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Home My WebLink About2010 - 2011Comprehensive Annual Financial Report City of Sebastian, Florida For the Fiscal Year October 1, 2010 through September 30, 2011 The CAFR cover depicts aerial photographs of the City of Sebastian Municipal Airport's Hangar Projects. The top photograph illustrates the recently completed Hangar B building, and the photographs below are of recently installed wind turbines and Hangars A & B. The Hangar buildings were constructed for additional economic growth and are leased to private Sebastian companies. The wind turbines will provide the Municipal Airport with electrical savings for security lighting. Funding for the Hangar B project in the amount of $1,160, 000 was made possible by the Florida Department of Transportation. Notice to proceed for the Hangar B Building was issued to Ahrens Companies, Inc., on January S, 2011, and the project completed in October, 2011. Photographs provided courtesy of Robert Messersmith, Systems Engineer, City of Sebastian Gary Nicholas, Airport Operations Specialist, City of Sebastian CITY OF SEBASTIAN, FLORIDA L j 40 r HOME OF PELICAN ISLAND Comprehensive Annual Financial Report For the Year Ended September 30, 2011 CITY COUNCIL JimHill ................................................. Mayor DonWright .......................................... Vice -Mayor Andrea Coy .......................................... Councilmember Richard H. Gillmor ............................. Councilmember Eugene Wolff ....................................... Councilmember Prepared By: Administrative Services Department INTRODUCTORY SECTION This section contains the following subsections: ➢ Table of Contents ➢ Letter of Transmittal ➢ Certificate of Achievement for Excellence in Financial Reporting for Fiscal Year Ended September 30, 2010 ➢ Organizational Chart ➢ List of Officials CITY OF SEBASTIAN, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2011 TABLE OF CONTENTS INTRODUCTORY SECTION Page Tableof Contents.......................................................................................................................................... ii Letterof Transmittal...................................................................................................................................... v Certificate of Achievement for Excellence in Financial Reporting............................................................... ix OrganizationalChart ..................................................................................................................................... x Listof Officials............................................................................................................................................. xi FINANCIAL SECTION Independent Auditors' Report ....................................................................................................................... 3 Management's Discussion and Analysis....................................................................................................... 5 Basic Financial Statements Government -wide Financial Statements: Statementof Net Assets......................................................................................................................... 15 Statementof Activities........................................................................................................................... 16 Fund Financial Statements: Balance Sheet — Governmental Funds.................................................................................................... 18 Statement of Revenues, Expenditures, and Changes in Fund Balances — GovernmentalFunds........................................................................................................................... 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities....................................................................... 22 Statement of Net Assets — Proprietary Funds......................................................................................... 23 Statement of Revenues, Expenses, and Changes in Fund Net Assets — Proprietary Funds .................... 24 Statement of Cash Flows — Proprietary Funds...................................................................................... 25 Statement of Fiduciary Net Assets — Fiduciary Funds........................................................................... 27 Statement of Changes in Fiduciary Net Assets — Fiduciary Fund.......................................................... 28 Notes to Financial Statements.................................................................................................................. 29 Required Suonlementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual— General Fund........................................................................................................................... 52 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Discretionary Sales Tax Special Revenue Fund...................................................................... 53 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Riverfront Redevelopment Agency Special Revenue Fund ..................................................... 54 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Discretionary Sales Surtax Revenue Bonds 2003 Debt Service Fund ............................. 55 Notes to the Required Supplementary Information — Budget Comparisons .............................................. 56 Police Officers' Pension Plan — Schedule of Contributions from the Employer and other ContributingEntities.............................................................................................................................. 57 Other Post Employment Benefits — Schedule of Contributions from the Employer ........................... 57 Combining and Individual Fund Statements and Schedules Combining Balance Sheet — Nonmajor Governmental Funds....................................................................... 62 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances — Nonmajor GovernmentalFunds.................................................................................................................................. 64 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Local Option Gas Tax Special Revenue Fund............................................................................ 66 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Parking In -Lieu -Of Special Revenue Fund.............................................................. 67 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Recreation Impact Fee Special Revenue Fund............................................................................ 68 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Stormwater Utility Special Revenue Fund.................................................................................. 69 Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Law Enforcement Forfeiture Special Revenue Fund.................................................................. 70 ii Page Schedule of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — Stormwater Utility Revenue Bonds 2003 Debt Service Fund ..................................................... 71 Statement of Changes in Assets and Liabilities — Agency Fund................................................................... 72 Capital Assets Used in the Operation of Governmental Funds — Comparative Scheduleby Source................................................................................................................................... 73 Capital Assets Used in the Operation of Governmental Funds — Schedule byFunction and Activity........................................................................................................................... 74 Capital Assets Used in the Operation of Governmental Funds — Schedule of Changes byFunction and Activity........................................................................................................................... 75 STATISTICAL SECTION (Unaudited) Financial Trends Net assets by Component — Last Ten Fiscal Years................................................................................... 78 Changes in Net Assets — Last Ten Fiscal Years....................................................................................... 80 Fund Balances, Governmental Funds — Last Ten Fiscal Years................................................................ 84 Changes in Fund Balances, Governmental Funds — Last Ten Fiscal Years ............................................. 86 Program Revenues by Function/Program — Last Ten Fiscal Years.......................................................... 88 Revenue Capacity Tax Revenues by Source, Governmental Funds — Last Ten Fiscal Years ................................................ 90 Property Tax Rates, Direct and Overlapping Governments — Last Ten Fiscal Years ............................... 91 Assessed Valuation and Estimated True Values of Taxable Property — Last Ten Fiscal Years ............... 92 Principal Taxpayers — Year 2011 and Year 2000..................................................................................... 94 Property Tax Levies and Collections — Last Ten Fiscal Years................................................................. 95 Debt Capacity Ratios of Outstanding Debt by Type — Last Ten Fiscal Years................................................................. 96 Computation of Legal Debt Margin — September 30, 2011..................................................................... 97 Direct and Overlapping Governmental Activities Debt, General Obligation Bonds — September30, 2011.............................................................................................................................. 97 Ratios of General Bonded Debt Outstanding and Legal Debt Margin — Last Ten Fiscal Years .............. 98 Pledged Revenue Coverage — Last Ten Fiscal Years............................................................................... 100 Economic and Demographic Information Demographic and Economic Statistics — Last Ten Years......................................................................... 102 Principal Employers —Year 2011 and 2010............................................................................................. 104 Operating Information Full-time Equivalent City Government Employees by Function/Program — Last Ten Fiscal Years ........ 105 Operating Indicators by Function/Program — Last Ten Fiscal Years ....................................................... 106 Capital Asset Statistics by Function/Program — Last Ten Fiscal Years .................................................... 107 SINGLE AUDIT SECTION 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 Governmental Auditins Standards............................................................................................................. III Independent Auditors' Management Letter................................................................................................... 113 iii ClY OF SIE HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK iv anoF SIEIAN HOME OF PELICAN ISLAND March 21, 2012 Honorable Mayor and City Council City of Sebastian, Florida Dear Council Members: We are submitting the Comprehensive Annual Financial Report of the City of Sebastian, Florida for the fiscal year ended September 30, 2011, as prepared by the City's Administrative Services department. State law requires that every general-purpose local government publish within six months of the close of each fiscal year a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ended September 30, 2011. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based on a comprehensive framework of internal control that is established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. Chapter 218.39, Florida Statutes requires that the financial statements of the City of Sebastian be audited by a certified public accountant selected by the City Council. The City's independent Certified Public Accountants, Harris, Cotherman, Jones, Price & Associates, has issued an unqualified ("clean') opinion on the City of Sebastian's financial statements for the year ended September 30, 2011. The independent auditors' report is located on page 3 and 4. 