UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA

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1 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA (A COMPONENT UNIT OF THE CITY OF NEW SMYRNA BEACH, FLORIDA) COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2017 AND 2016 UTILITIES COMMISSIONERS William E. Biedenbach, Chairman Jack Holcomb, Vice Chairman Bernadette Britz-Parker, Secretary-Treasurer James Davenport, Assistant Secretary-Treasurer Lee B. Griffith, Commissioner GENERAL MANAGER/CHIEF EXECUTIVE OFFICER William Ray Mitchum DIRECTOR OF FINANCE/CHIEF FINANCIAL OFFICER Brian S. Bilinski 1

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3 TABLE OF CONTENTS COMPREHENSIVE ANNUAL FINANCIAL REPORT September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Reference Page INTRODUCTORY SECTION Title Page... 1 Organization Chart... 7 Certificate of Achievement Letter of Transmittal FINANCIAL SECTION Independent Auditors' Report Management s Discussion and Analysis Basic Financial Statements: Statements of Net Position... Statement 1 44 Statements of Revenue, Expenses, and Changes in Net Position... Statement 2 47 Statements of Cash Flows... Statement 3 48 Notes to the Financial Statements Required Supplementary Information: Schedule of Funding Progress - Other Postemployment Benefits Plan... Schedule 1 95 Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions FRS Plan... Schedule 2 96 Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions HIS Plan... Schedule 3 98 Other Supplemental Schedules: Schedule of Revenue, Expenses and Changes in Net Position-By System... Schedule Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Electric System (Non-GAAP Budgetary Basis)... Schedule Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Water System (Non-GAAP Budgetary Basis)... Schedule Schedule of Revenue, Receipts, Expenses and Disbursements-Budget and Actual-Reclamation System (Non-GAAP Budgetary Basis)... Schedule Schedule of Operating Expenses-Electric System... Schedule Schedule of Operating Expenses-Water System... Schedule Schedule of Operating Expenses-Reclamation System... Schedule Schedule of Investment Earnings... Schedule Schedule of Debt Service Requirements to Maturity: Revenue Certificates Payable... Schedule

4 TABLE OF CONTENTS (Continued) COMPREHENSIVE ANNUAL FINANCIAL REPORT September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Reference Page STATISTICAL SECTION Net Position by Component, Last Ten Fiscal Years... Table Changes in Net Position, Last Ten Fiscal Years... Table Operating Revenues by Utility System, Last Ten Fiscal Years... Table Operating Expenses by Utility System, Last Ten Fiscal Years... Table Nonoperating Revenue and Expenses, Last Ten Fiscal Years... Table Utility System Operations Analysis, Last Ten Fiscal Years... Table Utility Rate Schedule-Electric Service, Last Ten Fiscal Years... Table Utility Rate Schedule-Water Service, Last Ten Fiscal Years... Table Utility Rate Schedule-Reclamation Services, Last Ten Fiscal Years... Table Number of Electric, Water, and Reclamation (Wastewater & Reuse) Customers, Last Ten Fiscal Years... Table Ten Largest Customers, Current and Nine Years Ago... Table Ratios of Outstanding Debt by Type, Last Ten Fiscal Years... Table Pledged Revenue Coverage, Last Ten Fiscal Years... Table Demographic and Economic Statistics, Last Ten Fiscal Years... Table Principal Employers, Current and Nine Years Ago... Table Full-Time Equivalent Employees by Function/Program, Last Ten Fiscal Years... Table Operating and Capital Indicators, Last Ten Fiscal Years... Table SUPPLEMENTAL AUDIT REPORTS Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Prior Year Findings and Corrective Action Plan Independent Auditors' Report on Compliance for Each Major Program and on Internal Control over Compliance Required by Uniform Guidance Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit Of Financial Statements Performed In Accordance With Government Auditing Standards Management Letter (with rebuttal comments) Independent Accountants Report (on Compliance with Section , Florida Statutes)

5 ORGANIZATION CHART 5

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7 Utilities Commission City of New Smyrna Beach Commission Executive Electric Operations Engineering Transmission & Distribution Installation Crew Electrical Engineering Substation & Relay Electrician Environmental Engineering Fleet Maintenance System Operations/Generation System Control Generation Water/Reclamation Water Water Production Water Reclamation Services Maintenance & Lift Stations Human Resources Field Ops: Water Distribution/Sewer/ New Construction Lab Risk Management & Safety Finance Payroll & Benefits Administration Customer Service Information Technology Meter Department Materials Management Accounting 7

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9 CERTIFICATE OF ACHIEVEMENT FOR THE YEAR ENDED SEPTEMBER 30, 2016 THE GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA (GFOA) AWARDED A CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING TO THE UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA, FOR ITS COMPONENT UNIT FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, IN ORDER TO BE AWARDED A CERTIFICATE OF ACHIEVEMENT, A GOVERNMENTAL UNIT MUST PUBLISH AN EASILY READABLE AND EFFICIENTLY ORGANIZED COMPREHENSIVE ANNUAL FINANCIAL REPORT, WHOSE CONTENTS CONFORM TO PROGRAM STANDARDS. SUCH REPORTS MUST SATISFY BOTH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND APPLICABLE LEGAL REQUIREMENTS. A CERTIFICATE OF ACHIEVEMENT IS VALID FOR A PERIOD OF ONE YEAR ONLY. MANAGEMENT BELIEVES THAT THIS REPORT CONTINUES TO CONFORM TO CERTIFICATE OF ACHIEVEMENT PROGRAM STANDARDS. 9

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11 CERTIFICATE OF ACHIEVEMENT For The Year Ended September 30, 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida 11

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13 LETTER OF TRANSMITTAL 13

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15 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA 200 Canal Street New Smyrna Beach, Florida Mailina Address: Post Office Box 100 New Smyrna Beach, Florida March 16,2018 To the Chairman and Members of the Utilities Commission, City of New Smyrna Beach, Florida The Comprehensive Annual Financial Report of the Utilities Commission, City of New Smyrna Beach, Florida, (the "Utilities Commission") for the fiscal years ended September 30, 2017 and 2016, is hereby submitted. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the Utilities Commission. To the best of our knowledge and belief, the enclosed data are accurate in all material aspects and are reported in a manner designed to. present fairly the financial position and results of operations of the Utilities Commission. All disclosures necessary to enable the reader to gain the maximum understanding of the Utilities Commission's financial affairs have been included. The financial statements of the Utilities Commission are audited in accordance with Government Auditing Standards issued by the Comptroller General of the United States and Chapter , Rules of the Auditor General of the State of Florida. Information related to this audit, findings and recommendations, and auditors' reports on the internal control structure and compliance with applicable laws and regulations are included in the compliance section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditors' report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complement this letter of transmittal and should be read in conjunction with it. REPORTING ENTITY AND SERVICES PROVIDED The Utilities Commission provides a full range of electric, water, and reclamation (wastewater & reuse) services to its customers both inside and outside the city limits. These activities are fully accounted for in this financial report. The funds and entities related to the operation of the Utilities Commission, which are included in these financial statements, are a component unit of the City of New Smyrna Beach, Florida, and an integral part of the City's reporting entity. The Comprehensive Annual Financial Report of the Utilities Commission is issued separately to provide a comprehensive fmancial reporting summary and presentation to the Utilities Commission and its revenue certificate holders. Audited financial statements of the primary government (City of New Smyrna Beach, Florida), are available upon request from the City of New Smyrna Beach, 210 Sams Avenue, New Smyrna Beach, Florida, "Connecting ]ou rwith Quality" 15

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22 To the Chairman and Members of the Utilities Commission Page 8 A Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to Certificate of Achievement Program requirements, and we are submitting it to GFOA to determine its eligibility for another certificate. Acknowledgments The preparation of this report on a timely basis could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. We would also like to thank the individual members of the Utilities Commission for their efforts, support, and leadership in planning and conducting the financial operations of the Utilities Commission in a most responsible and progressive manner. Respectfully submitted, William Ray Mitchum General Manager/CEO Brian S. Bilinski Director of Finance/CFO 22

23 FINANCIAL SECTION THIS SECTION IS COMPOSED OF THE FOLLOWING: INDEPENDENT AUDITORS' REPORT MANAGEMENT S DISCUSSION AND ANALYSIS FINANCIAL STATEMENTS SUPPLEMENTAL FINANCIAL INFORMATION 23

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25 INDEPENDENT AUDITORS' REPORT 25

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27 INDEPENDENT AUDITORS' REPORT To the Chairman and Commissioners Utilities Commission, City of New Smyrna Beach, Florida New Smyrna Beach, Florida Report on the Financial Statements We have audited the accompanying financial statements of the Utilities Commission, City of New Smyrna Beach, Florida (the Utilities Commission ), a component unit of the City of New Smyrna Beach, Florida, as of and for the years ended September 30, 2017 and 2016, and the related notes to the financial statements, which collectively comprise the Utilities Commission 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. 205 MAGNOLIA ST. NEW SMYRNA BEACH, FL (386) FAX (386) MEMBER: American Institute of Certified Public Accountants and AICPA Private Companies Practice Section 27

28 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Utilities Commission as of September 30, 2017 and 2016, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis and the Required Supplementary Schedule of Funding Progress - Other Postemployment Benefits Plan, Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions FRS Plan, and Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions HIS Plan, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a required 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. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the Utilities Commission s basic financial statements. The introductory section, supplemental schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplemental schedules 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 supplemental schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections, as listed in the table of contents, 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. 28

29 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2018, on our consideration of the Utilities Commission 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 under the heading Independent Auditors 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. 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 Utilities Commission s internal control over financial reporting and compliance. March 16,

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31 MANAGEMENT S DISCUSSION AND ANALYSIS 31

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33 MANAGEMENT S DISCUSSION AND ANALYSIS This section of Utilities Commission, City of New Smyrna Beach, Florida s (the Utilities Commission ) annual financial report presents our discussion and analysis of the Commission s financial performance during the fiscal year that ended September 30, Please read it in conjunction with the transmittal letter at the front of this report and the financial statements, which follow this section. Financial Highlights The Utilities Commission s demand for electrical energy decreased in 2017 at million kwh sales compared to million kwh sales in 2016, or a 3.4% decrease, due to a more normal summer weather pattern and a corresponding leveling in demand. Sales revenue generated by the Electric System decreased from $43.9 million in 2016 to $42.6 million in 2017 due to the reduced consumption from the prior year. The volume of treated potable water sold in 2017 increased by 2.7%. The volume of wastewater sold in 2017 was consistent with that of the prior year. The volume of reclaimed water sold in 2017 increased by 2.2%. Sales revenue generated by the Water System increased by 2.2% to $8.0 million, while Reclamation (wastewater and reuse) System revenues also increased from the prior year, by 2.6% to $9.6 million. The Utilities Commission s assets exceeded its liabilities (net position) at the end of September 30, 2017 by $181.3 million. Of this amount, approximately $29.0 million was unrestricted and available for us to meet the Commission s ongoing obligations to its customers and creditors. Of the remaining $152.3 million, approximately $138.9 million was invested in utility plant assets, while the remaining $13.4 million was restricted for utility plant expansion. During the year, the Utilities Commission s net position increased by $8.2 million. Of this amount, approximately $4.6 million came from developer donated assets. Net position totaled $181.3 million in 2017 compared to approximately $173.1 million at the end of During 2017, the Utilities Commission s operating revenue decreased by $.9 million to $60.2 million. The Utilities Commission s operating expenses increased by $1.6 million to $56.6 million, up 2.9% from last year s $55.0 million. The Commission s long-term debt decreased to $28.3 million in 2017, which is a decrease of $5.7 million from last year s $34.0 million. The decrease is attributed to debt service payments made in 2017 in accordance with repayment schedules as agreed to with the Utilities Commission s lending institutions. At September 30, 2017 the UC had an over-recovery of fuel and purchased power in the amount of $1.5 million. Due to the continued over-recovery position, the year-end 2017 balance is represented as a liability on the UC s financial statements instead of a receivable. The Utilities Commission has recorded a receivable of $1.8 million from FEMA and the State of Florida for reimbursement of remediation expenditures associated with the impacts from Hurricanes Matthew and Irma. 33

34 Overview of Financial Statements The Utilities Commission s basic financial statements are comprised of three parts: 1) management s discussion and analysis, 2) the basic financial statements, and 3) an optional section that presents detailed summaries and schedules of selected financial data. Management s Discussion and Analysis (MD&A) serves as an introduction to the basic financial statements and supplementary information. The MD&A represents management s examination and analysis of the Utilities Commission s financial condition and performance. Summary financial statement data, key financial and operational indicators used in the strategic plan, budget, bond resolutions and other management tools were used for this analysis. The basic financial statements consist of entity-wide financial statements that provide both the short- and long-term financial information about the Utilities Commission s financial activities, all of which are operated like commercial enterprises. These statements report information about the Utilities Commission using full accrual accounting methods and economic resources focus as utilized by similar business activities in the private sector. Information concerning all of the Commission s assets and liabilities, both financial and capital, and short-term and long-term are included. Likewise, all revenues and expenses received during the year, regardless of when cash is received or paid are reported. However, rateregulated accounting principles applicable to private sector utilities are not used by government utilities. The basic financial statements of the Utilities Commission include a statement of net position; a statement of revenues, expenses, and changes in net position; a statement of cash flows; and notes to the financial statements, which are described as follows: The statement of net position (formerly the balance sheet) presents the financial position of the Utilities Commission on a full accrual, historical cost basis. This statement provides information about the nature and amount of resources and obligations at year-end. The statement of revenues, expenses, and changes in net position presents the results of the business activities over the course of the fiscal year and information as to how the net position changed during the 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 the related cash flows. This statement also provides certain information about the Utilities Commission s recovery of its costs. Rate setting policies use different methods of cost recovery not fully provided for by generally accepted accounting standards. The primary objectives of the rate model are to improve equity among customer classes and to ensure that capital costs are allocated on the basis of long-term capacity needs, and ensuring that growth pays for growth. The statement of cash flows presents changes in cash and cash equivalents, resulting from operating, capital and related financing, and investing activities. This statement presents cash receipts and cash disbursement information, without consideration of the earnings event, when an obligation arises, or depreciation of capital assets. The notes to the financial statements provide required disclosures and other information that are essential to a full understanding of material data provided in the statements. The notes present information about the Utilities Commission s significant accounting policies, account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any. 34

35 The supplementary information presented by the Utilities Commission includes comparisons of budget to actual revenue and expenses, schedules that focus on the individual divisions of the Utilities Commission where more detailed financial data is desirable, and schedules presenting the Commission s future debt service requirements and other data required to be presented in accordance with the Commission s debt covenants. Entity-Wide Financial Analysis The Utilities Commission s entity-wide financial statements report its net position and how they have changed over the reporting period. Net position (the difference between assets and liabilities) may serve as a useful indicator of the Commission s financial position. Over time, increases or decreases in the Commission s net position are a useful indicator of whether its financial health is improving or deteriorating, respectively. However, other non-financial factors such as changes in economic conditions, population growth, and new or changed governmental legislation must be considered to adequately assess its overall health. The material portion of the Utilities Commission s net position (77%) reflects its investment in utility plant assets (e.g., land, buildings, utility plant, and equipment), less that portion of related debt used to acquire assets still outstanding. These utility plant assets are used to provide utility services to our customers; consequently, these assets are not available for future spending. Although the Commission s investment in capital assets is reported net of related debt, resources needed to repay this debt must be provided from other sources since the capital assets cannot be used to liquidate these liabilities. Condensed Net Position September 30, ($000's) Assets: Utility plant, net $ 171,676 $ 164,818 $ 158,574 Restricted and internally designated assets 45,600 46,354 51,080 Current assets 14,200 15,386 11,704 Other assets Total assets , , ,540 Deferred outflow of resources Total assets and deferred outflow of resources... $ 232,689 $ 227,528 $ 221,800 Liabilities and Net Position: Long-term debt, net... $ 28,340 $ 34,000 $ 39,460 Current liabilities 17,603 15,313 15,038 Other noncurrent liabilities 3,544 3,188 6,476 Total liabilities... 49,487 52,501 60,974 Deferred inflow of resources 1,912 1, Net Position: Net investment in capital assets 138, , ,724 Restricted 13,407 13,235 12,156 Unrestricted... 29,044 29,717 26,992 Total net position , , ,872 Total liabilities, deferred inflows and net position... $ 232,689 $ 227,528 $ 221,800 35

36 The Utilities Commission s net position increased $8.2 million to $181.3 million in 2017, which is up from $173.1 million in The most significant change in net position in 2017 was from a decrease in long term debt and an increase in net utility plant. In 2015, the most significant change in net position came from a decrease in long term debt and an increase in restricted and internally designated assets (primarily a receivable related to the CR 3 settlement). Condensed Statement of Revenues, Expenses and Changes in Net Position Fiscal Years Ended September 30, ($000's) Revenues: Charges for services: Electric system $ 42,578 $ 43,852 $ 44,395 Water system 7,997 7,828 7,491 Reclamation system 9,601 9,356 8,865 Total charges for services 60,176 61,036 60,751 Interest earnings Gain on disposal of impaired assets - - 2,888 Other revenues Total revenues 61,363 61,791 64,243 Expenses: Division operating expenses: Electric system 41,094 40,515 40,550 Water system 7,906 7,374 6,850 Reclamation system 7,571 7,062 6,878 Total division operating expenses 56,571 54,951 54,278 Interest and debt expense ,001 Other expenses ,990 Total expenses 57,788 55,945 57,269 Income before contributions 3,575 5,846 6,974 Contributions 4,621 7,376 3,511 Increase (decrease) in net position 8,196 13,222 10,485 Net position, beginning of year (previously reported) Change in accounting for defined benefit pension Net position, beginning of year (restated) 173, , ,387 Net position, end of year $ 181,290 $ 173,094 $ 159,872 While the statements of net position show a snapshot of the Commission s financial position at the beginning and ending of the fiscal years, the above statements of revenues, expenses, and changes in net position provide answers as to the nature and source of these changes. A comparison of the operating revenues to operating expenses shows stability in the Commission s traditional services reported by the electric, water, and reclamation (wastewater and reuse) divisions, which continue to produce positive net income. The 2015 gain on disposal of impaired assets of $2.9 million is for the CR 3 Settlement with Duke. Other expenses of $2.0 million in 2015 includes the cost of deconstruction of non-performing Sugar Mill water and wastewater assets approximating $1.8 million. 36

37 The following is a summary of the operating revenue and expense (operating margins) for each of the Commission s operating divisions: Operating Revenue and Expenses By Division Year Ended September 30, 2017 $50,000,000 $40,000,000 $30,000,000 $20,000,000 Revenue Expense $10,000,000 $ Electric Water Reclamation The following is a summary of the composition of 2017 utility system revenues by source: Operating Revenues By Source Year Ended September 30, % 1.31% 0.49% 14.55% Electric Water Reclamation Contributions Other Interest 12.12% 64.53% During FY 2017, the overall demand for electricity decreased. Total electric kwh sales decreased from million kwh sales in 2016 to million kwh sales in In the prior year, the demand for electricity had increased from million kwh sales in 2015 to million kwh in Fuel and purchased power costs for FY 2017 decreased by 1.2% to $21.1 million, compared to the costs incurred in the prior year. 37

38 The following is a summary of the individual components of the Commission s electrical energy sales for the past three years from residential, commercial demand, commercial non-demand, and street lighting service customers: Electric kwh Sales by Service Type Years Ended September 30, 2017, 2016 and ,000, ,000, ,000, ,000, ,000,000 50,000,000 Residential Demand Non Demand Street Lights Year Residential Demand Non-Demand Street Lights ,759,556 82,845,324 51,722,959 3,136, ,247,743 82,993,710 53,095,934 3,119, ,940,983 79,452,118 51,108,181 3,100,742 The volume of potable water sold during 2017 increased 2.7% to 1,688 MG compared to 1,644 MG in 2016 and compared to 1,544 MG in The wastewater system volume was constant for 2017 and the prior year at 931 MG, compared to 896 MG in the volume of wastewater treated in The volume of reclaimed water sold during 2017 increased 2.2% to 804 MG, compared to 787 MG sold in 2016, and as compared to 665 MG sold in For FY 2017, the customer accounts billed for electric, water and wastewater have increased; each service with approximately 2.0% growth compared to Reuse water customers have continued to increase significantly. For FY 2017 reuse water experienced a 13% increase in billed customers. A summary of customers (based on meter installations) follows: Utility Operations Customers Customers Customers Electric (meters installed)... 27,673 27,317 26,740 Water (meters installed)... 26,241 25,771 25,257 Wastewater (meters installed)... 21,170 20,762 20,307 Reuse water (meters installed)... 2,007 1,775 1,542 38

39 Capital Assets At the end of 2017, the Utilities Commission s investment in capital assets amounted to $171.7 million, which is stated net of $128.5 million of accumulated depreciation. This investment in capital assets includes: Land and land improvements, Electric generation, transmission and distribution facilities, Water supply, production, treatment and distribution facilities, Wastewater collection, treatment and reuse water distribution facilities, and Machinery and equipment. Over the past ten years, extensive work and progress has been made to more accurately reflect the assets of the Utilities Commission. Annually, a physical inventory of assets is conducted. Assets no longer in use are disposed of through proper procedure in a timely manner. During 2015, the Commission expanded its asset management for real properties, including evaluation to determine those with no future utility purpose, resulting in the sale of four no longer needed property sites. Utility Plant, Ne t September 30, ($000's) Utility Plant: Land and land rights $ 37,415 $ 36,791 $ 35,626 Structures and improvements 35,072 33,855 33,375 Production and treatment plant 42,552 43,054 43,065 Transmission, distribution and collection and treatment plant 160, , ,265 Other general plant and equipment 14,293 14,264 12, , , ,808 Accumulated depreciation (128,547) (126,219) (120,432) 161, , ,376 Construction in progress 10,339 12,140 8,198 Utility plant, net $ 171,676 $ 164,818 $ 158,574 During 2015, the Commission recognized the disposal of the remaining basis of its impaired CR 3 plant assets (including nuclear fuel), totaling $18.6 million, less accumulated depreciation and amortization of $16.4 million. Additional information regarding the Commission s investment in CR 3 and the status of the settlement agreement with Duke Energy Florida can be found in Note 7 to the financial statements. Additional information regarding the Commission s investment in capital assets can be found in Note 6 in the notes to the financial statements. 39

