in Plan Fiduciary Net Position 364,858 796,637 Plan Fiduciary Net Position - Beginning 8,128,264 7,331,627 Plan Fiduciary Net Position - Ending (b) 8,493,122 8,128,264 Net Pension Liability - Ending (a) - (b) 4,909,533 $ 4,727,662 $ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 63.37% 63.23% Covered Employee Payroll 1,633,327 $ 1,696,583 $ Net Pension Liability as a Percentage of Covered Employee Payroll 300.58% 278.66% The data presented above was measured using actuarial methods prescribed by GASB 67/68. Additional years will be added to this schedule annually until 10 years of data is presented. 47 CITY OF ATLANTIC BEACH, FLORIDA POLICE OFFICERS' PENSION PLAN SCHEDULE OF CONTRIBUTIONS September 30, 2015 September 30, 2014 Actuarially Determined Contribution* 665,091 $ 654,280 $ Contributions in Relation to the Actuarially Determined Contribution* 677,542 659,420 Contribution Deficiency (Excess) $ (12,451) $ (5,140) Covered Employee Payroll 1,633,327 $ 1,696,583 $ Contributions as a Percentage of Covered Employee Payroll 41.48% 38.87% *Amounts include the contribution from the State of Florida. Additional years will be added to this schedule annually until 10 years of data is presented. NOTES TO SCHEDULE Valuation Date: October 1, 2013 Actuarially determined contribution rates are calculated as of September 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Funding Method: Entry Age Normal Cost Method Amortization Method: Closed, Level % of Pay Method Remaining Amortization Period: 26 years Asset Valuation Method: Smoothed market value over a period of four (4) years, as prescribed under Internal Revenue Procedure 2000-40, adjusted to be no greater than 120% and no less than 80% of the fair market value. Inflation: 3.0% per year Salary Increases: 5.0% - 23.0% Payroll Growth: 1.88% per year Interest Rate: 7.0% per year compounded annually, net of investment related expenses. Retirement Age: Experience-based table of rates based on year of eligibility. Post Retirement COLA: None Mortality: RP2000 Combined Healthy Participant Mortality Table for males and females with generational projections from the year 2000 Projection Scale AA. Date of the Most Recent Experience Study: Significant assumptions used in the September 30, 2013 valuation were based on the results of an actuarial experience study for the period of October 1, 2001 ­ September 30, 2010. 48 CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION OTHER POSTEMPLOYMENT BENEFITS PLAN SCHEDULE OF FUNDING PROGRESS SEPTEMBER 30, 2015 Actuarial UAAL as Actuarial Accrued Unfunded Annual Percentage Valuation Value of Liability AAL Funded Covered of Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll 9/30/06 $ 0 $ 470,703 $ 470,703 0.0% $ 4,812,000 9.78% 10/1/09 0 497,883 497,883 0.0% 5,828,339 8.54% 10/1/12 0 360,584 360,584 0.0% 4,204,177 8.58% 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. The actuarial accrued liability (AAL) decreased significantly from the last valuation due to a decrease in the number of retirees receiving post- employment health benefits, as well as a change in the medical trend assumption. 49 CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Variance With Final Budget ­ Budgeted Amounts Actual Positive Original Final Amounts * (Negative) Revenues Property Taxes $ 4,055,229 $ 4,055,229 $ 4,113,476 $ 58,247 Nonproperty Taxes 1,133,812 1,133,812 1,109,470 (24,342) Permits, Fees, and Special Assessments 857,743 857,743 858,232 489 Intergovernmental Revenues 1,704,051 1,704,051 1,748,737 44,686 Fines and Forfeitures 83,700 83,700 77,434 (6,266) Charges for Services 774,658 774,658 742,416 (32,242) Interest Income 116,250 116,250 4,435 (111,815) Miscellaneous Revenues 49,385 56,885 49,909 (6,976) Interfund Charges 1,549,137 1,549,137 1,545,981 (3,156) Total Revenues 10,323,965 10,331,465 10,250,090 (81,375) Expenditures Governing Body: City Commission 