TOWN OF JUPITER ISLAND, FLORIDA. Audited Financial Statements And Supplementary Financial Information

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1 TOWN OF JUPITER ISLAND, FLORIDA Audited Financial Statements And Supplementary Financial Information SEPTEMBER 30, 2013

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3 TOWN OF JUPITER ISLAND, FLORIDA AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION SEPTEMBER 30, 2013 TABLE OF CONTENTS FINANCIAL SECTION: Report of Independent Certified Public Accountants... 5 Management s Discussion and Analysis... 9 BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenue, Expenditures and Changes in Fund Balance Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities Statement of Net Position Enterprise Fund Statement of Revenue, Expenses and Changes in Fund Net Position Enterprise Fund Statement of Cash Flows Enterprise Fund Statement of Fiduciary Net Position Fiduciary Funds Statement of Changes in Fiduciary Net Position Fiduciary Funds Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule General Fund Budgetary Comparison Schedule Beach Protection Fund Defined Benefit Pension Plan Schedule of Funding Progress Defined Benefit Pension Plan Schedule of Employer Contributions Schedule of Funding Progress Other Postemployment Benefits Notes to Required Supplementary Information OTHER SUPPLEMENTARY INFORMATION: Combining Balance Sheet Combining Statement of Revenue, Expenditures and Changes in Fund Balance... 91

4 OTHER SUPPLEMENTARY INFORMATION: (Continued) Schedule of Water and Wastewater Revenue Refunding Bond Coverage Pension Trust Funds: Combining Statement of Fiduciary Net Position Combining Statement of Changes in Fiduciary Net Position Private-Purpose Trust Fund Employee Education Trust Fund: Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Statement of Changes in Assets and Liabilities Town Employees Agency Fund COMPLIANCE SECTION: Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Management Letter in Accordance With the Rules of the Auditor General of the State of Florida

5 FINANCIAL SECTION

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7 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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9 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Honorable Mayor and Town Commissioners Town of Jupiter Island, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activity, each major fund and the aggregate remaining fund information of the Town of Jupiter Island, Florida, as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the Town 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. Auditor s 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 entity 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 entity 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. 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 activity, each major fund and the aggregate remaining fund information of the Town of Jupiter Island, Florida, as of September 30, 2013, 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. 5

10 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 9 to 17, budgetary comparison schedules on pages 71 to 81, schedules of funding progress and employer contributions for defined benefit plan on page 82, and schedule of funding progress for other postemployment benefits on page 83 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, 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 Town of Jupiter Island, Florida s basic financial statements. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements 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 combining and individual nonmajor fund financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 5, 2014, on our consideration of the Town of Jupiter Island, Florida 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 Town of Jupiter Island, Florida s internal control over financial reporting and compliance. Rampell & Rampell, P.A. Palm Beach, Florida February 5,

11 MANAGEMENT S DISCUSSION AND ANALYSIS

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13 Management s Discussion and Analysis The Town of Jupiter Island s (the Town) management discussion and analysis (MD&A) is designed to offer readers of the Town s financial statements an objective and easy-to-read analysis of the Town s financial activities based on currently available information. This narrative overview is only a component of the entire financial statement report. Readers should review and evaluate all sections of the report, including the footnotes and the other required supplementary information that is provided in addition to this MD&A for the fiscal year ended September 30, Financial Highlights The assets of the Town exceeded its liabilities at the close of the most recent fiscal year by $56,135,704. Of this amount, $5,331,561 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. Governmental net position was $20,666,847. Business-type net position was $35,468,857. The total revenue from all sources was $20,510,710 and the total cost of all Town programs was $18,875,859. As of the close of the current fiscal year, the Town s governmental funds reported combined ending fund balances of $7,746,294, which was an increase of $1,878,689 from the prior year balance of $5,867,605. Approximately 58% of this fund balance is restricted or assigned for specific purposes; the remaining 42% is available for spending at the Town s discretion from the General Fund. At the end of the current fiscal year, unassigned fund balance for the General Fund was $3,266,261, or 44% of the total General Fund expenditures for the year ended September 30, The Town s outstanding long-term debt (excluding compensated absences and other postemployment benefits) decreased from $56,255,987 to $55,279,896 during the current fiscal year, representing a net decrease of $976,091 (1.7%). Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Town s basic financial statements. The basic financial statements of the Town comprise three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements: The government-wide financial statements, which consist of the following two statements, are designed to provide readers with a broad overview of the Town s finances, in a manner similar to a private-sector business. The statement of net position and the statement of activities report information about the Town as a whole and about its activities in a way that helps to determine if the year s activities contributed positively to its overall financial well being. Both statements represent an overview of the Town as a whole, separating its operations between governmental activities and business-type activities. The statement of net position presents information on all of the Town s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. Other factors should be considered, however, such as the condition of the Town s capital assets to assess the overall health of the Town. 9