40 Long-Term Debt and Debt Administration The debt coverage ratio is a useful indicator of the Utilities Commission's debt position. The Commission s debt coverage ratio has continued to remain strong, as is summarized in the following twoyear tabulation: Debt Service Coverage Ratios Fiscal Years Ended September 30, ($000's) Operating revenues... $ 60,176 $ 61,036 $ 60,751 Interest and other income... 1, Capacity and other fees... 1,963 3,234 1,338 Revenues per certificate resolution... 63,326 65,024 62,694 Cost of Operation and Maintenance, net of depreciation and required payments to City of New Smyrna Beach... 46,334 44,905 44,334 Net revenues per certificate resolution 16,992 20,119 18,360 Scheduled annual debt service requirement $ 6,462 $ 6,246 $ 4,940 Debt service coverage ratio (times) Under its current debt agreements, the Commission has covenanted to maintain several coverage ratios, all of which approximate 1.25 times in the aggregate. The UC has maintained a much higher debt service coverage ratio than mandated. Additional information regarding the Commission s long-term debt obligations can be found in Note 8 in the notes to the financial statements. Outstanding Long-Term Debt September 30, ($000's) Utilities System Revenue Certificates: Series 2009 $ 11,105 $ 13,405 $ 15,200 Series ,530 4,670 5,790 Series ,200 2,350 3,690 Series 2013A 9,590 9,800 10,000 Series 2013B 8,575 9,235 9,890 34,000 39,460 44,570 Less: current maturities (5,660) (5,460) (5,110) 28,340 34,000 39,460 Asset retirement obligation - - 4,247 Compensated absences obligation OPEB obligation Net pension liability 2,573 2,343 1,472 Total long-term debt $ 31,884 $ 37,188 $ 45,936 40

41 As of September 30, 2017, the Utilities Commission had outstanding principal of $34.0 million for revenue certificates payable, which is $5.5 million lower than the amount outstanding at the end of FY All outstanding debt obligations are secured by a first lien on and a pledge of the net revenues of the system. At the end of the fiscal year, the Utilities Commission had $28.3 million in net (of current maturities) long-term debt outstanding, which is a decrease of $5.7 million over the prior year s $34.0 million. The net decrease is attributed to scheduled repayments made in The debt service requirements on these obligations are detailed in Schedule 12 of the supplementary section of the financial statements. Cash Flows The Statement of Cash Flows, shown in the Financial Statements section, demonstrates that the net cash provided by operating activities and investing activities provides the net cash necessary to cover our capital financing. The realized progress is mainly attributable to the continuation and adherence to the Utilities Commission s strategic plan and initiatives. Economic Factors and Next Year s Budget and Rates Many factors are considered each year by the Utilities Commission in its efforts to establish an operating budget, to evaluate its personnel needs, and to develop uniform electric, water, reclamation (wastewater and reuse) and other utility fees that are reasonable and, more importantly, capable of cost recovery. Some of the major factors considered in this process are the local economy, civilian labor force, unemployment rates, and inflation rates. The most recent estimates available for unemployment data in Volusia County, Florida, are compiled by the Florida Agency for Workforce Innovation on the Florida Research and Economic Information Database Application (FREIDA). This agency estimates a countywide unemployment rate of 3.6%, which is favorable to the 5.1% rate experienced one year earlier. These estimates are slightly lower than the state s current 3.8% unemployment rate. Nationwide the unemployment rate is stated at 4.2%, as of September Revenue projections for fiscal year 2018 are forecasted based on a combined modified regression model and expected consumptions. Based on the most recent engineering studies the existing infrastructure is aging, with the anticipation of continued increases in routine operating and maintenance expenses. Other factors influencing the Commission s 2018 operating budget includes the ever changing cost of fuel and purchased power and continued growth in all divisions. A summary of the enacted 2018 budget follows: 41

42 Revenues: Revenue and Receipts: Electric system 45, Dollar Budget Actual* Change $ $ 43,345 $ 2,060 Water system 8,263 8,259 4 Reclamation system 9,800 9,835 (35) Capital contributions 1,854 4,621 (2,767) 65,322 66,060 (738) Operating Expenses: Operation and maintenance 49,146 46,211 2,935 Required payments to City 3,754 3, ,900 49,827 3,073 Net revenue and receipts 12,422 16,233 (3,811) Debt service (principal and interest)* (6,375) (6,590) 215 Operating transfers (net) (6,047) (7,125) 1,078 Budgeted net cash receipts $ - $ 2,518 $ (2,518) Requests for Information This financial report is designed to provide a general overview of the Utilities Commission, City of New Smyrna Beach, Florida s finances for all those who have expressed an interest in its finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the office of the Director of Finance, Post Office Box 100, New Smyrna Beach, Florida

43 BASIC FINANCIAL STATEMENTS 43

44 STATEMENTS OF NET POSITION September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Assets: Current Assets: Cash and cash equivalents $ 2,018,445 $ 5,539,846 Accounts and notes receivable, net of allowance for doubtful accounts ($427, and $385, ) 7,683,140 7,441,703 Disaster relief funds receivable (net of valuation allowance of $96,974) 1,842,515 - Inventories: Fuel 199, ,886 Materials and supplies 1,982,375 1,809,831 Prepaid expenses and other assets 474, ,967 Total current assets 14,200,255 15,386,233 Restricted and Internally Designated Assets: Restricted cash and cash equivalents.. 18,209,526 19,838,275 Internally designated cash and cash equivalents 27,390,406 26,516,010 Total restricted and internally designated assets 45,599,932 46,354,285 Noncurrent Assets: Unamortized regulatory and nonregulatory studies expense 233, ,080 Capital Assets: Utility plant in service 289,884, ,896,671 Less: accumulated depreciation (128,547,036) (126,218,683) 161,337, ,677,988 Construction work in progress 10,338,597 12,139,631 Total utility plant, net 171,675, ,817,619 Total noncurrent assets 171,908, ,979,699 Total assets 231,709, ,720,217 Deferred Outflows of Resources: Deferred outflows on pensions 980, ,654 Deferred charge on refundings - 9,283 Total deferred outflows of resources 980, ,937 Total assets and deferred outflow of resources $ 232,689,165 $ 227,528,154 The accompanying notes are an integral part of the financial statements. 44

45 Liabilities and Net Position: Current Liabilities Payable From Restricted Assets: Accrued interest payable $ 464,685 $ 537,171 Revenue certificates and notes payable - current 5,660,000 5,460,000 Accounts payable 1,778, ,057 Customers' deposits 4,449,487 3,560,652 12,353,132 10,202,880 Current Liabilities: Accounts payable and accrued expenses 4,035,568 3,888,915 Due to other governments 1,213,849 1,220,901 5,249,417 5,109,816 Total current liabilities 17,602,549 15,312,696 Other Noncurrent Liabilities Other post-employment benefit obligations 465, ,054 Compensated absences 505, ,085 Net pension liability 2,573,330 2,343,324 Total other noncurrent liabilities 3,543,915 3,188,463 Long-Term Debt: Revenue certificates and notes payable (net) 28,340,000 34,000,000 Total liabilities 49,486,464 52,501,159 Deferred Inflows of Resources: Deferred energy cost and fuel adjustments 1,543,702 1,605,396 Deferred inflows on pensions 368, ,468 Total deferred inflows of resources 1,911,877 1,932,864 Net Position: Net investment in capital assets 138,838, ,141,946 Restricted for: Revenue Certificate covenants... 5,660,000 5,460,000 Renewal and replacement service capacity 7,747,829 7,775,155 Unrestricted 29,044,437 29,717,030 Total net position 181,290, ,094,131 Total liabilities, deferred inflows of resources and net position $ 232,689, ,528,154 The accompanying notes are an integral part of the financial statements. 45

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47 STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN NET POSITION For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Operating Revenue: Sales $ 59,533,215 $ 60,343,307 Other revenue 642, ,909 Total operating revenue 60,175,995 61,036,216 Operating Expenses: Purchased power and fuel expenses 21,075,755 21,324,833 Other production expenses 8,736,696 8,487,578 Transmission, distribution, and sewage collection and treatment 6,792,691 6,273,315 Customer accounting 1,381,236 1,293,829 Administrative and general 8,347,266 7,525,724 Required payments to the City of New Smyrna Beach 3,615,949 3,721,882 Depreciation 6,621,863 6,323,657 Total operating expenses 56,571,456 54,950,818 Operating income 3,604,539 6,085,398 Nonoperating Revenue (Expense): Interest earnings 325, ,764 Other income 862, ,518 Disaster relief costs - net (107,722) - Interest and debt expense (722,086) (870,421) Other expenses (146,299) (114,611) Gain (loss) on disposal of assets (239,571) (8,613) Total nonoperating (expense) (28,403) (239,363) Income (loss) before contributions 3,576,136 5,846,035 Contributions in aid of construction 4,620,557 7,375,674 Change in net position 8,196,693 13,221,709 Net position, beginning of year 173,094, ,872,422 Net position, end of year $ 181,290,824 $ 173,094,131 The accompanying notes are an integral part of the financial statements. 47

48 STATEMENTS OF CASH FLOWS For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Cash Flows From Operating Activities: Cash received from customers $ 60,761,699 $ 61,536,806 Cash paid for fuel and purchased power (21,171,448) (21,225,126) Cash paid to suppliers (17,078,259) (14,036,392) Cash paid to employees (9,887,591) (9,080,469) Cash paid to City of New Smyrna Beach (3,623,001) (3,654,238) Other cash receipts (payments) 608, ,907 Net cash provided by operating activities 9,609,445 14,055,488 Cash Flows From Capital and Related Financing Activities: Proceeds from sale of capital assets 56,849 36,845 Net proceeds from CR3 settlement - 1,024,528 Capital contributions 1,962,397 3,234,026 Acquisition and construction of capital assets (9,939,438) (8,487,656) Debt reduction outlays (5,460,000) (5,110,000) Interest paid (785,289) (914,571) Net cash used in capital and related financing activities (14,165,481) (10,216,828) Cash Flows From Investing Activities: Interest received 325, ,764 Net cash provided by investing activities 325, ,764 Net (decrease) increase in cash and cash equivalents (4,230,827) 3,963,424 Cash and cash equivalents, beginning of year 51,849,204 47,885,780 Cash and cash equivalents, end of year $ 47,618,377 $ 51,849,204 Reconciliation to Balance Sheet: Cash and cash equivalents $ 2,018,445 5,539,846 Restricted and internally designated cash and cash equivalents 45,599,932 46,354,285 Total cash and cash equivalents $ 47,618,377 51,894,131 Non-cash Capital and Related Financing Activities: Capital contributions $ 2,658,160 $ 4,141,648 Acquisition and construction of capital assets $ (2,658,160) $ (4,141,648) Decrease in asset retirement obligation $ - $ (4,246,517) The accompanying notes are an integral part of the financial statements. 48

49 STATEMENTS OF CASH FLOWS - (Continued) For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Reconciliation of operating income to net cash provided by operating activities: Operating income $ 3,604,539 $ 6,085,398 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 6,621,863 6,323,657 Amortization 9,283 19,719 Provision for losses on receivables 136, ,791 Provision for other post-employment benefits receivables 64,000 75,000 Decrease (increase) in operating assets: Accounts and notes receivable (562,663) (114,579) Unbilled accounts receivable 184,670 (232,966) Disaster funds receivable (1,842,515) - Inventories (232,924) (2,112) Prepaid expenses (18,547) 22,168 Increase (decrease) in operating liabilities: Accounts payable and accrued liabilities 146, ,749 Due to other governments (7,052) 67,644 Customer deposits 888,835 (500,265) Deferred energy cost and fuel adjustments (61,694) 1,239,609 Compensated absences 61,446 12,768 Other income 862, ,518 Other expense (245,071) (114,611) Net cash provided by operating activities $ 9,609,445 14,055,488 The accompanying notes are an integral part of the financial statements. 49

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51 NOTES TO THE FINANCIAL STATEMENTS 51

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53 NOTES TO THE FINANCIAL STATEMENTS September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Utilities Commission, City of New Smyrna Beach, Florida (the Utilities Commission ) are presented in conformity with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB). The existing hierarchy provides that accounting guidance should first be sought in statements of the GASB. If the GASB has not issued a standard applicable to a situation, then pronouncements of the Financial Accounting Standards Board (FASB) are presumed to apply. The following is a summary of the more significant accounting policies: Organization: The Utilities Commission was created by Special Act of the Legislature in 1967 through the passage of Chapter , Laws of Florida, Special Acts of 1967 (House Bill 1669), which amended the Charter of the City of New Smyrna Beach, Florida (the City ) to create the Utilities Commission. This Enabling Act gave the Utilities Commission full and exclusive authority over the management, operation and control of all of the City s utilities. Additionally, this Act granted authority to the Utilities Commission to hire employees, set rates, borrow money, and condemn property. Under the Enabling Act, the only measure of supervision by the City Commission was its power to appoint members of the Utilities Commission. By this Special Act, the Utilities Commission was established as a political subdivision of the State of Florida fully empowered under the authority of the 1885 Florida Constitution. In a referendum held in October, 1984, voters approved amendments to the City Charter which (1) require City Commission approval for extensions of utility services outside the City limits; (2) give the City Commission the right to review and approve the Utilities Commission's operating budget; and (3) require City Commission approval before issuing or refunding revenue certificates and entering into contracts which exceed four years. In 1985 the Florida Legislature enacted Chapter , Laws of Florida that constituted an amendment to Chapter , Laws of Florida and became the Revised Enabling Act for the Utilities Commission. The Special Act was a complete restatement of the 1967 Enabling Act, but included the 1984 charter amendments and added that the Utilities Commission would function the same as it previously functioned under Chapter Laws of Florida. In effect, this law change preserved the Utilities Commission s measure of independence under the Municipal Home Rule Powers Act; essentially, requiring Legislative approval for amendments to the City Charter regarding the Utilities Commission s operational autonomy. The Utilities Commission is governed by a five-member board of Commissioners who are appointed by the City Commission. Utilities Commissioners receive compensation of $100 per month and may serve no more than three consecutive three-year terms. Reporting Entity: The funds and entities related to the operation of the Utilities Commission are appropriately included as a component unit of the City of New Smyrna Beach, Florida, and an integral part of the City's reporting entity. The basic financial statements of the Utilities Commission are incorporated in the City's Comprehensive Annual Financial Report as an enterprise fund activity. Complete financial statements of the City of New Smyrna Beach, Florida, the primary government of the Utilities Commission, can be obtained directly from the City s administrative offices at the following address: 53

54 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Administrative Office: City of New Smyrna Beach, Florida 210 Sams Avenue New Smyrna Beach, Florida In 1983, the Utilities Commission entered into a participation agreement with Florida Municipal Power Agency (FMPA) for an entitlement share of electric capacity and electric energy from FMPA's undivided ownership interest in Florida Power and Light Company's St. Lucie Unit No. 2, a nuclear generating unit. The Utilities Commission's role in the agreement is limited to that of a participant contractually obligated to purchase electric capacity and electric energy. The agreement between the Utilities Commission and FMPA does not meet the criteria for inclusion within the reporting entity of the Utilities Commission. The agreement specifically provides that the arrangement is not a joint venture and neither FMPA nor the other utilities which entered into participation agreements with FMPA for entitlement shares from FMPA's undivided ownership interest in St. Lucie Unit No. 2 are accounting for the agreement as a joint venture. Accordingly, the Utilities Commission is not accounting for the agreement as a joint venture. The Utilities Commission has adopted GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Under this guidance, certain expenses and revenues are deferred and recognized in accordance with rate actions of the Utilities Commission. Basis of Presentation: The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and include all the activities of the Utilities Commission. By virtue of its municipal ownership, the financial affairs of the Utilities Commission are not subject to the oversight of, or regulation by, the Florida Public Service Commission. The accounting records of the electric system are maintained in accordance with the accounting principles and methods prescribed by the Federal Energy Regulatory Commission (FERC). The accounting records for the water and reclamation systems are maintained in accordance with the uniform system of accounts prescribed by the National Association of Regulatory Utility Commissioners (NARUC). The method of accounting for contributed capital is recorded in accordance with the standards prescribed by the GASB. As a result, the accounting provisions permitted under Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation (SFAS 71), have not been adopted by the Utilities Commission. The Utilities Commission s revenue certificate resolutions specify the flow of funds from revenues and specify the requirements for the use of certain restricted and unrestricted assets. Basis of Accounting and Financial Statement Presentation: Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made, regardless of the measurement focus applied. The Utilities Commission s financial statements are prepared on the accrual basis of accounting. By utilizing this method, revenues are recognized when they are earned, and expenses are recognized as they are incurred. Operating revenues and expenses result from providing utility services, which is the principal ongoing operation of the Utilities Commission and are stated separately from net non-operating expenses and contributions in aid of construction. The principal operating revenues are charges to customers for the production and delivery of electric, water, and reclamation sales and services. The principal operating revenues are charges to retail customers and are recorded net of the provision for doubtful accounts. Operating expenses include fuel and purchased power, administrative expenses, taxes, and depreciation on capital assets. Contributions in aid of construction are composed primarily of impact fees assessed for the future expansion and development of the 54

55 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Utilities Commission s water and reclamation systems as well as developer contributions for capital infrastructure improvements. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Rates, Revenues and Fuel Expense: The Utilities Commission acts as the regulatory authority for the establishment of all electric, water, and reclamation utility rates. Electric rates are set in accordance with established rate structures established by the Florida Public Service Commission (FPSC), as they have the jurisdiction to regulate the electric rate structures of municipal utilities in Florida. A rate structure is defined as the rate relationship between customer class and among customers within rate classes and is distinguishable from the total amount of revenue requirements a utility may receive from rates. The Utilities Commission periodically performs rate adequacy studies to determine the electric base and fuel revenue requirements. Based on these studies, other current cost-of-service studies, and regulations of the FPSC regarding electric rate structures, changes may be proposed to established electric rate schedules. Prior to the implementation of any rate change, the Utilities Commission notifies its customers, convenes public workshops, presents the rates to the governing board for approval and files the proposed tariffs with the FPSC. Water and sewer rate requirements are studied and prepared in a similar manner excluding filing a notification with the FPSC. There were no electric, water or reclamation service rate changes made in 2017 or The electric rate schedule contains an energy cost adjustment clause which reflects the cost of fuel as well as the energy and fuel components of purchased power. Generally, the effect of the increase/decrease in the cost of energy is recovered over a twelve month period and is determined as the difference between actual applicable fuel costs and the costs actually billed during the same period. The cost of nuclear fuel, when applicable, is amortized to fuel expense based on the quantity of heat produced for generation of electric energy in relation to the quantity of heat expected to be produced over the life of the nuclear fuel core. In October 2016, the Utilities Commission approved a reduction in the fuel adjustment rate from $24.96 per 1,000 kwh to $22.68 per 1,000 kwh to continue in its efforts to reduce cumulative amounts previously recovered. Budget and Budgetary Accounting: An annual revenue and expense budget is prepared by the administrative staff for the combined electric, water, and reclamation system and approved as provided by law by the Utilities Commission. In accordance with the Utilities Commission s budget policy, the approved budget is submitted to the City of New Smyrna Beach prior to June 1 of each fiscal year for subsequent City Commission approval. The budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) except that certain other cash receipts and payments are treated as budgetary items to maintain effective fiscal and budgetary control over the collection and disposition of all Utilities Commission resources. Specific budgetary control is exercised over internal operating transfers to restricted funds, payments of principal on long-term debt obligations, and collections of contributed capital which are recognized in the budget as additions and/or deductions to reconcile budgeted net cash receipts to reported net income (loss) for each system. Actual revenues, expenses and all mandatory and discretionary transfers are compared to the approved budget by operating department and reported to the Utilities Commission monthly. Budget amendments, if any, can be requested by the General Manager/CEO. However, all budget amendments must be approved by the Utilities Commission. 55

56 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Unexpended appropriations for operations lapse at year-end. No supplemental appropriations were required for the 2017 and 2016 fiscal years. Cash and Cash Equivalents: The Utilities Commission invests all cash balances in interest bearing accounts. Earnings from these investments are appropriately allocated to the investing fund accounts based upon the investment equity and are used, where applicable, to finance general Utilities Commission operations. For purposes of the statement of cash flows, all highly liquid debt instruments (including restricted and internally designated funds) purchased with original maturity dates of three months or less are considered cash equivalents. Restricted and Internally Designated Assets: Funds classified as restricted assets represent cash, cash equivalents and investments, which were designated by law, bond requirements or regulatory statutes. Funds classified as internally designated assets also represent cash, cash equivalents and investments for which the Utilities Commission has a customer obligation or the governing board has taken action to designate. Fair Value of Financial Instruments: The carrying amount reported in the statement of net position for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other payables approximates fair value because of the immediate or short-term maturity of these financial instruments. Accounts Receivable: Utility operating revenues and the associated customer accounts receivable are recognized in the period in which they are earned, net of the allowance for doubtful accounts, on the basis of cycle billings rendered monthly. All customer accounts receivable were anticipated to be collected within an operating cycle and were reported as current assets at year end. The allowance for doubtful accounts is based upon management's analysis of historical trends, which includes an aggressive examination and measurement of all customer accounts for collectability on a monthly basis. Bad debt expenses for estimated doubtful accounts totaling $136,556 and $108,791 were recognized as customer accounting expenses in the statement of activities for the years ended September 30, 2017 and 2016, respectively. Accrued Utility Revenue: Operating revenues for electric, water, and reclamation services provided to retail customers but not billed at the end of the fiscal year are accrued at year end to recognize the sales revenues earned between the last billed meter reading date made through the end of the fiscal year. Unbilled service receivables totaled $3,721,297 and $3,905,567 at September 30, 2017 and 2016, respectively. Inventories and Prepaid Expenses: Inventories are stated at cost using the weighted average unit cost method for fuel and materials and supplies. Obsolete and unusable items are reduced to estimated salvage values. The cost of fuel used for electric generation is charged to expense as consumed. Electric line transformers, electric meters, and replacement units for the generating plants are classified as utility plant in accordance with accepted industry practices set forth by NARUC and FERC. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the statement of net position. The cost of prepaid items is recorded as an expense when consumed rather than when purchased. Original Issue Debt Premium/Discount and Loss on Refinancing: Original debt issue premiums and discounts are recognized, deferred and amortized over the remaining terms of the applicable debt issues or life of the old debt, whichever is shorter using the bonds outstanding method, which approximates the interest method. Unamortized debt premium and discount are presented in aggregate in the financial statements as a reduction of the carrying cost of the related long-term debt. Unamortized loss on refinancing is presented in aggregate in the financial statements as a deferred outflow of resources. 56