41,665 41,665 38,708 2,957 City Clerk 288,265 292,368 253,017 39,351 City Attorney 132,000 132,000 96,150 35,850 Total Governing Body 461,930 466,033 387,875 78,158 City Administration: City Manager 261,506 261,506 235,093 26,413 General Government 521,706 557,322 461,303 96,019 Human Resources 194,531 194,531 187,215 7,316 Information Technology 835,706 876,662 809,654 67,008 Finance 906,827 934,421 859,608 74,813 Total City Administration 2,720,276 2,824,442 2,552,873 271,569 Planning and Zoning 152,292 245,166 145,206 99,960 Public Safety: Police 3,941,813 3,955,249 3,597,391 357,858 School Crossing Guards 9,693 9,693 9,850 (157) Animal Control 96,506 96,627 91,161 5,466 Fire 1,310,639 1,314,338 1,312,786 1,552 Code Enforcement 64,455 64,455 50,204 14,251 Total Public Safety 5,423,106 5,440,362 5,061,392 378,970 50 CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL - GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 (Concluded) Variance With Final Budget ­ Budgeted Amounts Actual Positive Original Final Amounts * (Negative) Expenditures (Concluded) Public Works: Administration and Streets 1,292,899 $ 1,318,688 $ 1,150,691 $ 167,997 $ Fleet Maintenance 269,624 269,624 261,471 8,153 Total Public Works 1,562,523 1,588,312 1,412,162 176,150 Parks and Recreation: Recreation and Special Events 364,353 364,353 346,294 18,059 Parks Maintenance 735,210 896,491 637,421 259,070 Total Parks and Recreation 1,099,563 1,260,844 983,715 277,129 (Total Expenditures) (11,419,690) (11,825,159) (10,543,223) 1,281,936 (Deficiency) of Revenues (Under) Expenditures (1,095,725) (1,493,694) (293,133) 1,200,561 Other Financing Sources (Uses) Transfers in 1,003,210 1,003,210 1,003,210 0 Transfers (out) 0 (322,709) 0 322,709 Sale of General Fixed Assets 0 0 17,611 17,611 Total Other Financing Sources (Uses) 1,003,210 680,501 1,020,821 340,320 Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing Uses (92,515) (813,193) 727,688 1,540,881 Fund Balances, Beginning of Year 5,637,789 5,236,590 6,574,588 1,337,998 Fund Balances, End of Year 5,545,274 $ 4,423,397 $ 7,302,276 $ 2,878,879 $ * Actual amounts include a reversal of $(346,721) prior year encumbrance roll-forward, plus current year encumbrance roll-forward of $257,113. 51 CITY OF ATLANTIC BEACH, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION NOTE TO SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL -GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2015 Budgets and Budgetary Accounting General governmental revenues 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 re-appropriated 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. 52 SUPPLEMENTARY INFORMATION CITY OF ATLANTIC BEACH, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Special Revenue Funds Assets Equity in Pooled Cash and Investments Due from Other Governments Total Assets Tree Replacement 18,956 $ 0 18,956 Convention Local Option Development Half-cent Gas Tax Tax Sales Tax 169,795 $ 102,939 $ 637,775 $ 78,346 25,656 131,190 248,141 128,595 768,965 Court Cost Training 105,927 $ 230 106,157 Liabilities and Fund Balances Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Deposits Total Liabilities 0 0 0 0 0 0 0 0 0 0 0 0 124,107 0 0 124,107 0 0 0 0 Fund Balances Restricted for: Public Safety Road Maintenance and Construction Other Capital Projects Other Purposes Committed: Conservation and Resource Management Unassigned Total Fund Balances 0 0 0 0 18,956 0 18,956 0 248,141 0 0 0 0 248,141 0 0 0 128,595 0 0 128,595 0 0 644,858 0 0 0 644,858 106,157 0 0 0 0 0 106,157 Total Liabilities and Fund Balances 18,956 $ 248,141 $ 128,595 $ 768,965 $ 106,157 $ 53 2015 Radio Communication Community Contraband Development Forfeiture Block Grants Special Revenue Funds Police Grants Totals Special Revenues Funds Capital Projects Totals Nonmajor Governmental Funds 2014 Totals 14,208 $ 797 15,005 47,231 $ 2,314 $ $ 0 0 47,231 2,314 