CITY OF PALM BAY, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT

Transcription

1 CITY OF PALM BAY, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30, 2012

2 Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2012 Prepared by Department of Finance

3 Introduction Section Letter of Transmittal... i Certificate of Achievement for Excellence in Financial Reporting... vii Organization Chart... ix Principal Officials... xi Independent Auditor s Report... 1 Management s Discussion and Analysis... 3 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements Governmental Funds: Balance Sheet Reconciliation of Balance Sheet Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balance Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities Proprietary Funds: Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows Fiduciary Funds: Statement of Fiduciary Net Assets Pension Trust Fund Statement of Changes in Fiduciary Net Assets Pension Trust Fund Notes to Financial Statements Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual General Fund Budget and Actual Bayfront Community Redevelopment Agency Schedule of Funding Progress City of Palm Bay Retirement System Schedule of Funding Progress Other Post-Employment Benefits Notes to Required Supplementary Information Supplementary Information Budget Comparison Schedule BCRA Construction Fund Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Nonmajor Governmental Balances

4 Table of Contents (continued) Budgetary comparison schedules: Law Enforcement Trust Fund Code Nuisance Fund SHIP Program Fund Community Development Block Grant Fund HOME Grant Fund Miscellaneous Donations Fund ARRA Fund Emergency Fund Recreation Program Fund Impact Fee Trust Fund Environmental Fee Fund Sanitation Fund Road Maintenance Fund Debt Service Funds Community Investment Fund Community Investment 06 bond CIP Fund City Hall Annex 10 Bond CIP Fund Nonmajor Enterprise Funds: Combining Statement of Net Assets Combining Statement of Revenues, Expenses and Changes in Net Assets Combining Statement of Cash Flows Internal Service Funds: Combining Statement of Net Assets Combining Statement of Revenues, Expenses and Changes in Net Assets Combining Statement of Cash Flows Statistical Section Government-Wide Information: Schedule 1 Net Assets by Component Last Ten Fiscal Years Schedule 2 Change in Net Assets Last Ten Fiscal Years Fund information: Schedule 3 Fund Balances of Governmental Funds Last Ten Fiscal Years Schedule 4 Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years Schedule 5 Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Schedule 6 Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Schedule 7 Principal Property Taxpayers Schedule 8 Property Tax Valuations, Levies and Collections Schedule 9 Ratios of Outstanding Debt by Type

5 Table of Contents Statistical Section (continued) Schedule 10 Computation of Direct and Overlapping Bonded Debt General Obligation Bonds Schedule 11 Pledged Revenue Coverage Last Ten Fiscal Years Schedule 12 Demographic and Economic Statistics Last Ten Fiscal Years Schedule 13 Principal Employers in the City of Palm Bay Schedule 14 Full-Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years Schedule 15 Capital Asset Statistics Last Ten Fiscal Years Schedule 16 Operating Indicators by Function/Program Last Ten Fiscal Years Schedule 17 Impact Fee Collections and Balances Last Ten Fiscal Years Schedule 18 Utility Debt Service Applicable to Transportation Projects Last Ten Fiscal Years Schedule 19 Historical Public Service Tax Receipts by Category Last Ten Fiscal Years Schedule 20 Certified Gallons of Taxable Fuel Sold in Brevard County, Florida and Local Option Gas Tax Revenue Last Ten Years Schedule 21 Distribution of Brevard County, Florida Local Option Gas Tax Revenues Schedule 22 Utilities Debt Service Coverage Last Ten Fiscal Years Schedule 23 Utility Rate Comparison with Neighboring Utilities Schedule 24 Ten Largest Customers of the Water and Wastewater System Compliance Section Schedule of Expenditures of Federal Awards and State Assistance Notes to Schedule of Expenditures of Federal Awards Reports Independent Auditor s 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 Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Program and on Major State Project Internal Control Over Compliance in Accordance with OMB Circular A-133 And Chapter Rules of the Auditor General Schedule of Findings and Questioned Costs Independent Auditor s Management Letter