14 The statement of activities presents information showing how the government 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 flow. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected revenues and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, roads, sanitation, and building and land development. The business-type activity of the Town includes the water and wastewater utility. The government-wide financial statements include only the Town itself (known as the primary government). The Jupiter Island Beach Protection District, although a legally separate entity, functions for all practical purposes as a department of the Town, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 21 to 23 of this report. Fund Financial Statements: Conventional users of governmental financial statements will find the fund financial statements presentation more familiar. 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 Town, 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 Town can be divided into three categories: governmental funds, enterprise funds, and fiduciary funds. Governmental Funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government 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 Town s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenue, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains four individual governmental funds. Information is presented separately in the governmental fund balance sheet and statement of revenue, expenditures, and changes in fund balances for the General Fund, Beach Protection Fund (Jupiter Island Beach Protection District) and in total for the nonmajor governmental funds which include the Electric Underground Fund and the Special Law Enforcement Fund. The basic governmental fund financial statements can be found on pages 24 to 31 of this report. Enterprise Funds: The Town maintains one enterprise fund, which is used to report the same functions presented as the business-type activity in the government-wide financial statements. The Town s enterprise fund accounts for the South Martin Regional Utility (SMRU) water and wastewater utility operations. The basic enterprise fund financial statements can be found on pages 32 to 37 of this report. The schedule of water and wastewater revenue refunding bond coverage for the enterprise fund can be found on page 92 of this report. Fiduciary Funds: Fiduciary funds, including trust and agency funds, are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the Town s own programs. The 10

15 accounting basis used for trust and agency finds is accrual, much like that used for enterprise funds. Agency funds are held for others and report only assets and liabilities. The basic fiduciary fund financial statements can be found on pages 38 to 39 of this report. Combining and individual fund statements for the fiduciary funds can be found on pages 93 to 97 of this report. Notes to the Financial Statements: The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 40 to 68 of this report. Other Information: In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. A budgetary comparison schedule has been provided as required supplementary information for the General Fund and the Beach Protection Fund on pages 71 to 81 to demonstrate compliance with the adopted budget for these major governmental funds. Information concerning the Town s progress in funding its obligation to provide pension benefits and other postemployment benefits to its employees can be found on pages 82 and 83 of this report. The combining and individual fund financial statements and schedules are presented as other supplementary information on pages 90 to 91 of this report immediately following the required supplementary information. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the Town, governmental activity assets exceeded liabilities by $20,666,847. Business-type activity assets exceeded liabilities by $35,468,857. Due to the changes in accounting principles described on page 47, beginning net position for the business-type activity has been decreased by $345,146 from $54,845,999 to $54,500,853. The Town-wide total net position was $56,135,704 at the close of the fiscal year ended September 30, The Statement of Net Position is on page 21 of this report. At the end of the current fiscal year, the Town reported positive balances in net position for the government as a whole, as well as for its separate business-type activity. The governmental activities reported a deficit balance in unrestricted net position at September 30, This deficit is attributable to construction costs incurred in 2010 for the electrical underground project in the approximate amount of $8 million. Pursuant to conversion agreements executed by the Town with an electric utility company, these assets were transferred to the electric utility upon completion. The project was substantially completed at September 30, The transfer of assets was recorded in the statement of activities as a special item for the year ended September 30, 2010, thus reducing unrestricted net position by the amount of the constructions costs. The largest portion of the Town s net position is reflected in the net investment in capital assets (e.g., land, buildings, machinery and equipment; less any related debt used to acquire those assets that is still outstanding). Capital assets total $91,914,806 or 81% of all assets, which total $112,886,562. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town s investment in its 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 Town s net position ($5,731,277 or 10%) represents resources that are subject to restrictions on how they may be used. 11