5,828 10,781 16,609 1,104,973 $ 247,000 1,351,973 2,717,551 $ 0 2,717,551 3,822,524 $ 247,000 4,069,524 $ 3,739,371 287,946 4,027,317 0 0 0 0 0 0 111 111 4,262 0 0 4,262 3,635 10,781 0 14,416 132,004 10,781 111 142,896 36,620 0 0 36,620 168,624 10,781 111 179,516 3,521 6,531 6,399 16,451 15,005 47,120 0 2,193 170,475 0 170,475 160,767 0 0 0 0 0 0 0 0 0 0 0 0 248,141 644,858 128,595 0 2,680,931 0 248,141 3,325,789 128,595 159,677 3,588,843 86,906 0 0 15,005 0 0 47,120 0 (1,948) (1,948) 0 0 2,193 18,956 (1,948) 1,209,077 0 0 2,680,931 18,956 (1,948) 3,890,008 14,673 0 4,010,866 15,005 $ 47,231 $ 2,314 $ $ 16,609 1,351,973 $ 2,717,551 $ 4,069,524 $ $ 4,027,317 54 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 2015 Special Revenue Funds Convention Tree Local Option Development Half-cent Court Cost Replacement Gas Tax Tax Sales Tax Training Revenues Taxes 0$ 450,707 $ 127,059 $ 772,098 $ 0$ Other Intergovernmental Revenues 0 0 0 0 0 Fines and Forfeitures 0 0 0 0 3,859 Investment Earnings (Loss) 0 567 (370) 340 (119) Miscellaneous Revenues 6,083 0 0 0 0 Total Revenues 6,083 451,274 126,689 772,438 3,740 Expenditures Current: Culture and Recreation 0 0 0 0 0 Public Safety 0 0 0 0 12,999 Road Maintenance and Construction 0 202,810 0 71,258 0 Conservation and Resource Management 1,800 0 0 0 0 Debt Service: Principal 0 0 0 0 0 Interest and Other 0 0 0 0 0 Capital Outlay 0 0 0 344,186 0 (Total Expenditures) (1,800) (202,810) 0 (415,444) (12,999) Excess (Deficiency) of Revenues Over (Under) Expenditures 4,283 248,464 126,689 356,994 (9,259) Other Financing Sources (Uses) Transfers in 0 0 0 0 0 Transfers (out) 0 (160,000) (85,000) (260,000) 0 Total Other Financing Sources (Uses) 0 (160,000) (85,000) (260,000) 0 Net Change in Fund Balances 4,283 88,464 41,689 96,994 (9,259) Fund Balances, Beginning of Year 14,673 159,677 86,906 547,864 115,416 Fund Balances, End of Year 18,956 $ 248,141 $ 128,595 $ 644,858 $ 106,157 $ 55 2015 Radio Communication 12,305 $ 0 0 (47) 0 12,258 Special Revenue Funds Community Contraband Development Forfeiture Block Grants 0$ 0$ 0 89,937 8,489 0 (71) 0 1,098 0 9,516 89,937 $ Police Grants 0 74,939 0 0 0 74,939 Totals Special Revenue Funds $ 1,362,169 164,876 12,348 300 7,181 1,546,874 Capital Projects 0$ 0 0 (2,325) 0 (2,325) Totals Nonmajor Governmental Funds 1,362,169 $ 164,876 12,348 (2,025) 7,181 1,544,549 $ 2014 Totals 1,252,577 278,510 59,909 96,491 3,724 1,691,211 0 0 500 0 500 0 500 0 0 0 0 72,746 85,745 17,542 103,287 122,354 0 0 0 0 274,068 0 274,068 285,478 0 0 0 0 1,800 0 1,800 0 0 0 0 0 0 0 0 69,203 0 0 0 0 0 0 0 1,457 0 0 91,385 0 435,571 425,181 860,752 390,159 0 0 (91,885) (72,746) (797,684) (442,723) (1,240,407) (868,651) 12,258 9,516 (1,948) 2,193 749,190 (445,048) 304,142 822,560 0 0 0 0 0 85,000 85,000 275,500 0 (5,000) 0 0 (510,000) 0 (510,000) (721,208) 0 (5,000) 0 0 (510,000) 85,000 (425,000) (445,708) 12,258 4,516 (1,948) 2,193 239,190 (360,048) (120,858) 376,852 2,747 42,604 0 0 969,887 3,040,979 4,010,866 3,634,014 $ 15,005 $ 47,120 $ (1,948) $ 2,193 $ 1,209,077 $ 2,680,931 $ 3,890,008 $ 4,010,866 56 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2015, WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2014 Pension Trust Funds Assets Cash and Cash Equivalents Interest Receivable Investments at Fair Value Total Assets Police Officers' Retirement Plan 68,372 $ 3,355 8,421,395 8,493,122 General Employees' Retirement Plan 68,735 $ 5,566 14,934,037 15,008,338 $ 2015 Totals 137,107 8,921 23,355,432 23,501,460 2014 Totals 37,480 $ 64,250 23,066,411 23,168,141 Liabilities Accounts Payable and Accrued Liabilities Total Liabilities 0 0 0 0 0 0 114 114 Total Net Position Held in Trust for Pension Benefits (as Restated) 8,493,122 $ 15,008,338 $ $ 23,501,460 $ 23,168,027 57 CITY OF ATLANTIC BEACH, FLORIDA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2015 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2014 