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14 CITY OF PALM BAY ORGANIZATIONAL STRUCTURE FY 2012 CITIZENS OF PALM BAY City Council William Capote, Mayor ADVISORY BOARDS AND COMMITTEES Council Members Kristine Isnardi, Deputy Mayor Michele Paccione Ken Greene Harry Santiago, Jr. City Clerk City Manager City Attorney Deputy City Manager Utilities Administration Business Operations Distribution/Collections Engineering Enterprise GIS Plant Operations Parks and Recreation Administration Facility Maintenance Parks Recreation Public Works Admin/Eng. Services Construction Fleet Services Infrastructure ROW Beautification Stormwater Utility Surveying Services Traffic Operations Economic Development Office Police Code Compliance Communications Center Executive Division Investigations Patrol Police Athletic League Support Services Fire Administration Emergency Services Bayfront Community Redevelopment Agency Growth Management Administration Building Division Land Development Information Technology Administration Finance Accounting Administration Purchasing & Contracts Revenue Human Resources Employee Health Insurance Risk Management ix

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16 CITY OF PALM BAY, FLORIDA LIST OF PRINCIPAL OFFICIALS As of date of transmittal MAYOR DEPUTY MAYOR COUNCIL MEMBER COUNCIL MEMBER COUNCIL MEMBER CITY MANAGER DEPUTY CITY MANAGER CITY ATTORNEY CITY CLERK INFORMATION TECHNOLOGY DIRECTOR FINANCE DIRECTOR FIRE CHIEF HUMAN RESOURCES DIRECTOR GROWTH MANAGEMENT DIRECTOR PARKS AND RECREATION DIRECTOR POLICE CHIEF PUBLIC WORKS DIRECTOR UTILITIES DIRECTOR WILLIAM CAPOTE KRISTINE ISNARDI MICHELE PACCIONE KEN GREENE HARRY SANTIAGO JR. SUSAN HANN, P.E. CHAD SHOULTZ, CFP ANDREW LANNON ALICE PASSMORE LISA MORRELL YVONNE MCDONALD, CGFO JAMES STABLES, CFO GEORGE HUNT DAVID WATKINS, AICP HEIDI LAPIN, CPRP DOUGLAS MULDOON ELIA TWIGG, P.E. DAN ROBERTS, P.E. xi

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18 INDEPENDENT AUDITOR S REPORT The Honorable Mayor and Members of the City Council City of Palm Bay, Florida We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Bay, Florida (the City ), as of and for the year ended September 30, 2012, which collectively comprise the City s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the City of Palm Bay Police and Firefighters Retirement System, which represent 100 percent of the assets, liabilities and revenues of the Pension Trust Fund. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the City of Palm Bay Police and Firefighters Retirement System, is based on the report of the other auditors. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2012, and the respective changes in financial position and, where applicable, cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. 1

19 The Honorable Mayor and Members of the City Council City of Palm Bay, Florida INDEPENDENT AUDITOR S REPORT (Concluded) In accordance with Government Auditing Standards, we have also issued our report dated March 15, 2013, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the required supplementary information, as listed in the table of contents, 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, the other supplementary information section, and the statistical section, listed in the table of contents, are presented for additional analysis and are not a required part of the financial statements. The other supplementary information section is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The other supplementary information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. The introductory section and statistical section have 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. MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida March 15,

20 Management s Discussion and Analysis The City of Palm Bay, Florida s (the City ) Management s Discussion and Analysis (the MD&A ) presents this overview and analysis of the City s financial activities for the fiscal year ended September 30, Please read it in conjunction with the letter of transmittal in the introductory section, and the City s financial statements following the MD&A. Financial Highlights The assets of the City exceeded its liabilities at the close of fiscal year 2012 by $154.1 million (net assets). Of this amount, $9.4 million (unrestricted net assets) may be used to meet the City s ongoing obligations to citizens and creditors. At September 30, 2012, the City s governmental funds reported combined ending fund balances of $19.7 million, as compared to $22.1 million as of September 30, Key components of this change are decreased property tax revenues and transportation impact fees. At September 30, 2012, the City s General Fund reported an unrestricted fund balance of $8.59 million or 16.1% of total 2012 General Fund expenditures and transfers out. The City s outstanding long-term debt decreased by $4.7 million during fiscal year The City did not issued any new debt in fiscal year The City s business-type activities reported total net assets of $84.0 million, which is a decrease of $113,029 or 0.1% in comparison to the prior year. Approximately 11% of the total, or $9.3 million, is unrestricted. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The financial statement focus is on both the City as a whole (government-wide) and on the major individual funds. The following chart shows the relationship between the CAFR and the basic financial statements and Required Supplementary Information ( RSI ). 3