57 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Utility Plant: Utility plant is stated at historical or estimated historical cost. Utility property, plant, improvements and equipment with initial individual costs that equal or exceed $1,000 and with estimated useful lives of more than one year are recorded as capital assets. Maintenance and repairs of property, and replacements and renewals of items determined to be less than units of property, are charged to maintenance expense. The cost of units of property replaced, renewed or retired, plus removal or disposal costs, less salvage, is charged to accumulated depreciation. Donated utility plant is stated at its estimated fair market value on the date donated. Construction period interest, when incurred, is capitalized, net of interest earned on unexpended construction funds. All capitalized interest is depreciated over the remaining useful lives of the related assets. Net capitalized interest totaled $187,784 and $203,857 in 2017 and 2016, respectively. For financial reporting purposes, assets are depreciated systematically using the straight-line method over the estimated useful life considering FERC guidelines or license period of the asset. The cost of electric, water or reclamation utility plant assets retired, together with removal costs less salvage, are charged to accumulated depreciation. Depreciation expense is based on the estimated useful life of the property, adjusted for estimated net salvage, which are as follows: Years Electric System: Production plant: Nuclear production Diesel production Transmission plant Distribution plant General plant: Structures and improvements Other general plant Water System: Source of supply plant Pumping plant Water treatment plant Transmission and distribution plant General plant: Structures and improvements Other general plant Reclamation System: Collection plant Pumping plant: Structures and improvements Pumping equipment Treatment and disposal plant General plant Water Reuse System: Structures and improvements Transmission and distribution plant Common Plant: Structures and improvements Other general plant

58 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Accounting for Nuclear Plant Decommissioning and Asset Retirement Obligation Provisions: The provisions for nuclear plant decommissioning costs are based on site-specific estimates that include the costs for removal of all radioactive and other structures at the nuclear plant site. The Utilities Commission s prorata share of the estimated future decommissioning costs for the Crystal River Unit 3 nuclear generation facility is accounted for as an Asset Retirement Obligation (ARO), which represents a legal obligation associated with the retirement of certain tangible long-lived assets, in accordance with FERC Order 631, Accounting, Financial Reporting, and Rate Filing Requirements for Asset Retirement Obligations. The ARO was determined based on the most recent approved FPSC report provided to the Utilities Commission by the owner-operator of this plant. The present value of retirement costs is recorded as a liability with an equivalent amount added to the asset cost and depreciated over an appropriate period. This liability was systematically accreted over a life consistent with the plant s license period. On February 5, 2013, Duke Energy Florida, Inc. announced its intention to retire the CR3 nuclear power plant and subsequently entered into a settlement agreement with the Utilities Commission approved by the Nuclear Regulatory Commission which closed on October 30, No asset retirement obligation remains at September 30, 2017 or Asset Impairment: On an annual basis, the Utilities Commission assesses whether there has been an impairment of its long-lived assets and certain intangibles held and used by the entity when such impairment indicators exist. Identified impairment costs are recognized as an operating expense when the carrying value of a long-lived asset exceeds the recoverable amount. Intangible Assets: All intangible assets, excluding those that are exempt, are classified as capital assets under the heading of Utility plant, net. Intangible assets considered to have indefinite useful lives, such as utility easements, are recognized, measured and capitalized upon conveyance. Deferred Outflows of Resources: In addition to assets, the statement of net position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources expense until then. The Utilities Commission has two items that qualify for reporting in this category, as follows: Unamortized Loss on Refunding of Bonds - A deferred charge (or loss) on the advance refunding of bonds results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Pension Costs - A deferred amount on defined benefit pension liabilities associated with the Florida Retirement System (FRS) and Florida Retirement System Health Insurance Subsidy (HIS) results from the recognition of the Utilities Commission's proportionate shares of collective pension expense and collective deferred outflows of resources and deferred inflows of resources related to the pension plan. The deferred outflows related to pensions will be recognized as either pension expense or a reduction in the net pension liabilities in future reporting years. Deferred Inflows of Resources: In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The Utilities Commission has two items that qualify for reporting in this category, as follows: 58

59 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Pension Contributions - the deferred inflows on defined benefit pension contributions, earnings and other liabilities associated with the Florida Retirement System (FRS) and Florida Retirement System Health Insurance Subsidy (HIS) that qualify for reporting are deferred and recognized as an inflow of resources in the period that the amounts become available. Deferred Energy Cost and Fuel Adjustments - The deferred inflows of resources associated with electric energy cost and fuel adjustments are reported in the statement of net position and consist of amounts charged to retail customers for fuel based on estimated costs, which are adjusted for any differences between the actual and estimated costs once actual fuel costs are known. If the amount recovered through billings exceeds actual fuel costs, the excess is reported as a deferred inflow of resources. If the amount recovered through billings is less than the actual fuel costs, the excess is reported as a deferred outflow of resources, for amounts to be collected through future rates. As of September 30, 2017 and 2016, the over-recovery of fuel costs were reported as deferred inflows of resources in the amounts of $1,543,702 and $1,605,396, respectively. Current Portion of Long-term Debt: Bonds payable within one year represents scheduled principal payments due within the upcoming year, in accordance with the serial requirements of the bond agreements. Proportionately throughout the year, the annual required funds are segregated and included as a component of internally designated assets. Compensated Absences and Accrued Wages: A current liability is recorded and recognized under the classification of accrued liabilities for that portion of employee payroll costs paid subsequent to year-end and attributable to services performed prior to year-end. The balance of compensated absences that will be payable beyond one year are reported as deferred compensated absences under the classification of other liabilities. Employees earn annual personal leave time (vacation, sick and personal leave) at the rate of 160 hours to 240 hours per year, depending on the number of years of service measured on the employees anniversary date of employment with the Utilities Commission. Employees are required to use or sell 50% of the time accrued each year and may retain the balance for use in succeeding years. The maximum amount of hours that can be accumulated at the end of each anniversary year is 480 hours for all employees except for exempt positions, who may maintain a balance of up to 600 hours. Employees with accrued personal leave time over the above guidelines will be paid, at their normal hourly rate, for all hours in excess with the next normal payroll following their anniversary of employment with the Commission. Pollution Remediation Obligations: The Utilities Commission records applicable pollution remediation obligations in accordance with the provisions of GASBS 49, Pollution Remediation Obligations. As of September 30, 2017 and 2016, no pollution remediation obligations were included as liabilities at year end. Pensions / Net Pension Liabilities. In the financial statements, retirement plans (pensions) are required to be recognized and disclosed using the accrual basis of accounting. In general, the Utilities Commission recognizes a net pension liability, which represents the Utilities Commission s proportionate share of the excess of the total pension liability over the fiduciary net position of the pension reflected in the actuarial report provided by the Florida Retirement System (FRS) defined benefit plan and the Health Insurance Subsidy (HIS) defined benefit plan. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the FRS defined benefit plan and the HIS defined benefit plan, and additions to/deductions from the FRS and the HIS 59

60 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida fiduciary net position have been determined on the same basis as they are reported by the FRS and the HIS plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. Contributions in Aid of Construction: Capital contributions represent contributions of cash and capital assets from the City, developers, customers, and other third parties. Capital contributions are recorded in the statement of revenues, expenses, and changes in net assets at fair value at the time of receipt. Depreciation is recorded on contributed capital assets on a straight-line basis. Net Position: The Utilities Commission classifies its net position into three components net investment in capital assets, restricted, and unrestricted. These classifications are defined as follows: Net investment in capital assets This component of net position consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, or other long-term borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds is not included in the calculation of "net investment in capital assets." Rather, that portion of the debt is included in the same net position component as the unspent proceeds. Restricted This component of net position consists of net position with external constraints placed upon their use. Constraints include those by creditors (such as through debt covenants) or through grants, laws, regulations, or constraints imposed by law through constitutional provisions or enabling legislation, reduced by any liabilities to be paid from these assets. Unrestricted This component of net position consists of net position that is not included in the definition of restricted or net investment in capital assets. Net Position Flow Assumption: Sometimes the Utilities Commission will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Utilities Commission s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Use of Estimates and Assumptions: In preparing financial statements that conform with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and amounts of revenues and expenses reflected during the reporting period. Actual results could differ from those estimates. Recent GASB Accounting Standards: The following Governmental Accounting Standards Board (GASB) Statements have been implemented in the current financial statements: Statement No. 74, "Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans." The objective of this Statement is to improve the usefulness of information about postemployment benefits other than pensions (OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. This Statement results from a comprehensive review of the effectiveness of existing 60

61 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida standards of accounting and financial reporting for all post-employment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. The Utilities Commission is currently evaluating the effects that the following Governmental Accounting Standards Board (GASB) Statements, which will be implemented in future financial statements, will have on its financial statements for subsequent fiscal years. Statement No. 75, "Accounting and Financial Reporting for Postemployment Benefits Other Than Pension Plans." The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency. This statement is under review and is expected to materially change the financial statement presentation. The provisions of this statement are effective for fiscal years beginning after June 15, Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68, and No. 73. The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. This statement has been reviewed and no action will be required. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016, except for the requirements of this Statement for the selection of assumptions in a circumstance in which an employer s pension liability is measured as of a date other than the employer s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15,

62 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 2 CASH DEPOSITS AND INVESTMENTS As of September 30, 2017, the Utilities Commission had the following deposits and investments: Carrying Bank Deposits Amount Balance Insured (FDIC) and collateralized... $ 41,531,964 $ 41,745,052 Cash funds... 9, Total deposits... $ 41,541,914 $ 41,745,052 Investments-Mutual Funds Carrying Value Fair Value Maturities Credit Rating BOA-Money Market Reserves... $ 6,076,463 $ 6,076, days (average) N/A As of September 30, 2016, the Utilities Commission had the following deposits and investments: Carrying Bank Deposits Amount Balance Insured (FDIC) and collateralized... $ 45,844,536 $ 45,909,744 Cash funds... 9, Total deposits... $ 45,854,486 $ 45,909,744 Investments-Mutual Funds Carrying Value Fair Value Maturities Credit Rating BOA-Money Market Reserves... $ 6,039,645 $ 6,039, days (average) N/A Investment Policy: The Utilities Commission's investment policies are governed by state statutes and local resolution. Allowable investments include: bonds, notes, certificates of indebtedness, treasury bills, or other securities which are guaranteed by the full faith and credit of the United States of America, interest bearing savings accounts, interest bearing certificates of deposit and interest bearing time deposits. Interest Rate Risk: In accordance with its investment policy, the Utilities Commission manages its exposure to declines in fair values by limiting the maturity of specific investments based on the following restrictions: (1) funds earmarked for operation and maintenance expenses, debt service sinking funds, and annually budgeted plant expansion cost and equipment purchases will be invested with a maturity of one year from date of purchase, and (2) construction funds are limited to being invested in securities maturing not more than five years from the date of purchase. Credit Risk: The provisions under Section , Florida Statutes, require that investment activity by a unit of local government must be consistent with a written investment plan adopted by the governing body. On December 21, 2015, the Utilities Commission adopted Resolution No. 6-15, Investment Policy in Accordance with Florida Statute , as amended, that applies to all cash and investments under the 62

63 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida control of the Utilities Commission. Under the above described provisions, the Utilities Commission had identified the following permissible investments: The Local Government Surplus Funds Trust Fund, or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act, Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency, Interest-bearing time deposits and savings accounts in qualified public depositories, Direct obligations of the U.S. Treasury, Obligations of U.S. Government instrumentalities, such as; Federal National Mortgage Association, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and Federal Farm Credit Banks, Mutual funds, provided that the portfolio of such investment companies or trusts is limited to U.S. Government obligations and to repurchase agreements fully collateralized by such U.S. Government obligations, Commercial paper of U.S. corporations, rated as Prime -1 by Moody s and or A-1 by Standard & Poor s, State and local government taxable and tax exempt debt rated at least Aa by Moody s, AA by Standard & Poor s for long-term debt or rated at least MIG-2 by Moody s and SP-2 by Standard & Poor s for short-term debt, Bankers Acceptances which are inventory-based and issued by a domestic bank which has as unsecured, uninsured and unguaranteed obligation rating of at least Prime-1 and A by Moody s Investor Service and A-1 and A by Standard & Poor s Corporation and ranked in the top fifty United States banks in terms of total assets by the American Banker s yearly report. The Utilities Commission specifically refrains from investing in derivative investment products. As of September 30, 2017 and 2016, the Utilities Commission s only investments were in the form of a professionally managed mutual fund. Credit ratings do not apply to the securities underlying the mutual fund, which is invested in U.S. government securities guaranteed by the U.S. government. Concentration of Credit Risk: Provisions in the Utilities Commission s policy limit the investment in specific investments to control the risk of loss resulting from the over concentration of assets in a specific maturity, issuer, instrument, dealer, or bank. With the exception of Repurchase Agreements, Overnight deposits, and Non-negotiable Certificate of Deposits, no more than 25% of the entire portfolio may be placed with any one bank, savings and loan or broker/dealer unless specifically authorized by the Utilities Commission. 63

64 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Custodial Credit Risk (Collateralization) Deposits: In the case of deposits, this is the risk that in the event of a bank failure, the Utilities Commission s deposits may not be returned to it. Pursuant to the applicable provisions of Chapter 280, Florida Statutes, The Florida Security for Public Deposits Act ("the Act"), the State of Florida, Department of Financial Services, Division of Treasury, Bureau of Collateral Management have established specific requirements relative to the security and collateralization for public deposits. Accordingly, banks qualifying as a public depository in the State of Florida must adopt the necessary procedures outlined in these statutes and meet all of the requirements of this chapter to be designated by the State Chief Financial Officer as eligible to receive deposits from municipal depositors. Collateral having a market value equal to 50% of the average daily balance for each month of all public deposits in excess of any applicable depository insurance is required to be pledged or deposited with the State Chief Financial Officer to secure such deposits. Additional collateral, up to a maximum of 125% may be required if deemed necessary under the conditions set forth in the Act. Securities eligible to be pledged as collateral are generally limited to obligations of the United States government and any state thereof and are held in the name of the State Chief Financial Officer s office. Compliance with the provisions of Chapter 280, Florida Statutes, is monitored by a Qualified Public Depository Oversight Board with members appointed by the Chief Financial Officer of the state of Florida. At September 30, 2017, the carrying amount of the Utilities Commission's deposits, including money market funds held with financial institutions, was $47,608,427 and the bank balances totaled $47,821,515, of which $250,000 was covered by federal depository insurance, and $47,571,515 was secured in accordance with the statutory provisions of the Act. Foreign Currency Risk: The Utilities Commission is not exposed to any foreign currency risk at September 30, 2017 or

65 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 3 UNRESTRICTED, RESTRICTED AND INTERNALLY DESIGNATED ASSETS For financial reporting purposes, the Utilities Commission s cash, cash equivalents and investments are aggregated into unrestricted, restricted and internally designated assets. Certain cash and investments are externally restricted by revenue certificate resolutions, enabling legislation and customer agreements. The Utilities Commission s restricted assets consist of debt service funds, restricted renewal and replacement funds consisting of service capacity fees charged to developers, and developer escrow funds. The Utilities Commission s internally designated restricted assets consist of discretionary renewal and replacement funds, customer deposits, and discretionary energy replacement funds. The balances for the years ending September 30, 2017 and 2016 are as follows: September 30, Cash deposits. $ 41,541,914 $ 45,854,486 Investments - money market mutual fund 6,076,463 6,039,645 Total unrestricted, restricted and internally designated assets $ 47,618,377 $ 51,894,131 Unrestricted: Cash and cash equivalents. $ 2,018,445 $ 5,539,846 Restricted Assets: Revenue certificate covenant funds: Principal and interest funds. 6,124,685 5,997,171 Construction funds (Series 2013A). 1,162,794 4,775,044 7,287,479 10,772,215 Renewal and replacement service capacity fee funds 9,526,789 8,420,212 Developer infrastructure escrow funds. 1,395, ,848 Total restricted assets. 18,209,526 19,838,275 Internally Designated: Renewal and replacement funds (discretionary). 23,201,118 22,451,052 Customer deposits. 3,054,229 2,929,899 Energy replacement funds. 1,135,059 1,135,059 Total internally designated assets 27,390,406 26,516,010 Total unrestricted, restricted and internally designated assets $ 47,618,377 $ 51,894,131 65

66 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 4 FAIR VALUE MEASUREMENTS Fair Value Definition and Hierarchy: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price ) in an orderly transaction between market participants at the measurement date. In determining fair value, the Utilities Commission uses various valuation approaches. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. Observable inputs (when applicable) are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Utilities Commission. Unobservable inputs (when applicable) reflect the Utilities Commission s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Utilities Commission has the ability to access. Valuation adjustments are not applied to Level 1 investments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these investments does not entail a significant degree of judgment. Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Utilities Commission in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Utilities Commission s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Utilities Commission uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified to a lower level within the fair value hierarchy. 66

67 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Estimated fair value of the certain assets measured on a recurring basis at September 30, 2017, is as follows: Fair Value Measurements at the End of the Reporting Period Using Quoted Prices Significant In Active Other Significant Markets For Observable Unobservable Identical Assets Inputs Inputs Total (Level 1) (Level 2) (Level 3) Recurring Fair Value Measurements: Investments: Mutual funds... $ 6,076,463 $ 6,076, Totals... $ 6,076,463 $ 6,076, NOTE 5 DISAGGREGATION OF RECEIVABLES AND PAYABLES Receivables: Accounts receivable consist of trade accounts receivable from customers for utility system revenue and other revenue sources and are anticipated to be collected within an operating cycle. As of yearend, the following accounts receivable, which are reported net of provisions for uncollectible accounts, are reported as current assets: September 30, Billed customer receivables. $ 3,786,455 $ 3,357,282 Unbilled customer receivables. 3,721,297 3,905,967 Pole rental receivables. 182, ,790 Miscellaneous receivables. 420, ,892 8,110,826 7,826,931 Reserve for uncollectible accounts. (427,686) (385,228) Total accounts receivable, net $ 7,683,140 $ 7,441,703 67

68 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Payables: Accounts payable and accrued expenses consist of purchased power, trade accounts, contract retainage, and wages and benefits which are anticipated to be paid within an operating cycle. As of year-end, the following accounts payable and accrued liabilities are reported as current liabilities: September 30, Trade accounts payable from restricted assets $ 1,396,120 $ 479,098 Contract retainage payable from restricted assets 382, ,959 Total restricted accounts payable and retainage 1,778, ,057 Purchased power. 2,293,493 2,389,186 Trade accounts payable. 712, ,875 Deposit in escrow. 6,900 6,900 Accrued wages and related employee benefits 1,022, ,954 Total current accounts payable and accrued expenses 4,035,568 3,888,915 Total accounts payable and accrued expenses, net $ 5,814,528 $ 4,533,972 NOTE 6 UTILITY PLANT A summary of utility plant at September 30, is as follows: : September 30, Electric Water Reclamation Common 2017 Land and land rights $ 9,138,191 $ 503,377 $ 364,167 $ 27,408,814 $ 37,414,549 Structures and improvements 4,417,413 9,366,987 17,169,384 4,118,355 35,072,139 Production and treatment plant 16,891,544 11,310,718 14,349,898-42,552,160 Transmission, distribution and collection and treatment plant 65,463,733 47,051,616 48,036, ,552,207 Other general plant and equipment 4,694,138 1,537,026 2,872,096 5,189,888 14,293, ,605,019 69,769,724 82,792,403 36,717, ,884,203 Accumulated depreciation (60,839,619) (27,500,858) (34,298,030) (5,908,529) (128,547,036) 39,765,400 42,268,866 48,494,373 30,808, ,337,167 Construction in progress 2,842,156 1,414,849 2,402,734 3,678,858 10,338,597 Utility plant, net $ 42,607,556 43,683,715 50,897,107 34,487, ,675,764 September 30, Electric Water Reclamation Common 2016 Land and land rights $ 9,147, , ,167 26,775,826 36,790,841 Structures and improvements 4,335,959 9,318,301 16,069,308 4,131,465 33,855,033 Production and treatment plant 19,086,483 9,502,251 14,465,239-43,053,973 Transmission, distribution and collection and treatment plant 63,400,427 44,020,686 43,512, ,933,381 Other general plant and equipment 4,119,159 1,603,933 2,897,987 5,642,364 14,263, ,089,499 64,948,548 77,308,969 36,549, ,896,671 Accumulated depreciation (61,072,475) (26,147,266) (32,771,467) (6,227,475) (126,218,683) 39,017,024 38,801,282 44,537,502 30,322, ,677,988 Construction in progress 3,101,884 4,326,710 3,484,331 1,226,706 12,139,631 Utility plant, net $ 42,118,908 $ 43,127,992 $ 48,021,833 $ 31,548,886 $ 164,817,619 68

69 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Depreciation expense charges totaled $6,621,863 and $6,323,657, respectively, during the years ended September 30, 2017 and Capitalized interest costs, net of interest earnings, associated with expansion and improvements made to utility plant for the fiscal years ended September 30, 2017 and 2016 totaled $187,784 and $203,857, respectively. A summary of capital assets activity for the years ended September 30, 2017 and 2016 is as follows: September 30, September 30, 2016 Acquisitions Disposals 2017 Capital assets not being depreciated: Land and land rights $ 36,790,841 $ 650,200 $ (26,490) $ 37,414,551 Construction work in progress 12,139,631 14,111,781 (15,912,815) 10,338,597 Total capital assets not being depreciated 48,930,472 14,761,981 (15,939,305) 47,753,148 Capital assets being depreciated: Structures and improvements 33,855,032 1,278,505 (61,399) 35,072,138 Production and treatment plant 43,053,973 1,948,330 (2,450,143) 42,552,160 Transmission, distribution and collection and treatment plant 150,933,381 9,987,829 (369,003) 160,552,207 Other general plant and equipment 14,263,444 1,713,413 (1,683,709) 14,293,148 Total capital assets being depreciated 242,105,830 14,928,077 (4,564,254) 252,469,653 Less accumulated depreciation for: Structures and improvements (14,547,829) (846,263) 41,498 (15,352,594) Production and treatment plant (26,084,556) (1,368,741) 2,418,920 (25,034,377) Transmission, distribution and collection and treatment plant (74,659,397) (3,628,217) 270,930 (78,016,684) Other general plant and equipment (10,926,901) (778,641) 1,562,160 (10,143,382) Total accumulated depreciation (126,218,683) (6,621,862) 4,293,508 (128,547,037) Total capital assets being depreciated 115,887,147 8,306,215 (270,746) 123,922,616 Total capital assets, net $ 164,817,619 $ 23,068,196 $ (16,210,051) $ 171,675,764 September 30, September 30, 2015 Acquisitions Disposals 2016 Capital assets not being depreciated: Land and land rights $ 35,626,024 $ 1,164,817 $ - $ 36,790,841 Construction work in progress 8,197,708 9,553,669 (5,611,746) 12,139,631 Total capital assets not being depreciated 43,823,732 10,718,486 (5,611,746) 48,930,472 Capital assets being depreciated: Structures and improvements 33,374, ,542 (18,502) 33,855,032 Production and treatment plant 43,064,663 9,619 (20,309) 43,053,973 Transmission, distribution and collection and treatment plant 146,265,296 4,805,689 (137,604) 150,933,381 Other general plant and equipment 12,477,078 2,192,219 (405,853) 14,263,444 Total capital assets being depreciated 235,182,029 7,506,069 (582,268) 242,105,830 Less accumulated depreciation for: Structures and improvements (13,728,660) (826,279) 7,110 (14,547,829) Production and treatment plant (24,734,814) (1,364,492) 14,750 (26,084,556) Transmission, distribution and collection and treatment plant (71,154,343) (3,614,197) 109,143 (74,659,397) Other general plant and equipment (10,814,019) (518,689) 405,807 (10,926,901) Total accumulated depreciation (120,431,836) (6,323,657) 536,810 (126,218,683) Total capital assets being depreciated 114,750,193 1,182,412 (45,458) 115,887,147 Total capital assets, net $ 158,573,925 $ 11,900,898 $ (5,657,204) $ 164,817,619 69