Pension Trust Funds Additions Contributions: Employer Employees State of Florida Total Contributions Net (Decrease) Increase in Fair Value of Investments Interest and Dividends Total Additions Police Officers' Retirement Plan 574,014 $ 112,354 103,528 789,896 37,142 50,642 877,680 General Employees' Retirement Plan 863,613 $ 136,191 0 999,804 152,158 88,632 1,240,594 $ 2015 Totals 1,437,627 248,545 103,528 1,789,700 189,300 139,274 2,118,274 $ 2014 Totals 1,514,183 260,478 96,217 1,870,878 792,566 441,637 3,105,081 Deductions Refunds of Contributions Benefits Investment Expenses Administrative Expenses Total Deductions 28,505 524,537 44,250 35,985 633,277 0 1,031,191 78,464 41,909 1,151,564 28,505 1,555,728 122,714 77,894 1,784,841 70,596 1,222,239 101,021 54,272 1,448,128 Change in Net Position 244,403 89,030 333,433 1,656,953 Net Position, Beginning of Year (as Restated) 8,248,719 14,919,308 23,168,027 21,511,074 Net Position, End of Year 8,493,122 $ 15,008,338 $ $ 23,501,460 $ 23,168,027 58 CITY OF ATLANTIC BEACH, FLORIDA HISTORICAL REVENUES AND EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2011 THROUGH SEPTEMBER 30, 2015 2011 2012 2013 2014 2015 Revenues Operating Revenues: Water: Customer Charges Miscellaneous Charges Total Water Sewer: $ 3,382,973 46,424 3,429,397 $ 3,069,998 48,815 3,118,813 $ 3,006,787 52,996 3,059,783 $ 2,955,863 54,852 3,010,715 $ 2,992,677 62,286 3,054,963 Customer Charges Miscellaneous Charges Total Sewer Total Operating Revenues 5,085,318 20,006 5,105,324 8,534,721 5,015,358 3,303 5,018,661 8,137,474 5,109,868 1,651 5,111,519 8,171,302 4,938,510 1,237 4,939,747 7,950,462 4,934,151 107 4,934,258 7,989,221 Nonoperating Revenues: Investment Income (Loss): Water Sewer Total Nonoperating Revenues Total Revenues 108,762 (16,367) 92,395 8,627,116 197,492 (21,010) 176,482 8,313,956 (115,023) 18,426 (96,597) 8,074,705 186,681 (43,954) 142,727 8,093,189 (7,718) (4,257) (11,975) 7,977,246 Expenses Operating Expenses: Water Sewer Total Operating Expenses 1,292,948 2,569,748 3,862,696 1,303,708 2,493,500 3,797,208 1,228,763 2,005,653 3,234,416 1,287,783 2,170,495 3,458,278 1,442,578 2,055,780 3,498,358 Administrative, Nondivisional and Other: Water Sewer Total Administrative, Non- divisional and Other (Total Expenses) 545,971 685,074 1,231,045 (5,093,741) 518,506 696,922 1,215,428 (5,012,636) 521,600 674,514 1,196,114 (4,430,530) 530,715 677,464 1,208,179 (4,666,457) 563,356 734,839 1,298,195 (4,796,553) Net Revenues Available for Debt Service 3,533,375 3,301,320 3,644,175 3,426,732 3,180,693 Nonoperating Income (Expense) Interest Expense Loan Amortization Total Nonoperating Income (Expense) (710,196) (14,730) (724,926) (726,058) (25,712) (751,770) (766,111) (12,787) (778,898) (896,571) (162,552) (1,059,123) (556,635) (98,507) (655,142) Net Income Before Depreciation and Operating Transfers $ 2,808,449 $ 2,549,550 $ 2,865,277 $ 2,367,609 $ 2,525,551 59 CITY OF ATLANTIC BEACH, FLORIDA SCHEDULES OF NET REVENUES IN ACCORDANCE WITH BOND RESOLUTIONS ENTERPRISE FUNDS (WATER AND SEWER) FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND SEPTEMBER 30, 2014 2015 2014 Gross Revenues Utility 7,955,290 $ $ 7,933,418 Connection Charges 33,932 17,044 Interest (11,977) 142,727 Total Gross Revenues 7,977,245 8,093,189 Operating Expenses Personal Services 1,968,047 1,802,458 Contractual Services 638,961 788,322 Supplies 388,737 366,425 Repairs and Maintenance 120,049 133,621 Utilities 372,361 367,452 Intergovernmental Charges 1,113,777 986,547 Other Expenses 194,619 221,633 (Total Operating Expenses) (4,796,551) (4,666,458) Total Net Revenues in Accordance with Bond Resolutions 3,180,694 $ $ 3,426,731 Total Debt Service $ 768,739 * $ 2,001,479 Debt Service Coverage Ratio 413.75% 171.21% Required Debt Service Coverage Ratio 100.00% 100.00% (a) Rate Stabilization Fund: Balance, Beginning of Year 400,000 $ $ 400,000 Transfer/Redeposit to Revenue Fund 0 0 Balance, End of Year 400,000 $ $ 400,000 * The 2014 Series Refunding Bonds' first principal payment was not due until October 1, 2015. 