21 Management s Discussion and Analysis Relationship between Comprehensive Annual Financial Report (CAFR) And Basic Financial Statement and Required Supplementary Information (RSI) General Information on the government structure, services and environment Introductory Section Management s Discussion and Analysis Government-wide Financial Statements Basic financial statements and RSI Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements Notes to the Financial Statements Financial Section CAFR Additional Required Supplementary Information Information of Individual funds and discretely Presented component units and other Supplementary information not required by GAAP Trend data and nonfinancial data Statistical Section 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. As described below, these statements do not include the City s fiduciary funds because resources of these funds cannot be used to finance the City s activities. However, the financial statements of fiduciary funds are included in the City s fund financial statements, because the City is financially accountable for those resources, even though they belong to other parties. The government-wide financial statements consist of the following two statements: The statement of net assets presents information on all of the City s assets held and liabilities owed, with the difference between the two reported as net assets. Assets are reported when the City acquires ownership over the assets and liabilities reported when they are incurred, regardless of the timing of the related cash flows. For example, the City reports buildings and infrastructure assets, even though they are not available to pay the obligations incurred by the City. On the other hand, the City reports liabilities even though these liabilities might not be paid until several years into the future. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Although the purpose of the City is not to accumulate net assets, in general, as this amount increases it indicates that the financial position of the City is improving over time. The statement of activities presents the revenue and expenses of the City. The items presented on the statement of activities are measured in a manner similar to the approach used in the private-sector in that revenues are recognized when earned and expenses are reported when incurred, regardless of the timing of related cash flows. Accordingly, revenues are reported even when they may not be collected for several months after the end of the accounting period and expenses are recorded even though they may not have used cash during the current period. 4

22 Management s Discussion and Analysis Both of these financial statements distinguish functions of the City 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 City include general government, public safety, physical environment, transportation, economic environment, and culture/recreation. The business-type activities of the City include water, sewer, stormwater utilities and building inspections. The government-wide financial statements can be found immediately following the MD&A. Fund financial statements Unlike government-wide financial statements, the focus of fund financial statements is directed to specific activities of the City rather than the City as a whole. 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 divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. In general, these financial statements have a shortterm emphasis and, for the most part, measure and account for cash and other assets that can easily be converted to cash. Fund liabilities include amounts that are to be paid within a short period of time after the end of the fiscal year. The difference between a fund s total assets and total liabilities is labeled as the fund balance, and generally indicates the amount that can be used to finance the next fiscal year s activities. The operating statement for governmental funds reports only those revenues and expenditures that were collected or paid during the current period or very shortly after the end of the year. Such information may be useful in evaluating a government s near-term financing requirements. For the most part, the balances and activities accounted for in governmental funds are also reported in the governmental activities columns of the government-wide financial statements. However, because a different accounting basis is used to prepare the fund financial statements and the government-wide financial statements, there are often significant differences between the totals presented. For this reason, there is an analysis after the balance sheet that reconciles the total fund balances to the amount of net assets presented in the governmental activities column on the statement of net assets. Also, there is an analysis after the statement of revenues, expenditures, and changes in fund balances that reconciles the total change in fund balances for all governmental funds to the change in net assets as reported in the governmental activities column the statement of activities. The City maintains several 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, Bayfront Community Redevelopment Agency, and BCRA Construction fund, which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements in the other supplemental information section of this report. The City adopts an annual appropriated budget for its general, all special revenue (except for the Miscellaneous Donations Fund), all capital projects, and all debt service funds. Budgetary comparison schedules have been provided for these funds to demonstrate budgetary compliance. 5

23 Management s Discussion and Analysis The basic governmental fund financial statements may be found immediately following the government-wide financial statements. Proprietary funds The City maintains two different types of proprietary funds. The City uses Enterprise Funds to account for business-type activities that charge fees to customers for the use of specific goods or services. These funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the fiscal activities relating to water, sewer, stormwater utilities and the activities of the Building Division. The internal service funds are an accounting device used to accumulate and allocate costs internally among the City s various functions. The City uses the internal service funds to account for its risk management, employee benefit programs and fleet services activities. Because these activities predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Utilities Fund, which is considered to be a major fund of the City, the Building Inspection Fund, and the aggregate of the internal service funds. The City s proprietary fund financial statements are presented on pages Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City s own programs. The accounting used for fiduciary funds is similar to proprietary funds. The City only has one fiduciary fund, the Pension Trust Fund. The City s fiduciary fund financial statements are presented on pages Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Other information In addition to the basic financial statements and accompanying notes, required supplementary information is included which presents budgetary comparison schedules for the City s General Fund and the major special revenue fund. The City adopts an annual appropriated budget for its governmental funds. This section includes a comparison between the City s adopted and final budget and actual financial results to demonstrate compliance with the budget. In addition, information concerning the City s progress in funding its obligation to provide pension benefits to its employees as well as other post employment benefits is presented. Required supplementary information can be found following the notes to the financial statements. The combining statements referred to earlier in connection with non-major governmental funds are presented in the other supplemental information section of this report. Combining and individual fund schedules can be found after the required supplementary information. 6