16 The following table reflects the condensed statement of net position for the current year as compared to the prior year. 12 Net Position (In Thousands) Governmental Activities Business-type Activity Total Assets Current and other assets $ 8,723 $ 6,384 $ 12,248 $ 11,223 $ 20,971 $ 17,607 Capital assets 22,850 23,828 69,064 70,315 91,914 94,143 Total assets $ 31,573 $ 30,212 $ 81,312 $ 81,538 $ 112,885 $ 111,750 Deferred outflows of resources $ - $ - $ 3,583 $ 4,815 $ 3,583 $ 4,815 Total deferred outflows of resources $ - $ - $ 3,583 $ 4,815 $ 3,583 $ 4,815 Liabilities Long-term liabilities $ 9,691 $ 10,224 $ 46,806 $ 47,443 $ 56,497 $ 57,667 Other liabilities 1, ,621 3,696 3,837 4,397 Total liabilities $ 10,907 $ 10,925 $ 49,427 $ 51,139 $ 60,334 $ 62,064 Net position Net investment in capital assets $ 22,833 $ 23,777 $ 22,239 $ 24,783 $ 45,072 $ 48,560 Restricted 2, ,242 3,195 5,731 3,863 Unrestricted (4,656) (5,158) 9,987 7,236 5,331 2,078 Total net position $ 20,666 $ 19,287 $ 35,468 $ 35,214 $ 56,134 $ 54,501 The following table reflects the condensed statement of changes in net position for the current year as compared to the prior year. Changes in Net Position (In Thousands) Governmental Activities Business-type Activity Total Revenues Program revenues: Charges for services $ 1,935 $ 1,504 $ 9,523 $ 10,146 $ 11,458 $ 11,650 Operating grants and contributions Capital grants and contributions 28 2, ,796 General revenues: Taxes 9,012 9, ,012 9,921 Intergovernmental Investment earnings Total revenues 11,155 14,134 9,704 10,517 20,859 24,651 Continued on the following page.

17 Changes in Net Position (Continued) (In Thousands) Governmental Activities Business-type Activity Total Expenses General government $ 1,515 $ 1,643 $ - $ - $ 1,515 $ 1,643 Public safety 3,320 3, ,320 3,227 Building Public works 1,240 1, ,240 1,249 Environmental 2,797 5, ,797 5,723 Interest on long-term debt Water and wastewater - - 9,117 10,235 9,117 10,235 Loss on disposal of assets 16 2, ,609 Total expenses 9,776 15,126 9,450 10,443 19,226 25,569 Change in net position before special item 1,379 (992) ,633 (918) Special item - (33) (33) Change in net position 1,379 (1,025) ,633 (951) Net position beginning of year, as restated 19,287 20,312 35,214 35,140 54,501 55,452 Net position end of year $ 20,666 $ 19,287 $ 35,468 $ 35,214 $ 56,134 $ 54,501 Governmental Activities: Governmental activities increased the Town s net position by $1,380,269. The largest single source of governmental revenue received was $9,011,988 for taxes or 81% of the total governmental revenues. Of this amount, approximately $2.8 million was assessed and collected by the Beach Protection District, a blended component unit of the Town. Charges for services increased $431,000 and taxes decreased $909,000. The decrease was attributable to reduction of ad valorem taxes in the Beach Protection District. Investment earnings continued to remain minimal due to low interest rates. The sources of governmental activities revenue as a percentage of total governmental revenue for 2013 are summarized as follows: Revenues by Source - Governmental Activities Taxes 81% Grants & Contributions 1% Interest 0% Charges for services 17% Intergovernmental 1% 13