60 CITY OF ATLANTIC BEACH, FLORIDA OTHER BOND COVENANT DISCLOSURES FOR THE YEARS ENDED SEPTEMBER 30, 2011 THROUGH SEPTEMBER 30, 2015 Utility Service Tax Collections (Last Five Years) Year Electricity Communications Gas Fuel Oil Total 2011 $ 487,585 $ 604,567 $ 28,062 $ 33 $ 1,120,247 2012 452,183 567,909 23,187 14 1,043,293 2013 459,672 576,839 20,849 17 1,057,377 2014 473,097 522,654 16,911 29 1,012,691 2015 476,997 526,996 15,555 7 1,019,555 Ad Valorem Tax Collections (Last Five Years) Year Total 2011 $ 3,968,233 2012 3,961,395 2013 3,843,755 2014 3,908,365 2015 4,113,476 61 OTHER STATISTICAL INFORMATION CITY OF ATLANTIC BEACH, FLORIDA MAJOR UTILITY CUSTOMERS FOR THE YEAR ENDED SEPTEMBER 30, 2015 (UNAUDITED) Annual Billings Fleet Landing (Retirement Community) $ 386,590 Oaks of Atlantic Beach (Mobile Home Park) 1,644,484 Navy (Federal Government) 294,668 City of Atlantic Beach, Florida 143,636 Arium Atlantic Beach (Apartment Complex) 129,311 John Creek Estate (Mobile Home Park) 126,044 Hanna Park (Regional Park) 105,919 Avesta Homes (Apartment Complex) 81,911 One Ocean Resort (Hotel) 77,958 Sea Oats Plantation (Apartment Complex) 60,727 Total $ 3,051,248 62 ADDITIONAL ELEMENTS OF REPORT PREPARED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, ISSUED BY THE COMPTROLLER GENERAL OF THE UNITED STATES; THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA; AND OTHER CONTRACT REQUIREMENTS CITY OF ATLANTIC BEACH, FLORIDA SCHEDULE OF SOURCE AND EXPENDITURE OF THE CITY GRANT FUNDS PER ORDINANCE CODE CHAPTER 118.301(e) FOR FISCAL YEAR 2014-2015 City of Jacksonville Public Service Grants Received as a Subgrant Recipient Per Interlocal Agreement Source of City Funds Fiscal Year 2014-2015 Grant No. 5629-57 Amount of Award (Per City of Jacksonville Budget Ordinance) $ 91,386 (A) Actual Funds Received from City of Jacksonville in Last Audit Period 0 Actual Funds Received this Period (89,937) Amount Earned but Not Received this Period 0 Unspent Award Amount $ 1,449 Expenditure of City Funds (A) City Fiscal Year 2014-2015 Grant #5629-76 - includes carry-over of $9,192 from 2013-2014 Grant #5629-56. Actual 10/1/2014 Remaining Project / Federal Grant Number Budgeted 9/30/2015 Balance Area Neighborhood Infrastructure Improvements # 005525 / B14UC120017 $ 91,386 $ 89,937 $ 1,449 Total $ 91,386 $ 89,937 $ 1,449 63 INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Atlantic Beach, Florida, (the City), as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated June 23, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. We consider the following deficiency in internal control to be a material weakness: 64 Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (Concluded) Internal Control Over Financial Reporting (Concluded) 15-1 – Financial Close and Reporting Condition―At the commencement of final fieldwork it was noted that the preliminary working trial balance did not reflect all of the required closing entries, including but not limited to the accrual and reversal of numerous balance sheet accounts. It was also noted that a large prior year accrual was improperly booked to expense in fiscal year 2015. A deficiency in the financial reporting and close process could result in numerous errors and increases the risk of undetected misstatements. Recommendation―We recommend that the City’s finance department evaluates their monthly and yearly financial close and reporting process. In addition, the finance department should perform variance analysis throughout the year over major balance and income statement accounts in order to identify and correct any errors in a timely manner. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 23, 2016 Gainesville, Florida 65 INDEPENDENT ACCOUNTANTS’ REPORT ON COMPLIANCE WITH SECTION 218.415, FLORIDA STATUTES Honorable Mayor, City Commissioners, and City Manager Atlantic Beach, Florida We have examined the City of Atlantic Beach, Florida’s (the City) compliance with Section 218.415, Florida Statutes during the period ended September 30, 2015, as required by Section 10.556(10)(a), Rules of the Auditor General. Management is responsible for the City’s compliance with those requirements. Our responsibility is to express an opinion on the City’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA) and, accordingly, included examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination of the City’s compliance with specified requirements. In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2015. This report is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, the City, its management, and is not intended to be, and should not be, used by anyone other than these specified parties. June 23, 2016 Gainesville, Florida 66 MANAGEMENT LETTER Honorable Mayor, City Commissioners, and City Manager City of Atlantic Beach Atlantic Beach, Florida Report on the Financial Statements We have audited the financial statements of the City of Atlantic Beach, Florida (the City) as of and for the year ended September 30, 2015, and have issued our report thereon dated June 23, 2016. Auditors’ Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Chapter 10.550, Rules of the Auditor General. Other Reports and Schedule We have issued our Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards, and Independent Accountants’ Report on an examination conducted in accordance with AICPA Professional Standards, Section 601, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule, which are dated June 23, 2016, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial report. There were no recommendations made in the preceding annual financial report. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This information is included in Note 1 to the financial statements. Financial Condition Sections 10.554(1)(i)5.(a) and 10.556(7), Rules of the Auditor General, require that we apply appropriate procedures and report the results of our determination as to whether or not the City has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section 218.503(1), Florida Statutes. 67 Honorable Mayor, City Commissioners, and City Manager City of Atlantic Beach Atlantic Beach, Florida MANAGEMENT LETTER (Concluded) Financial Condition (Concluded) Pursuant to Sections 10.554(1)(i)5(c) and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures. It is management’s responsibility to monitor the City’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. Annual Financial Report Sections 10.554(1)(i)5.(b.) and 10.556(7), Rules of the Auditor General, require that we apply appropriate procedures and report the results of our determination as to whether the annual financial report for the City for the fiscal year ended September 30, 2015, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2015. In connection with our audit, we determined that these two reports were in agreement. Special District Component Units Section 10.554(1)(i)5.(d), Rules of the Auditor General, requires that we determine whether or not a special district that is a component unit of a county, municipality, or special district, provided the financial information necessary for proper reporting of the component unit, within the audited financial statements of the county, municipality, or special district in accordance with Section 218.39(3)(b), Florida Statutes. In connection with our audit, we determined that there were no special district component units that were required to be reported in accordance with Section 218.39(3)(b), Florida Statutes. Other Matters Section 10.554(1)(i)2., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. June 23, 2016 Gainesville, Florida 68 69