24 Management s Discussion and Analysis Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City, assets exceeded liabilities by $154.1 million at the close of the fiscal year ended September 30, At the end of the fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as governmental and business-type activities. As shown in the table below, the largest portion of the City s net assets (80%) reflects its investment in capital assets (e.g., 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, except for some properties held for resale, are not available for future spending. Although the City 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. The City has restricted net assets ($22.2 million) for capital improvement projects and special revenues. These resources are subject to external restrictions on how the funds may be used. The remaining balance of unrestricted net assets ( $9.4 million) may be used to meet the government s ongoing obligations to citizens and creditors. There was a net increase of $872,829 in net assets in connection with the City s governmental activities. A detailed explanation is provided on page 8 of this report. There was a net decrease of $113,029 in net assets reported in connection with the City s business-type activities, which include the Utilities Fund, Stormwater Utility Fund and the Building Inspections Fund. A detailed explanation is provided on page 11 of this report. Net Assets Governmental Activities Business-type Activities Total Activities Current and Other Assets $ 71,429,066 $ 70,717,601 $ 48,719,833 $ 49,212,235 $ 120,148,899 $ 119,929,836 Capital Assets (Net) 95,827,120 98,041, ,458, ,619, ,285, ,661,149 Deferred Swap Outflows 20,234,011 18,295, ,234,011 18,295,444 Total Assets and Deferrals 187,490, ,054, ,177, ,831, ,668, ,886,429 Current and Other Liabilities 7,554,652 7,532,277 6,144,322 5,410,607 13,698,974 12,942,884 Long-Term Liabilities 109,790, ,250,279 79,034,923 82,309, ,825, ,559,636 Total Liabilities 117,345, ,782,556 85,179,245 87,719, ,524, ,502,520 Investement in capital assets, net of related debt 62,197,018 64,944,616 60,343,032 48,685, ,540, ,630,099 Restricted 7,900,735 8,965,925 14,318,054 14,989,123 22,218,789 23,955,048 Unrestricted 47,211 (4,638,406) 9,337,659 20,437,168 9,384,870 15,798,762 Total net assets $ 70,144,964 $ 69,272,135 $ 83,998,745 $ 84,111,774 $ 154,143,709 $ 153,383,909 7

25 Management s Discussion and Analysis There was an overall increase in the City s net assets of $759,800. As a result of vigilant cost containment measures, such as the implementation of furlough days which reduced salaries and related taxes by $1.1 million, the City was able to mitigate the trickle-down effect of a stagnant economy. A comparative analysis of government-wide changes in net assets is as follows: Governmental Activities Business-type Activities Total Activities Revenues: Program Revenues Charges for Services $ 10,764,993 $ 16,776,448 $ 26,861,196 $ 27,765,064 $ 37,626,189 $ 44,541,512 Operating Grants and Contributions 3,139,324 6,585,450 54,425-3,193,749 6,585,450 Capital Grants and Contributions 610, , ,157 3,078,516 1,531,692 3,548,159 General Revenues Property Taxes 22,759,737 24,606, ,759,737 24,606,678 Other Taxes 18,353,486 17,926, ,353,486 17,926,925 Other 8,210,612 7,981, , ,784 8,701,795 8,657,538 Total Revenues 63,838,687 74,346,898 28,327,961 31,519,364 92,166, ,866,262 Expenses: General Government 7,838,165 9,660, ,838,165 9,660,449 Public Safety 33,687,869 37,294, ,687,869 37,294,661 Physical Environment 872, , , ,105 Transportation 12,984,446 13,676, ,984,446 13,676,102 Economic Environment 1,576,831 2,360, ,576,831 2,360,314 Culture/Recreation 3,890,650 8,992, ,890,650 8,992,328 Interest on Long-Term Debt 3,441,661 4,449, ,441,661 4,449,497 Water and Wastewater ,238,071 24,178,305 23,238,071 24,178,305 Building Inspections , , , ,279 Stormwater - - 3,164,194 3,564,481 3,164,194 3,564,481 Total expenses 64,292,557 76,923,456 27,114,291 28,635,065 91,406, ,558,521 Change in Net Assets before transfers (453,870) (2,576,558) 1,213,670 2,884, , ,741 Transfers in (out) 1,326,699 2,480,899 (1,326,699) (2,480,899) - - Special Item - 4,025, ,025,658 Change in Net Assets 872,829 3,929,999 (113,029) 403, ,800 4,333,399 Beginning Net Assets 69,272,135 65,342,136 84,111,774 83,708, ,383, ,050,510 Ending Net Assets $ 70,144,964 $ 69,272,135 $ 83,998,745 $ 84,111,774 $ 154,143,709 $ 153,383,909 Governmental Activities As mentioned previously, governmental activities increased the City s net assets by $872,829 and governmental fund revenues showed a decrease of $10.51 million or 14.1%. Key elements of this change are as follows: Charges for Services income reported in the governmental activities decreased by $6.01 million from the prior year. This change is in part due to the dissolution of an agreement between the City and Palm Bay Community Charter School in June of Revenues from operating grants and contributions experienced a decrease of $3.4 million, primarily as a result of maximized grant funding from the Neighborhood Stabilization Program. Property tax collections decreased by $1.8 million. This decline is reflective of reduced taxable assessed property valuation. Governmental expenditures decreased by $12.6 million or 16.4% as compared with the prior year. Primary reasons for the decrease are the closing of two Palm Bay Charter schools for which fiscal year 2011 expenditures were approximately $5.6 million, shared sacrifices in the form of furlough days, and various other judicious budgetary initiatives. 8