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. The MD&A complements this letter of transmittal and should be read in conjunction with it. Profile of the Government The City of Sebastian, Florida is located in Indian River County approximately midway through the east coast of the Florida Peninsula (between Melbourne and Vero Beach) in an area known as the Treasure Coast. It is recognized as the Home of Pelican Island, the first designated wildlife refuge in the United States, a Millennium City, and a Tree City USA. It was first incorporated as the Town of Sebastian in 1924. In the late 1950s General Development Corporation purchased the land from the Mackle family of Miami and began the development of a planned community that is now the City of Sebastian. The City has a population of 21,929 living in an area of approximately 14.6 square miles. The City is empowered to levy a property tax on both real and personal property located within its boundaries. It also is empowered by state statute to extend its corporate limits by annexation, which it has done from time to time. v The City is a Florida municipal corporation with a five -member City Council. Council members serve a two-year term. Annual elections are held on the first Tuesday following the first Monday in November and two members are elected in even -numbered years and three members are elected in odd -numbered years. Elections are non -partisan and at -large. Mayor and Vice Mayor are elected from among the members of every newly seated Council at a Special meeting following the election each year. The City has operated under a Council -City Manager form of government since 1989. The City provides a wide range of services including general government administration, police protection, the construction and maintenance of local roads, public works, recreational and cultural activities, a golf course, a general aviation airport, and a building department to enforce building codes. This report includes all funds of the City. In evaluating the City as a reporting entity, we have included all component units for which the City Council is financially accountable. The component units have been blended with the financial statements presented for the Primary Government because the component unit's governing body is the same as the City Council or because the component unit exclusively serves the City. The blended component units are the Riverfront Redevelopment Agency and the Sebastian Police Officer's Pension Trust Fund. The Council is required to adopt a final budget no later than the close of the fiscal year. This annual budget serves as the foundation for the City's financial planning and control. The budget is prepared by fund, function (e.g., transportation), and department (e.g., public works). Shifts in appropriations within fund totals may be done administratively on the authority of the City Manager. Total fund appropriation changes and use of contingency appropriations must be approved by the City Council. Local Economv The region (which includes the City of Sebastian and the surrounding unincorporated area within the same county) has a fluctuating labor force depending on agricultural demand and a strong retirement community. Although the labor force fluctuates, unemployment in the region steadily declined through 2006 but has increased over the past five years to a range of 13-14%. The historical overall unemployment rate for the area over the past ten years and the projected unemployment rate for the next ten years are greater than that of the State of Florida. This high number is representative of the general economic difficulties being experienced in the area and the lack of job creation. The largest major occupational group is Office and Administrative Support Occupations (18%), followed by Sales and Related Occupations (13%) and Food Preparation and Serving Related Occupations (9%). According to the U.S. Census Bureau (2000), 86% of the population age 25 or older are high school graduates and 23.1 % hold a bachelor's degree or higher. The area median age for 2010 was 50.1 per the U.S Census Bureau and average wage is $34,684 per year, assuming a 40-hour work -week, per the Florida Research & Economic Database. The geographical area of the City of Sebastian, just north of the Treasure Coast, houses a number of high-tech industries including NASA and various aerospace industry - related businesses. In the past, this attracted a workforce with a higher than average education and technical skills to the vicinity but with the end of the Space Shuttle program, the loss of these activities has affected job availability. Lona-term Financial Planning The voters of Indian River County in November 2003 extended the Infrastructure Sales Surtax in the amount of $.01 per $1.00 sale for an additional fifteen years and seven months beginning in January 2004. This Infrastructure Sales Surtax is estimated to provide the City in excess of $40 million dollars over the life of the extension for the City's emergency vehicle and capital improvement needs. vi In addition, the City has funded a number of other capital projects with impact fees and has actively pursued grant funding for some major transportation and environmental improvements. It has also employed the use of a Community Redevelopment Agency that is funded by means of tax -increment financing. The millage was reduced from 3.3456 to 3.3041, although the City experienced another sizable decline in taxable value. Construction activity in fiscal year 2011 continued to be low, with just 51 permits being issued for new construction in fiscal year 2011 with a value of $10.2 million. The decline is primarily attributed to the slowdown of the housing market. General Fund unassigned fund balance and amounts committed by the financial policies resolution based on 30% of the general fund expenditures budget, were 48% of the general fund expenditures budget. The City has been steadfast and refused to spend down these balances due to uncertainty about the future due to the slow down of building activity and because the City understands reliance on accumulated fund balances to fund operating expenditures is not a prudent fiscal strategy. To this end, the budget for next year incorporates reductions in operating expenditures and plans for no reduction of fund balances. Maior Initiatives Administration — There were several significant initiatives during the past fiscal year. Through request for proposals, the City determined to continue with the same independent auditing firm to conduct the financial audits for the next three years, with an option to extend for two additional years. With the continued decline in taxable property values, management acted decisively to reduce personnel costs. In addition to continuing mandatory monthly furlough days and eliminating positions vacated through attrition, several management level positions were cut. Furthermore, collective bargaining agreements were negotiated that reduced benefits offered to new employees and offered no wage increases. Additionally, the City approved a change in the type of medical plan offered to all employees from a traditional co -pay medical plan to a high deductible plan with health reimbursement account debit cards in the amounts of $750 for single coverage and $1,500 for dependent coverage. By transitioning to this new plan, the City is transferring health care responsibility back to employees, and hopes to realize savings. These actions were all considered important to minimize personnel costs during these difficult economic times. Other initiatives included a detailed study of property values and evaluation of the appropriate amounts of insurance coverage, a successful endeavor to improve City garage operations and accountability, plus an upgrade on the video broadcasting capabilities for public meetings. Stormwater - The main focus of stormwater effort expended for the past fiscal year has continued to be on the City's Stormwater Management Program, including capital projects, maintenance, citizen response and education, and forward planning. In fiscal year 2007, City began a program to upgrade the current Swale system by installing quarter -round piping. The City also started outsourcing the swale and ditch maintenance work to enable City crews to focus on different stormwater maintenance practices. During fiscal year 2011, drainage improvements continued with the installation of quarter -round piping in additional areas of the City. Traffic & Transportation — The City continues working on transportation improvements. Funds were utilized in fiscal year 2011 to initiate an extension to Powerline Road, construct and repair sidewalks and to complete street resurfacing projects enabled by the 2010 bank note. To enhance aesthetics, the City obtained grant funding to continue the improvement of medians within the Highway 512 corridor that were initiated by Indian River County, and allocated funds to improve rights -of -way along U.S. Highway #1. Other projects being planned for future years include upgrading parking areas around Riverview Park, repairs to the bridge on Barber Street and working with the County to make intersection improvements. vii Airport - The Sebastian Municipal Airport's infrastructure is being developed with the intent of attracting economic development and stimulating the business climate in order to create jobs in the community. In fiscal year 2011, the City constructed Hangar B, adding a second City owned $15,000 square -foot manufacturing facility. The current Master Plan serves as the guiding document for airport planning. Land leases are a primary source of airport revenues and over 150 acres of property is available for lease, for both aviation and non -aviation businesses. Also important are sales from a self -serve fueling facility. The Airport's limited resources continue to be leveraged by aggressively seeking and obtaining grants available from the Florida Department of Transportation (FDOT) and Federal Aviation Administration (FAA) to provide the funding needed to develop the necessary infrastructure. Recent improvements include adding a hangar and constructing an access road. These and other ventures will help attract business to the Airport and thereby improve the Airport and City financial positions. Public Safetv — The decision to not replace three management level employees that retired during fiscal year 2011 led to a flattening in the organizational structure of the Police Department. The City continues to provide a Community Police Officer who participates in community events and offers special services, such as child safety seat inspections, youth safety talks, neighborhood safety meetings and security surveys. The School Resources Officer Program at the two elementary and one middle school located within the City is also continuing to offer DARE (Drug Abuse Resistance Education) courses to all 5th grade students and GREAT (Gang Resistance Education and Training) courses to all 71h grade students. In addition, the Sebastian Police Department K-9 Unit is still funded sufficiently to enable this capability on every work shift. The K-9 Unit is considered effective in assisting officers with narcotics detection, location of missing persons and tracking criminal suspects more expeditiously. Road Patrol and Special Operations continue to serve the community by patrolling the City to deter crime and maintain the community policing philosophy. The criminal investigations division continues to be fully functional, providing quality crime scene processing and investigations on all major crimes occurring in the City. 911 operators continue to provide 24 hour, seven day a week call taker and dispatch services to the police department and the community. Additionally the City continues to evaluate the efficiency of the Police Vehicle Replacement Program. Culture/Recreation — Parks and Recreation completed the dog park and made renovations to the recreational facilities at Schumann Park. It also initiated plans to place a canopy over part of the children's splash park and to build an office facility at the skate park. During the year, the City Council conducted a review of proposed projects in the community redevelopment area and reaffirmed some major capital projects that had been previously defined in the capital improvements program. With substantial grant funding, the City was able to acquire riverfront properties that will be renovated and developed as a "working waterfront" concept, which is expected to have a positive impact on the area. Awards and Acknowledg-ements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Sebastian for its comprehensive annual financial report for the fiscal year ended September 30, 2010. The Certificate of Achievement is a prestigious national award -recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both U.S. generally accepted accounting principles and applicable legal requirements. viii A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not be possible without the dedicated service of the Administrative Services department staff. Their efforts toward improving the accounting and financial reporting systems has led to the improved quality of information reported to the City Council, State and Federal agencies and the citizens of the City of Sebastian. We sincerely appreciate their contributions. Respectful y submitted, 4 1 n er Ci anager Kenneth W. Killgore Director of Finance ix Certificate of Achievement for Excellence in Financial Reporting Presented to City of Sebastian Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2010 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ja On OF ME � ►JkITED STATES y ANDCkWA cMity } ATfIK President ?per SEAL �#A Executive Director x CITY OF SEBASTIAN, FLORIDA ORGANIZATIONAL CHART CITIZENS OF SEBASTIAN CITY COUNCIL BOARDS & COMMISSIONS CITY CITY CITY CLERK I MANAGER ATTORNEY I I PUBLIC WORKS ADMINISTRATIVE GOLF COURSE COMMUNITY POLICE SERVICES DEVELOPMENT ADMINISTRATION '-� MAINTENANC FINANCE AND PLANNING E ACCOUNTING AND ZONING OPERATIONS ��F�F` HUMAN BUILDING STORMWATER RESOURCES DEPARTMENT DETECTIVE 77 FLEET..:: t MANAGEMENT INFORMATION AIRPORT DISPATCH SYSTEMS MAINTENANCE MANAGEMENT DEVE OPMEN ENFORCEMENT FACILITIES PROJECT CODE T RECREATION CEMETERY X1 CITY OF SEBASTIAN, FLORIDA CITY OFFICIALS City Manager City Clerk City Attorney DEPARTMENT HEADS: Police Chief Administrative Services Director Finance Director Public Works Director Building Official Golf Course Director Community Development and Airport Director u Im ' SALLY A. MAIO, MMC ROBERT GINSBURG MICHELLE MORRIS DEBRA KRUEGER KEI\1NETH W. KILLGORE JERRY CONVERSE WAYNE ESELTINE JOSEPH GRIFFIN xii FINANCIAL SECTION This section contains -the following Subsections: ➢ Independent Auditor's Report ➢ Management's Discussion and Analysis ➢ Government -wide Financial Statements ➢ Fund Financial Statements ➢ Notes to Financial Statements ➢ Required Supplementary Information ➢ Combining and Individual Fund Statements and Schedules I THIS PAGE INTENTIONALLY LEFT BLANK Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered 5070 North Highway AIA, Suite 250 Vero Beach, FL 32963 Tel 772-234-8484 Fax 772.234.8488 Independent Auditors' Report Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Sebastian, Florida (the "City") as of and for the year ended September 30, 2011, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Sebastian, Florida's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2011, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 13, 2012 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. "Providing Vision and Direction to our Clients" Member AICPA Member AICPA Division For CPA Firms Member FICPA Private Companies Practice Section 3 Harris, Cotherman, Jones, Price & Associates Certified Public Accountants -Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page two Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 5 through 14 and the budgetary comparison information on pages 52 through 55 and 66 through 72 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Sebastian, Florida's basic financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements, the capital assets used in the operation of government funds, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards and State Expenditures is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements, the capital assets used in operations, and the Schedule of Expenditures of Federal Awards and State Expenditures are the responsibility of management, and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections 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. AW tU4V:X_1U40-Jh0A&tt0(I Vero Beach, Florida March 13, 2012 O MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Sebastian's (the "City") discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the City's financial activity, (c) identify changes in the City's financial position, (d) identify any material deviations from the financial plan, and (e) identify individual fund issues or concerns. Since the Management's Discussion and Analysis (MD&A) is designed to focus on the current years activities, resulting changes and currently known facts, please read it in conjunction with the Transmittal Letter (beginning on page v) and the City's financial statements (beginning on page 15). HIGHLIGHTS Financial Highlights • The assets of the City exceeded its liabilities at the close of the fiscal year 2011 by $52,468,800 (net assets). Of this amount, $3,408,131 (unrestricted net assets) may be used to meet the City's on -going obligations to citizens and creditors. • The city's total net assets decreased by $163,205 resulting from a decrease of $321,782 from governmental activities and an increase of $158,577 from business -type activities • Governmental funds reported a combined ending fund balance of $11,345,613, a decrease of $3,023,829 in comparison with the prior year. Approximately 16% of this amount, $1,784,413 is unassigned and available for spending, a decrease of $380,497 from fiscal year 2010 due to less property tax revenue. • The golf course fund reported a lower deficit in unrestricted net assets, primarily due to no longer having debt service payments. The airport deficit is the result of investment in capital assets that will ultimately be beneficial. The building enterprise fund is using accumulated net assets to sustain services until construction activity increases. USING THIS ANNUAL REPORT The annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities (on pages 15, 16, and 17) provide information about the activities of the City as a whole and present a longer -term view of the City's finances. Fund financial statements begin on page 18. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City's operations in more detail by providing information about the City's most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government. Reporting the City as a Whole Our analysis of the City as a whole begins on page 15. One of the most important questions asked about the City's finances is, "Is the City as a whole better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used in most private -sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net assets and changes in them. You can think of the City's net assets — the difference between assets and liabilities — as one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net assets, is one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City's property tax base and the condition of the City's roads, to assess the overall health of the City. 5 In the Statement of Net Assets and the Statement of Activities, we divide the City into two kinds of activities: Governmental activities — Most of the City's basic services are reported here, including the police, public works, parks and recreation, and general administration. Taxes, franchise fees, and state shared revenue finance most of these activities. Business -type activities — The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City's Golf Course, Airport, and Building operations are reported here. Fund Financial Statements Our analysis of the City's major funds begins on page 18. The fund financial statements provide detailed information about the most significant funds — not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, the City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money (like the local option gas tax and infrastructure sales surtax (a.k.a. Discretionary Sales Tax)). Governmental Funds Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliations at the bottom of the fund financial statements. The City maintains sixteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, discretionary sales tax special revenue fund, riverfront redevelopment special revenue fund, discretionary sales surtax revenue bonds 2003 fund, transportation improvements capital project fund and stormwater utility improvements capital project fund, all of which are considered to be major funds. Data from the other eleven governmental funds are combined into a single, aggregated presentation. Individual fund data for each nonmajor governmental fund is provided in the form of combining statements beginning on page 60. Annual budgets are adopted for all governmental funds except the capital project funds, which are approved on a "life of the project basis", and the permanent fund, which is not budgeted. The budgetary comparison statements have been provided for all governmental funds except capital project funds to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 18-22 of this report. Cs Proprietary Funds When the City charges customers for the services it provides — whether to outside customers or to other units of the City — these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City's enterprise funds (a component of proprietary funds) are the same as the business -type activities we report in the government -wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The basic proprietary fund financial statements can be found on page 23-26 of this report. Fiduciary Funds The City is the trustee, or fiduciary, for the Police Officers' Pension Plan. The City's fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets on page 27 and 28. We exclude these activities from the City's other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. The City holds deposits for various individuals and businesses for contract performance that are then returned when the contract has been completed. These deposits are accounted for in an Agency fund, where assets equal liabilities. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 29- 50 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's major funds budget and actual comparison and progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 51-57 of this report. THE CITY AS A WHOLE Financial Analysis of the City as a Whole The City's combined net assets decreased $.1 million from $52.6 million to $52.5 million or .2%. Looking at the net assets and net revenues of the governmental and business -type activities, a decrease of .3 million occurred in the net assets of governmental -type activities and an increase of .2 million occurred in the business -type activities. Our analysis focuses on net assets (Table 1) and changes in net assets (Table 2) of the City's governmental and business -type activities. 7 GOVERNMENT -WIDE STATEMENTS Statement of Net Assets The following table reflects the condensed Statements of Net Assets: Statements of Net Assets as of September 30, 2011 and 2010 (in thousands) Governmental Activities Business -type Activities Total Primary Government 2011 2010 2011 2010 2011 2010 Current and other assets $ 12,665 $ 15,664 $ (54) $ 166 $ 12,611 $ 15,830 Capital assets 43,779 42,378 11,851 11,390 55,630 53,768 Total assets $ 56,444 $ 58,042 $ 11,797 $ 11,556 $ 68,241 $ 69,598 Non -current liabilities $ 14,173 $ 15,517 $ 237 $ 232 $ 14,410 $ 15,749 Other liabilities 1,008 940 354 277 1,362 1,217 Total liabilities $ 15,181 $ 16,457 $ 591 $ 509 $ 15,772 $ 16,966 Net assets: Invested in capital assets, net of related debt $ 31,542 $ 28,939 $ 11,851 $ 11,390 $ 43,393 $ 40,329 Restricted 5,668 8,757 - - 5,668 8,757 Unrestricted 4,053 3,889 (645) (343) 3,408 3,546 Total net assets $ 41,263 $ 41,585 $ 11,206 $ 11,047 $ 52,469 $ 52,632 For more detail information see the Statement of Net Assets on page 15. Total net assets of the governmental activities decreased from $41.585 million to $41.263 million. Total net assets for business -type activities increased from $1 1.047 million to $11.206 million. The increase in governmental activities capital assets is due to projects that were completed during the period. The decrease in governmental activities non -current liabilities is due to normal amortization of the long-term debt. The increase in unrestricted net assets is mainly due to the corresponding increase in restricted net assets caused from investment in capital assets. The increase in net assets for business -type activities is primarily due to the increase in capital assets funded by the Florida Department of Transportation for the City's municipal airport. The following table shows the revenue and expenses of the total primary government. Changes in Net Assets For the Fiscal Years Ended September 30, 2011 and 2010 (in thousands) Governmental Business -type Total Primary Activities Activities Government 2011 2010 2011 2010 2011 2010 REVENUES Program revenues: Charges for services $ 1,220 $ 1,266 $ 2,269 $ 1,959 $ 3,489 $ 3,225 Operating grants and contributions 197 210 - - 197 210 Capital grants and contributions 838 3,179 900 905 1,738 4,084 General revenues: Property taxes 3,454 4,164 - - 3,454 4,164 Other taxes 4,751 4,765 - 4,751 4,765 Intergovernmental 1,869 1,825 - - 1,869 1,825 Other 1,467 1,523 4 218 1,471 1,741 Total revenues 13,796 16,932 3,173 3,082 16,969 20,014 EXPENSES General government 2,767 3,309 - - 2,767 3,309 Public safety 5,547 5,721 - - 5,547 5,721 Physical environment 1,559 1,948 - - 1,559 1,948 Transportation 2,263 1,864 - - 2,263 1,864 Economic environment 209 136 - - 209 136 Culture and recreation 1,227 1,240 - - 1,227 1,240 Golf Course - - 1,355 1,388 1,355 1,388 Airport - - 1,189 1,068 1,189 1,068 Building - - 470 497 470 497 Interest and fiscal charges 546 566 - - 546 566 Total expenses 14,118 14,784 3,014 2,953 17,132 17,737 Change in net assets before transfers (322) 2,148 159 129 (163) 2,277 Transfers - (7) - 7 - - Increase in net assets (322) 2,141 159 136 (163) 2,277 Net assets - October 1, 2010 41,585 39,444 11,047 10,911 52,632 50,355 Net assets - September 30, 2011 $ 41,263 $ 41,585 $ 11,206 $ 11,047 $ 52,469 $ 52,632 Overall the total revenues decreased $3.045 million from the previous year, primarily as a result of large decreases in property taxes and in capital grants. The total expenses of all programs decreased by $605 thousand because of a reduction in general government expenses. Our analysis below separately considers the operations of governmental and business -type activities. Governmental Activities Governmental activities expenses exceed revenues by $.322 million. Total revenues decreased approximately $3.136 million from the previous year. The decrease was primarily due to receiving less in property taxes and capital grant proceeds. About the same amount of revenues were received in other categories. Total expenses decreased $666 thousand from the previous year. The largest decreased in spending was in the category of general government. The following is a graphic illustration of the comparison for governmental activities revenue and expenses. Governmental Activities Comparison for Fiscal Year 2011 and Fiscal Year 2010 7,000 , m 6,000 � 5,000 - c 4,000 - — - - - - E r 3,000 --' — Q E, 2,000It 1,000 ki °t set s`��ta �a��ta ett9 ta�ret a�tp'4`e�tate` e�� tn�e�� SaSe�t°n�e pt�a�v°t o�ee� ea�v°e �` crept at�e5`OQeta GaQ" 4t°� Otet�°�e O��eeta��'° 4v'peaNe�� Cta�S�.,9, aoa ��°oft G'�` ♦n Ge° 4r9s ° G J`i�tete5t ° Revenue/Expense types 02011 ■ 2010 Business -type Activities Revenues of the City's business -type activities (see Table 2) increased $91 thousand primarily because of increased collections of charges for services. Expenses increased by $61 thousand for all the City's business -type activities, with loss on disposal of capital assets and depreciation increases for the Airport being the primary cause. Expenses for the Golf Course declined by 2.4%, which was due to reductions in staffing and no longer having interest on outstanding bonds. The Building Enterprise has been reduced to minimal staffing in order to preserve cash reserves until the economy and building activity resumes. The City's Municipal Airport enjoys a continued interest by the Florida Department of Transportation -Aviation Section and Federal Aviation Administration to upgrade the airport facilities as evidenced by repeated support via grant funding. The following is a graphic comparison of the City's business -type activities. Business -Type Activities Comparison for Fiscal Year 2011 and Fiscal Yeal 2010 2,500 2,000 - N w 1,500 E 0 E c L Q F 11000 1 500 1 "� �;�e5 a��5 �SeS �SeS �SeS t Se ta�f't e'�Qe e'�Qe e'�Qe Grat�es�° GaQty °``G°Jtse �tQ°tx $J``avpG, G Revenue/Expense types ❑2011 ■2010 I 10 FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As the City completed the fiscal year, its governmental funds (as presented in the balance sheet on pages 18-19) reported a combined fund balance of $11.3 million, which is a decrease of $3.1 million from the prior year of $14.4 million. Approximately 15.7% of this total amount ($1.8 million) constitutes unassigned fund balance, which is available for spending at the City's discretion. The remainder of fund balance is classified as nonspendable ($1.8 million), restricted ($4.7 million), committed ($2.9 million) or assigned ($.02 million). The general fund is the chief operating fund of the City. At the end of the fiscal year, unassigned fund balance of the general fund was $1,784,413, while total fund balance was $5,102,458. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 17 percent of total general fund expenditures, while total fund balance represents 48 percent of that same amount. The fund balance of the City's general fund decreased by $509,941 during the current fiscal year. Key factors in this reduction are as follows: • Property tax revenues decreased by $578,240 due to reductions in taxable property values. • Investment earnings decreased $74,339 due to lower rates of return. • Public utility taxes increased by $44,705. • Franchise fees decreased by $44,006. • All other revenues increased by $13,189. • Transfers in from other Funds decreased by $28,161 because less could be transferred from the cemetery trust fund. • Expenditures decreased $402,036 due to reductions in employees and cuts in other operating accounts. The discretionary sales tax revenue special revenue fund has a total fund balance of $1,623,442, an increase from the $1,379,095 total fund balance of the prior year. Funds are intentionally being accumulated for projects that are planned in future years. The riverfront redevelopment special revenue fund has a total fund balance of $455,810. The decrease from the $682,591 total fund balance of the prior year is mainly due to receiving less tax increment revenue and the funding of renovations to the properties acquired on the riverfront. The discretionary sales surtax revenue bonds 2003 fund has a total fund balance of $1,556,577, all of which is restricted for debt service on the bonds. The transportation improvements capital project fund has a total fund balance of $52,506, all of which is encumbered or reserved for transportation related construction such as roads, intersections and sidewalks. The stormwater utility improvements capital project fund has a total fund balance of $13,332, all of which is reserved for stormwater capital projects. 11 Proprietary Funds The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. The total net assets of the golf course fund at the end of the fiscal year amounted to $358,155, while the unrestricted net assets (deficit) amounted to ($216,241). Compared to the prior year in the same category, net assets are $27,155 more than the prior year, while the unrestricted net assets (deficit) has a decrease of $119,706 from the prior year. This is mainly because of no longer having payments on long-term debt. Detailed golf course net assets information is presented on page 23. The total net assets of the airport fund at the end of the fiscal year amounted to $10,386,980, while the unrestricted net assets (deficit) amounted to ($888,827). Compared to the prior year in the same category, net assets have increased by $196,818 while the unrestricted net assets decreased by $363,643. The decrease in unrestricted net assets is mainly due to the construction of airport capital projects. The total net assets of the building fund at the end of the fiscal year amounted to $460,806, while the unrestricted net assets amounted to $460,448. The building fund continues to experience operating losses, as a result of the slowdown in activity and drop in collections of building permit fees. Other factors concerning the finances of these three funds have already been addressed in the discussion of the City's business -type activities. Budgetary Highlights Over the course of the fiscal year, the City Council revised the City budget four times. These budget amendments fall into three categories. The first category includes amendments and supplemental appropriations that were approved shortly after the beginning of the year and reflect fund balances carried over from the prior fiscal year to reappropriate transfers to cover certain purchase orders and capital projects. The second category includes adjustments for unanticipated revenues. The third category includes supplemental appropriations to cover unanticipated items or project costs that were above or below budgeted amounts. The main components of the increase are as follows: • $2,004,631 supplemental appropriation to General Fund, Local Option Gas Tax, Discretionary Sales Tax and Recreation Impact Fee Funds to cover transfers for open purchase orders and capital projects that were carried forward from the prior fiscal year. • $920 supplemental appropriation for a donation for police equipment from the Women's Club. • $30,118 supplemental appropriation to make an exchange to get new automatic defibrillators. • $2,421 supplemental appropriation to apply a refund from a previous purchase to the purchase of evidence collection equipment needed by the Police Department. • $173,552 reduction to appropriations in the Discretionary Sales Tax Fund for police vehicle replacements and $2,448 for accounting software. • $29,197 reduction to appropriations in the Recreation Impact Fee Fund for the splash pad canopy and $489 for the Periwinkle Stormwater Park project. • $60,000 supplemental appropriation in the Discretionary Sales Tax Fund for a new phone system. • A net change of $72,399 in funding in the Discretionary Sales Tax Fund between the Middle Stonecrop and Potomac Road Crossing projects. • $9,195 supplemental appropriation in the Discretionary Sales Tax Fund for the Highway 512 Corridor project. • $63,000 appropriation in the Recreation Impact Fee Fund to do a project at the Easy Street Park. • $48,660 supplemental appropriation in the Recreation Impact Fee Fund to the Barber Street Football Field Expansion project. • $2,456 reduction to appropriations in the Recreation Impact Fee Fund to the Skate Park Office project. • $245,283 change in appropriations in the Discretionary Sales Tax Fund resulting from several projects being finalized and a change in the funding source for the U.S.#1 Improvements project. • $243,411 reduction in the River -front Redevelopment Fund to change the Riverview Park Lift Station to Grant funding and take out funding for the Presidential Streets that was deferred to the 2012 fiscal year. • $199,585 reduction in the Recreation Impact Fee Fund for the U.S.#1 Improvements project. • $33,946 reduction in the Stormwater Utility Fee Fund for equipment that was not affordable. 12 During the fiscal year, total general fund actual revenues were less than final amended budgetary estimates and total general fund actual expenditures were less than the final amended budgetary estimates. The shortfall in anticipated revenues was mainly due to a decline in franchise fees and public utility taxes received from Florida Power and Light Company. A positive overall variance on expenditures resulted in a lower draw on existing fund balances than would have otherwise occurred. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year 2011 the City had $85,893,089 invested in a broad range of capital assets, including land, police and public works equipment, buildings, park facilities, roads, bridges, and stormwater drainage structures. This amount represents a net increase (including additions and deductions) of $4,950,984, or 6.1%, over last year. The following table illustrates the changes in capital assets. See page 40 and page 41 in the notes to the financial statements for detailed changes in capital assets. Land Buildings Improvements Equipment Infrastructure Construction -in Progress Table 3 Governmental Business -type Activities Activities Totals 2011 2010 2011 2010 2011 2010 $ 8,007,437 $ 8,007,437 $ 9,060 $ 9,060 $ 8,016,497 $ 8,016,497 12,370,759 12,061,711 6,335,323 5,083,230 18,706,082 17,144,941 5,992,537 5,738,546 1,909,804 1,942,229 7,902,341 7,680,775 8,028,080 7,742,063 935,283 1,033,439 8,963,363 8,775,502 33,628,446 30,891,580 7,468,512 7,477,976 41,096,958 38,369,556 I,207,848 951,144 3,690 1,207,848 954,834 Totals $ 69,235,107 $ 65,392,481 $ 16,657,982 $ 15,549,624 $ 85,893,089 $ 80,942,105 Governmental activities had the following major increases during the fiscal year: • An increase in buildings mainly due to renovations to the property at the riverfront. • An increase in improvements mainly due to additional facilities added to parks. • An increase in equipment mainly due to the purchase of broadcasting and computer equipment. • An increase in infrastructure mainly due to making roadway and stormwater system improvements. • An increase in construction -in -progress mainly due to major road construction and median improvements that were not complete at year end. Business -type activities had the following major changes during the fiscal year: • An increase in buildings at the Airport with the construction of a new hangar. • A decrease in other categories due to recording retirement of capital assets. Debt On September 30, 2011, the City had $12,246,000 in bonds and notes outstanding versus $13,449,000 on September 30, 2010 — as shown in the table on the following page: The decrease in debt is attributable to the normal amortization of the outstanding issues. The Infrastructure Sales Surtax Revenue Bonds, Series 2003 and Series 2003A and the Stormwater Utility Revenue Bonds, Series 2003 were initially insured by AAA rated insurance agencies and rated AAA, which is the highest rating given by rating agencies. However, ratings on the insurance agencies have since been downgraded. All of the City's other debt, primarily notes and a capital lease, are not rated. Other obligations of the City include accrued vacation pay and sick leave. Additional information on the City's long-term debt can be found on pages 43 through 45 in the notes to the financial statements. 13 Long-term Debt For the Fiscal Years Ended September 30, 2011 and 2010 (in Thousands) Governmental Business -type Activities Activities 2011 2010 2011 2010 Infrastructure sales surtax revenue bonds, Series2003 $ 5,035,000 $ 5,655,000 Infrastructure sales surtax revenue bonds, Series 2003A 1,180,000 1,325,000 Stormwater utility revenue bonds, Series 2003 3,785,000 4,055,000 Totals 2011 2010 $ - $ 5,035,000 $ 5,655,000 1,180,000 1,325,000 3,785,000 4,055,000 Notes payable (backed by local option gas tax) 2,246,000 2,414,000 - 2,246,000 2,414,000 Totals $ 12,246,000 $ 13,449,000 $ $ $ 12,246,000 $ 13,449,000 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials considered many factors when setting the fiscal year 2012 budget, tax rates, and fees that will be charged for the business -type activities. One of those factors is the economy. Sebastian's local economy consists largely of retail and service industries. Less than one percent is devoted to industrial activities. Construction of new homes is the largest single business in the area. Some of the largest retail stores include Publix Supermarket and Wal-Mart Stores, Inc.