70 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 7 PREVIOUS JOINTLY OWNED POWER GENERATION FACILITIES Previous Investment in Crystal River Unit 3 (CR3): The Utilities Commission previously had a % undivided participant interest in Crystal River Unit 3 (CR3) nuclear power plant with a facility net megawatt capacity of 890 MW operated by Duke Energy Florida, Inc. (DEF). On February 5, 2013, the management of DEF announced their decision to retire CR3. In September 2014, The Utilities Commission entered into a CR-3 Settlement, Release, and Acquisition Agreement (CR-3 Agreement) with DEF wherein, each party acknowledged and agreed that the agreement was intended to serve as a global settlement document, setting forth the terms for the settlement of: (1) the participant disputes and wholesale customer disputes; (2) the terms for the acquisition of the purchased interests; and (3) the transfer of the CR-3 decommissioning trusts, and all proceeds and rights, and all post-closing obligations and liabilities at the closing. The terms and conditions of this revised license amendment were contingent upon the approval of the Nuclear Regulatory Commission (NRC), which was formally obtained on May 29, Pursuant to the approval of the license amendment by the NRC, the joint owners agreed to transfer their ownership in CR 3 back to DEF via a special warranty deed. Additionally, the joint owners agreed to transfer their decommissioning trust funds to DEF. In exchange, DEF will assume all past and future liabilities associated with the maintenance and decommissioning of the CR 3 facility, as well as make a final settlement payment to the joint owners. Closing on the exchange of property under the settlement occurred on October 30, 2015, at which time the Utilities Commission received $5,271,045 for its share of settlement related proceeds, which included $916,219 for wholesale customer payments. Additionally, on October 30, 2015, the Utilities Commission transferred its decommissioning trust funds in the amount of $4,246,517 to DEF subsequent to the confirmed receipt of the settlement funds. In exchange, DEF has assumed all past and future liabilities associated with the maintenance and decommissioning of the CR 3 facility. Based on the proposed settlement agreement, the Utilities Commission reported a nonoperating gain on the disposal of the remaining basis of its impaired CR3 assets, inventories and nuclear fuel stores in the amount of $2,887,763 in the financial statements as of September 30, Decommissioning and Asset Retirement Obligation Provisions: The NRC requires utilities owning nuclear powered electric generating plants to provide financial assurance that funds would be sufficient and available when needed to pay for all future decommissioning costs. In accordance with the NRC requirements, the Utilities Commission established a decommissioning trust. On October 30, 2015, the Utilities Commission transferred the decommissioning trust fund to DEF pursuant to the CR-3 Agreement referred to above. The Utilities Commission's had no carrying balance in this decommissioning trust fund at September 30, The Utilities Commission and Florida Municipal Power Agency (FMPA) entered into an agreement whereby the FMPA would act as agent for the Utilities Commission and other CR3 minority owner participants to coordinate the administration of the decommissioning trust funds. Contributions to this trust fund are not available to the Utilities Commission for any other purpose except for the decommissioning of CR3. Contributions were based on independent studies, which took into account the anticipated future decommissioning costs and anticipated investment returns. Future contribution amounts were based on updated cost estimates and trust fund earnings. On October 30, 2015, the Utilities Commission transferred all of its decommissioning trust funds to DEF, at which time it is no longer responsible for any and all past and future liabilities associated with the maintenance and decommissioning of the CR 3 facility. 70

71 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 8 LONG-TERM DEBT A summary of the long-term debt outstanding at September 30, 2017 and 2016 is as follows: September 30, Revenue Certificate Obligations: $20,250,000 Utilities System Revenue Certificate, Series % due in installments to $ 11,105,000 $ 13,405,000 $9,025,000 Utilities System Revenue Certificate, Series % due in installments to ,530,000 4,670,000 $9,570,000 Utilities System Revenue Certificate, Series % due in installments to ,200,000 2,350,000 $10,000,000 Utilities System Revenue Certificate, Series 2013A 2.26% due in installments to ,590,000 9,800,000 $10,000,000 Utilities System Refunding Revenue Certificate, Series 2013B, 2.32% due in installments to ,575,000 9,235,000 34,000,000 39,460,000 Less current maturities: Series 2009 Certificates... (2,400,000) (2,300,000) Series 2011 Certificates... (1,160,000) (1,140,000) Series 2012 Certificates... (1,200,000) (1,150,000) Series 2013A Certificates... (220,000) (210,000) Series 2013B Certificates... (680,000) (660,000) (5,660,000) (5,460,000) Net long-term certificate obligations... 28,340,000 34,000,000 Compensated absences , ,085 Other post-employment benefit obligations , ,054 Net Pension liability FRS... 1,808,190 1,491,320 Net Pension liability - FRS HIS , ,004 Other noncurrent liabilities... 3,543,915 3,188,463 Total long-term debt, net... $ 31,883,915 $ 37,188,463 Refunded Obligations: No obligations were refunded during the years ended September 30, 2017 and

72 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Changes in Long-Term Debt: A summary of borrowings and debt service activity for the years ended September 30, 2017 and 2016 are as follows: Balance Balance October 1, September 30, Due Within 2016 Additions Reductions 2017 One Year Utilities Revenue Certificates: Series 2009 $ 13,405,000 $ - $ (2,300,000) $ 11,105,000 $ 2,400,000 Series ,670,000 - (1,140,000) 3,530,000 1,160,000 Series ,350,000 - (1,150,000) 1,200,000 1,200,000 Series 2013A 9,800,000 - (210,000) 9,590, ,000 Series 2013B 9,235,000 - (660,000) 8,575, ,000 Total certificate obligations 39,460,000 - (5,460,000) 34,000,000 5,660,000 Compensated absences 444,085 61, ,531 - OPEB obligation 401,054 64, ,054 - Net pension liability-frs 1,491, ,870-1,808,190 - Net pension liability-his 852,004 - (86,864) 765,140 - Other current liabilities 3,188, ,316 (86,864) 3,543,915 - Total long-term debt $ 42,648,463 $ 442,316 $ (5,546,864) $ 37,543,915 $ 5,660,000 Balance Balance October 1, September 30, Due Within 2015 Additions Reductions 2016 One Year Utilities Revenue Certificates: Series 2009 $ 15,200,000 $ - $ (1,795,000) $ 13,405,000 $ 2,300,000 Series ,790,000 - (1,120,000) 4,670,000 1,140,000 Series ,690,000 - (1,340,000) 2,350,000 1,150,000 Series 2013A 10,000,000 - (200,000) 9,800, ,000 Series 2013B 9,890,000 - (655,000) 9,235, ,000 Total certificate obligations 44,570,000 - (5,110,000) 39,460,000 5,460,000 Asset retirement obligation 4,246,517 - (4,246,517) - - Compensated absences 431,317 12, ,085 - OPEB obligation 326,054 75, ,054 - Net pension liability-frs 750, ,178-1,491,320 - Net pension liability-his 721, , ,004 - Other current liabilities 6,475, ,168 (4,246,517) 3,188,463 - Total long-term debt $ 51,045,812 $ 959,168 $ (9,356,517) $ 42,648,463 $ 5,460,000 72

73 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Revenue Certificate Covenants: The authorization for the above described revenue certificates outstanding (collectively referred to as the "Certificates") provides that the Utilities Commission will not issue additional obligations except for the construction and acquisition of additions, extensions and improvements to the system or for refunding purposes and except upon the parity conditions provided in the authorizing resolution. The Certificates are payable from and secured by a first lien upon and pledge of the net revenues derived from the operation of the system. The Certificates do not constitute general indebtedness of the Utilities Commission or the City of New Smyrna Beach, Florida (the City ), and the City is not obligated to levy any taxes for their payment. Under the terms of its long-term debt agreements, the Utilities Commission has agreed to maintain certain restricted funds and to comply with the covenants contained in such agreements, which require specific actions to be taken by the Utilities Commission. Certain of these agreements contain the following provision relating to the right of the obligation holder: "Any holder of certificates or any coupons appertaining thereto issued under the provision hereof or any trustee acting for the holders of such certificates may by suit, action, mandamus or other proceedings in any court of competent jurisdiction, protect and enforce any and all rights, including the right to the appointment of a receiver, existing under the laws of the State of Florida, or granted and contained herein, and may enforce and compel the performance of all duties herein required or by any applicable statutes to be performed by the Commission or by any officer thereof. Nothing herein, however, shall be construed to grant to any holder of the certificates any lien on any real property of the Commission or the City." Aggregate annual long-term debt service requirements for each of the next five years and five year increments thereafter are as follows: Fiscal Year Ending September 30, Principal Interest Total 2018 $ 5,660,000 $ 855,058 $ 6,515, ,595, ,585 6,285, ,520, ,119 6,033, ,665, ,685 4,032, ,810, ,210 2,099,210 22,250,000 2,715,657 24,965, ,675, ,475 10,475, ,075,000 23,709 2,098,709 Total $ 34,000,000 $ 3,539,841 $ 37,539,841 73

74 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 9 PRIOR YEARS' DEFEASANCE OF DEBT In prior years, the Utilities Commission defeased certain of its outstanding utilities revenue certificates (and certain general obligation bonds of the City of New Smyrna Beach, Florida), originally issued for the System and payable from revenues derived from the operation of the utilities systems by placing the proceeds of new certificates in irrevocable trusts to provide for all future debt service payments on the defeased certificates/bonds. Accordingly, the trust account assets and the liabilities for the defeased bonds are not included in the accompanying financial statements. As of September 30, 2017 and 2016, all prior year outstanding and defeased bonds have been called and redeemed. NOTE 10 OPERATING LEASES The Utilities Commission leases office copiers and equipment under non-cancellable operating leases with terms ranging from thirty-six to forty-eight months, all of which expire at the end of their respective lease periods that extend through August These leases are accounted for as operating leases and contain options to be cancelled in the event annual appropriations are not authorized. The aggregate annual costs for operating leases totaled $48,216 and $42,130 for the years ended September 30, 2017 and 2016, respectively. The minimum future rentals under these non-cancellable agreements are as follows: Fiscal Year Ending September 30, Rents $ 45, , ,273 Total $ 79,775 NOTE 11 COMPENSATED ABSENCES Compensated absences due and payable within one-year are reported in the caption accounts payable and accrued liabilities amounted to $505,531 and $444,085 as of September 30, 2017 and 2016, respectively. The balances of compensated absences due beyond one year are estimated to be equal to the current amounts due and are reported separately as non-current compensated absences on the balance sheet. The changes in both compensated absences components for the years ended September 30, 2017 and 2016 are as follows: Beginning End of Year Additions Reductions of Year Year Ended September 30, 2017: Due and payable within one year $ 444,085 $ 707,196 $ (645,750) $ 505,531 Noncurrent portion 444,085 61, ,531 Total compensated absences $ 888,170 $ 768,642 $ (645,750) $ 1,011,062 Year Ended September 30, 2016: Due and payable within one year $ 431,317 $ 758,613 $ (745,845) $ 444,085 Noncurrent portion 431,317 12, ,085 Total compensated absences $ 862,634 $ 771,381 $ (745,845) $ 888,170 74

75 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 12 NET POSITION Net position represents the difference between assets and liabilities. The following is a summary of the individual components of the Utilities Commission s net position at September 30, 2017 and 2016: September 30, Net invested in capital assets: Net utility plant. $ 171,675,764 $ 164,817,619 Less: revenue certificates payable (net): Revenue certificates payable (34,000,000) (39,460,000) Deferred charge on refundings - 9,283 Construction funds remaining 1,162,794 4,775, ,838, ,141,946 Restricted: Revenue certificate covenant funds: Debt service principal and interest sinking funds 6,124,685 5,997,171 Less: accrued interest payable. (464,685) (537,171) 5,660,000 5,460,000 Renewal and replacement funds: Renewal and replacement service capacity fee funds 9,526,789 8,420,212 Less: accounts payable from restricted assets (1,778,960) (645,057) 7,747,829 7,775,155 Total restricted assets 13,407,829 13,235,155 Unrestricted net position.. 29,044,437 29,717,030 Total net position.. $ 181,290, ,094,131 Pursuant to Resolution No , Section 16 D (8), as amended, the Commission established a Renewal and Replacement Fund that requires mandatory monthly contributions of not less than 8% of the gross revenues derived from sale of services from the combined utility system for the second preceding year, after deducting from the gross revenues a sum equal to 100% of the fuel and purchased power expenses incurred by the Electric system in the second preceding fiscal year. The moneys in the Renewal and Replacement Fund can be used to pay the cost of extensions or improvements to the combined utility system, emergency repairs to the combined system, and if necessary, for operating expenses. If not needed for these purposes, the monies in the Renewal and Replacement Fund may also be used for any lawful purpose. The principles under GASB Statement No. 34, as amended, are followed by the Commission in accounting for restricted net assets. Based on this criteria, restricted net assets of the Commission are those net assets where limitations on the use of such assets are externally imposed, for example, by creditors (bond 75

76 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida covenants), contributors (developer agreements), or the laws and regulations of other governments. Because the Renewal and Replacement Fund is discretionary and can be used for operating expenses and for any lawful purpose deemed necessary by the Commission, it is excluded from the determination of restricted net assets as reported above. The Renewal and Replacement Service Capacity Fee Funds are separately distinguished from the Renewal and Replacement Fund (discretionary), which are separately established funds to invest utilities system service capacity fees received from customers that are legally restricted for extensions of water and reclamation utility plant assets. The CR3 Nuclear Generation Facility Decommissioning Fund was previously established to invest funds set aside by the Utilities Commission to finance the future decommissioning and dismantling costs associated with the CR3 nuclear plant. At September 30, 2015, the present value of the CR3 asset retirement obligation (ARO) exceeded the amounts which were required to be set aside for this future commitment. As a result, no net asset restriction existed for this fund at year end since the restricted funds held in escrow were offset by the corresponding ARO liability. On October 30, 2015, the Utilities Commission transferred its decommissioning trust funds and related ARO to Duke Energy Florida, Inc. as more fully described in note 7 to the financial statements. A restricted Developer Infrastructure Fund has been separately established to invest infrastructure fees received from developers that are legally restricted pursuant to the developer agreements for expansion of electric, water and reclamation utility plant assets. As these fees are appropriately recognized and reported as customer deposits, all restricted funds held in escrow are offset by the corresponding customer deposit liability resulting in no net asset restriction for this fund. NOTE 13 TRANSACTIONS WITH CITY OF NEW SMYRNA BEACH Nonmetered and Metered Utility Service Charges: As an enterprise fund of the City of New Smyrna Beach, transactions occur between the Utilities Commission and the City s governmental and other proprietary funds throughout the year in the ordinary course of operations. The Utilities Commission bills the City's operating funds on a monthly basis for all nonmetered and metered utility services. In 2017 and 2016, the Utilities Commission billed the City $1,048,283 and $1,027,447, respectively, for these services. Required 6% Payment: The legislation that created the Utilities Commission requires it to pay to the general fund of the City of New Smyrna Beach a sum equal to six percent (6%) of the gross revenues from utilities under Utilities Commission control, net of related charge-offs. This payment is subordinate to the debt service requirement of all utilities revenue certificates and is recorded as a quasi-external transaction for financial reporting purposes. Amounts due to the City for the years ended September 30, 2017 and 2016 totaled $3,615,949 and $3,721,883, respectively. The balances payable to the City at September 30, 2017 and 2016, totaled $348,763 and $360,112, respectively. SR 44 Sanitary Sewer Line Agreement (S.S.L.A): The Utilities Commission approved $1.2 million to be included in its FY 2016 budget for use by the City of New Smyrna Beach (City) for a City requested infrastructure project for sanitary sewer services, which is purportedly to be 100% funded by the affected commercial property owners (17 parcels 12 property owners), through the City s authorized special assessment process. During the November 16, 2015 Utilities Commission meeting, the Utilities Commissioners approved the S.S.L.A. between the City and the Utilities Commission, for the City-requested 76

77 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida project on the south side of S.R. 44 (between Wild Orange Rd. and S. Glencoe Rd.). The S.S.L.A. includes additional security for the reimbursement of the total cost of the project to the Utilities Commission. The City approved City Resolution No declaring a public purpose and benefit in the providing of this sewer service for commercial development in support of the City s Special Assessment. Amounts due the City at September 30, 2017 and 2016 totaled $575,516 and $19,797, respectively. As Agent for Solid Waste Utilities: The Utilities Commission acts solely as an agent of the City of New Smyrna Beach with respect to the City s billings to citizens and customers for solid waste utilities services managed by the City. Under the arrangement, the Utilities Commission simultaneously bills and collects the City s solid waste utilities revenues with its monthly customer service billings and is entitled to a 1% service charge. All customer collections on these accounts are subsequently remitted to the City on a monthly basis. Amounts to be remitted to the City for the years ended September 30, 2017 and 2016 totaled $5,471,113 and $5,349,971, respectively. Amounts payable to the City at September 30, 2017 and 2016 totaled $462,599 and $452,565, respectively. Public Service Tax: Pursuant to Sections and of the Code of Ordinances of the City of New Smyrna Beach, a 9% public service tax is levied on the purchase of electricity by non-exempt customers within the corporate boundaries of the City. Amounts collected and remitted to the City for the years ended September 30, 2017 and 2016 totaled $1,893,032 and $1,948,518, respectively. The balances payable to the City at September 30, 2017 and 2016, totaled $196,475 and $197,020, respectively. NOTE 14 OTHER POST-EMPLOYMENT BENEFITS C. Other Post-Employment Benefits (OPEB) Life and Health Insurance Plan Description: Utilities Commission, City of New Smyrna Beach, Florida Other Postemployment Benefits Program (the "UCOPEB Program ) is a single-employer healthcare plan administered by the Utilities Commission. Pursuant to Section , Florida Statutes, the Utilities Commission is required to permit participation in the UCOPEB Program to retirees and their eligible dependents at a cost to the retiree that is no greater than the cost at which coverage is available for active employees. Eligible individuals include all regular employees of the Utilities Commission who retire from active service under one of the pension plans sponsored by the Utilities Commission. Under certain conditions, eligible individuals also include spouses and dependent children. The UCOPEB Program does not issue a publicly available financial report. Funding Policy: The required contribution is based on projected pay-as-you-go financing requirements and is subject to constant revision. The Utilities Commission has opted to not fund the net OPEB obligation or the resulting unfunded actuarial accrued liability on an annual basis. Annual OPEB Cost and Net OPEB Obligation: The Utilities Commission's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the Utilities Commission s annual OPEB for each of the past three years, the amounts actually contributed to the plan, and changes in the Utilities Commission s net OPEB obligation to UCOPEB: 77

78 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Valuation date... 10/01/ /01/ /01/2014 Annual required contribution (ARC)... $ 102,000 $ 94,000 $ 94,675 As a percent of covered payroll % 1.02% 1.00% Interest on the net OPEB obligation... 14,000 11,000 12,216 Adjustment to annual required contribution... (20,000) (15,000) (17,226) Annual OPEB cost (expense)... 96,000 90,000 89,665 Estimated net contributions made... (32,000) (15,000) (35,077) Increase in net OPEB obligation... 64,000 75,000 54,588 Net OPEB obligation-beginning of year , , ,466 Net OPEB obligation-end of year... $ 465,054 $ 401,054 $ 326,054 The Utilities Commission s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017 and the two preceding years (three year trend information) were as follows: Percent Fiscal Annual of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed O4bligation 09/30/17 $96, % $465,054 09/30/16 $90, % $401,054 09/30/15 $89, % $326,054 Funded Status and Funding Progress: As of October 1, 2016, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits and the actuarial value of assets was as follows: Funded Status as of... 10/01/ /01/ /01/2014 Actuarial Accrued Liability (AAL)... $ 870,000 $ 811,000 $ 744,757 Actuarial Value of Assets (AVA) Unfunded Actuarial Accrued Liability (UAAL) 870, , ,757 Funded Ratio % 0.0% 0.0% Covered payroll... $ 10,150,128 $ 9,171,838 $ 9,044,776 Ratio of covered payroll to UAAL % 8.8% 8.2% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 78

79 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the October 1, 2016, actuarial valuation, the Entry Age Normal (level % of pay) actuarial cost method was used. The actuarial assumptions included a 3.5% percent investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual (pre-medicare and post-medicare) healthcare cost trend rate based on the Society of Actuaries (SOA) Long-Run Medical Cost Trend Model. The payroll growth rate and inflation assumptions are 3.0% and 2.3%, respectively. If, and when, funded, the actuarial value of assets will be determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll (closed amortization over 30 years). NOTE 15 - PENSION PLANS 1. Florida Retirement System (FRS) (Defined Benefit Pension Plan) General Information About the FRS. The FRS was created in Chapter 121, Florida Statutes, to provide a defined benefit pension plan for participating public employees. The FRS was amended in 1998 to add the Deferred Retirement Option Program under the defined benefit plan and amended in 2000 to provide a defined contribution plan alternative to the defined benefit plan for FRS members effective July 1, This integrated defined contribution pension plan is the FRS Investment Plan. Chapter 112, Florida Statutes, established the Retiree Health Insurance Subsidy (HIS) Program, a cost-sharing multiple-employer defined benefit pension plan, to assist retired members of any State-administered retirement system in paying the costs of health insurance. Essentially, membership in the State-administered FRS and HIS plans is limited to those remaining regular employees of the Utilities Commission who were employed before January 1, 1996, at which time active membership in these plans was terminated for new employees hired after December 31, Provisions relating to the FRS are established by Chapters 121 and 122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and FRS Rules, Chapter 60S, Florida Administrative Code; wherein eligibility, contributions, and benefits are defined and described in detail. Such provisions may be amended at any time by further action from the Florida Legislature. The FRS is a single retirement system administered by the Florida Department of Management Services, Division of Retirement, and consists of the two cost-sharing, multiple-employer defined benefit plans and other nonintegrated programs. The State of Florida annually issues a publicly available financial report that includes financial statements and required supplementary information for the FRS. The latest available report may be obtained by writing to the State of Florida Division of Retirement, Department of Management Services, P.O. Box 9000, Tallahassee, Florida , or from the Web site: 79