26 Management s Discussion and Analysis The following tables show the components of program and general revenues as a percentage of total governmental activities: Functions/Programs Expenses and Program Revenues Governmental Activities Expenses % of Total Program Revenues % of Total Net (Expense) Revenue General Government $ 7,838, % $ 2,937, % $ (4,900,724) Public Safety 33,687, % 2,406, % (31,281,847) Physical Environment 872, % 5,136, % 4,263,838 Transportation 12,984, % 1,644, % (11,340,299) Economic Environment 1,576, % 2,087, % 510,645 Culture/Recreation 3,890, % 302, % (3,587,657) Interest on Long-Term Debt 3,441, % - 0.0% (3,441,661) $ 64,292, % $ 14,514, % $ (49,777,705) The following chart compares expenses and program revenues for the governmental activities: Expenses and Program Revenue Governmental Activities Millions Expenses Program Revenues $40 $35 $30 $25 $20 $15 $10 $5 $- 9

27 Management s Discussion and Analysis The following table and chart shows revenues by source of governmental activities by percent of total revenues. Revenue by Source Governmental Activities Program Revenues Charges for Services $ 10,764, % Operating Grants and Contributions 3,139, % Capital Grants and Contributions 610, % General Revenues Property Tax 22,759, % Franchise Fees 4,935, % Utility Service 6,865, % Communication Service 3,446, % Gas Tax 3,105, % State Revenue Sharing 7,633, % Interest Revenue 90, % Miscellaneous 486, % Transfers 1,326, % $ 65,165, % Revenue by Source Governmental Activities Operating Grants and Contributions Capital Grants and Contributions Taxes Charges for Services Miscellaneous Interest Revenue State Revenue Sharing Gas Tax Communication Service 10

28 Management s Discussion and Analysis Business-type activities As mentioned above, business-type activities decreased the City s total net assets by $113,029. Key elements of the decrease in business-type activities are as follows: Completion of the Florida Drinking Water Revolving Loan Program. Reverberations of the economic climate as evidenced by the decrease in contributed capital and other revenue generating activities. The following tables show the components of program and general revenues as percentage of total for business-type activities: Functions/Programs Expenses and Program Revenues Business-type Activities Expenses % of Total Program Revenues % of Total Net (Expense) Revenue Water & Sewer Utilities $ 23,238, % $ 24,039, % $ 800,943 Building Inspections & Permitting 712, % 586, % (125,077) Stormwater Utility 3,164, % 3,210, % 46,621 $ 27,114, % $ 27,836, % $ 722,487 Expenses and Program Revenues Business-type Activities Millions $30 $25 $20 Expenses Program Revenues $15 $10 $5 $- Water & Sewer Utilities Building Inspections & Permitting Stormwater Utility 11

29 Management s Discussion and Analysis Revenues by Source Business-type Activities Charges for Services $ 26,861, % Operating grants and Contributions 54, % Capital Grants and Contribution 921, % Interest Revenue 473, % Miscellaneous 17, % Transfers (1,326,699) -5% $ 27,001, % Revenues by Source Business-type Activities Charges for Services Miscellaneous Interest Revenue Capital Grants and Contribution Operating Grants and Contributions 12