® The Indian River County unemployment rate in September 2011 was 13.6% down from 15.2% in the previous year, which is a positive sign and analogous to the economic pattern existing throughout the state and nation. Again in fiscal year 2011, a major reduction in property value (a 9.86% decrease) was experienced but somewhat less than experienced the past few years. These indicators were taken into account when adopting the General Fund budget for fiscal year 2012. Amounts available for appropriation in the General Fund budget are $9,921,464, a decrease of 5.1% from the original fiscal year 2011 budget of $10,454,340. Uncertainty about the low amount of building activity and concern about additional measures that may be enacted by the State to limit revenues and spending has caused the City to limit spending. The City has determined that it should continue to proceed cautiously. The Golf Course experienced some increase in golf revenues in fiscal year 2011 mainly due to a slight increase in number of rounds being played. This revenue increase and with no longer having to cover a payment on long-term debt enabled an improvement in the Golf Courses financial position. Even so, a temporary interfund loan from General Fund was made at the end of the year to provide sufficient cash flow. It is expected that with a reasonably good level of revenues in the coming year, the current loan can be repaid and further loans will not be necessary. General Fund also made a temporary interfund loan to the Airport in order to cover capital project costs that will eventually be reimbursed by a Florida Department of Transportation grant. It is expected that repayment will be made after receipt of the grant funds. REQUEST FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional information, contact the Administrative Services Department at City of Sebastian, 1225 Main Street, Sebastian, Florida 32958. 14 City of Sebastian, Florida Statement of Net Assets September 30, 2011 Governmental Business -type Activities Activities Total ASSETS Cash and cash equivalents $ 249,468 $ 59,186 $ 308,654 Investments 6,348,222 591,307 6,939,529 Receivables 992,897 605,079 1,597,976 Internal balances 1,343,550 (1,343,550) - Prepaid items 161,251 19,722 180,973 Inventory 65,368 14,211 79,579 Restricted assets: Temporarily restricted: Cash and cash equivalents 94,982 - 94,982 Investments 2,184,249 - 2,184,249 Permanently restricted: Investments 705,445 - 705,445 Overfunded pension costs 141,337 - I41,337 Deferred charges 378,107 - 378,107 Capital assets not being depreciated: Land 8,007,437 9,060 8,016,497 Construction in progress I,207,848 - 1,207,848 Capital assets (net of accumulated depreciation): Buildings 8,922,248 5,438,009 14,360,257 Improvements other than buildings 3,546,201 1,209,096 4,755,297 Machinery and equipment 1,302,227 183,168 1,485,395 Infrastructure 20,793,242 5,011,228 25,804,470 Total assets 56,444,079 11,796,5I6 68,240,595 LIABILITIES Accounts payable and other current liabilities 789,480 210,832 1,000,312 Accrued interest payable 216,638 - 216,638 Unearned revenues 2,191 143,271 145,462 Non -current liabilities: Due within one year 1,421,149 7,962 1,429,111 Due in more than one year 12,751,762 228,510 12,980,272 Total liabilities 15,181,220 590,575 15,771,795 NET ASSETS Invested in capital assets, net of related debt 31,541,953 11,850,561 43,392,514 Restricted for: Debt service 1,739,597 - 1,739,597 Capital 1,977,666 - 1,977,666 Perpetual care: Expendable 214,334 - 214,334 Nonexpendable 705,445 - 705,445 Other expenditures 1,031,113 - 1,031,113 Unrestricted 4,052,751 (644,620) 3,408,131 Total net assets $ 41,262,859 $ 11,205,941 $ 52,468,800 The accompanying notes to financial statements are an integral part of this financial statement. 15 Function/Program Governmental activities: General government Public safety Physical environment Transportation Economic environment Cultural/recreation Interest and fiscal charges Total governmental activities Business -type activities: Golf Course Airport Building Total business -type activities Total government City of Sebastian, Florida Statement of Activities For the year ended September 30, 2011 Charges for Expenses Services Program Revenues Operating Capital Grants and Grants and Contributions Contributions $ 2,766,575 $ 197,945 $ 45,094 $ - 5,546,632 92,350 142,087 - 1,558,974 868,059 - 61,959 2,263,367 - 9,353 734,030 208,518 - - - 1,227,198 61,353 - 42,253 546,103 - - - 14,117,367 1,219,707 196,534 838,242 1,355,266 1,382,421 - - 1,188,788 485,229 - 900,340 470,406 401,021 - - 3,014,460 2,268,671 - 900,340 $ 17,131,827 $ 3,488,378 $ 196,534 $ 1,738,582 General Revenues: Property taxes, levied for general purposes Sales and use taxes Franchise fees State shared revenues not restricted to specific programs Interest earnings Miscellaneous Total general revenues Change in net assets Net assets - beginning Net assets - ending The accompanying notes to financial statements are an integral part of this financial statement. 16 Net (Expense) Revenue and Changes in Net Assets Governmental Business -type Activities Activities Total $ (2,523,536) $ - $ (2,523,536) (5,312,195) - (5,312,195) (628,953) - (628,953) (1,519,984) - (1,519,984) (208,518) - (208,518) (1,123,595) - (1,123,595) (546,103) - (546,103) (11,862,884) - (11,862,884) - 27,155 27,155 - 196,781 196,781 - (69,385) (69,385) - 154,551 154,551 (11,862,884) 154,551 (11,708,333) 3,453,778 - 3,453,778 4,751,021 - 4,751,021 1,184,686 - 1,184,686 1,868,555 - 1,868,555 111,943 4,026 115,969 171,119 - 171,119 11,541,102 4,026 11,545,128 (321,782) 158,577 (163,205) 41,584,641 11,047,364 52,632,005 $ 41,262,859 $ 11,205,941 $ 52,468,800 17 City of Sebastian, Florida Balance Sheet Governmental Funds September 30, 2011 Discretionary Sales Surtax Discretionary Riverfront Revenue Transportation General Sales Tax Redevelopment Bonds 2003 Improvements ASSETS Cash and cash equivalents $ 193,051 $ 8,783 $ 11,436 $ 19,519 $ 18,283 Investments 3,719,094 839,044 444,588 1,537,058 370,000 Accounts receivables 255,949 - - - - Due from other funds 628,550 - - - - Due from other governments 234,584 200,615 - - 176,100 Inventory 65,368 - - - - Prepaid items 81,627 - - - - Advance to other funds 200,000 575,000 - - - Total assets 5,378,223 1,623,442 456,024 1,556,577 564,383 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 245,254 214 - 435,432 Retainage payable - - - - 76,445 Due to other funds - - - - - Due to other governments 28,320 - - - - Deferred revenues 300 - - - - Other deposits held in escrow 1,891 - - - - Totalliabilities 275,765 - 214 - 511,877 Fund balances: Nonspendable 346,995 575,000 - - - Restricted - 1,048,442 455,810 1,556,577 52,506 Committed 2,949,139 - - - - Assigned 21,911 - - Unassigned 1,784,413 - - - - Total fund balances 5,102,458 1,623,442 455,810 1,556,577 52,506 Total liabilities and fund balances $ 5,378,223 $ 1,623,442 $ 456,024 $ 1,556,577 $ 564,383 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources, therefore, are not reported in the funds. Negative net pension obligation resulting from overfunding of the police officers' pension plan. Accrued other post employment and termination benefits are not financial uses, therefore, are not reported in the funds. Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Accrued long term debt interest expenses are not financial uses, therefore, are not reported in the funds. Some interest receivables are not financial resources in the current period and, therefore, are not reported in the funds. Net assets of governmental activities The accompanying notes to financial statements are an integral part of this financial statement. 18 Stormwater Other Total Utility Governmental Governmental Improvements Funds Funds $ 13,332 $ 80,046 $ 344,450 - 2,328,132 9,237,916 - - 255,949 - 628,550 117,501 728,800 - 65,368 - 79,624 161,251 - - 775,000 13,332 2,605,303 12,197,284 3,815 684,715 - 76,445 60,000 60,000 - 28,320 300 - 1,891 63,815 851,671 - 919,779 1,841,774 13,332 1,621,709 4,748,376 - - 2,949,139 - - 21,911 - - 1,784,413 13,332 2,541,488 11,345,613 $ 13,332 $ 2,605,303 43,779,203 141,337 (326,696) (13,468,108) (216,638) 8,148 $ 41,262,859 19 City of Sebastian, Florida Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2011 Discretionary Sales Surtax Discretionary Riverfront Revenue Transportation General Sales Tax Redevelopment Bonds 2003 Improvements REVENUES: Taxes: Property $ 3,156,158 $ - $ 297,620- Public utility 2,392,345 - - - Sales - 2,358,676 - - Motor fuel - - - - - Franchise fees 1,184,686 - - - Licenses and permits 23,646 - - - - Intergovernmental 2,002,032 - - - 176,100 Impact fees - - - - Charges for services 260,838 - - - Fines 80,654 - - - - Investment earnings 53,185 5,377 5,152 5,748 - Contributions and donations 47,409 - - - 350 Other revenue 142,227 - 16,264 - - Total revenues 9,343,180 2,364,053 319,036 5,748 176,450 EXPENDITURES: Current: General government 2,539,211 - - - - Public safety 5,029,108 - - - - Physical environment 1,129,621 - - - - Transportation 930,525 - - - - Economic environment - - 188,918 - - Culture and recreation 903,836 - - - - Debt Service: Principal - - - 765,000 - Interest and fiscal charges - - - 254,612 - Capital outlay 57,547 - - - 2,228,125 Total expenditures 10,589,848 - 188,918 1,019,612 2,228,125 Excess (deficiency) of revenues over (under) expenditures (1,246,668) 2,364,053 130,118 (1,013,864) (2,051,675) OTHER FINANCING SOURCES (USES) Transfers in 736,727 - - 1,015,787 1,615,193 Transfers out - (2,119,706) (356,899) - - Total other financing sources (uses) 736,727 (2,1 19,706) (356,899) 1,015,787 1,615,193 Net changes in fund balances (509,941) 244,347 (226,781) 1,923 (436,482) Fund balances - beginning 5,535,011 1,379,095 682,591 1,554,654 488,988 Fund balances - ending $ 5,025,070 $ 1,623,442 $ 455,810 $ 1,556,577 $ 52,506 The accompanying notes to financial statements are an integral part of this financial statement. 20 Stormwater Other Total Utility Governmental Governmental Improvements Funds Funds - $ - $ 3,453,778 - - 2,392,345 - - 2,358,676 - 557,930 557,930 - - 1,184,686 - - 23,646 - 71,315 2,249,447 - 42,250 42,250 - 861,129 1,121,967 - 880 81,534 - 34,333 103,795 585 5,360 53,704 - 12,628 171,119 585 1,585,825 13,794,877 2,539,211 - 1,600 5,030,708 36,584 104 1,166,309 - 286,996 1,217,521 - 188,918 903,836 - 438,000 1,203,000 - 266,540 521,152 705,329 1,057,050 4,048,051 741,913 2,050,290 16,818,706 (741,328) (464,465) (3,023,829) 597,189 1,411,762 5,376,658 - (2,900,053) (5,376,658) 597,189 (1,488,291) - (144,139) (1,952,756) (3,023,829) 157,471 4,571,632 14,369,442 13,332 $ 2,618,876 $ 11,345,613 21 City of Sebastian, Florida Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended September 30, 2011 Net change in fund balances - total governmental funds $ (3,023,829) Amount reported for governmental activities in the statement of activities are different because: Some interest revenues reported in the statement of activities do not constitute current financial resources, therefore, are not reported as revenues in governmental funds. 8,148 Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. 1,415,673 Governmental funds only report the disposal of assets to the extent proceeds are received from the sale. In the statement of activities, a gain or loss is reported for each disposal. (14,474) Repayment of bond principal, note principal, and capital lease principal are expenditures in the governmental funds, but the payment reduces long-term liabilities in the statement of net assets. 1,203,000 Some expenses reported in the statement of activities do not require the use of current financial resources, therefore, are not reported as expenditures in the governmental funds. 89,700 Change in net assets of governmental activities $ (321,782) The accompanying notes to financial statements are an integral part of this financial statement. 22 City of Sebastian, Florida Statement of Net Assets Proprietary Funds September 30, 2011 Enterprise Funds Golf Course Airport Building Totals ASSETS Current assets: Cash and cash equivalents $ 5,755 $ 6,671 $ 46,760 $ 59,186 Investments - - 591,307 591,307 Accounts receivable 25,180 - 25,180 Due from other governments 579,883 - 579,883 Interest receivable - - 16 16 Inventory 11,425 2,786 - 14,211 Prepaid items 8,217 9,730 1,775 19,722 Total current assets 25,397 624,250 639,858 1,289,505 Noncurrent assets: Capital assets: Land - 9,060 - 9,060 Buildings 331,228 6,004,095 6,335,323 Improvements other than buildings 271,475 1,638,329 - 1,909,804 Machinery and equipment 229,503 649,630 56,150 935,283 Infrastructure 1,100,951 6,367,561 - 7,468,512 Less accumulated depreciation (1,358,761) (3,392,868) (55,792) (4,807,421) Total noncurrent assets 574,396 11,275,807 358 11,850,561 Total assets 599,793 11,900,057 640,216 13,140,066 LIABILITIES Current Iiabilities: Accounts payable 6,I26 64,708 7,478 78,312 Retainage payable - 123,778 - 123,778 Due to other funds 100,000 468,550 568,550 Advance from other fund - 775,000 - 775,000 Due to other governments 6,419 963 1,360 8,742 Unearned revenues 64,800 4,839 73,632 143,271 Accrued compensated absences 142 2,030 5,790 7,962 Total current liabilities 177,487 1,439,868 88,260 1,705,615 Non -current liabilities: Compensated absences 56,015 59,903 83,817 199,735 Unfunded OPEB obligation 8,136 13,306 7,333 28,775 Total non -current liabilities 64,151 73,209 91,150 228,510 Total liabilities 241,638 1,513,077 179,410 1,934,125 NET ASSETS Net assests, invested in capital assets 574,396 11,275,807 358 11,850,561 Unrestricted (deficit) (216,241) (888,827) 460,448 (644,620) Total net assets $ 358,155 $ 10,386,980 $ 460,806 $ 11,205,941 The accompanying notes to financial statements are an integral part of this financial statement. 