80 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Plan Description. The FRS Pension Plan (Plan) is a cost-sharing multiple-employer defined benefit pension plan, with a Deferred Retirement Option Program (DROP) for eligible employees. The Utilities Commission s general classes of membership available are as follows: Regular Class - Members of the FRS who do not qualify for membership in the other classes. Senior Management Service Class (SMSC) - Members in senior management level positions. Employees enrolled in the Plan prior to July 1, 2011, vest at 6 years of creditable service and employees enrolled in the Plan on or after July 1, 2011, vest at 8 years of creditable service. All vested members, enrolled prior to July 1, 2011, are eligible for normal retirement benefits at age 62 or at any age after 30 years of service. All members enrolled in the Plan on or after July 1, 2011, once vested, are eligible for normal retirement benefits at age 65 or any time after 33 years of creditable service. Members of the Plan may include up to four years of credit for military service toward creditable service. The Plan also includes an early retirement provision; however, there is a benefit reduction for each year a member retires before his or her normal retirement date. The Plan provides retirement, disability, death benefits, and annual cost-of-living adjustments to eligible participants. DROP, subject to provisions of Section , Florida Statutes, permits employees eligible for normal retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with an FRS participating employer. An employee may participate in DROP for a period not to exceed 60 months after electing to participate, except that certain instructional personnel may participate for up to 96 months. During the period of DROP participation, deferred monthly benefits are held in the FRS Trust Fund and accrue interest. The net pension liability does not include amounts for DROP participants, as these members are considered retired and are not accruing additional pension benefits. Benefits Provided. Benefits under the Plan are computed on the basis of age and/or years of service, average final compensation, and service credit. Credit for each year of service is expressed as a percentage of the average final compensation. For members initially enrolled before July 1, 2011, the average final compensation is the average of the 5 highest fiscal years earnings; for members initially enrolled on or after July 1, 2011, the average final compensation is the average of the 8 highest fiscal years earnings. The total percentage value of the benefit received is determined by calculating the total value of all service, which is based on the retirement class to which the member belonged when the service credit was earned. Members are eligible for in-line-of-duty or regular disability and survivors benefits. The following chart shows the percentage value for each year of service credit earned: Class, Initial Enrollment, and Retirement Age/Years of Service % Value Regular Class members initially enrolled before July 1, 2011: Retirement up to age 62 or up to 30 years of service 1.60 Retirement at age 63 or with 31 years of service 1.63 Retirement at age 64 or with 32 years of service 1.65 Retirement at age 65 or with 33 or more years of service 1.68 Regular Class members initially enrolled on or after July 1, 2011: Retirement up to age 65 or up to 33 years of service 1.60 Retirement at age 66 or with 34 years of service

81 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Retirement at age 67 or with 35 years of service 1.65 Retirement at age 68 or with 36 or more years of service 1.68 Senior Management Service Class 2.00 As provided in Section , Florida Statutes, if the member is initially enrolled in the FRS before July 1, 2011, and all service credit was accrued before July 1, 2011, the annual cost-of-living adjustment is 3 percent per year. If the member is initially enrolled before July 1, 2011, and has service credit on or after July 1, 2011, there is an individually calculated cost-of-living adjustment. The annual cost-of-living adjustment is a proportion of 3 percent determined by dividing the sum of the pre-july 2011 service credit by the total service credit at retirement multiplied by 3 percent. Plan members initially enrolled on or after July 1, 2011, will not have a cost-of-living adjustment after retirement. Contributions. The Florida Legislature establishes contribution rates for participating employers and employees. Contribution rates during the fiscal year were as follows: Percent of Gross Salary Employer (1) Class Employee Pre 7/01/17 Post 6/30/17 FRS, Regular FRS, Senior Management Service DROP - Applicable to Members of the Above Class FRS, Reemployed Retiree (2) (2) Notes: (1) Employer rates include 1.66 percent and 1.66 percent for the postemployment health insurance subsidy for Pre 7/1/17 and Post 6/30/17, respectively. Also, employer rates, other than for DROP participants, include 0.04 percent for administrative costs of the Investment Plan. (2) Contribution rates are dependent upon retirement class in which reemployed. The Utilities Commission s employer and employee contributions to the FRS Plan totaled $158,042 and $48,730, respectively, for the fiscal year ended September 30, This excludes HIS defined benefit pension plan contributions of $38,054 and FRS Investment Plan contributions of $11,578. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At September 30, 2017, the Utilities Commission reported a liability of $1,808,190 for its proportionate share of the Plan s net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The Utilities Commission s proportionate share of the net pension liability was based on the Utilities Commission s fiscal year contributions relative to the fiscal year contributions of all participating members based on a June 30, 2017 fiscal year. At June 30, 2017, the Utilities Commission s proportionate share was percent, which was up percent from its proportionate share measured as of June 30, 2016 of percent. For the fiscal year ended September 30, 2017, the Utilities Commission recognized Plan pension expense of $257,065. In addition, the Utilities Commission reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 81

82 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Deferred Outflows Deferred Inflows Description of Resources of Resources Differences between expected and actual experience $ 165,948 $ 10,016 Changes in assumptions 607,679 - Net difference between projected and actual earnings on FRS pension plan investments - 44,811 Changes in proportion and differences between FRS contributions and proportionate share of contributions 36, ,449 Contributions subsequent to the measurement date 37,475 - Total $ 847,685 $ 186,276 The deferred outflows of resources related to pensions, totaling $37,475, resulting from the Utilities Commission s contributions to the Plan subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the fiscal year ended September 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30 Amount 2018 $ 49, , , , ,370 Thereafter 47,128 $ 623,934 Actuarial Assumptions. The total pension liability in the July 1, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary Increases Investment rate of return 2.60 percent 3.25 percent, average, including inflation 7.10 percent, net of pension plan investment expense, including inflation Mortality rates were based on the Generational RP-2000 with Projection Scale BB tables. The actuarial assumptions used in the July 1, 2017, valuation were based on the most recent actuarial experience study for the period July 1, 2008, through June 30, The following changes in actuarial assumptions occurred in 2017: The long-term expected rate of return was decreased from 7.60% to 7.10%, and the active member mortality assumption was updated. 82

83 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Long-Term Expected Rate of Return. The long-term expected rate of return assumption of 7.10 percent consists of two building block components: 1) a real (in excess of inflation) return of 4.50 percent, consistent with the currently articulated real return target in the current Florida State Board of Administration s investment policy, developed using capital market assumptions calculated by Aon Hewitt Investment Consulting; and 2) a long-term average annual inflation assumption of 2.60 percent as adopted in October 2017 by the FRS Actuarial Assumption Conference. In the opinion of the FRS consulting actuary, Milliman, both components and the overall 7.10 percent return assumption were determined to be reasonable and appropriate per the Actuarial Standards of Practice. The 7.10 percent reported investment return assumption differs from the 7.50 percent investment return assumption chosen by the 2017 FRS Actuarial Assumption Conference for funding policy purposes, as allowable under governmental accounting and reporting standards. For reference, the table below contains a summary of Milliman s assumptions for each of the asset classes in which the plan was invested at that time based on the long-term target asset allocation. Each asset class assumption is based on a consistent set of underlying assumptions, and includes an adjustment for the inflation assumption. These assumptions are not based on historical returns, but instead are based on a forward-looking capital market economic model. Annual Annual Target Arithmetic (Geometric) Standard Asset Class Allocation (1) Return Return Deviation Cash 1.00% 3.00% 3.00% 1.80% Fixed income 18.00% 4.50% 4.40% 4.20% Global equity 53.00% 7.80% 6.60% 17.00% Real Estate (Property) 10.00% 6.60% 5.90% 12.80% Private Equity 6.00% 11.50% 7.80% 30.00% Strategic investments 12.00% 6.10% 5.60% 9.70% Total % Assumed Inflation - Mean 2.60% 1.90% Note: (1) As outlined in the Plan's Investment Policy Discount Rate. The discount rate used to measure the total pension liability was 7.10 percent. The Plan s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. Sensitivity of the Entity s Proportionate Share of the Net Position Liability to Changes in the Discount Rate. The following presents the Utilities Commission s proportionate share of the net pension liability calculated using the discount rate of 7.10 percent, as well as what the Utilities Commission s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.10 percent) or 1 percentage-point higher (8.10 percent) than the current rate: 83

84 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida 1% Current 1% Decrease Discount Rate Increase (6.10%) (7.10%) (8.10%) The Utilities Commission's proportionate share of the net pension liability ( %) $3,272,715 $1,808,190 $ 592,299 Pension Plan Fiduciary Net Position. Detailed information about the Plan s fiduciary net position is available in the separately issued FRS Pension Plan and Other State-Administered Systems Comprehensive Annual Financial Report. Payable to the FRS Pension Plan. The Utilities Commission had no amounts payable to the FRS Plan for outstanding contributions at September 30, HIS Pension Plan (Defined Benefit Pension Plan) Plan Description. The HIS Pension Plan (HIS Plan) is a cost-sharing multiple-employer defined benefit pension plan established under Section , Florida Statutes, and may be amended by the Florida Legislature at any time. The benefit is a monthly payment to assist retirees of State-administered retirement systems in paying their health insurance costs and is administered by the Florida Department of Management Services, Division of Retirement. Benefits Provided. For the fiscal year ended June 30, 2017, eligible retirees and beneficiaries received a monthly HIS payment equal to the number of years of service credited at retirement multiplied by $5. The minimum payment is $30 and the maximum payment is $150 per month, pursuant to section , Florida Statutes. To be eligible to receive a HIS benefit, a retiree under one of the state administered retirement systems must provide proof of eligible health insurance coverage, which may include Medicare. Contributions. The HIS Plan is funded by required contributions from FRS participating employers as set by the Florida Legislature. Employer contributions are a percentage of gross compensation for all active FRS members. For the fiscal year ended September 30, 2017, the HIS contribution rate for the period from October 1, 2016 through June 30, 2017, and from July 1, 2017 through September 30, 2017, was 1.66% and 1.66%, respectively, of payroll pursuant to section , Florida Statutes. The Utilities Commission contributed 100 percent of its statutorily required contributions for the current and preceding 3 years. HIS Plan contributions are deposited in a separate trust fund from which payments are authorized. HIS Plan benefits are not guaranteed and are subject to annual legislative appropriation. In the event the legislative appropriation or available funds fail to provide full subsidy benefits to all participants, benefits may be reduced or canceled. The Utilities Commission s contributions to the HIS Plan totaled $38,054 for the fiscal year ended September 30, Pension Liabilities, Pension Expense, and Deferred Outflows of Resources Related to Pensions. At September 30, 2017, the Utilities Commission reported a net pension liability of $765,140 for its proportionate share of the HIS Plan s net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, The Utilities Commission s proportionate share of the net pension 84

85 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida liability was based on the Utilities Commission s fiscal year contributions relative to the total fiscal year contributions of all participating members. At June 30, 2017, the Utilities Commission s proportionate share was percent, which was up percent from its proportionate share measured as of June 30, 2015, of percent. For the fiscal year ended September 30, 2017, the Utilities Commission recognized the Plan pension expense of $31,243. In addition, the Utilities Commission reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows Description of Resources of Resources Differences between expected and actual experience $ - 1,593 Changes in assumptions 107,552 66,163 Net difference between projected and actual earnings on HIS pension plan investments Changes in proportion and differences between HIS contributions and proportionate share of contributions 15, ,143 Contributions subsequent to the measurement date 8,656 - Total $ 132, ,899 The deferred outflows of resources related to pensions, totaling $8,656, resulting from the Utilities Commission s contributions to the Plan subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the fiscal year ended September 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ending June 30 Amount 2018 $ (14,415) 2019 (14,496) 2020 (14,534) 2021 (4,795) ,234 Thereafter (12,110) $ (58,116) Actuarial Assumptions. The total pension liability in the July 1, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary Increases Investment rate of return 2.60 percent 3.25 percent, average, including inflation 3.58 percent Mortality rates were based on the Generational RP-2000 with Projection Scale BB. 85

86 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida The following changes in actuarial assumptions occurred in 2017: The municipal rate used to determine total pension liability was increased from 2.85% to 3.58%. Discount Rate. The discount rate used to measure the total pension liability was 3.58 percent. In general, the discount rate for calculating the total pension liability is equal to the single rate equivalent to discounting at the long-term expected rate of return for benefit payments prior to the projected depletion date. Because the HIS benefit is essentially funded on a pay-as-you-go basis, the depletion date is considered to be immediate, and the single equivalent discount rate is equal to the municipal bond rate selected by the HIS Plan sponsor. The Bond Buyer General Obligation 20-Bond Municipal Bond Index was adopted as the applicable municipal bond index. Sensitivity of the Entity s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the Utilities Commission s proportionate share of the net pension liability calculated using the discount rate of 3.58 percent, as well as what the Utilities Commission s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.58 percent) or 1 percentage point higher (4.58 percent) than the current rate: 1% Current 1% Decrease Discount Rate Increase (2.58%) (3.58%) (4.58%) The Utilities Commission's proportionate share of the net pension liability ( %) $ 873,127 $ 765,140 $ 675,194 Pension Plan Fiduciary Net Position. Detailed information about the Plan s fiduciary net position is available in the separately issued FRS Pension Plan and Other State-Administered Systems Comprehensive Annual Financial Report. Payable to the HIS Pension Plan. The Utilities Commission had no amounts payable to the HIS Plan for outstanding contributions at September 30, FRS Investment Plan (Defined Contribution Pension Plan) The Utilities Commission contributes to the Florida Retirement System (FRS) Investment Plan, a defined contribution pension plan, for its eligible employees electing to participate in the FRS Investment Plan. The FRS Investment Plan is administered by the Florida State Board of Administration (SBA), and is reported in the SBA's annual financial statements and in the State of Florida Comprehensive Annual Financial Report. Service retirement benefits are based upon the value of the member's account upon retirement. As provided in Section , Florida Statutes, eligible FRS members may elect to participate in the FRS Investment Plan in lieu of the FRS defined-benefit plans. Utilities Commission employees participating in DROP are not eligible to participate in the FRS Investment Plan. Employer and employee contributions, including amounts contributed to individual member's accounts, are defined by law, but the ultimate benefit depends in part on the performance of investment funds. Benefit terms, including contribution requirements, for the FRS Investment Plan are established and may be amended by the Florida Legislature. The FRS Investment Plan is funded with the same employer and employee contribution rates that are based on salary 86

87 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida and membership class (Regular Class, Senior Management Service Class, etc.), as the FRS defined benefit plan. Contributions are directed to individual member accounts, and the individual members allocate contributions and account balances among various approved investment choices. Allocations to the investment member's accounts during the fiscal year were as follows: Percent of Gross Salary Employer (1) Class Pre 7/01/17 Post 6/30/17 FRS, Regular FRS, Senior Management Service For all membership classes, employees are immediately vested in their own contributions and are vested after one year of service for employer contributions and investment earnings. If an accumulated benefit obligation for service credit originally earned under the FRS Pension Plan is transferred to the FRS Investment Plan, the member must have the years of service required for FRS Pension Plan vesting (including the service credit represented by the transferred funds) to be vested for these funds and the earnings on the funds. Nonvested employer contributions are placed in a suspense account for up to five years. If the employee returns to FRScovered employment within the five year period, the employee will regain control over their account. If the employee does not return within the five year period, the employee will forfeit the accumulated account balance. Costs of administering the FRS Investment Plan, including the FRS Financial Guidance Program, are funded through an employer contribution of 0.04% of payroll and by forfeited benefits of FRS Investment Plan members. For the fiscal year ended June 30, 2017, the information for the amount of forfeitures was unavailable from the SBA; however, management believes that these amounts, if any, would be immaterial to the Utilities Commission. After termination and applying to receive benefits, the member may rollover vested funds to another qualified plan, structure a periodic payment under the FRS Investment Plan, receive a lump-sum distribution, leave the funds invested for future distribution, or any combination of these options. Disability coverage is provided; the member may either transfer the account balance to the FRS Pension Plan when approved for disability retirement to receive guaranteed lifetime monthly benefits under the FRS Pension Plan, or remain in the FRS Investment Plan and rely upon that account balance for retirement income. The Utilities Commission s employer and employee contributions to the Investment Plan totaled $7,698 and $3,880, respectively, for the fiscal year ended September 30, Payable to the FRS Investment Plan. The Utilities Commission had no amounts payable to the FRS Investment Plan for outstanding contributions at September 30, Employees Defined Contribution Pension Plan The Utilities Commission contributes to the Utilities Commission of the City of New Smyrna Beach Employees Defined Contribution Plan, an IRC Section 401(a) defined contribution plan administered by the Principal Mutual Life Insurance Company, P. O. Box 9396, Des Moines, IA Under Resolution No , the Utilities Commission established this plan for all regular full time and regular part time employees hired on or after January 1, 1996, by revoking its participation in the Florida Retirement System (FRS) pursuant to Chapter , Laws of Florida with respect to such employees. 87

88 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida The Utilities Commission, as the sponsoring employer, is responsible for defining and amending pension benefit terms, provisions and contribution requirements for the plans. The Utilities Commission has the power to amend plan provisions at any time. For each participating employee in the plan, the Utilities Commission contributed 8.00% of covered payroll to individual employee accounts. Employees may make voluntary contributions to the extent permitted by law. Voluntary contributions are credited to the participant's account when made. The part of the participant's account resulting from voluntary contributions is 100% vested and nonforfeitable at all times. For the year ended September 30, 2017, employee contributions totaled $-0- and the City recognized pension expense of $595,572. For the year ended September 30, 2016, employee contributions totaled $-0- and the City recognized pension expense of $525,583. All qualifying employees at least 18 years of age participate in the plan on the date of employment. A participant's vesting percentage increases 20% for each whole year of credited service until after five whole years of credited service, after which the participant is fully vested. Normal retirement and disability benefits are available after 5 years of service and attaining age 62. Early retirement and disability benefits are available after 5 years of service and attaining age 55. Nonvested Utilities Commission contributions are forfeited upon termination of employment. Forfeitures are determined at least once during each plan year and may first be used to pay administrative expenses. Forfeitures that have not been used to pay administrative expenses shall be applied to reduce the earliest employer contributions made after the forfeitures are deemed to be employer contributions. Employee forfeitures recognized by the Utilities Commission in the year ended September 30, 2017, totaled $10,985. Employee forfeitures recognized by the Utilities Commission in the year ended September 30, 2016, totaled $20, Employees Deferred Compensation 457 Plan The Utilities Commission also provides its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The assets of this plan are administered by the International City Managers Association Retirement Corporation. Employees are permitted to make contributions to the 457(b) pension plan, up to applicable Internal Revenue Code limits. Annual contributions, determined by the participant, may not exceed the lesser of $18,000, or 100% of gross annual compensation, with an additional catch-up provision of $5,500 after the covered employee has reached age 50. Deferred compensation withheld from a participating employee's pay is not taxable as current income until withdrawn from the plan. Such compensation is not available to the employees until employment termination, retirement, or death. All assets and income of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Employee contributions to the plan were $839,177 and $757,596 for the years ended September 30, 2017 and 2016, respectively. Individual employee rollovers totaling $92,128 and $38,078 were transferred to the plan for the years ended September 30, 2017 and 2016, respectively. NOTE 16 LEGAL MATTERS The Utilities Commission is engaged in routine litigation incidental to the conduct of its utilities affairs. In the opinion of its legal counsel, no legal proceedings are pending or threatened against the Utilities Commission which are not covered by applicable insurance which would inhibit its ability to perform its operations or materially affect its financial condition. 88

89 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida NOTE 17 COMMITMENTS Generation Facility: The Utilities Commission, acting through the Florida Municipal Power Agency (FMPA), is a participant in a portion of Florida Power and Light Company's (FPL) St. Lucie Unit No. 2, a nuclear generating unit. FMPA originally acquired an 8.806% undivided ownership interest of St. Lucie No. 2 together with rights to receive electric capacity and electric energy under a reliability exchange agreement. The Utilities Commission's participation provides for a 9.884% entitlement share of FMPA's ownership interest. A reliability exchange agreement provides for FMPA exchanging 50% of its share of the output from St. Lucie No. 2 for a like amount from FPL's exclusively owned St. Lucie No. 1 to mitigate the potential for economic loss resulting from the extended or permanent outage or early retirement of St. Lucie No. 2. The Utilities Commission, as a participant, has also entered into a power sales contract which requires payment on a take-and-pay basis for its entitlement share of the project capability for the St. Lucie Project for each month during any portion of which electric capacity and electric energy are available to the Utilities Commission from the St. Lucie Project, including electric capacity and electric energy under the reliability exchange agreement with FPL. In the event payment is not required for any month under the power sales contract, the Utilities Commission is required to make payment for such month under its project support contract on a take-or-pay basis. The payment under the project support contract would be the amount the Utilities Commission would have been required to pay under its power sales contract for such month if any electric capacity and electric energy from the St. Lucie Project had been made available to them. As a result of these agreements, the Utilities Commission is obligated to provide future payments of approximately $5.2 million (for FY 2018) annually. Purchase of Capacity and Energy: On April 22, 2008, the Utilities Commission entered into an agreement with Duke Energy Florida, Inc. (DEF) to purchase and receive up to 25 MW of electric capacity (Base load contract) and a shaped monthly demand amount of electric capacity (peaking contract) ranging from zero (0) MW to twenty four (24) MW based on the system s average peaking shaped monthly demand, plus applicable fuel charges. Subsequent to the adoption of the agreement on June 26, 2012, the Utilities Commission and DEF amended the 25MW electric capacity purchase agreement to provide for an increase to a maximum of 30 MW. Under the agreement, the Utilities Commission was obligated to pay annual minimum fees for electric capacity through the expiration of the contract in December On June 16, 2014, the Utilities Commission and DEF agreed to an amendment to extend the Base load component of the contract through December 31, As a part of the amendment, DEF reduced capacity costs for future years ( ) and reduced the non-fuel energy rate with the two-year contract extension. The peaking contract component of the agreement is scheduled to expire on December 31, 2016, at which time it is anticipated that it will be replaced (as described in Note 19). Anticipated minimum future energy capacity costs for the remainder of the contract period for each fiscal year ending September 30 are as follows: $2.4 million; $0.6 million. To assist in meeting anticipated load and reserve requirements, on January 27, 2014, the Utilities Commission entered into a Native Load Firm Power and Energy Transaction Confirmation with Florida Power & Light Company (FPL) as a lower cost energy capacity and reserve alternative to the installation of mobile generation units deployed at three of the UC distribution substations. The structure of the agreement provides the Utilities Commission the ability to vary the monthly MW levels up to 45 MW to accommodate the higher summer and winter loads by decreasing the capacity obligations during the lower load shoulder months. In conjunction with the agreement, the Utilities Commission secured Network Integrated 89