30 City of Palm Bay, Florida Management s Discussion and Analysis Financial Analysis of the City s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of fiscal year 2012, the City s governmental funds reported combined ending fund balances of $19.7 million, a decrease of $2.4 million in comparison with the prior year. A key element of the decrease is the decline in charges for service revenues and ad valorem tax revenues. Non-Spendable fund balance is $5,743 and is comprised of prepaid items and inventory. Restricted fund balance is $12.7 million and represents 64% of the total fund balance. The Committed fund balance is $11,126. Assigned fund balance is $1.9 million. Unassigned fund balance, which is the residual, had a balance of approximately $5.1 million. The General Fund is the chief operating fund of the City. At the end of fiscal year 2012, unrestricted fund balance of the General Fund was $8.59 million, while total fund balance reached $8.60 million. As a measure of the General Fund s liquidity, it may be useful to compare both unrestricted fund balance and total fund balance to total fund expenditures and transfers out. The fund balance of the City s General Fund increased by $2.52 million during the current fiscal year due to several prudent budgeting initiatives which are outlined in the General Fund budgetary highlights on page 14 of this report. General Fund Balance and Expenditures Millions Fund Balance Expenditures

31 Management s Discussion and Analysis The Bayfront Community Redevelopment Agency Fund (BCRA) is used to account for the ad valorem tax increment revenues accumulated for the community development in areas where taxes were assessed. Capital-oriented projects of the BCRA are accounted for in the BCRA Construction Fund. At the end of fiscal year 2012, restricted fund balance of the BCRA Fund was $1.4 million, which is a decrease of $445,888. This is primarily due to a decline in property tax revenues. Enterprise funds The City s enterprise funds provide the same type of information found in the government-wide financial statements, but in more detail. The City has three enterprise funds, of which the Utilities Fund is a major fund and the Building Inspections and Stormwater Utility Funds are non-major funds. Unrestricted net assets of the enterprise funds at the end of the year were $9.3 million. The total net assets of the Utilities Fund decreased by $113,029 in fiscal year The net assets for the Building Inspection Fund decreased by $110,314, which is attributable to stagnant construction. Stormwater Utility Fund also experienced a decrease of $100,635 in net asset. Other factors concerning the finances of these funds have been addressed in the discussion of the City s business-type activities. General Fund Budgetary Highlights The approved General Fund budget totals $55,908,375, representing a decrease of $3,618,413 or 6.08% from FY The budget continues essential existing and critical City services while making necessary reduction to meet the fiscal requirements of the state mandated property tax reform and the current economic challenges. Some significant changes in programs funded in this year s budget include: Implementation of 9 furlough days with expected savings in salaries and related taxes of $1.1 million. Utilize stop/start, state approved credit option to reduce fire pension obligations by $825,324. Reduction in force of 18.6 FTE through elimination of vacant positions and voluntary separation incentive program (VSIP) Deferment of the road maintenance program. General Fund revenues decreased $3,064,928 or 6.26% from the prior year. This includes the receipt of $2,470,116 from the Utility Fund as a Return on Investment (ROI). Additionally, $366,469 was received from the Sanitation fund in lieu of residential service franchise fees previously received from the City s waste hauler. The budget is based upon an estimated unreserved fund balance as of September 30, 2011 of $4,857,488. The minimum fund balance for FY12, as established by administrative code, is $5,046,518 and represents 10% of projected operating costs. The approved budget FY12 exceeds the minimum requirement by $190,230. The FY 12 adopted millage rate of mills is an increase from the mills adopted for FY

32 Management s Discussion and Analysis The City generated positive/(negative) variances in the General Fund. There was a cumulative positive variance of approximately $3.2 million between the final adopted budget and actual results of operations. Actual revenues were more than the final budgeted revenues by $1.1 million. This positive variance was primarily realized from various tax revenues that exceeded budget projections. Actual expenditures during the year were approximately $2.1 million less than the final budgeted expenditures. This positive variance was primarily a result of reduced personal services and operation expenditures and the utilization of the state approved stop/stop retirement pension credit General Fund Budgetary Comparison Millions Revenues Expenditures Fund Balance 10 - Original Budget Amended Budget Actual Balance 15