23 City of Sebastian, Florida Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended September 30, 2011 Enterprise Funds Golf Course Airport Building Totals Operating revenues: Charges for fees and rents: Building permit fees $ - $ - $ 401,021 $ 401,021 Golf course fees pledged as security for revenue bonds 1,349,119 - - 1,349,119 Rents 27,800 301,135 - 328,935 Other revenue 5,502 184,094 - 189,596 Total operating revenues 1,382,421 485,229 401,021 2,268,671 Operating expenses: Salaries, wages and employee benefits 297,280 229,190 366,796 893,266 Contractual services, materials and supplies 965,435 263,104 96,922 1,325,461 Depreciation 92,267 659,977 5,959 758,203 Total operating expenses 1,354,982 1,152,271 469,677 2,976,930 Operating income (loss) 27,439 (667,042) (68,656) (708,259) Nonoperating revenues (expenses): Interest income - 37 3,989 4,026 Interest expense - (8,550) - (8,550) Loss on disposal of capital assets (284) (27,967) (729) (28,980) Total nonoperating revenues (expenses) (284) (36,480) 3,260 (33,504) Income/(loss) before capital contributions and transfers 27,155 (703,522) (65,396) (741,763) Capital contributions - 900,340 - 900,340 Change in net assets 27,155 196,818 (65,396) 158,577 Total net assets - beginning 331,000 10,190,162 526,202 11,047,364 Total net assets - ending $ 358,155 $ 10,386,980 $ 460,806 $ 11,205,941 The accompanying notes to financial statements are an integral part of this financial statement. 24 City of Sebastian, Florida Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users Cash payments to suppliers Cash payments for employee services Net cash provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Loan from other fund Interest paid on advance from other funds Net cash provided (used) by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets Proceeds from sale of assets Receipt from capital contributions Receipt from capital grants Receipt from advance from other fund Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments Interest on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, October 1 Cash and cash equivalents, September 30 Enterprise Funds Golf Course Airport Building Totals $ 1,384,926 $ 495,552 $ 399,849 $ 2,280,327 (984,548) (153,485) (105,531) (1,243,564) (304,033) (220,353) (364,121) (888,507) 96,345 121,714 (69,803) 148,256 (100,000) 468,550 - 368,550 (8,550) - (8,550) (100,000) 460,000 - 360,000 (1,248,405) - (1,248,405) - 365 365 640 640 377,410 - 377,410 290,000 - 290,000 - (580,355) 365 (579,990) - (162,914) (162,914) 39 4,010 4,049 39 (158,904) (158,865) (3,655) 1,398 (228,342) (230,599) 9,410 5,273 275,102 289,785 $ 5,755 $ 6,671 $ 46,760 $ 59,186 The accompanying notes to financial statements are an integral part of this financial statement. 25 City of Sebastian, Florida Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2011 (Continued) Enterprise Funds Golf Course Airport Building Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 27,439 $ (667,042) $ (68,656) $ (708,259) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 92,267 659,977 5,959 758,203 (Increase) Decrease in assets: Accounts receivable - 9,276 - 9,276 Inventories 692 9,249 - 9,941 Prepaid expenses 1,275 (4,048) 417 (2,356) Increase (Decrease) in liabilities: Accounts payable (21,664) 103,813 (10,386) 71,763 Due to other governments 584 605 1,360 2,549 Unearned revenues 2,505 1,047 (1,172) 2,380 Accrued compensated absences (6,626) 9,044 2,790 5,208 Accrued OPEB liability (127) (207) (115) (449) Total adjustments 68,906 788,756 (1,147) 856,515 Net cash provided (used) by operating activities 96,345 121,714 (69,803) 148,256 Cash and cash equivalents reconciliation: Current assets: Cash and cash equivalents 5,755 6,671 46,760 59,186 Cash and cash equivalents at September 30 $ 5,755 $ 6,671 $ 46,760 $ 59,186 The accompanying notes to financial statements are an integral part of this financial statement. 26 City of Sebastian, Florida Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2011 ASSETS Cash and cash equivalents Interest and dividends receivable Investments, at fair value: Local government surplus trust funds investment pool United States treasuries United States agency notes Domestic corporate bonds Municipal Obligations Domestic corporate equities Total investments Total assets LIABILITIES Refunds payable Total liabilities NET ASSETS Held in trust for pension benefits Pension Trust Police Officers' Pension $ 1,090,660 $ 35,988 156,403 1,094,212 2,074,158 34,534 3,040,899 6,400,206 7,526,854 $ 7,526,854 $ Agency Performance Deposits The accompanying notes to financial statements are an integral part of this financial statement. 11,930 220,000 220,000 231,930 231,930 231,930 27 City of Sebastian, Florida Statement of Changes in Fiduciary Net Assets Fiduciary Fund - Pension Trust For the Year Ended September 30, 2011 Police Officers' Pension ADDITIONS Contributions: Employer Plan members State Total contributions Investment earnings: Net decrease in fair value of investments Interest and dividends Total investment earnings Less investment expenses Net investment earnings Total additions DEDUCTIONS Benefits Refunded contributions Administrative expenses Total deductions Change in net assets Net assets - beginning of year Net assets - end of year The accompanying notes to financial statements are an integral part of this financial statement. 28 592,903 121,122 133,477 847,502 (352,079) 206,167 (145,912) (47,024) (192,936) 654,566 201,620 1,585 10,810 214,015 440,551 7,086,303 7,526,854 City of Sebastian, Florida Notes to the Financial Statements September 30, 2011 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Sebastian (the "City"), a Florida Municipal Corporation, was incorporated in 1924 under Sections 1826-1832 of the Revised Florida Statutes. The City has a population of 21,929 living in an area of approximately 14.6 square miles. The governing body is a five member elected City Council with a mayor elected from the five members. The City Council appoints the City Manager who is responsible for the administration of all City services. The financial statements of the City have been prepared in conformity with U.S. generally accepted accounting principles as applied to governmental units. The more significant of the City's accounting policies are described below: A. Reportine Entitv In evaluating the City as a reporting entity, management has included all component units in accordance with Governmental Accounting Standards Board (GASB) Statement No. I4, "Defining the Financial Reporting Entity" and Statement No. 39 — an amendment of GASB No. 14. The Financial Reporting Entity consists of the City of Sebastian (the primary government) and its blended component units. Blended component units are legally separate organizations for which the City Council is financially accountable. The component units discussed below are included in the City's reporting entity. Blended Component Units The following component units are blended with the primary government for financial statement purposes because the component unit's governing body is substantially the same as the City Council or because the component unit exclusively serves the City. Community Redevelopment Agency (CRA) — The governing body of the CRA is the Sebastian City Council. The CRA is accounted for in a special revenue fund entitled "Riverfront Redevelopment". F.S. Section 163.387(8) requires an independent audit of the fund each fiscal year and a report of such audit. The City has presented the CRA as a major fund of the City to satisfy this requirement simply due to the scope of the audit for a major fund is broader than a non -major fund. City of Sebastian Police Officers' Pension Plan — The City Council only appoints two of the five members of the governing board, but it is financially responsible for funding the police officers' pension benefits. The City of Sebastian Police Officers' Pension Trust Fund only exists to provide pension benefits to City of Sebastian police officers. It is accounted for as a Pension Trust fund entitled "Police Officers' Pension". B. Government -wide and fund financial statements The government -wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its blended component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Separate fund financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. GASB Statement No. 34 Basic Financial Statements and Management Discussion and Analvsis for State and Local Governments sets forth minimum criteria (percentage of the assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise funds combined) for the determination of major funds. In addition to funds that meet that criteria, funds that are particularly important to financial statement users may be reported as a major fund. Management has elected to also report the Stormwater Utility Improvements Fund as a major fund because of public interest in those activities. The nonmajor funds are combined in a column in the fund financial statements and detailed in the combining section. 29 C. Measurement Focus, Basis of Accountine, and Financial Statement Presentation 1. Economic Resources Measurement Focus and Accrual Basis of Accountin$ The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. This means that revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. In applying the "susceptible to accrual" concept to intergovernmental revenues pursuant to GASB Statement No. 33, Accountine and Financial Renortin¢ for NonexchanQe Transactions as amended by GASB Statement No. 36, Recipient Renortine of Certain Shared Nonexchanee Revenues (the City may act as either provider or recipient), the provider should recognize liabilities and expenses and the recipient should recognize receivables and revenue when the applicable eligibility requirements including time requirements, are met. Resources transmitted before the eligibility requirements are met should, under most circumstances, be reported as advances by the provider and deferred revenue by the recipient. Private -sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private -sector guidance for their business -type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private -sector guidance. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the golf course fund and the building fund are charges to customers for services and for the airport fund lease revenue. Operating expenses for enterprise funds include cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The agency fund reports only assets and liabilities; therefore, it does not have a measurement focus. However, it uses the accrual basis of accounting to recognize receivables and payables. 2. Modified Accrual Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. "Available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within sixty (60) days of the end of the current fiscal period except grant revenues. The City considers grant revenues to be available if they are collected within one year of the end of the current fiscal period. All material revenues, except for property taxes, are considered measurable and available and are thus susceptible to accrual. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, if measurable. An exception to this general rule is principal and interest on general long-term obligations, which are recognized when due. Property taxes, public utility taxes, franchise fees, sales and fuel taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues in the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. 