18 The largest expenditure in the governmental fund was for the Gomez Road drainage and paving project which paved over two miles of road and improved drainage at a cost of $882,382. Business-type Activity: The Town s business-type activity increased net position by $254,582 for Charges for services for the business-type activity decreased slightly from the previous fiscal year. The decrease of approximately $623,000 or 6% resulted primarily from a 12.4% water rate reduction. Capital contributions have historically been a major revenue source for the Utility. Developer contributions in 2013 decreased approximately $174,000 as a result of the continued sluggish housing market. Financial Analysis of the Town s Funds As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds: The governmental funds report on the same functions as the governmental activities in the government-wide statements but the focus of the Town s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in evaluating the Town s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Town s governmental funds reported combined ending fund balances of $7,746,294, an increase of $1,878,689 from the prior year balance of $5,867,605. Of this amount $4,439,516 is restricted or assigned for specific purposes as follows: $2,369,058 restricted for beach protection projects $100,022 restricted for debt repayment $20,403 restricted for public safety equipment and training $1,000,000 assigned for emergencies $115,000 assigned for compensated absences $80,000 assigned for uninsured losses $3,639 assigned for the art committee $571,959 assigned for conservation projects $166,757 assigned for beautification projects $12,678 assigned for public safety training and education The general fund is the chief operating fund of the Town. At the end of the current fiscal year, in accordance with GASB Statement No. 54, the unassigned fund balance of the general fund was $3,266,261, while the total fund balance reached $5,256,811. As a measure of the general fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures of $7,447,606. Unassigned fund balance represents 44% of total general fund expenditures, while total fund balance represents 71% of that same amount. The fund balance of the Town s general fund increased by $56,869 during the current fiscal year. Enterprise Fund: Enterprise funds present the same functions as presented for business-type activities in the government-wide financial statements. The Town uses an enterprise fund to account for its water and wastewater operations, doing business as South Martin Regional Utility (SMRU). The enterprise fund provides the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the water and wastewater utility at the end of the year amounted to $9,987,518, representing an increase of $2,406,468 from the prior year balance of $7,581,

19 Budgetary Highlights General Fund Overall actual revenues and other financing sources were less than the anticipated amounts by $330,623 and expenditures were $386,718 less than the appropriated budget. Accordingly, the Town had a favorable budget variance for 2013 of $56,095. The largest budget variance for revenue was building permits, which exceeded the budgeted amount by $520,386. Expenditures were under-budget in several departments for the year, with the largest variance of $100,878 due to a road project that was completed in 2013 under-budget. Beach Protection Fund Actual revenues were more than the anticipated amounts by $14,662 and expenditures were $57,380 less than the appropriated budget. An additional $1,822,542 was added to reserves for a future beach renourishment project. Capital Assets Capital Assets and Debt Administration The Town s investment in capital assets for its governmental and business-type activities at September 30, 2013, amounts to $91,914,806 (net of accumulated depreciation). Depreciation on capital assets is recognized in the government-wide financial statements. This investment in capital assets includes land, buildings and improvements, water distribution system, wastewater collection system, wells, machinery and equipment, beach renourishment, roads and construction in progress. The Town s investment in capital assets is summarized as follows: Capital Assets (In Thousands) (net of accumulated depreciation) Governmental Activities Business-type Activity Total Land $ 10,858 $ 10,858 $ 14,475 $ 14,483 $ 25,333 $ 25,341 Building and improvements 2,729 2,672 6,365 7,771 9,094 10,443 Water distribution system ,364 19,250 24,364 19,250 Wastewater collection system ,172 22,572 17,172 22,572 Wells - - 3,134 3,587 3,134 3,587 Equipment ,508 2,652 3,976 3,158 Beach renourishment 7,653 9, ,653 9,488 Roads 1, , Construction in progress Total capital assets $ 22,850 $ 23,828 $ 69,064 $ 70,315 $ 91,914 $ 94,143 The Town s total investment in capital assets decreased for the current fiscal year by approximately $2,229,000. This was mainly attributable to depreciation of beach renourishment projects. Additional information on the Town s capital assets can be found in Note 5 on pages 52 to 53 of this report. 15