33 Management s Discussion and Analysis Capital Asset and Debt Administration Capital Assets The City s investment in capital assets for its governmental and business-type activities as of September 30, 2012 amounts to $216.3 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements other than buildings, machinery and equipment, vehicles, infrastructure, and construction in progress. A summary of government-wide capital assets is presented below: Governmental Activities Business-type Activities Total Activities Land $ 17,108,018 $ 18,927,335 $ 4,923,881 $ 4,887,159 $ 22,031,899 $ 23,814,494 Construction in Progress 4,218,897 10,251,365 7,140,322 5,424,553 11,359,219 15,675,918 Buildings and Improvements 24,191,065 21,227,045 2,863,766 2,863,766 27,054,831 24,090,811 Water and Sewer System ,437, ,554, ,437, ,554,909 Machinery and Equipment 24,307,302 24,445,017 3,886,577 3,768,596 28,193,879 28,213,613 Infrastructure 91,146,225 83,184, ,146,225 83,184, ,971, ,035, ,251, ,498, ,223, ,534,514 Less: Accumulated Depreciation (65,144,387) (59,993,885) (49,793,411) (46,879,480) (114,937,798) (106,873,365) Capital Assets, net $ 95,827,120 $ 98,041,646 $ 120,458,157 $ 122,619,503 $ 216,285,277 $ 220,661,149 Major capital asset purchases and projects during the current fiscal year include the following: Road reconstruction and drainage projects of $8.0 million and road improvement projects still in progress at the end of the year of $1.0 million. Construction and completion of New Fire Station 1. Additional information on the City s capital assets can be found in Note 7 of this report. 16

34 Management s Discussion and Analysis Long-term debt At the end of fiscal year 2012, the City had total long-term liabilities of $178.9 million. Of this amount $138.0 million is secured solely by specified revenue sources (i.e., revenue bonds). In addition, the City s Risk Insurance Funds had an estimated $2.1 million in claims payable. Outstanding Long-Term Debt and Claims Payable Governmental Activities Business-type Activities Total Activities Revenue Bonds $ 73,685,987 $ 75,286,571 $ 64,315,308 $ 68,558,549 $ 138,001,295 $ 143,845,120 Notes Payable 4,465,000 4,750,000 3,380,000 3,575,000 7,845,000 8,325,000 Capital Leases 2,436,370 2,827, ,436,370 2,827,874 OPEB Obligation 1,410,002 1,182, , ,929 1,789,741 1,494,915 Compensated Absences 5,413,211 5,331, , ,259 6,399,195 6,200,663 Interest Rate Swap-Fair Value 20,234,011 18,295, ,234,011 18,295,444 Claims Payable 2,146,000 2,576, ,146,000 2,576,000 $ 109,790,581 $ 110,250,279 $ 69,061,031 $ 73,314,737 $ 178,851,612 $ 183,565,016 Claims Payable decreased by $430,000 in fiscal year 2012 due to the transition from being self-funded to fully funded. There was an increase in the City compensated absence balance of $198,532 from the prior year. This was in part due to the usage of mandatory furlough days in lieu of sick and vacation accruals. Additional information on the City s debt can be found in Note 8 of this report. 17

35 Management s Discussion and Analysis Economic Factors and Next Year s Budgets and Rates The unemployment rate for the City at September 30, 2012 was 9.4%, a decrease of.9% from the prior year. The national average unemployment rate for 2012 was 8.1%. Population increased less than 1% from the prior year. The taxable value of real property for the City decreased by 2.8% in the 2012 fiscal year. Building activity resulted in $21.2 million of new construction during the year, which is an increase of $5.5 million, or 35.5%, from the previous year. A graphical presentation of the change in taxable value from new construction for the past ten years is presented below: Taxable Value from New Construction During the current fiscal year, unrestricted fund balance in the General Fund increased to $8.59 million. The ad valorem tax rate for the General Fund was increased to mills for the 2012 fiscal year budget. Requests for Information This financial report is designed to present users with a general overview of the City s finances and to demonstrate the City s accountability. If you have questions concerning any of the information provided in this report or need additional financial information, contact the City s Finance Department, 120 Malabar Road, S.E., Palm Bay, Florida The Comprehensive Annual Financial Report for fiscal year 2011/2012 can also be found on the City s website at 18