90 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Transmission Service (NITS) through FPL for delivery of this energy since the constraints are not as limiting as those associated with Point-to-Point transmission service. To further improve the long-term energy supply strategy, on August 17, 2015, the Utilities Commission amended the contract with FPL to extend the current delivery period for one year from December 31, 2017, through December 31, The agreement provides the Utilities Commission the ability to gradually increase capacity amounts in future years to accommodate load growth, to reduce the monthly capacity costs for 2016, and to maintain a fixed cost through the end of Anticipated minimum future energy capacity costs for the remainder of the contract period for each fiscal year ending September 30 are as follows: $3.1 million; $3.4 million and $3.1 million.. Replacement Purchase of Capacity and Energy: The Utilities Commission previously had a contract with Duke Energy Florida (DEF) for peaking capacity and energy during the expected high peak months which expired on December 31, 2016 (as described in Note 17). On December 19, 2016, the Utilities Commission entered into two replacement Peaking Native Load Firm Power and Energy Transaction Confirmations with Florida Power & Light Company (FPL) for 2017 and 2018, for supplying varying levels of capacity, up to a maximum of 20 MW during high peak months. Due to regulatory time constraints, FPL has broken the agreement into two separate transactions, one for the period from January 1, 2017 through June 30, 2017, and one for the period from July 1, 2017 through December 31, On January 22, 2018, the Utilities Commission approved extensions with Florida Power & Light Company (FPL) for firm capacity and energy, as well as peaking, through December 31, Anticipated minimum future energy costs for the remainder of the contract period for each fiscal year ending September 30 are as follows: $0.7 million; $0.2 million and $0.6 million.. Insurance Policies and Claims: The Utilities Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters, all of which is satisfactorily insured by general liability insurance. Commercial insurance policies are also obtained for all other risks of loss, including workers compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three years. NOTE 18 POLLUTION REMEDIATION OBLIGATIONS The Utilities Commission is subject to numerous federal, state, and local environmental regulations, some of which have resulted in environmental liabilities due to contaminated site assessment and remediation. Under the provisions of Governmental Accounting Standards Board Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, related to various environmental matters, no significant environmental remediation liabilities existed at September 30, 2017 and NOTE 19 SUBSEQUENT EVENTS Tax Cuts and Jobs Act: This act was signed into law on December 22, 2017, and decreased the U.S. Federal Corporate Tax rate effective January 1, As holders of the Utilities Commission s outstanding Revenue Certificates (Series 2009, 2011, 2013A and 2013 B), the financial institutions believe this tax rate reduction will negatively affect their yield, and that their respective Loan Agreements allows them to 90

91 NOTES TO THE FINANCIAL STATEMENTS (Continued) September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida increase the interest rate to account for this reduction. Based on this decrease in Federal Corporate Tax Rates, it has been determined at all bond certificates are expected to increase by 21.54%. The Utilities Commission has notified each applicable financial institution of its disagreement with any interest rate increase. The ultimate resolution of this issue cannot be determined as of this date. Evaluation of Events and Transactions: In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through March 16, 2018, the date the financial statements were available to be issued. 91

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95 REQUIRED SUPPLEMENTAL INFORMATION- Schedule 1 SCHUEDULE OF FUNDING PROGRESS - OTHER POST-EMPLOYMENT BENEFITS For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Accrued UAAL as Actuarial Liability Unfunded a % of Actuarial Value of (AAL) AAL Funded Covered Covered Valuation Assets (Entry Age) (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 10/1/2016 $ - $ 870,000 $ 870, % $ 10,150, % 10/1/2015 $ - $ 811,000 $ 811, % $ 9,171, % 10/1/2014 $ - $ 744,757 $ 744, % $ 9,044, % 10/1/2013 $ - $ 521,302 $ 521, % $ 8,361, % 10/1/2012 $ - $ 502,741 $ 502, % $ 8,463, % 10/1/2011 $ - $ 536,000 $ 536, % $ 8,202, % 10/1/2010 $ - $ 522,697 $ 522, % $ 7,957, % 10/1/2009 $ - $ 696,285 $ 696, % $ 8,500, % Source: Most recent actuarial valuation dated October 1,

96 REQUIRED SUPPLEMENTARY INFORMATION FLORIDA RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule of the Proportionate Share of the Net Pension Liability: Utilities Commission proportion of the net pension liability % % % Utilities Commission proportionate share of the net pension liability $ 1,808,190 $ 1,491,320 $ 750,142 Utilities Commission covered employee payroll $ 2,292,387 $ 2,195,132 $ 2,152,917 Utilities Commission proportinate share of the net pension liability as a percentage of covered payroll 78.88% 67.94% 34.84% Plan fiduciary net position as a percentage of the total pension liability 83.89% 84.88% 92.00% Schedule of Contributions: Contractually required contribution $ 164,688 $ 147,792 $ 145,823 Contributions in relation to the contractually required contribution $ (164,688) $ (147,792) $ (145,823) Contribution deficiency (excess) $ 0 $ 0 $ 0 Utilities Commission covered employee payroll $ 2,292,387 $ 2,195,132 $ 2,152,917 Contributions as a percentage of covered employee payroll 7.18% 6.73% 6.77% Notes: (1) The amounts presented for each fiscal year were determined as of June 30. (2) Changes of Assumptions. As of June 30, 2017, the long-term expected rate of return decreased from 7.60 percent to 7.10 percent. 96

97 Schedule 2 Fiscal Year % n/a n/a n/a n/a n/a n/a $ 387,648 n/a n/a n/a n/a n/a n/a $ 2,297,488 n/a n/a n/a n/a n/a n/a 16.87% n/a n/a n/a n/a n/a n/a 96.09% n/a n/a n/a n/a n/a n/a $ 143,949 n/a n/a n/a n/a n/a n/a $ (143,949) n/a n/a n/a n/a n/a n/a $ 0 n/a n/a n/a n/a n/a n/a $ 2,297,488 n/a n/a n/a n/a n/a n/a 6.27% n/a n/a n/a n/a n/a n/a 97

98 REQUIRED SUPPLEMENTARY INFORMATION FRS HEALTH INSURANCE SUBSIDY DEFINED BENEFIT PENSION PLAN UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Schedule of the Proportionate Share of the Net Pension Liability: Utilities Commission proportion of the net pension liability % % % Utilities Commission proportinate share of the net pension liability $ 765,140 $ 852,004 $ 721,782 Utilities Commission covered employee payroll $ 2,292,387 $ 2,195,132 $ 2,152,917 Utilities Commission proportinate share of the net pension liability as a percentage of covered payroll 33.38% 38.81% 33.53% Plan fiduciary net position as a percentage of the total pension liability 1.64% 0.97% 0.50% Schedule of Contributions: Contractually required contribution $ 38,054 $ 36,439 $ 29,440 Contributions in relation to the contractually required contribution $ (38,054) $ (36,439) $ (29,440) Contribution deficiency (excess) $ 0 $ 0 $ 0 Utilities Commission covered employee payroll $ 2,292,387 $ 2,195,132 $ 2,152,917 Contributions as a percentage of covered employee payroll 1.66% 1.66% 1.37% Notes: (1) The amounts presented for each fiscal year were determined as of June 30. (2) Changes of Assumptions. The municipal rate used to determine total pension liability increased from 2.85 percent to 3.58 percent. 98

99 Schedule 3 Fiscal Year % n/a n/a n/a n/a n/a n/a $ 750,041 n/a n/a n/a n/a n/a n/a $ 2,297,488 n/a n/a n/a n/a n/a n/a 32.65% n/a n/a n/a n/a n/a n/a 0.99% n/a n/a n/a n/a n/a n/a $ 27,913 n/a n/a n/a n/a n/a n/a $ (27,913) n/a n/a n/a n/a n/a n/a $ 0 n/a n/a n/a n/a n/a n/a $ 2,297,488 n/a n/a n/a n/a n/a n/a 1.21% n/a n/a n/a n/a n/a n/a 99

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101 OTHER SUPPLEMENTARY INFORMATION THIS SECTION IS COMPOSED OF THE FOLLOWING: SUPPLEMENTAL DETAIL FINANCIAL INFORMATION OF THE: ELECTRIC SYSTEM, WATER SYSTEM, RECLAMATION SYSTEM STATISTICAL SECTION THESE SCHEDULES PROVIDE A MORE DETAILED VIEW OF THE "BASIC FINANCIAL STATEMENTS" PRESENTED IN THE PRECEDING SUBSECTION. RESOLUTION NUMBERS AND 28-78, AS AMENDED, ESTABLISHED THE ELECTRIC, WATER, AND RECLAMATION SYSTEMS AS A SINGLE ENTERPRISE FUND. THESE SCHEDULES ARE PRESENTED TO PROVIDE DETAILED INFORMATION ON THE INDIVIDUAL UTILITY SYSTEMS AND TO PRESENT THE BUDGETARY COMPARISONS THAT ARE NOT NECESSARY FOR A FAIR PRESENTATION IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 101

102 SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - BY UTILITY SYSTEM For the Fiscal Year Ended September 30, 2017 With Comparative Actual Amounts for the Fiscal Year Ended September 30, 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric Water Operating Revenue: Sales $ 42,180,989 $ 7,759,910 Other revenues 397, ,056 Total operating revenue 42,578,315 7,996,966 Operating Expenses: Purchased power and fuel expenses 21,075,755 - Other production expenses 6,208,725 2,527,971 Transmission, distribution, and sewage collection and treatment 3,039, ,915 Customer accounting 800, ,594 Administrative and general 4,621,101 1,794,698 Required payments to City of New Smyrna Beach 2,559, ,365 Depreciation 2,788,333 1,839,877 Total operating expenses 41,093,583 7,906,420 Operating income 1,484,732 90,546 Nonoperating Revenue (Expenses): Interest earnings 167,276 95,215 Other income 611, ,405 Disaster relief costs - net (107,722) - Interest and debt expense (234,102) (274,245) Other expenses (87,508) (43,568) Gain (loss) on disposal of assets (90,824) (102,282) Total nonoperating revenue (expenses) 259,010 (197,475) Income (loss) before contributions 1,743,742 (106,929) Contributions in aid of construction 600,287 1,630,133 Change in net position 2,344,029 1,523,204 Net position, beginning of year 69,349,683 48,144,102 Net position, end of year $ 71,693,712 $ 49,667,

103 Schedule 4 Totals Reclamation $ 9,592,316 $ 59,533,215 $ 60,343,307 8, , ,909 9,600,714 60,175,995 61,036,216-21,075,755 21,324,833-8,736,696 8,487,578 2,812,140 6,792,691 6,273, ,542 1,381,236 1,293,829 1,931,467 8,347,266 7,525, ,651 3,615,949 3,721,882 1,993,653 6,621,863 6,323,657 7,571,453 56,571,456 54,950,818 2,029,261 3,604,539 6,085,398 62, , , , , ,518 - (107,722) - (213,739) (722,086) (870,421) (15,223) (146,299) (114,611) (46,465) (239,571) (8,613) (89,938) (28,403) (239,363) 1,939,323 3,576,136 5,846,035 2,390,137 4,620,557 7,375,674 4,329,460 8,196,693 13,221,709 55,600, ,094, ,872,422 $ 59,929,806 $ 181,290,824 $ 173,094,

104 SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS - Schedule 5 BUDGET AND ACTUAL - ELECTRIC SYSTEM (NON-GAAP BUDGETARY BASIS) For the Fiscal Year Ended September 30, 2017 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Final Budget Actual Variance Revenue and Receipts: Direct Sales: Electric sales $ 43,702,647 $ 42,307,383 $ (1,395,264) Other revenues 479, ,326 (81,857) Nonoperating revenue (expenses): Interest earnings 15, , ,974 Other revenues (expenses) 525, ,089 (52,287) Capital contributions 316, , ,845 45,038,950 43,945,361 (1,093,589) Operating Expenses: Purchased power and fuel expenses 21,337,940 21,075, ,185 Power production 6,005,087 6,208,725 (203,638) Transmission and distribution 3,030,300 3,039,636 (9,336) Customer accounting 732, ,100 (67,280) Administrative and general 4,355,412 4,548,733 (193,321) Required payments to the City of New Smyrna Beach 2,650,542 2,559,933 90,609 38,112,101 38,232,882 (120,781) Net revenue and receipts 6,926,849 5,712,479 (1,214,370) Operating Transfers In (Out): Revenue certificate proceeds Sinking Fund Certificates. (1,438,621) (1,438,621) - Sinking Fund Certificates. (601,562) (601,562) - Infrastructure Fund (75,000) 6,672 81,672 Renewal and Replacement Funds (4,811,666) (2,102,596) 2,709,070 (6,926,849) (4,136,107) 2,790,742 Budgeted net cash receipts $ - 1,576,372 $ 1,576,372 Reconciliation of Net Cash Receipts to Net Income (GAAP): Principal portion of required Sinking Fund transfers 1,810,680 Net transfers to Renewal and Replacement Fund 2,102,596 Net transfers from Infrastructure Fund (6,672) Gain (loss) on disposal of property and equipment (121,538) Depreciation (2,788,333) Amortization of personal leave time (72,368) Amortization of regulatory expense (25,712) Unbilled utility revenues (126,394) Amortization of loss on refunding (4,602) Change in net position $ 2,344,

105 SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS - Schedule 6 BUDGET AND ACTUAL - WATER SYSTEM (NON-GAAP BUDGETARY BASIS) For the Fiscal Year Ended September 30, 2017 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Final Budget Actual Variance Revenue and Receipts: Direct Sales: Water sales $ 7,375,846 $ 7,794,033 $ 418,187 Other revenues 313, ,056 (75,997) Nonoperating revenue (expenses): Interest earnings 8,830 95,215 86,385 Other revenues (expenses) 64, ,248 67,634 Capital contributions 1,060,136 1,630, ,998 8,822,479 9,888,686 1,066,207 Operating Expenses: Water production 2,554,884 2,527,971 26,913 Transmission and distribution 950, ,915 9,847 Customer accounting 338, ,594 14,506 Administrative and general 1,836,649 1,751,557 85,092 Required payments to the City of New Smyrna Beach 456, ,365 (22,551) 6,137,209 6,023, ,807 Net revenue and receipts 2,685,270 3,865,284 1,180,014 Operating Transfers In (Out): Revenue certificate proceeds Sinking Fund Certificates (445,559) (445,559) - Sinking Fund Certificates (335,064) (335,064) - Sinking Fund B Certificates (878,940) (878,940) - Renewal and Replacement Funds (950,707) (1,933,264) (982,557) Infrastructure Fund (75,000) 3,336 78,336 (2,685,270) (3,589,491) (904,221) Budgeted net cash receipts $ - 275,793 $ 275,793 Reconciliation of Net Cash Receipts to Net Income (GAAP): Principal portion of required Sinking Fund transfers 1,387,880 Net transfers to Renewal and Replacement Fund 1,933,264 Net transfers from Infrastructure Fund (3,336) Gain (loss) on disposal of property and equipment (121,799) Unbilled utility revenues (34,123) Depreciation (1,839,877) Amortization of personal leave time (43,141) Amortization of regulatory expense (28,894) Amortization of loss on refunding (2,563) Change in net position $ 1,523,

106 SCHEDULE OF REVENUE, RECEIPTS, EXPENSES AND DISBURSEMENTS - Schedule 7 BUDGET AND ACTUAL - RECLAMATION SYSTEM (NON-GAAP BUDGETARY BASIS) For the Fiscal Year Ended September 30, 2017 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Final Budget Actual Variance Revenue and Receipts: Direct Sales: Reclamation sales $ 9,360,691 $ 9,616,469 $ 255,778 Other revenues 9,064 8,398 (666) Nonoperating revenue (expenses): Interest earnings 8,830 91,667 82,837 Other revenues (expenses) 26, ,763 91,840 Capital contributions 406,719 2,390,137 1,983,418 9,812,227 12,225,434 2,413,207 Operating Expenses: Collection and treatment system 2,754,967 2,812,140 (57,173) Customer accounting 270, ,542 12,938 Administrative and general 2,005,140 1,924,085 81,055 Required payments to the City of New Smyrna Beach 553, ,651 (23,137) 5,584,101 5,570,418 13,683 Net revenue and receipts 4,228,126 6,655,016 2,426,890 Operating Transfers In (Out): Revenue certificate proceeds 3,206,717 - (3,206,717) Sinking Fund Certificates (955,579) (955,579) - Sinking Fund Certificates (1,220,716) (1,220,716) - Sinking Fund Certificates (276,934) (276,934) - Sinking Fund A Certificates (436,734) (436,734) - Renewal and Replacement Funds (4,469,880) (3,102,150) 1,367,730 Infrastructure Fund (75,000) 2,823 77,823 (4,228,126) (5,989,290) (1,761,164) Budgeted net cash receipts $ - 665,726 $ 665,726 Reconciliation of Net Cash Receipts to Net Income (GAAP): Principal portion of required Sinking Fund transfers 2,461,440 Capitalized interest (net) on Series 2013A Certificates 187,953 Net transfers to Renewal and Replacement Fund 3,102,150 Net transfers from Infrastructure Fund (2,823) Gain (loss) on disposal of property and equipment (53,896) Unbilled utility revenues (24,153) Depreciation (1,993,653) Amortization of personal leave time (7,382) Amortization of regulatory expense (3,784) Amortization of loss on refunding (2,118) Change in net position $ 4,329,

107 SCHEDULE OF OPERATING EXPENSES- Schedule 8 ELECTRIC SYSTEM For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Operating Expenses: Purchased power and fuel: Nuclear fuel $ 462,386 $ 425,604 Diesel fuel 19,057 41,944 Purchased power 20,594,312 20,857,285 21,075,755 21,324,833 Power production: Nuclear power generation 4,759,669 4,865,685 Diesel power generation 411, ,536 System control and load dispatching 1,037, ,859 6,208,725 6,164,080 Transmission and distribution 3,039,636 2,731,727 Customer accounting 800, ,747 Administrative and general 4,621,101 4,128,613 Required payments to the City of New Smyrna Beach 2,559,933 2,697,523 Depreciation 2,788,333 2,717,639 Total operating expenses $ 41,093,583 $ 40,515,

108 SCHEDULE OF OPERATING EXPENSES- Schedule 9 WATER SYSTEM For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Operating Expenses: Water production: Source of supply $ 498,395 $ 523,697 Water treatment 2,029,576 1,799,801 2,527,971 2,323,498 Transmission and distribution 940, ,529 Customer accounting 323, ,949 Administrative and general 1,794,698 1,628,115 Required payments to the City of New Smyrna Beach 479, ,957 Depreciation 1,839,877 1,769,503 Total operating expenses $ 7,906,420 $ 7,373,

109 SCHEDULE OF OPERATING EXPENSES- Schedule 10 RECLAMATION SYSTEM For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Operating Expenses: Collection and treatment system: Collection expenses $ 393,437 $ 445,375 Pumping expenses 498, ,961 Treatment and disposal 1,920,483 1,804,723 2,812,140 2,658,059 Customer accounting 257, ,133 Administrative and general 1,931,467 1,768,996 Required payments to the City of New Smyrna Beach 576, ,402 Depreciation 1,993,653 1,836,515 Total operating expenses $ 7,571,453 $ 7,062,

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111 SCHEDULE OF INVESTMENT EARNINGS Schedule 11 For the Fiscal Years Ended September 30, 2017 and 2016 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Investment Earnings By Source: Sinking funds... $ 54,521 $ 29,255 Renewal and replacement funds ,539 84,773 Customers' deposits... 21,393 8,900 Other... 6,756 1,836 Total investment earnings... $ 325,209 $ 124,764 Investment Earnings By System: Electric system... $ 167,276 $ 64,367 Water system... 95,215 35,805 Reclamation system... 62,718 24,592 Total investment earnings... $ 325,209 $ 124,

112 SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY REVENUE CERTIFICATES PAYABLE For the Fiscal Year Ended September 30, 2017 UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Utilities System Utilities System Utilities System Revenue Certificates Revenue Certificates Revenue Certificates Series 2009 Series 2011 Series 2012 Payment Principal Total Principal Total Principal Total Date Amount Interest Requirements Amount Interest Requirements Amount Interest Requirements 10/01/2017 $ 2,400,000 $ 219,879 $ 2,619,879 $ 1,160,000 $ 30,358 $ 1,190,358 $ 1,200,000 $ 6,780 $ 1,206,780 04/01/ , ,359-20,382 20, /01/2018 3,480, ,359 3,652,359 1,180,000 20,382 1,200, /01/ , ,455-10,234 10, /01/2019 3,325, ,455 3,428,455 1,190,000 10,234 1,200, /01/ ,620 37, /01/2020 1,900,000 37,620 1,937, /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ /01/ Totals $ 11,105,000 $ 846,747 $ 11,951,747 $ 3,530,000 $ 91,590 $ 3,621,590 $ 1,200,000 $ 6,780 $ 1,206,