20 Long-term Debt: The Town s total debt decreased by $976,091 (1.7%) during the current fiscal year. The Town s outstanding debt, excluding compensated absences and other post employment benefits with no fixed maturity date, is summarized as follows: Outstanding Debt (In Thousands) Governmental Activities Business-type Activity Total Notes payable $ 9,244 $ 9,671 $ 15,934 $ 16,449 $ 25,178 $ 26,120 Capital lease Revenue bonds ,085 30,085 30,085 30,085 Total debt $ 9,261 $ 9,722 $ 46,019 $ 46,534 $ 55,280 $ 56,256 The revenue bonds of the utility system have been rated AA by S&P and Aa2 by Moody s Investor Services. The remaining debt has not been rated. Governmental Activities Debt: In 2008 the Town issued two promissory notes to a financial institution with a total principal amount of $11.0 million to finance the electric underground project. A portion of the new borrowing was used to repay an outstanding balance of $400,000 on the note obtained in 2006 to finance the pilot project for the electric underground project. The notes issued in 2008 were approved by the Town s voters in November Business-type Activity Debt: In August 2010, the Town issued $30,085,000 Utility System Refunding Bonds, Series 2010 for the principal purpose of refunding all of the Town s outstanding Series 1998 Bonds. Net proceeds of $27,789,738 from the Series 2010 Bonds plus $1,986,335 of sinking fund monies from the Series 1998 Bonds were deposited in an irrevocable trust with an escrow agent and all of the Series 1998 Bonds ($29,060,000) were called on October 1, At the end of the current fiscal year, the Town had bonded debt outstanding of $30,085,000 and notes payable outstanding of $15,933,511 in the utility system for a total of $46,018,511. Two of the notes payable totaling $13,467,627 at September 30, 2013 are secured by all non-ad valorem revenues of the governmental activities. The remaining outstanding debt of the utility system is secured solely by specified revenue sources of the water and wastewater utility system. Additional information on the Town s long-term debt can be found in Note 8 on pages 55 to 60 of this report. Economic Factors and Next Year s Budgets and Rates The following economic factors were considered in establishing the Town s budgets and charges for services for the fiscal year. Ad valorem taxes (property taxes) are the single most significant governmental revenue source for the Town. These revenues are generated by a millage rate set annually by the Town Commission. When creating the budget, the primary objective was to provide Town services while at the same time keeping the General Fund millage rate flat. The General Fund millage rate adopted for increased from to This millage rate results in a total projected tax levy of $5,216,000. General Fund revenues and expenditures for the budget year decreased $180,000 from the budget. 16

21 The Beach Protection District millage rate for decreased from to This millage rate results in a total projected tax levy of $2,800,000. The Town will continue the voted debt millage in 2014 for the pay off of the promissory notes issued for the electric undergrounding project. The millage rate for is.4278 mills. Many other factors with less significant impacts other than those above were also considered in preparing the Town s budget for the fiscal year. South Martin Regional Utility operations are primarily supported by user fees. In , a decrease of $500,000 in water revenue was budgeted based on the reduction of water rates in fiscal year This reduction in rates was the result of the Utility System Revenue Refunding Bonds, Series Requests for Information This financial report is designed to provide a general overview of the Town s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Deputy Town Manager/Finance Director, 2 Bridge Road, Hobe Sound, FL

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23 BASIC FINANCIAL STATEMENTS

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25 TOWN OF JUPITER ISLAND, FLORIDA Statement of Net Position September 30, 2013 Governmental Business-Type Activities Activity Total Assets Cash and cash equivalents $ 8,570,847 $ 3,947,745 $ 12,518,592 Investments 16,297 3,013,909 3,030,206 Accounts receivable, net of allowance for doubtful accounts of $0 and $123,053, respectively 10, , ,980 Interest receivable - 20,619 20,619 Prepaid items 40,517 61, ,218 Due from other governments 26,406-26,406 Internal balances (362) Restricted assets: Cash and cash equivalents - 389, ,515 Investments - 3,276,873 3,276,873 Notes receivable - 950, ,374 Inventory - 19,052 19,052 Net pension asset 58,921-58,921 Capital assets: Capital assets not being depreciated 10,858,049 14,521,415 25,379,464 Depreciable capital assets, net 11,992,527 54,542,815 66,535,342 Total assets $ 31,573,849 $ 81,312,713 $ 112,886,562 Deferred outflow of resources Accumulated decrease in fair value of derivative instruments $ - $ 1,906,975 $ 1,906,975 Refunding loss on bonds payable - 1,675,541 1,675,541 Total deferred outflow of resources $ - $ 3,582,516 $ 3,582,516 Liabilities Accounts payable $ 355,568 $ 151,823 $ 507,391 Accrued liabilities 137,326 64, ,093 Contracts and retainage payable 405, ,289 Accrued interest payable 298,117 72, ,551 Due to other governments 19,875-19,875 Liabilities payable from restricted assets - 424, ,594 Derivative instrument - interest rate swap - 1,906,975 1,906,975 Long-term liabilities: Due within one year 505, , ,188 Due in more than one year 9,185,787 46,435,631 55,621,418 Total liabilities $ 10,907,002 $ 49,426,372 $ 60,333,374 Net position Net investment in capital assets $ 22,833,321 $ 22,239,545 $ 45,072,866 Restricted 2,489,483 3,241,794 5,731,277 Unrestricted (4,655,957) 9,987,518 5,331,561 Total net position $ 20,666,847 $ 35,468,857 $ 56,135,704 See notes to basic financial statements. 21