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37 STATEMENT OF NET ASSETS September 30, 2012 ASSETS AND DEFERRALS Governmental Activities Primary Government Business-type Activities Cash and Cash Equivalents $ 13,483,129 $ 4,468,641 $ 17,951,770 Investments 8,058,614 3,872,187 11,930,801 Restricted Assets: Cash and Cash Equivalents 183,705 8,283,443 8,467,148 Investments - 12,281,012 12,281,012 Accounts Receivable (Net) 3,480,061 11,715,647 15,195,708 Internal Balances (2,329,000) 2,329,000 - Due from Other Governments 2,826,694-2,826,694 Inventories 264, , ,687 Prepaid Items 528, ,723 Other Assets 13,940 66,530 80,470 Noncurrent Receivables (Net) - 4,331,305 4,331,305 Deferred Charges 1,640,275 1,046,099 2,686,374 Net Pension Asset 43,278,207-43,278,207 Capital Assets Not Being Depreciated: Land 17,108,018 4,923,881 22,031,899 Construction in Progress 4,218,897 7,140,322 11,359,219 Capital Assets, Net of Accumulated Depreciation: Building and Improvements 12,571,167 1,908,417 14,479,584 Water and Sewer Systems - 105,378, ,378,125 Machinery, Equipment and Vehicles 4,281,036 1,107,412 5,388,448 Infrastructure 57,648,002-57,648,002 Total Total Assets 167,256, ,177, ,434,176 Deferred Swap Outflows 20,234,011-20,234,011 Total Assets and Deferrals 187,490, ,177, ,668,187 Continued on the next page 20

38 Governmental Activities Business-type Activities LIABILITIES Accounts Payable $ 4,229,193 $ 812,179 $ 5,041,372 Accrued Liabilities 980, ,979 1,181,318 Due to Other Governments 26,437-26,437 Unearned Revenue 1,249,243 3,284,516 4,533,759 Liabilities Payable from Restricted Assets: Accrued Interest Payable 885, ,735 Customer Deposits 183,705 1,846,648 2,030,353 Long-Term Liabilities: Due Within One Year: Bonds Payable 1,727,189 5,024,933 6,752,122 Notes Payable 295, , ,000 Capital Leases Payable 390, ,563 Claims Payable 343, ,360 Compensated Absences 866, ,758 1,023,872 Due in More Than One Year: Bonds Payable 71,958,798 59,290, ,249,173 Notes Payable 4,170,000 3,175,000 7,345,000 Capital Leases Payable 2,045,807-2,045,807 Accreted Interest Payable - 9,973,892 9,973,892 Claims Payable 1,802,640-1,802,640 Net OPEB Obligation 1,410, ,739 1,789,741 Interest Rate Swap Fair Value 20,234,011-20,234,011 Compensated Absences 4,547, ,226 5,375,323 Total Total Liabilities 117,345,233 85,179, ,524,478 NET ASSETS Invested in Capital Assets, Net of Related Debt 62,197,018 60,343, ,540,050 Restricted for: Transportation 3,284,005-3,284,005 Economic Development 1,437,031-1,437,031 Debt Service 2,783,891-2,783,891 Building Fund - 651, ,280 Water and Sewer Utilities System - 13,666,774 13,666,774 Public Safety 395, ,808 Unrestricted 47,211 9,337,659 9,384,870 Total Net Assets $ 70,144,964 $ 83,998,745 $ 154,143,709 The notes to the financial statements are an integral part of the financial statements. Primary Government 21

39 STATEMENT OF ACTIVITIES For Fiscal Year Ended September 30, 2012 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs: Expenses Services Contributions Contributions Governmental Activities: General Government $ 7,838,165 $ 2,902,742 $ 34,699 $ - Public Safety 33,687,869 1,383,345 1,022,677 - Physical Environment 872,935 5,136, Transportation 12,984,446 1,055, ,066 Economic Environment 1,576,831 27,433 2,060,043 - Culture/Recreation 3,890, ,619 21,905 21,469 Interest on Long-Term Debt 3,441, Total Governmental Activities 64,292,557 10,764,993 3,139, ,535 Business-type Activities: Water and Sewer Utilities 23,238,071 23,083,432 34, ,157 Building Inspections & Permiting 712, , Stormwater Utility 3,164,194 3,190,815 20,000 - Total Business-type Activities 27,114,291 26,861,196 54, ,157 Total $ 91,406,848 $ 37,626,189 $ 3,193,749 $ 1,531,692 General Revenues: Taxes: Property Tax Franchise Fees Utility Service Tax Communication Service Tax Gas Tax State Revenue Sharing (unrestricted) Interest Revenue Miscellaneous Transfers Total General Revenues/Transfers Change in Net Assets Net Assets - Beginning Net Assets - Ending The notes to the financial statements are an integral part of the financial statements. 22