113 Schedule 12 Utilities System Revenue Certificates Series 2013A Utilities System Refunding Revenue Certificates Series 2013B Total Debt Service Requirements to Maturity -- All Certificates -- Principal Total Principal Total Principal Total Amount Interest Requirements Amount Interest Requirements Amount Interest Requirements $ 220,000 $ 108,367 $ 328,367 $ 680,000 $ 99,470 $ 779,470 $ 5,660,000 $ 464,854 $ 6,124, , ,881-91,582 91, , , , , , ,000 91, ,582 5,595, ,204 5,985, , ,056-83,636 83, , , , , , ,000 83, ,636 5,520, ,381 5,820,381-99,892 99,892-75,226 75, , ,738 1,010,000 99,892 1,109, ,000 75, ,226 3,665, ,738 3,877,738-88,479 88,479-66,468 66, , ,947 1,040,000 88,479 1,128, ,000 66, ,468 1,810, ,947 1,964,947-76,727 76,727-57,536 57, , ,263 1,060,000 76,727 1,136, ,000 57, ,536 1,845, ,263 1,979,263-64,749 64,749-48,430 48, , ,179 1,090,000 64,749 1,154, ,000 48, ,430 1,885, ,179 1,998,179-52,432 52,432-39,208 39,208-91,640 91,640 1,115,000 52,432 1,167, ,000 39, ,208 1,935,000 91,640 2,026,640-39,833 39,833-29,696 29,696-69,529 69,529 1,145,000 39,833 1,184, ,000 29, ,696 1,980,000 69,529 2,049,529-26,894 26,894-20,010 20,010-46,904 46,904 1,175,000 26,894 1,201, ,000 20, ,010 2,030,000 46,904 2,076,904-13,617 13,617-10,092 10,092-23,709 23,709 1,205,000 13,617 1,218, ,000 10, ,092 2,075,000 23,709 2,098,709 $ 9,590,000 $ 1,451,485 $ 11,041,485 $ 8,575,000 $ 1,143,238 $ 9,718,238 $ 34,000,000 $ 3,539,840 $ 37,539,

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115 STATISTICAL SECTION This part of Utilities Commission, City of New Smyrna Beach, Florida s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Commission s overall financial health. Contents Pages Financial Trends These tables contain trend information to help the reader understand how the Commission s financial performance and well-being have changed over time. Revenue Capacity These tables contain information to help the reader assess the Commission s most significant revenue sources, consumptive user fees. Debt Capacity These tables present information to help the reader assess the affordability of the Commission s current levels of outstanding debt and its ability to issue additional debt in the future. Demographic and Economic Information These tables offer demographic and economic indicators to help the reader understand the environment within which the Commission s financial activities take place. Operating Information These tables contain service and infrastructure data to help the reader understand how the information in the Commission s financial report relates to the services the Commission provides and the activities it performs. Sources: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year. 115

116 NET POSITION BY COMPONENT, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Net investment in capital assets $ 138,838,558 $ 130,141,946 $ 120,724,100 $ 120,142,491 Restricted 13,407,829 13,235,155 12,156,227 10,286,206 Unrestricted 29,044,437 29,717,030 26,992,095 18,958,381 Total net position $ 181,290,824 $ 173,094,131 $ 159,872,422 $ 149,387,078 Notes: Amounts reported in 2011 and later years include restatement for inclusion of intangible assets with indefinite useful lives that were acquired in prior years. During 2015, GASB Statement No. 68 was implemented, resulting in adjustments to beginning net position in 2015 and Periods previous to 2014 have not been adjusted for these changes. 116

117 Table 1 Fiscal Year $ 115,267,837 $ 119,417,863 $ 108,826,431 $ 86,635,550 $ 81,813,265 $ 84,302,560 13,877,564 11,174,766 14,773,049 13,161,211 16,687,264 9,871,241 16,269,037 11,059,331 12,309,104 11,210,703 11,760,610 11,384,652 $ 145,414,438 $ 141,651,960 $ 135,908,584 $ 111,007,464 $ 110,261,139 $ 105,558,

118 CHANGES IN NET POSITION, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Operating Revenue: Sales $ 59,533,215 $ 60,343,307 $ 60,051,776 $ 57,962,356 Other revenue 642, , , ,113 Total operating revenue... 60,175,995 61,036,216 60,751,400 58,729,469 Operating Expenses: Purchased power and fuel expenses 21,075,755 21,324,833 22,662,798 23,046,714 Other production expenses 8,736,696 8,487,578 7,585,845 7,007,952 Transmission, distribution, and sewage collection and treatment 6,792,691 6,273,315 5,951,399 6,040,504 Customer accounting 1,381,236 1,293,829 1,201,018 1,253,808 Administrative and general 8,347,266 7,525,724 6,932,469 6,858,146 Required payments to the City 3,615,949 3,721,882 3,550,060 3,463,859 Depreciation.. 6,621,863 6,323,657 6,393,956 6,341,117 Impairment charges (1) Total operating expenses 56,571,456 54,950,818 54,277,545 54,012,100 Operating income 3,604,539 6,085,398 6,473,855 4,717,369 Nonoperating Revenue (Expense): Interest earnings 325, ,764 32,350 18,779 Other income 862, , , ,372 Gain on disposal of impaired assets (2) - - 2,887,763 - Disaster relief costs - net.. (107,722) Interest and debt expense (722,086) (870,421) (1,000,686) (1,249,136) Other expenses (146,299) (114,611) (211,932) (62,738) (Loss) on disposal of assets.. (239,571) (8,613) (1,779,421) (156,483) Total nonoperating revenue (expense) (28,403) (239,363) 500,637 (918,206) Income (loss) before contributions and transfers 3,576,136 5,846,035 6,974,492 3,799,163 Contributions in aid of construction 4,620,557 7,375,674 3,510,852 2,275,611 Change in net position $ 8,196,693 $ 13,221,709 $ 10,485,344 $ 6,074,774 Notes: In 2003, the Commission officially established the Communications System Division to account for internet and telephone related services to its customers within and outside the City. The first full year of operations of telephone sales under its own CLEC license occurred in The Commission ceased providing telephone services effective in September 2006 and internet services in September (1) Includes impairment charges associated with the retirement and decommissioning of CR3 nuclear plant. (2) Includes one-time gain on the disposition and sale of participant's interest in the CR3 nuclear plant. During 2015, GASB Statement No. 68 was implemented, resulting in adjustments to beginning net position and pension expense in 2015 and Periods previous to 2014 have not been adjusted for these changes. 118

119 Table 2 Fiscal Year $ 56,413,841 $ 54,142,443 $ 58,903,860 $ 58,733,895 $ 56,146,191 $ 62,297, , , ,665 1,121, , ,909 57,193,863 54,943,086 59,878,525 59,854,959 56,937,294 62,922,200 20,451,330 20,252,092 23,247,562 24,622,098 22,173,197 28,018,777 7,069,503 7,535,222 6,803,928 7,158,937 5,802,643 6,433,609 6,186,312 6,137,526 6,082,365 6,259,037 6,431,192 6,499,601 1,185,459 1,307,195 1,190,247 1,293,146 1,238,348 1,086,447 6,756,683 6,550,718 6,655,477 7,001,554 7,343,481 7,025,702 3,258,726 3,388,377 3,564,277 3,833,943 3,601,594 3,612,294 6,481,504 6,470,740 6,401,336 6,502,283 6,380,923 6,324,910 3,467, ,856,534 51,641,870 53,945,192 56,670,998 52,971,378 59,001,340 2,337,329 3,301,216 5,933,333 3,183,961 3,965,916 3,920,860 34,260 32,633 31,931 42, , , , , , , , , (1,687,497) (2,150,646) (2,392,189) (2,388,731) (2,404,288) (2,635,048) (112,697) (205,333) (287,020) (691,734) (132,752) (124,182) (191,929) (153,693) (172,076) (636,835) (339,545) (115,037) (1,386,050) (1,983,079) (2,280,616) (3,056,229) (2,214,703) (1,703,013) 951,279 1,318,137 3,652, ,732 1,751,213 2,217,847 2,811,199 4,425,239 1,616, , ,137 3,847,167 $ 3,762,478 $ 5,743,376 $ 5,269,329 $ 746,325 $ 2,373,350 $ 6,065,

120 OPERATING REVENUES BY UTILITY SYSTEM, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric: Sales... $ 42,180,989 $ 43,416,397 $ 43,953,921 $ 42,458,741 Other revenue , , , ,164 Total electric operating revenue... 42,578,315 43,852,499 44,394,786 42,934,905 Water: Sales... 7,759,910 7,579,805 7,241,852 6,906,208 Other revenue , , , ,934 Total water operating revenue... 7,996,966 7,827,807 7,491,746 7,188,142 Reclamation: Sales... 9,592,316 9,347,105 8,856,003 8,597,407 Other revenue... 8,398 8,805 8,865 9,015 Total reclamation operating revenue... 9,600,714 9,355,910 8,864,868 8,606,422 Internet: Sales Other revenue Total internet operating revenue Total operating revenues... $ 60,175,995 $ 61,036,216 $ 60,751,400 $ 58,729,469 Notes: In fiscal year 2007 the Utilities Commission officially established the Internet System division to account for internet services to its customers, separate from telephone services previously offered under the Communications System. Effective 09/30/2012, the Utilities Commission officially terminated its Internet System division. Other revenue includes connection charges, penalties, and miscellaneous revenue. 120

121 Table 3 Fiscal Year $ 40,724,442 $ 39,341,756 $ 43,734,487 $ 44,766,297 $ 42,145,939 $ 48,241, , , , , , ,472 41,207,458 39,826,769 44,309,679 45,396,865 42,607,585 48,645,746 7,040,555 7,139,821 7,492,475 6,471,827 6,478,906 6,459, , , , , , ,470 7,338,500 7,447,226 7,883,558 6,956,959 6,804,677 6,672,764 8,648,844 7,603,131 7,603,990 7,393,886 7,390,058 7,409,412 (939) 8,225 8,390 5,364 3,686 6,967 8,647,905 7,611,356 7,612,380 7,399,250 7,393,744 7,416,379-57,735 72, , , , ,735 72, , , ,311 $ 57,193,863 $ 54,943,086 $ 59,878,525 $ 59,854,959 $ 56,937,294 $ 62,922,

122 OPERATING EXPENSES BY UTILITY SYSTEM, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric: Purchased power and fuel expenses... $ 21,075,755 $ 21,324,833 $ 22,662,798 $ 23,046,714 Other production expenses... 6,208,725 6,164,080 5,508,306 5,040,681 Transmission and distribution... 3,039,636 2,731,727 2,540,238 2,590,207 Customer accounting , , , ,227 Administrative and general... 4,621,101 4,128,613 3,782,054 3,769,183 Required payments to City of New Smyrna Beach.. 2,559,933 2,697,523 2,575,520 2,507,716 Depreciation... 2,788,333 2,717,639 2,800,889 2,816,801 Impairment charges (1) Total electric operating expenses... 41,093,583 40,515,162 40,550,140 40,485,529 Water: Other production expenses... 2,527,971 2,323,498 2,077,539 1,967,271 Transmission and distribution , , , ,196 Customer accounting , , , ,651 Administrative and general... 1,794,698 1,628,115 1,486,785 1,454,197 Required payments to City of New Smyrna Beach.. 479, , , ,084 Depreciation... 1,839,877 1,769,503 1,779,863 1,708,877 Total water operating expenses... 7,906,420 7,373,551 6,849,614 6,768,276 Reclamation: Transmission and distribution... 2,812,140 2,658,059 2,643,873 2,547,101 Customer accounting , , , ,930 Administrative and general... 1,931,467 1,768,996 1,663,630 1,634,766 Required payments to City of New Smyrna Beach.. 576, , , ,059 Depreciation... 1,993,653 1,836,515 1,813,204 1,815,439 Total reclamation operating expenses... 7,571,453 7,062,105 6,877,791 6,758,295 Internet: Other production expenses Administrative and general Required payments to City of New Smyrna Beach Total internet operating expenses

123 Table 4 Fiscal Year $ 20,451,330 $ 20,252,092 $ 23,247,562 $ 24,622,098 $ 22,173,197 $ 28,018,777 5,180,302 5,639,188 4,799,394 5,253,527 4,011,224 4,682,655 2,747,998 2,604,332 2,543,878 2,683,586 2,754,949 2,884, ,297 1,012, , , , ,724 3,577,953 3,495,645 3,552,057 3,730,949 3,722,321 3,488,280 2,325,702 2,482,873 2,637,346 2,972,859 2,758,740 2,763,854 3,058,496 3,014,132 3,041,064 3,180,253 3,085,391 3,015,390 3,467, ,486,095 38,501,068 40,714,197 43,414,833 39,434,442 45,666,229 1,889,201 1,896,034 2,004,534 1,905,410 1,790,909 1,750, , , , , ,894 1,006, , , , , , ,670 1,461,566 1,444,309 1,475,971 1,554,436 1,701,850 1,660, , , , , , ,640 1,644,925 1,628,342 1,517,036 1,383,535 1,254,566 1,216,233 6,601,371 6,495,732 6,580,372 6,285,357 6,367,719 6,267,885 2,544,379 2,629,201 2,602,764 2,733,402 2,735,349 2,608, , , , ,778 25,461 35,053 1,717,164 1,522,355 1,520,544 1,546,530 1,532,701 1,513, , , , , , ,572 1,778,083 1,828,266 1,843,236 1,938,495 1,922,580 1,872,464 6,769,068 6,553,209 6,539,348 6,795,097 6,655,831 6,471, , , , , ,591-3,452 4,370 6,072 7,881 11,228-91, , , , ,

124 OPERATING EXPENSES BY UTILITY SYSTEM, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida (Continued) Communications: Other production expenses... $ - $ - $ - $ - Customer accounting Administrative and general Required payments to City of New Smyrna Beach Depreciation Total communications operating expenses Total operating expenses... $ 56,571,456 $ 54,950,818 $ 54,277,545 $ 54,012,100 Totals-Combined Systems: Purchased power and fuel expenses... $ 21,075,755 $ 21,324,833 $ 22,662,798 $ 23,046,714 Other production expenses... 8,736,696 8,487,578 7,585,845 7,007,952 Transmission and distribution... 6,792,691 6,273,315 5,951,399 6,040,504 Customer accounting... 1,381,236 1,293,829 1,201,018 1,253,808 Administrative and general... 8,347,266 7,525,724 6,932,469 6,858,146 Required payments to City of New Smyrna Beach.. 3,615,949 3,721,882 3,550,060 3,463,859 Depreciation and decommissioning... 6,621,863 6,323,657 6,393,956 6,341,117 Impairment charges (1) Total operating expenses... $ 56,571,456 $ 54,950,818 $ 54,277,545 $ 54,012,100 Notes: In fiscal year 2003, the Commission officially established the Communications System division to account for internet and telephone related services to its customers and to customers outside the Commission's immediate customer base. The first full year of operations for telephone sales under its own CLEC license occurred in fiscal year The Commission ceased providing telephone services effective in September In fiscal year 2007 the Utilities Commission officially established the Internet System division to account for internet services to its customers, separate from telephone services previously offered under the Communications System. The Commission ceased providing internet services effective in September The Commission accounts for other production expenses separate from purchased power and fuel expenses in the electric system. Other production expenses in the electric system include nuclear power generation, diesel power generation, and system control load dispatch expenses. Other production expenses in the water system include source of supply and water treatment expenses. Other production expenses in the communications system include payments to internet and telephone providers. (1) Includes impairment charges associated with the retirement and decommissioning of CR3 nuclear plant. During 2015, GASB Statement No. 68 was implemented, resulting in adjustments to beginning net position and pension expense in 2015 and Periods previous to 2014 have not been adjusted for these changes. 124

125 Table 4 Fiscal Year $ - $ - $ - $ - $ - $ , , , , ,823 $ 54,856,534 $ 51,641,870 $ 53,945,192 $ 56,670,998 $ 52,971,378 $ 59,001,340 $ 20,451,330 $ 20,252,092 $ 23,247,562 $ 24,622,098 $ 22,173,197 $ 28,018,777 7,069,503 7,535,222 6,803,928 7,158,937 5,802,643 6,433,609 6,186,312 6,137,526 6,082,365 6,259,037 6,431,192 6,499,601 1,185,459 1,307,195 1,190,247 1,293,146 1,238,348 1,086,447 6,756,683 6,550,718 6,655,477 7,001,554 7,343,481 7,025,702 3,258,726 3,388,377 3,564,277 3,833,943 3,601,594 3,612,294 6,481,504 6,470,740 6,401,336 6,502,283 6,380,923 6,324,910 3,467, $ 54,856,534 $ 51,641,870 $ 53,945,192 $ 56,670,998 $ 52,971,378 $ 59,001,

126 NONOPERATING REVENUE AND EXPENSES, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Nonoperating Revenue (Expenses): Interest earnings... $ 325,209 $ 124,764 $ 32,350 $ 18,779 Other income , , , ,372 Gain on disposal of impaired assets (1) - - 2,887,763 - Disaster relief costs - net... (107,722) Interest and debt expense... (722,086) (870,421) (1,000,686) (1,249,136) Other expenses... (146,299) (114,611) (211,932) (62,738) Gain (loss) on disposal of assets... (239,571) (8,613) (1,779,421) (156,483) Total nonoperating revenue (expense)... $ (28,403) $ (239,363) $ 500,637 $ (918,206) Note: Interest and debt expenses are reported net of capitalized amounts, where applicable. (1) Includes one-time gain on the disposition and sale of participant's interest in the CR3 nuclear plant. 126

127 Table 5 Fiscal Year $ 34,260 $ 32,633 $ 31,931 $ 42,381 $ 116,472 $ 627, , , , , , , (1,687,497) (2,150,646) (2,392,189) (2,388,731) (2,404,288) (2,635,048) (112,697) (205,333) (287,020) (691,734) (132,752) (124,182) (191,929) (153,693) (172,076) (636,835) (339,545) (115,037) $ (1,386,050) $ (1,983,079) $ (2,280,616) $ (3,056,229) $ (2,214,703) $ (1,703,013) 127

128 UTILITY SYSTEM OPERATIONS ANALYSIS, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric System: Net energy load requirements (kwh) ,318, ,319, ,500, ,895,204 Total Consumption/Sales (kwh) ,463, ,457, ,602, ,751,789 Total Direct Rate-Electric: (1) Customer charge... $ 6.75 $ 6.75 $ 6.75 $ 6.75 Energy charge... $ $ $ $ Water System: Gallons of water pumped from water plant (KGs)... 1,953,350 1,887,534 1,761,140 1,733,196 Gallons of water consumed (KGs)... 1,687,758 1,643,758 1,543,834 1,508,063 Total Direct Rate-Water: (2) Base facility charge... $ $ $ $ Gallonage charge per 1,000 gallons... $ 1.62 $ 1.62 $ 1.62 $ 1.62 Reclamation System: Wastewater: Gallons of wastewater treated (KGs)... 1,254,440 1,188,441 1,326,094 1,232,524 Gallons of wastewater sold (KGs) , , , ,789 Total Direct Rate-Wastewater: (3) Base facility charge... $ $ $ $ Gallonage charge per 1,000 gallons... $ 4.07 $ 4.07 $ 4.07 $ 4.07 Reuse Water: Gallons of reclaimed water pumped from wastewater treatment plant (KGs)... 1,242,180 1,186,610 1,318,611 1,237,338 Gallons of reclaimed water sold (KGs) , , , ,662 Total Direct Rate-Reuse water: (4) Minimum monthly charge... $ $ $ $ Gallonage charge per 1,000 gallons... $ 2.24 $ 2.24 $ 2.24 $ 2.24 Notes: Water, reclamation and reuse water amounts are presented in 1,000 gallon (KG) units. (1) Rate for customer charge shown for electric system is an average for single phase and three phase service for residential customers. See Table 7 for rate schedule applicable to electric customers. (2) Rate shown for water system is for residential single family 5/8" meter size. The gallonage charge is an average of the monthly rate block rates. See Table 8 for rate schedule applicable to water customers. (3) Rate shown for reclamation system is for residential single family 5/8" meter size. See Table 9 for rate schedule applicable to reclamation customers. (4) Rate shown for reuse water is for primary tier 3/4" meter size. See Table 9 for rate schedule applicable to reuse water customers. 128

129 Table 6 Fiscal Year ,507, ,484, ,774, ,389, ,669, ,050, ,496, ,603, ,559, ,330, ,773, ,659,029 $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ $ $ $ $ $ ,642,673 1,624,580 1,727,554 1,772,579 1,676,964 1,696,270 1,454,472 1,561,540 1,643,942 1,578,231 1,511,699 1,549,232 $ $ $ $ $ $ $ 1.62 $ 1.62 $ 1.62 $ 1.62 $ 1.62 $ ,204,472 1,317,993 1,170,050 1,329,990 1,497,340 1,242, , , , , , ,822 $ $ $ $ $ $ $ 4.07 $ 3.63 $ 3.63 $ 3.63 $ 3.63 $ ,197,644 1,321,050 1,145,550 1,370,690 1,445, , , , , , , ,691 $ $ $ $ $ $ $ 2.24 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $

130 UTILITY RATE SCHEDULE - ELECTRIC SERVICE, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Direct Monthly Rate Residential: Customer charge: Single phase service... $ 5.65 $ 5.65 $ 5.65 $ 5.65 Three phase service... $ 7.85 $ 7.85 $ 7.85 $ 7.85 Energy charge: All per kwh per month, plus fuel and purchased power cost adjustment... $ $ $ $ General Service - Non-Demand: (1) Customer charge: Single phase service... $ 6.05 $ 6.05 $ 6.05 $ 6.05 Three phase service... $ 8.85 $ 8.85 $ 8.85 $ 8.85 Energy charge: All per kwh per month, plus fuel and purchased power cost adjustment... $ $ $ $ General Service - Demand: (2) Customer charge... $ $ $ $ Demand charge - all kwh of billing demand... $ 6.75 $ 6.75 $ 6.75 $ 6.75 Energy charge: All per kwh per month, plus fuel and purchased power cost adjustment... $ $ $ $ General Service - Large Demand: (3) Customer charge... $ $ $ $ Demand charge - all kwh of billing demand... $ 6.50 $ 6.50 $ 6.50 $ 6.50 Energy charge: All per kwh per month, plus fuel and purchased power cost adjustment... $ $ $ $ General Service - Demand Time of Use: (4) Customer charge... $ $ $ $ Demand charge - per kw of excess demand... $ $ $ $ Energy charge: All per kwh per month, plus fuel and purchased power cost adjustment... $ $ $ $ Fuel and Purchased Power Cost Adjustment (5) Clause Monthly Billing Factor (per 1,000 kwh)... $ $ $ $ Notes: (1) Non-Demand electric rate schedule reserved for non-residential customers with an annual measured peak demand of less than 50kW. (2) Demand electric rate schedule reserved for non-residential customers with an annual measured peak demand of 50kW up to 250kW. (3) Large Demand electric rate schedule reserved for non-residential customers with an annual measured peak demand of 250kW or greater. (4) Demand Time of Use electric rate schedule reserved for non-residential customers with an annual measured peak demand of 50kW or greater. Service under this schedule is limited to customers who shift their capacity requirements from on-peak periods to off-peak periods and enter into an agreement with the Commission to do so. 130