26 TOWN OF JUPITER ISLAND, FLORIDA Statement of Activities Year Ended September 30, 2013 Functions/Programs Expenses Governmental activities General government 1,515,209 $ $ 713,039 $ 44,875 $ 28,100 Public safety 3,319,541 12, Building 508,535 1,120,386 1,000 - Public works 1,239,565 89, Environmental 2,797, Interest on long-term debt 378, Total governmental activities 9,759,336 1,935,064 45,875 28,100 Business-type activity Water and wastewater 9,116,523 9,523, ,645 Total $ 18,875,859 $ 11,458,476 $ 45,875 $ 130,745 General revenues Taxes: Property taxes, levied for general purposes Property taxes, levied for beach protection Property taxes, levied for electric underground Local option gas tax Franchise fees Communications tax Intergovernmental not restricted to specific programs Investment income Loss on disposal of assets See notes to basic financial statements. Charges for Services Total general revenues Change in net position Net position, beginning of year, as restated Net position, end of year Program Revenues Operating Capital Contributions Contributions and Grants and Grants 22

27 Net Revenue (Expense) and Changes in Net Position Governmental Business-type Activities Activity Total $ (729,195) $ - $ (729,195) (3,307,402) - (3,307,402) 612, ,851 (1,150,065) - (1,150,065) (2,797,591) - (2,797,591) (378,895) - (378,895) (7,750,297) - (7,750,297) - 509, ,534 (7,750,297) 509,534 (7,240,763) 5,107,889-5,107,889 2,810,870-2,810, , , , ,950 89,492-89,492 91,023-91, , ,289 9,915 77,682 87,597 (15,626) (332,634) (348,260) 9,130,566 (254,952) 8,875,614 1,380, ,582 1,634,851 19,286,578 35,214,275 54,500,853 $ 20,666,847 $ 35,468,857 $ 56,135,704 23

28 TOWN OF JUPITER ISLAND, FLORIDA Balance Sheet - Governmental Funds September 30, 2013 Major Governmental Funds Beach General Protection Fund Fund Assets Cash and cash equivalents $ 5,932,751 $ 2,517,685 Investments 6,273 10,024 Accounts receivable 10,647 - Prepaid items 40,517 - Due from other governments 26,392 - Due from other funds Total assets $ 6,017,225 $ 2,527,709 Liabilities and fund balance Liabilities Accounts payable $ 196,917 $ 158,651 Accrued liabilities 137,326 - Contracts and retainage payable 405,289 - Due to other governments 19,875 - Due to other funds 1,007 - Total liabilities 760, ,651 Fund balance Nonspendable 40,517 - Restricted - 2,369,058 Assigned 1,950,033 - Unassigned 3,266,261 - Total fund balance 5,256,811 2,369,058 Total liabilities and fund balance $ 6,017,225 $ 2,527,709 See notes to basic financial statements. 24

29 Nonmajor Governmental Funds Total Governmental Funds $ 120,411 $ 8,570,847-16,297-10,647-40, , $ 120,425 $ 8,665,359 $ - $ 355, , ,289-19,875-1, ,065-40, ,425 2,489,483-1,950,033-3,266, ,425 7,746,294 $ 120,425 $ 8,665,359 25

30

31 TOWN OF JUPITER ISLAND, FLORIDA Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position September 30, 2013 Total governmental fund balance (page 25) $ 7,746,294 Amounts reported for governmental activities in the statement of net position are different because: Cost of assets $ 45,654,279 Accumulated depreciation (22,803,703) 22,850,576 Net pension assets are not available to pay for current liabilities, and therefore are not recognized in governmental funds. 58,921 Accrued interest on long-term debt is not due and payable in the current period and is not reported in governmental funds. (298,117) Other postemployment benefits obligations are reported in the statement of net position. Because this liability is not due and payable in the current period, it is not reported in governmental funds. (95,231) Long-term liabilities, including notes payable, compensated absences payable and capital leases are not due and payable in the current period and therefore are not reported in governmental funds. Long-term liabilities at year-end consist of: Notes payable (9,244,130) Capital lease obligation (17,255) Compensated absences (334,211) (9,595,596) Total net position (page 21) $ 20,666,847 See notes to basic financial statements. 27

32 TOWN OF JUPITER ISLAND, FLORIDA Statement of Revenue, Expenditures and Changes in Fund Balance Governmental Funds Year Ended September 30, 2013 Major Governmental Funds Beach General Fund Protection Fund Revenue Taxes $ 5,393,354 $ 2,810,870 Licenses and permits 1,123,338 - Intergovernmental 125,289 - Charges for services 129,432 - Fines and forfeitures 4,256 - Donations 44,875 - Investment income 6,100 3,792 Miscellaneous 677,831 - Total revenue 7,504,475 2,814,662 Expenditures Current: General government: Administration 1,278, ,857 Public safety 3,226,618 - Building 497,329 - Public works: Solid waste 895,066 - Grounds 259,678 - Roads 15,861 - Environmental: Lethal yellowing program 122,284 - Beach protection and monitoring - 410,349 Beautification and maintenance 19,319 - Conservation 27 - Capital outlay 1,097, ,914 Debt service: Principal 33,484 - Interest 1,728 - Total expenditures 7,447, ,120 Net change in fund balance 56,869 1,822,542 Fund balance, beginning of year 5,199, ,516 Fund balance, end of year $ 5,256,811 $ 2,369,058 See notes to basic financial statements. 28

33 Nonmajor Governmental Funds Total Governmental Funds $ 807,764 $ 9,011,988-1,123, , , ,463-44, , , ,994 11,127, ,448,983 1,495 3,228, , , ,678-15, , ,349-19, ,394 1,513, , , , , ,716 9,248,442 (722) 1,878, ,147 5,867,605 $ 120,425 $ 7,746,294 29

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35 TOWN OF JUPITER ISLAND, FLORIDA Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities Year Ended September 30, 2013 Net change in fund balance - total governmental funds (page 29) $ 1,878,689 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period. (961,407) In the statement of activities, the loss on disposal of capital assets is reported, whereas in governmental funds, the proceeds from the disposal increases financial resources: Loss on disposal of assets (15,626) Repayment of debt principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 460,871 In the statement of activities, interest is accrued on outstanding debt, whereas in governmental funds, an interest expenditure is reported when the payment is due. This is the change in accrued interest payable. (2,042) Some revenues, expenses and gains reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Change in other postemployment benefits payable (6,987) Change in net pension asset (52,754) Change in compensated absences 79,525 Change in net position of governmental activities (page 23) $ 1,380,269 See notes to basic financial statements. 31

36 TOWN OF JUPITER ISLAND, FLORIDA Statement of Net Position Enterprise Fund September 30, 2013 Assets Current assets Cash and cash equivalents $ 3,947,745 Investments 3,013,909 Accounts receivable, net of allowance for doubtful accounts of $123, ,333 Due from other funds 362 Notes receivable - current 38,241 Interest receivable 20,619 Inventory 19,052 Prepaid items 61,701 Total current assets 7,669,962 Noncurrent assets Restricted assets: Cash and cash equivalents 389,515 Investments 3,276,873 Total restricted assets 3,666,388 Other assets Notes receivable - long-term 912,133 Total other assets 912,133 Capital assets Land and improvements 14,475,544 Buildings and improvements 10,223,495 Water distribution systems 32,033,755 Wastewater distribution systems 24,180,281 Wells 4,611,972 Equipment 6,843,144 Construction in progress 45,871 Total capital assets 92,414,062 Less accumulated depreciation (23,349,832) Total capital assets 69,064,230 Total assets $ 81,312,713 Deferred outflows of resources Accumulated decrease in fair value of derivative instruments $ 1,906,975 Refunding loss on bonds payable 1,675,541 Total deferred outflows of resources $ 3,582,516 Continued on the following page. 32