131 Table 7 Fiscal Year $ 5.65 $ 5.65 $ 5.65 $ 5.65 $ 5.65 $ 5.65 $ 7.85 $ 7.85 $ 7.85 $ 7.85 $ 7.85 $ 7.85 $ $ $ $ $ $ $ 6.05 $ 6.05 $ 6.05 $ 6.05 $ 6.05 $ 6.05 $ 8.85 $ 8.85 $ 8.85 $ 8.85 $ 8.85 $ 8.85 $ $ $ $ $ $ $ $ $ $ $ $ $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ 6.75 $ $ $ $ $ $ $ $ $ $ $ $ $ 6.50 $ 6.50 $ 6.50 $ 6.50 $ 6.50 $ 6.50 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ (5) The Fuel and Purchased Power Cost Adjustment Clause (FPPCAC) is an integral component of the monthly charges, and is designed to allow for accurate billing of fluctuating applicable fuel and purchased power costs. In order to minimize changes in customer billings, the FPPCAC is developed on a twelve month projected basis, with provision to "true-up" any over or under recovery of any applicable fuel and purchased power cost in each subsequent twelve month period. A provision in the clause allows the FPPCAC to be modified if significant circumstances arise during the twelve month billing cycle. (6) Increases in electric rates do not require approval by the Florida Public Service Commission; however, the Commission voluntarily files tariff sheets with the Florida Public Service Commission whenever there are rate increases, which are kept on file in the Bureau of Certification, Economics & Tariffs Section of the Division of Economic Regulation. 131

132 UTILITY RATE SCHEDULE - WATER SERVICE, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Direct Monthly Rate Residential: Single Family: Base facility charge: Meter Size (Inches): 5/8"... $ $ $ $ "... $ $ $ $ /2"... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ 1, $ 1, $ 1, $ 1, Gallonage charge per 1,000 Gallons: (1) Block 1... $ 0.93 $ 0.93 $ 0.93 $ 0.93 Block 2... $ 1.24 $ 1.24 $ 1.24 $ 1.24 Block 3... $ 1.96 $ 1.96 $ 1.96 $ 1.96 Block 4... $ 2.33 $ 2.33 $ 2.33 $ 2.33 Multi-Family: Base facility charge: Each Unit... $ $ $ $ Master Meter... $ $ $ $ Gallonage charge per 1,000 Gallons: Each Unit... $ - $ - $ - $ - Master Meter... $ 1.10 $ 1.10 $ 1.10 $ 1.10 Non-Residential: Base facility charge: Meter Size (Inches): 5/8"... $ $ $ $ "... $ $ $ $ /2"... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ 1, $ 1, $ 1, $ 1, "... $ 1, $ 1, $ - $ - Gallonage charge per 1,000 Gallons: (2) Block 1... $ 1.54 $ 1.54 $ 1.54 $ 1.54 Block 2... $ 2.05 $ 2.05 $ 2.05 $

133 Table 8 Fiscal Year $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1, $ 1, $ 1, $ 1, $ 1, $ 1, $ 0.93 $ 0.93 $ 0.93 $ 0.93 $ 0.93 $ 0.93 $ 1.24 $ 1.24 $ 1.24 $ 1.24 $ 1.24 $ 1.24 $ 1.96 $ 1.96 $ 1.96 $ 1.96 $ 1.96 $ 1.96 $ 2.33 $ 2.33 $ 2.33 $ 2.33 $ 2.33 $ 2.33 $ $ $ $ $ $ $ $ $ $ $ $ $ - $ - $ - $ - $ - $ - $ 1.10 $ 1.10 $ 1.10 $ 1.10 $ 1.10 $ 1.10 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1, $ 1, $ 1, $ 1, $ 1, $ 1, $ - $ - $ - $ - $ - $ - $ 1.54 $ 1.54 $ 1.54 $ 1.54 $ 1.54 $ 1.54 $ 2.05 $ 2.05 $ 2.05 $ 2.05 $ 2.05 $

134 UTILITY RATE SCHEDULE - WATER SERVICE, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Direct Monthly Rate Irrigation Service: Base facility charge: Meter Size (Inches): 5/8"... $ $ $ $ "... $ $ $ $ /2"... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ 1, $ 1, $ 1, $ 1, "... $ 1, $ 1, $ 1, $ 1, Gallonage charge per 1,000 Gallons: (1) Block 1... $ 1.92 $ 1.92 $ 1.92 $ 1.92 Block 2... $ 2.56 $ 2.56 $ 2.56 $ 2.56 Block 3... $ 4.03 $ 4.03 $ 4.03 $ 4.03 Block 4... $ 4.80 $ 4.80 $ 4.80 $ 4.80 Notes: (1) The monthly rate blocks for residential and irrigation water usage at September 30, 2017, are as follows: Monthly Rate Blocks (Gallons) Meter Size (Inches): Block 1 Block 2 Block 3 Block 4 5/8" ,999 3,000-5,999 6,000-15,000 Above 15,000 1" ,999 6,000-13,999 14,000-38,000 Above 38, /2" ,999 11,000-25,999 26,000-75,000 Above 75,000 2" ,999 17,000-40,999 41, ,000 Above 120,000 3" ,999 31,000-75,999 76, ,000 Above 225,000 4" ,999 51, , , ,000 Above 375,000 6" , , , , ,000 Above 750,000 8" , , , ,000-1,200,000 Above 1,200,000 10" , , , ,000-1,725,000 Above 1,725,000 (2) The monthly rate blocks for non-residential water usage at September 30, 2017, are as follows: Monthly Rate Blocks (Gallons) Meter Size (Inches): Block 1 Block 2 5/8" ,000 Above 7,000 1" ,000 Above 18, /2" ,000 Above 35,000 2" ,000 Above 56,000 3" ,000 Above 105,000 4" ,000 Above 175,000 6" ,000 Above 350,000 8" ,000 Above 560,000 10" ,000 Above 805,000 (3) Increases in water rates do not require approval by the FPSC; however, the Commission voluntarily files tariff sheets with the FPSC whenever there are rate increases, which are kept on file in the Bureau of Certification, Economics & Tariffs Section of the Division of Economic Regulation. 134

135 Table 8 Fiscal Year $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1, $ 1, $ $ $ $ $ 1, $ 1, $ 1, $ 1, $ 1, $ 1, $ 1.92 $ 1.92 $ 1.37 $ 1.37 $ 1.37 $ 1.37 $ 2.56 $ 2.56 $ 1.83 $ 1.83 $ 1.83 $ 1.83 $ 4.03 $ 4.03 $ 2.88 $ 2.88 $ 2.88 $ 2.88 $ 4.80 $ 4.80 $ 3.43 $ 3.43 $ 3.43 $

136 UTILITY RATE SCHEDULE - RECLAMATION SERVICES, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Direct Monthly Rate: Wastewater Rate Schedule: Residential (Single Family) and Non-residential: Base facility charge: Meter Size (Inches): 5/8"... $ $ $ $ "... $ $ $ $ /2"... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ 1, $ 1, $ 1, $ 1, "... $ 2, $ 2, $ 2, $ 2, Gallonage charge per 1,000 Gallons: All meter sizes... $ 4.07 $ 4.07 $ 4.07 $ 4.07 Multi-Family: Base facility charge: Each Unit... $ $ $ $ Master Meter... $ $ $ $ Gallonage charge per 1,000 Gallons: Each Unit... $ - $ - $ - $ - Master Meter... $ 3.25 $ 3.25 $ 3.25 $ 3.25 Reuse Water Rate Schedule: Primary Tier Rate: Minimum monthly charge: Meter Size (Inches): 3/4"... $ $ $ $ "... $ $ $ $ /2"... $ $ $ $ Major Users Meter Size (Inches): 2"... $ $ $ $ "... $ $ $ $ "... $ $ $ $ "... $ $ $ $ Gallonage charge per 1,000 Gallons: (1) Meter Size (Inches): 3/4"... $ 2.24 $ 2.24 $ 2.24 $ "... $ 2.24 $ 2.24 $ 2.24 $ /2"... $ 2.24 $ 2.24 $ 2.24 $ 2.24 Flow charge per 1,000 Gallons: Major Users Meter Size (Inches): 2"... $ 0.34 $ 0.34 $ 0.34 $ "... $ 0.34 $ 0.34 $ 0.34 $ "... $ 0.34 $ 0.34 $ 0.34 $ "... $ 0.34 $ 0.34 $ 0.34 $

137 Table 9 Fiscal Year $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1, $ 1, $ 1, $ 1, $ 1, $ 1, $ 2, $ 1, $ 1, $ 1, $ 1, $ 1, $ 4.07 $ 3.63 $ 3.63 $ 3.63 $ 3.63 $ 3.63 $ $ $ $ $ $ $ $ $ $ $ $ $ - $ - $ - $ - $ - $ - $ 3.25 $ 2.90 $ 2.90 $ 2.90 $ 2.90 $ 2.90 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2.24 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.24 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.24 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 0.34 $ 0.30 $ 0.30 $ 0.30 $ 0.15 $ 0.15 $ 0.34 $ 0.30 $ 0.30 $ 0.30 $ 0.15 $ 0.15 $ 0.34 $ 0.30 $ 0.30 $ 0.30 $ 0.15 $ 0.15 $ 0.34 $ 0.30 $ 0.30 $ 0.30 $ 0.15 $

138 UTILITY RATE SCHEDULE - RECLAMATION SERVICES, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Direct Monthly Rate: (Continued) Secondary Tier Rate: A fixed rate established at a minimum rate per $ $ $ $ acre per month for major metered users whose anticipated capacity exceeds 100,000 gallons per day and which must provide a minimum of three days of wet weather storage for a minimum flow rate of 1,900 gallons/acre/day on an annual average. Notes: (1) The gallonage charge for metered reuse water customers applies to usage over the monthly maximum allowance that is included in the minimum monthly charge, which varies depending on meter size. (2) Increases in utility rates do not require approval by the FPSC; however, the Commission voluntarily files tariff sheets with the FPSC whenever there are rate increases, which are kept on file in the Bureau of Certification, Economics & Tariffs Section of the Division of Economic Regulation. 138

139 Table 9 Fiscal Year $ $ $ $ $ $

140 NUMBER OF ELECTRIC, WATER, RECLAMATION (WASTEWATER & REUSE) CUSTOMERS, LAST TEN FISCAL YEARS September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric... 27,673 27,317 26,740 26,407 Water... 26,241 25,771 25,257 24,518 Wastewater... 21,170 20,762 20,307 20,037 Reuse water... 2,007 1,775 1,542 1,407 Note: (1) Obtained from customer billing records as summarized in the Monthly Consolidated Sales Reports, as of September 30th for each fiscal year. 140

141 Table 10 Fiscal Year ,938 25,584 25,327 24,984 24,731 24,702 24,451 24,068 23,838 23,733 23,835 27,565 19,661 19,390 19,186 19,091 18,908 23,716 1,224 1,

142 TEN LARGEST CUSTOMERS, CURRENT AND NINE YEARS AGO September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Fiscal Year Ended September 30, 2017 Kilowatt Hour Sales Revenues Billed kwh Percent of Percent of Electric Customers (000's) Total Rank Amount Total Bert Fish Medical Center... 8, % 1 $ 818, % Wal-Mart Store , % 2 408, % Water Resources... 4, % 3 410, % Volusia School District # , % 4 362, % Publix Food - Store # , % 5 302, % Winn Dixie - Store # , % 6 262, % Publix Food - Store # , % 7 225, % Reddy Ice Corp... 2, % 8 203, % Home Depot... 1, % 9 181, % Volusia School District... 1, % , % Totals... 34, % $ 3,342, % Consumption Revenues Billed Gallons Percent of Percent of Water & Reclamation Customers (000's) Total Rank Amount Total Rinker Materials... 13, % 1 $ 63, % Reddy Ice Corp... 8, % 2 48, % Islander Beach Lodge 9, % 3 36, % Bert Fish Medical Center... 7, % 4 36, % Oceanview Towers... 6, % 5 32, % Errol by the Sea Condo Assoc... 6, % 6 30, % Winn Dixie Plaza - Common Area... 5, % 7 27, % Pelican Assoc... 5, % 8 23, % Las Brisas HOA... 4, % 9 23, % Colony Beach Club... 4, % 10 21, % Volusia School District # Volusia School District # Oceanview Nursing Home... Sea Woods HOA... EBB Tide Condo Assoc... Quail Hollow Assoc... Totals... 72, % $ 342, % Note: The ten largest water customers are also the ten largest reclamation customers. However, the information above for consumption and amounts billed represents billings for water usage only. For Water, Bert Fish Medical Center was billed in two customer accounts in 2008 as 5 & 6 142

143 Table 11 Fiscal Year Ended September 30, 2008 Kilowatt Hour Sales Revenues Billed (kwh) Percent of Percent of (000's) Total Rank Amount Total 8, % 1 $ 910, % 1, % , % 4, % 2 495, % 4, % 3 500, % 3, % 4 425, % 2, % 6 311, % 2, % 7 305, % 2, % 5 334, % 2, % 8 269, % 1, % 9 256, % 34, % $ 4,020, % Consumption Revenues Billed Gallons Percent of Percent of (000's) Total Rank Amount Total 18, % 1 $ 63, % 8, % 4 23, % 14, % 2 44, % 8, % 3 22, % 7, % 5 25, % 5, % 8 12, % 5, % 9 18, % 5, % 7 11, % 6, % 6 6, % 81, % $ 228, % 143

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145 RATIOS OF OUTSTANDING DEBT BY TYPE, Table 12 LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Total Fiscal State Percent of Year Ended Revenue Revenue Revolving Per Personal September 30, Certificates (1) Notes Fund Amount Capita (2) Income (3) ,881,677 16,535,000 11,796,761 69,213,438 2, % ,058,927-10,884,945 65,943,872 2, % ,626,508-9,943,987 61,570,495 2, % ,220,046-8,972,956 56,193,002 2, % ,995, ,995,000 1, % ,940, ,940,000 2, % ,270, ,270,000 2, % ,570, ,570,000 1, % ,460, ,460,000 1, % ,000, ,000,000 1, % Notes: (1) Revenue certificates outstanding are reported net of unamortized discounts, premiums, and deferred losses on advanced refundings prior to (2) Per capita based on population for City of New Smyrna Beach, Florida reported in Table 14. (3) Percent of Personal Income based on data obtained on Table 14. (4) The Commission's bond covenants stipulate that it may issue additional debt as long as certain conditions are met. The major criterion is that the net earnings of the system must be at least 1.40 times the highest combined debt service requirement. 145

146 PLEDGED REVENUE COVERAGE, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Revenues as defined by Certificate Resolution: (1) Operating revenues... $ 60,175,995 $ 61,036,216 $ 60,751,400 $ 58,729,469 Interest and other income... 1,187, , , ,151 Capital contributions (excluding donated property) 1,962,397 3,234,026 1,338,432 1,835,014 63,325,667 65,024,524 62,694,745 61,114,634 Expenses as defined by Certificate Resolution: (2) Operating expenses... 56,571,456 54,950,818 54,277,545 54,012,100 Less: Depreciation expense... (6,621,863) (6,323,657) (6,393,956) (6,341,117) Impairment charges Required payments to City... (3,615,949) (3,721,882) (3,550,060) (3,463,859) 46,333,644 44,905,279 44,333,529 44,207,124 Net revenues available for debt service... 16,992,023 20,119,245 18,361,216 16,907,510 Annual Debt Service Requirements: (3) Principal... 5,460,000 5,110,000 3,700,000 6,670,000 Interest... 1,001,579 1,136,051 1,240,437 1,337,243 6,461,579 6,246,051 4,940,437 8,007,243 Coverage ratio (times) (4) Notes: (1) Revenues are defined under Resolution No , as amended, and include: gross revenues from sales of service, all income and earnings, including special assessments, connection fees, and other revenue as derived from operation of the utility systems. Revenues do not include proceeds from the sale of debt or property, grants from governmental agencies, contributions in aid of construction (other than connection fees), customer deposits, or moneys deposited into advance refunding escrow accounts. (2) Expenses are defined under Resolution No , as amended, as cost of "Operation and Maintenance," which includes all expenses for operating and maintaining the utility systems. Excluded from this definition are: payments in lieu of taxes paid to the City, depreciation, and extraordinary repairs or any allowance of renewals, replacements, or reserves thereof. (3) Annual debt service requirements are for all outstanding debt that are secured by a pledge of the net revenues derived from the operation of the utility systems (includes pro-rata amounts due for refunded obligations). The amounts reported as annual debt service requirements include only those amounts that were scheduled for payment for the period from October 1 through September 30, of each fiscal year. (4) The rate covenant established for revenue certificates requires that net revenues must equal or exceed 125% of annual debt service principal and interest requirements. 146

147 Table 13 Fiscal Year $ 57,193,863 $ 54,943,086 $ 59,878,525 $ 59,854,959 $ 56,937,294 $ 62,922, , , , , ,882 1,171,254 1,837,434 3,025,418 1,384, , ,365 1,014,468 59,637,370 58,495,097 61,834,041 61,061,475 58,172,541 65,107,922 54,856,534 51,641,870 53,945,192 56,670,998 52,971,378 59,001,340 (6,481,504) (6,470,740) (6,401,336) (6,502,283) (6,380,923) (6,324,910) (3,467,017) (3,258,726) (3,388,377) (3,564,277) (3,833,943) (3,601,594) (3,612,294) 41,649,287 41,782,753 43,979,579 46,334,772 42,988,861 49,064,136 17,988,083 16,712,344 17,854,462 14,726,703 15,183,680 16,043,786 2,055,000 5,334,243 5,616,031 4,880,956 5,762,816 5,685,020 1,343,975 2,057,386 2,404,629 2,521,878 2,475,242 2,457,884 3,398,975 7,391,629 8,020,660 7,402,834 8,238,058 8,142,

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149 DEMOGRAPHIC AND ECONOMIC STATISTICS, Table 14 LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Fiscal New County-wide County-wide Year Smyrna Annual Median Median County Ended Beach Personal Per Capita Household HUD Unemployment September 30, Population 1 Income 2 Income 3 Income 3 Income 3 Rate , ,666,382 30,806 n/a n/a 7.20% , ,532,410 31,798 n/a n/a 11.20% , ,959,808 23,547 43,409 n/a 12.40% , ,199,950 23,641 43,583 n/a 10.80% , ,395,744 23,736 43,777 n/a 8.80% , ,927,957 23,831 43,952 n/a 6.80% , ,640,143 22,415 45,054 n/a 5.90% , ,057,960 22,247 44,717 n/a 5.50% , ,064,522 22,285 44,793 n/a 5.10% , ,102,408 27,134 45,311 n/a 3.60% Source: 1 U.S. Department of Commerce, Bureau of Census, for 2016 and 2017 are estimated. 2008, 2010 U.S. Bureau of the Census, ESRI BIS forecasts for 2009, 2011, 2012, 2013, 2014, Amount computed from population and per capita personal income statistics for Volusia County, Florida. 3 Florida Research and Economic Database. Amounts indicated are for Volusia County, Florida. 149

150 PRINCIPAL EMPLOYERS, CURRENT AND NINE YEARS AGO September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida September 30, 2017 Percent to Total Total City Employer Employees Rank Employment Bert Fish Medical Center % Volusia County Public Schools % Publix Supermarkets % Wal-Mart Stores % City of New Smyrna Beach % Ocean View Nursing and Rehabilitation Center % Utilities Commission, NSB % McDonald's % Winn-Dixie Supermarkets % Vern's Insulation % Home Depot % New Smyrna Chevrolet Chrysler Jeep Dodge Total 2, % Estimated Labor Force in New Smyrna Beach 15,595 Source: InfoUSAgov Employer Database 2016, ed City of New Smyrna Beach 150

151 Table 15 September 30, 2008 Percent to Total Total City Employees Rank Employment % % % % % % % % % % % % 2, % 7,

152 FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Utilities Commissoners Executive Management Finance and Accounting: Accounting Billing and collections Materials management Information Technology Personnel Engineering: Management Environmental Electrical engineerning Electric: Operations Fleet Maintenance Transmission and distribution Substation and relay Water and Reclamation: Water production Water distribution Wastewater collection Wastewater treatment Internet Total Notes: All managers or directors are included with their respective operating divisions. Full-time equivalent employment is calculated by dividing total labor hours by 2,080 hours. 152

153 Table 16 Fiscal Year

154 OPERATING AND CAPITAL INDICATORS, LAST TEN FISCAL YEARS Year Ending September 30, UTILITIES COMMISSION, CITY OF NEW SMYRNA BEACH, FLORIDA New Smyrna Beach, Florida Electric: Net energy for load (million kwh) Retail energy sales (million kwh) Distribution loss factor (%) 6.68% 6.90% 7.01% 4.48% Annual peak energy demand (kw) 97, , ,000 91,000 Peaking Power Systems Nameplate rating (kw): Smith Street Generating Station (fuel oil) Field Street Generating Station (fuel oil) 53,059 53,059 53,059 53,059 W.E. Swoope Generating Station (fuel oil) Water: Maximum daily flow (MGD) Average daily treated flow (MGD) Minimum daily treated flow (MGD) Raw water pumped and treated (MG) 1, , , , CUP Allowance (1) Storage capacity (MGD) Water mains (miles) (2) Pumping stations Reclamation (Wastewater and Reuse): Maximum daily flow (MGD) Average daily treated flow (MGD) Minimum daily treated flow (MGD) Wastewater collected and treated (MG) 1, , , , Reclaimed water treated and pumped (MG) 1, , , , Collection system (miles) (2) Number of treatment plants Treatment capacity (MGD) Maximum plant capacity (MGD) Amount treated annually (MGY) 1,254 1,187 1,319 1,233 Percent of capacity utilized (MG) 49.00% 46.00% 52.00% 49.00% Percent of unused capacity (MG) 51.00% 54.00% 48.00% 51.00% Notes: kw = kilowatt; kwh = kilowatt hours; MG = million gallons; MGD = millions of gallons per day. (2) Third Avenue pumping station taken off-line and steel storage tank dismantled in 2000 (rebuilt in 2008). (3) Miles of water/wastewater mains do not include mileage installed by developers. 154

155 Table 17 Fiscal Year % 3.69% 5.07% 2.90% 5.64% 5.46% 86,000 86, ,000 99,000 99,000 89,000 12,540 12,540 12,540 12,540 12,540 12,540 53,059 53,059 53,059 53,059 53,059 53,059 5,145 5,145 5,145 5,145 5,145 5, , , , , , , , , , , , , , , , , , ,204 1,318 1,170 1,330 1,497 1, % 51.40% 46.00% 52.00% 59.00% 49.00% 52.90% 48.60% 54.00% 48.00% 41.00% 51.00% 155

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157 SUPPLEMENTAL AUDIT REPORTS 157

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