37 TOWN OF JUPITER ISLAND, FLORIDA Statement of Net Position (Continued) Enterprise Fund September 30, 2013 Liabilities and net assets Current liabilities Accounts payable $ 151,823 Accrued liabilities 64,767 Accrued interest payable 72,434 Current portion of compensated absences payable 1,305 Current portion of notes payable 368,843 Total current liabilities 659,172 Current liabilities payable from restricted assets Accounts payable 4,800 Accrued interest payable 252,898 Current portion of notes payable 166,896 Total current liabilities payable from restricted assets 424,594 Noncurrent liabilities Compensated absences payable 71,294 Other postemployment benefits payable 75,391 Derivative instrument - interest rate swap 1,906,975 Notes payable 15,397,784 Revenue bonds payable, net of unamortized premium and loss on refunding 30,891,162 Total noncurrent liabilities 48,342,606 Total liabilities $ 49,426,372 Net position Net investment in capital assets $ 22,239,545 Restricted 3,241,794 Unrestricted 9,987,518 Total net position $ 35,468,857 See notes to basic financial statements. 33

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39 TOWN OF JUPITER ISLAND, FLORIDA Statement of Revenue, Expenses and Changes in Fund Net Position Enterprise Fund Year Ended September 30, 2013 Operating revenue Water $ 6,319,247 Wastewater 2,802,310 Other 393,601 Total operating revenue 9,515,158 Operating expenses Personal services 2,402,251 Operating expenses 2,816,860 Depreciation 1,662,456 Total operating expenses 6,881,567 Operating income 2,633,591 Nonoperating revenue (expenses) Interest income 77,682 Other income 8,302 Loss on disposal of assets (332,682) Interest expense (2,103,130) Amortization (131,826) Total nonoperating revenue (expenses) (2,481,654) Loss before capital contributions 151,937 Capital contributions 102,645 Change in net position 254,582 Net position, beginning of year, as restated 35,214,275 Net position, end of year $ 35,468,857 See notes to basic financial statements. 35

40 TOWN OF JUPITER ISLAND, FLORIDA Statement of Cash Flows Enterprise Fund Year Ended September 30, 2013 Cash flows from operating activities Cash received from customers $ 9,495,314 Cash received for interfund services provided 38,276 Cash received from others 8,302 Cash paid to suppliers and contractors (2,524,218) Cash paid to employees (2,389,595) Cash paid for interfund services (436,867) Net cash provided by operating activities 4,191,212 Cash flows from noncapital financing activities Transfers from other funds 2,949 Net cash provided by noncapital financing activities 2,949 Cash flows from capital and related financing activities Capital contributions 94,337 Principal received on notes receivable 64,552 Principal paid on notes payable (515,223) Acquisition and construction of capital assets (743,975) Payment of interest (2,111,892) Net cash used in capital and related financing activities (3,212,201) Cash flows from investing activities Interest received 87,979 Proceeds from sale of investments 8,554,000 Purchase of investments (9,551,330) Net cash used in investing activities (909,351) Net increase in cash and cash equivalents 72,609 Cash and cash equivalents, beginning of year 4,264,651 Cash and cash equivalents, end of year $ 4,337,260 Reconciliation of cash and cash equivalents to statement of net position: Unrestricted cash and cash equivaents $ 3,947,745 Restricted cash and cash equivalents 389,515 Cash and cash equivalents at September 30, 2013 $ 4,337,260 Continued on the following page. 36

41 TOWN OF JUPITER ISLAND, FLORIDA Statement of Cash Flows (Continued) Enterprise Fund Year Ended September 30, 2013 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 2,633,591 Adjustments to reconcile operating income to net cash provided by operating activities: Provision for uncollectible accounts (433,572) Depreciation 1,662,456 Other income 8,302 Changes in operating assets and liabilities: Accounts receivable 452,004 Inventory (19,052) Prepaid items (24,334) Accounts payable (100,839) Accrued liabilities (4,073) Compensated absences payable 10,846 Other postemployment benefits payable 5,883 Net cash provided by operating activities $ 4,191,212 Supplemental disclosure of noncash capital and related financing activities: Amortization of refunding loss on bonds $ (131,826) Notes receivable for capital contributions 8,308 See notes to basic financial statements. 37