30 The government reports the following major governmental funds: The general fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The discretionary sales tax fund accounts for the financial resources used for infrastructure improvements and equipment purchases. The riverfront redevelopment fund accounts for tax increment revenues that are legally restricted for the redevelopment of the City's riverfront area. The discretionary sales surtax revenue bonds 2003 fund accounts for the accumulation of pledged funds that are legally restricted to pay the bonded debt obligations of the Discretionary Sales Surtax Revenue Bonds, Series 2003 and Series 2003A. The transportation improvements fund accounts for transportation related construction such as, roads, intersections, and sidewalks and is funded with governmental resources, impact fees, local option gas tax, and state grants. The stormwater utility improvements fund accounts for the resources associated with debt and stormwater assessment fees for the purpose of constructing stormwater related improvements. The government reports the following major proprietary funds: The golf course fund accounts for the activities of the municipal golf course. The airport fund accounts for the activities of the municipality's general aviation airport. The building fund accounts for the activities associated with the building permit and inspection program. Additionally, the government reports the following fund types: The pension trust fund accounts for the activities of the Police Officer's Retirement System, which accumulates resources for pension benefit payments to qualified police officers. The performance deposits fund accounts for deposits placed by bidders and developers to guarantee performance pursuant to bid or contract. These funds are held by the City as agent for individuals and businesses. D. Assets, Liabilities and Fund Equity 1. Cash and cash equivalents Cash and cash equivalents represents all investments that are short term, highly liquid, and readily convertible to a specified cash value. These investments generally have original maturities of three months or less. Cash equivalents consist of cash in banks and on hand. 2. Investments Investments consist of U.S. Treasury Securities, U.S. Government Agency Securities, common stock, guaranteed investment contracts and the Local Government Surplus Funds Trust Fund Investment pool (Pool A and Pool B). The Local Government Surplus Funds Trust Fund is administered by the Florida State Board of Administration, which is not a registrant with the Securities and Exchange Commission. However, the Board has adopted operating procedures consistent with the requirements for a 2a-7 fund or accounts in Pool A. In accordance with the regulations of 2a-7 like pools, the City's share of investments held at the State Board of Administration in Pool A are reported at amortized cost, which approximates fair value. This pool is regulated by the State and the fair value of the position in the pool is the same as the value of the pool share. Investment earnings of Pool A are allocated to the participating funds at the end of each month based upon the ratio of each participant's investment to the total pooled investments. Investments in Pool B are reported at fair value and as income and returns of principal become available, they are transferred to Pool A. Other investments, including the Police Officers' Pension Fund, are reported at their fair value based on the quoted market price or the best available information. 3. Interfund Receivables and Pavables During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as "due to and from other funds". Due to and from other funds are eliminated in the Statement of Net Assets. As of September 30, 2011, the capital improvements fund was loaned $60,000, the golf course fund was loaned $100,000 and the airport fund was loaned $468,550 from general fund to provide cash -flow needs. There were no other interfund loans between the Governmental funds and Proprietary funds. Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. As of September 30, 2011, the airport fund has been advanced $200,000 from the general fund and $575,000 from the discretionary sales tax fund. 31 4. Receivables Receivables consist of trade receivables, due from other governments and interest receivable (see Note IV.C. on page 39 for detail) and are recorded at the net realizable value. The City, as of September 30, 2011, has no allowance for doubtful accounts, since all receivables are considered collectible. 5. Inventory and Prepaid Items Inventory is valued at cost using the average cost method. Inventory in the General fund consists of materials and supplies held for consumption. The cost is recorded as an expenditure/expense at the time the individual inventory items are consumed. Inventory in the Golf Course fund consists of supplies held for resale. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. 6. Restricted Assets Certain net assets of the City are classified as restricted assets on the statement of net assets because their use is limited either by law through constitutional provision or enabling legislation; or by restrictions imposed externally by creditors, grantors, contributors, or laws or regulations of other governments. In a fund with both restricted and unrestricted assets, qualified expenses are considered to be paid first from restricted net assets and then from unrestricted net assets. 7. Capital Assets Capital assets, which include land, buildings, improvements, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business -type activities columns in the government - wide financial statements. The City defines capital assets as assets with an initial, individual cost of more than $750 and an estimated useful life in excess of one year. Such assets are recorded at historical cost, if purchased, and at fair market value at date of gift, if donated. Major additions are capitalized while maintenance and repairs that do not improve or extend the life of the respective assets are expensed. All infrastructure assets acquired prior to the implementation of GASB Statement 34 were capitalized as projects and were completed or assets were acquired. Therefore, the initial capitalization of general infrastructure assets was not necessary. Capital asset depreciation is recognized using the straight-line method over the estimated useful lives as follows: Classification Rance of Lives Buildings and improvements 10-40 years Public domain infrastructure 40-50 years System infrastructure 15-30 years Improvements other than buildings 10-40 years Machinery, equipment and other 5-I5 years Airport runways 20 years 8. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick leave benefits and these are accounted for using the termination payment method. All vacation and sick leave amounts are accrued in the government -wide and proprietary financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. 9. Long -Term Liabilities In the government -wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are recorded net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the life of the related debt. In the fund financial statements, governmental fund types recognize bond premium and discounts, as well as debt issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 32 10. Fund Balances GASB Statement No. 54, Fund Balance Renortina and Governmental Tvpe Definitions was effective for periods beginning after June 15, 2010, with early implementation encouraged. The City chose to implement it for the year ended September 30, 2010. It established criteria for classifying fund balances into specifically defined classifications. These classifications are explained as follows: Nonspendable — amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Restricted — amounts where constraints have been placed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Committed — amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision making authority, which is the City Council. These commitments are established annually by adoption of a financial policies resolution. Assigned — amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed. These consist of deposits from various sources that the City Manager has directed to be earmarked for certain purposes. Unassigned — amounts representing fund balance that has not been restricted, committed or assigned to specific purposes within the general fund and balances in other governmental funds, if any, exceeding the amounts restricted, committed or assigned to those purposes. II. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS A. Exalanation of Differences Between the Governmental Fund Balance Sheet and the Government -wide Statement of Net Assets The governmental fund balance sheet includes reconciliation between fund balance -total governmental funds and net assets - governmental activities as reported in the government -wide statement of net assets. "Total fund balances" of the City's governmental funds ($11,345,613) differs from "net assets" of governmental activities ($41,262,859) reported in the statement of net assets. This difference primarily results from the long-term economic focus of the statement of net assets versus the current financial resources focus of the governmental fund balance sheet. The effect of the differences is illustrated below. Capital related items When capital assets (property, plant, equipment) that are to be used in the governmental activities are purchased or constructed, the cost of those assets, are reported as expenditures in governmental funds. However, the statement of net assets included those capital assets among the assets of the City as a whole. Cost of capital assets Accumulated depreciation Total $ 69,235,107 (25,455.904) $ 43.779.203 Net pension obligation When net pension obligation is a negative amount, the amount is presented as an asset on the statement of net assets. Negative net pension obligation 141.337 Other post emplovment and termination benefits Accrued other post employment benefits are not financial uses, therefore, are not reported in the fund. Other post employment benefits S (326.696) 33 Lone -term debt transactions Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities (both current and long-term) are reported in the statement of net assets. Balances at September 30, 2011 were: Bonds payable: Infrastructure sales surtax revenue bonds, Series 2003 $(5,035,000) Less: Deferred charge for issuance costs 126.705 $(4,908,295) Infrastructure sales surtax revenue bonds, Series 2003A (1,180,000) Less: Deferred charge for issuance costs 49.565 (1,130,435) Stormwater utility revenue bonds, Series 2003 (3,785,000) Less: Deferred charge for issuance costs 115,933 Less: Deferred charge for bond discounts 8.750 (3,660,317) Notes payable (2,246,000) Less: Deferred charge for issuance costs 26,792 Deferred charge for refunding costs 59.112 (2,160,096) Contamination liability (91,200) Compensated absences (1.517.765) Total S(13-468.108) Accrued interest Accrued liabilities in the statement of net assets differs from the amount reported in governmental funds due to accrued interest on bonds payable and notes payable. Bonds $ (186,116) Notes (30.522) Total S (216.639) Accrued receivable Some interest receivables are not financial resources in the current period, therefore, are not reported in the funds. Interest receivable % 8.148 34 B. Explanation of Differences Between the Governmental Fund Statement of Revenues. Exuenditures, and ChanEes in Fund Balances and the Government -wide Statement of Activities The "net change in fund balances" for governmental funds (a decrease of $3,023,829) differs from the "change in net assets" for governmental activities (a decrease of $321,782) reported in the statement of activities. The differences arise primarily from the long- term economic focus of the statement of activities versus the current financial resources focus of the governmental funds. The effect of the differences is illustrated below. Interest receivables Some interest earnings reported in the statement of activities the prior year were reported as revenues in governmental funds. Interest earnings 8.148 Capital related items When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives and reported as depreciation expense. As a result, fund balances decrease by the amount of financial resources expended, whereas net assets decrease by the amount of depreciation expense charged for the year. Capital outlay $ 4,048,051 Depreciation expense (2,632,378) Difference $ 1,415,673 In the statement of activities, the gain and loss on the sale and disposal of capital assets are reported. However, in the governmental funds, only the proceeds from the sale increase financial resources. Loss on disposal of fixed assets $ (14.474) Lonc-term debt transactions Repayments of bond principal, notes payable principal, and capital lease principal are reported as expenditures in the governmental funds and, thus, have the effect of reducing fund balance because current financial resources have been used. However, the principal payments reduce the liabilities in the statement of net assets and do not result in an expense in the statement of activities. Bond principal payment made $ 1,035,000 Notes payable principal payment made 168,000 Total $ 1.203.000 Some expenses reported in the statement of activities do not require the use of current financial resources, therefore, are not reported as expenditures in governmental funds. Net change in compensated absences $ 134,026 Net accrued bond interest expense 17,156 Net accrued notes interest expense 2,283 Amortization of issuance costs/discounts (47,440) Pension benefits (24,293) Other post employment benefits (4,768) Termination benefits 12,736 Net adjustment $ 89,700 Mi III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Budeetary Information Budgets are prepared annually on a modified accrual basis with encumbrance accounting for all governmental funds except the capital project funds, which are approved on a "life of the project basis", and the permanent fund, which is not budgeted. All annual appropriations lapse at year end. On or before the third Friday in May of each year, all agencies of the government submit requests for appropriations to the government's City Manager so that a budget may be prepared. Before July 31, the proposed budget is presented to the government's council for review. The council holds budget workshops and public hearings and a final budget must be prepared and adopted no later than September 30. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General, Special Revenue, Debt Service, and Capital Projects funds. Encumbrances outstanding at year end are carried forward and reappropriated to the next year's budget. Actual results of operations presented in accordance with U.S. generally accepted accounting principles (GAAP basis) and the City's accounting policies do not recognize encumbrances as expenditures until the period in which the actual goods or services are received and a liability is incurred. It is necessary to include budgetary encumbrances to reflect actual revenues and expenditures on a basis consistent with the City's legally adopted budget. (See page 52 through page 55) IV. DETAIL NOTES ON ALL FUNDS A. Deposits At September 30, 2011, the carrying amount of the City of Sebastian's deposits with banks was $413,136 and the bank balance was $448,970. All the deposits were covered by the FDIC or collateralized in accordance with the "Florida Security for Public Deposits Act". Under the Act, every qualified public depository shall deposit with the Treasurer eligible collateral having a market value equal to 50% of the average daily balance for each month that all public deposits are in excess of any applicable deposit insurance. If the public deposits exceed the total amount of the regulatory capital accounts of a bank or the regulatory net worth of a savings association, the required collateral shall have a market value equal to 125% of the deposits. B. Investments On April 23, 2003, Sebastian City Council formally adopted an investment policy pursuant to Section 218.415, Florida Statutes that established permitted investments, asset allocation limits and issuer limits, credit ratings requirements and maturity limits to protect City's cash and investment assets. The City maintains a common cash and investment pool for the use of all funds. Pension Trust Funds are held with third parry trustees and are governed by rules established by Florida Statute Chapter 185. Investment holdings during the year included United States Government Agencies which were reported at fair value in accordance with GASB Statement No.31 "Accounting and Financial Reporting for Certain Investments and for External Investment Pools". These investments were held in trust by the City's bank depository in the City's name. Section 218.415, Florida Statutes, limits the types of investments that the City can invest in unless specially authorized in the City's investment policy. The City has a formal investment policy that allows for the following investments: Florida Local Government Surplus Funds Trust Fund, United States Government Securities, United States Government Agencies, Federal Instrumentalities, Interest Bearing Time Deposit or Saving Accounts, Repurchase Agreements, Commercial Paper, High Grade Corporate Notes, Bankers' Acceptances, State and/or Local Government Taxable and/or Tax -Exempt Debt, Registered Investment Companies (Money Market Mutual Funds), and Intergovernmental Investment Pool. Florida Statutes Chapter 185 regulates the types of investment that may be held by the Police Pension Trust Fund. The investment guidelines have been augmented by City ordinance that have adopted specific investment policies. Compliance with the policies and guidelines has been evaluated by the pension board. 36 As of September 30, 2011, the City had the following investments and effective duration presented in terms of years: Investment TvDe Government -wide Local government surplus fund trust fund investment pool United States Treasuries United States Agencies Fiduciary Funds Local government surplus funds trust fund ("SBA") United States Treasuries United States Agencies Municipal Obligations Domestic corporate bonds Domestic corporate equities Total fair value Investment Maturity (Year) Fair Value Less Than 1 From 1-3 From 4-6 Over 7 $ 3,796,271 $ 3,796,271 $ - $ - $ - 3,012,808 1,003,980 2,008,828 - - 3,020,144 1,006,958 2,013,186 - - 9,829,223 5,807,209 4,022,014 - 220,000 220,000 - 156,403 - - 156,403 1,094,212 56,465 213,815 823,932 34,534 - - - 34,534 2,074,158 35,868 478,300 830,243 729,747 3,040,899 3,040,899 - - - 6,620,206 3,353,232 478,300 1,044,058 1,744,616 $ 16,449,429 $ 9,160,441 $ 4,500,314 $ 1,044,058 $ 1,744,616 Interest receivable on the government -wide and fiduciary investment portfolios amounted to $8,164 and $35,988, respectively, as of September 30, 2011. Interest Rate Risk The City's investment policy limits interest rate risk by attempting to match investment maturities with known cash needs and anticipated cash flow requirements. Investment maturities shall not exceed thirty-six (36) months. Investments of construction funds shall have a term appropriate to the need for funds and in accordance with debt covenants. Credit Risk The City investment policy permits for investments in the following investments, which are limited to credit quality ratings from nationally recognized agencies as follows: Mutual funds shall be rated "m" or "AAm-G" or better by Standard & Poor's, or the equivalent by another rating agency. State and/or local government taxable and/or tax-exempt debt, general obligation and/or revenue bonds, rated at least "Aa" by Moody's and "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 issued by a domestic bank or a federally chartered domestic office of a foreign bank, which are eligible for purchase by the Federal Reserve System, at the time of purchase, the short-term paper is rated, at a minimum, "P-1" by Moody's Investors Services and "A-1" Standard & Poor's. Commercial paper of any United States company that is rated, at the time of purchase, "Prime -I" by Moody's and "A-]" by Standard & Poor's (prime commercial paper). Corporate notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States that have a long term debt rating, at the time of purchase, at a minimum "Aa" by Moody's and a minimum long term debt rating of "AA" by Standard & Poor's. As of September 30, 2011, the City's investment securities were all individually rated AA+ by Standard & Poor's and Aaa by Moody's Investor Services. As of September 30, 2011, the city had $4,016,271 invested in the State Board of Administration's Local Government Surplus Trust Funds Investment Pool, which consist of accounts in Pool A and Pool B. $3,849,40I is in Pool A and $I66,870 is in Pool B. Pool A had a rating by Standard and Poor's Rating Services as "AAAm" on September 30, 2011 and amounts may be withdrawn without penalty. Pool B participants are prohibited from making withdrawals. Pool B is not rated by any nationally recognized statistical rating agency. Additional information regarding the Local Government Surplus Funds Trust Fund may be obtained from the State Board of Administration. Investment in the City's pension trust funds are limited by State Statutes Chapter 185 and by an investment policy adopted by the fund's Board of Trustees on June 24, 2005. The allowable investment instruments include: United States government and agency issues, bankers acceptances and certificates of deposit by United States banks, savings accounts with banks or other financial institutions incorporated in the United States and commercial paper rated A-2 or P-2 or higher by Moody's or Standard and Poors. In addition, common stocks of corporations listed on a recognized national stock exchange, plus issues convertible into common stock are also allowed. No more than ten percent (10%) of the cost value of total assets may be invested in foreign securities. 37 Custodial Credit Risk The City's investment policy pursuant to Section 218.415(18), Florida Statutes requires securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchased by, and all collateral obtained by the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida as defined in Section 658.12, Florida Statutes, or by a national association organized and existing under the laws of the United States, which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits maintained by book -entry at the issuing bank shall clearly identify the City as the owner. As of September 30, 2011, the City's investment portfolio was held with a third -party custodian as required by the City's investment policy. Concentration of Credit Risk The City's investment policy has established asset allocation and issuer limits on the following investments, which are designed to reduce concentration of credit risk of the City's investment portfolio. A maximum of 100% of available funds may be invested in the SBA and in the United States Government Securities, 50% of available funds may be invested in United States Government agencies with a 25% limit on individual issuers, 80% of available funds may be invested in Federal Instrumentalities with a 40% limit on individual issuers, 25% of available funds may be invested in non-negotiable interest bearing time certificates of deposits with a 15% limits on individual issuers, 50% of available funds may be invested in repurchase agreements excluding one (1) business day agreements and overnight sweep agreements with a 25% limit on any one institution, 25% of available funds may be directly invested in prime commercial paper with a 10% limit on individual issuers, 15% of available funds may be directly invested in corporate notes with a 5% limit on individual issuers, 25% of available funds may be directly invested in Bankers' Acceptances with a 10% limit on individual issuers, 20% of available funds may be invested in taxable and tax-exempt debts, 50% of available funds may be invested in money market mutual fund with a 25% limit on individual issuers, 10% of available funds may be invested in intergovernmental investment pools. The City's pension trust funds investment policy adopted by the fund's Board of Trustees has established asset allocation and issuer limits on the following investments, which are designed to focus on performance. A maximum of 100% of available funds may be invested in fixed income securities and a maximum of 50% of available funds may be invested in equity securities. As of September 30, 2011, the City had the following issuer concentration based on fair value: Issuer Local government surplus funds trust fund ("SBA") United States Treasuries United States Agencies Municipal Obligations Domestic corporate bonds Domestic corporate equities Total Government -wide Fiduciary Funds Percentage of Percentage of Amount Portfolio Amount Portfolio $ 3,796,271 38.62% $ 220,000 3.32% 3,012,808 30.65% 156,403 2.36% 3,020,144 30.73% 1,094,212 16.53% - - 34,534 0.52% - 2,074,158 31.33% - - 3,040,899 45.94% $ 9,829,223 100.00% $ 6,620,206 100.00% 38 C. Receivable and Pavable Balances Receivables Receivables at September 30, 2011 were as follows: Due From Interest Accounts Other Receivable Receivable Governments Total Governmental activities: General $ - $ 255,949 $ 234,584 $ 490,533 Discretionary sales tax - - 200,615 200,615 Transportation improvements - - 176,100 176,100 Other governmental - - 117,501 117,501 Total - governmental activities $ - $ 255,949 $ 728,800 $ 984,749 Business -type activities: Airport $ - $ 25,180 $ 579,883 $ 605,063 Building 16 - - 16 Total - business -type activities $ 16 $ 25,180 $ 579,883 $ 605,079 All receivables are anticipated to be collected. Accounts Payable and Other Current Liabilities Amounts at September 30, 2011 were as follows: Governmental activities: General Riverfront redevelopment Transportation improvements Other governmental Total -governmental activities Business -type activities: Golf course Airport Building Total - business -type activities Salaries Due to and Other Vendors Benefits Government Total $ 115,606 $ 129,648 $ 28,320 $ 273,574 214 - - 214 511,877 - - 511,877 3,815 - - 3,815 $ 631,512 $ 129,648 $ 28,320 $ 789,480 $ 1,173 $ 4,953 $ 6,419 $ 12,545 184,306 4,180 963 189,449 1,765 5,713 1,360 8,838 $ 187,244 $ 14,846 $ 8,742 $ 210,832 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At September 30, 2011, there was $300 reported as deferred revenues. 39 D. Capital Assets Capital asset activity for the year ended September 30, 2011 was as follows: Beginning Ending Balance Increases Decreases Balance Governmental activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Business -type activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets, being depreciated, net Business -type activities capital assets, net $ 8.007,437 $ 951,144 8,958,581 12,061,711 5,738,546 7,742,063 30,891,580 56,433,900 1,025,614 1,025,614 309,048 256,331 489,102 2,736, 866 3,791,347 (3,048,272) (400,239) (2,174,043) (273,853) (6,315,777) (599,467) (11,476,385) (1,358,819) (23,014,477) (2,632,378) 33,419,423 1,158,969 $ 42,378,004 $ 2,184,583 $ Beginning Balance Increases - $ 8,007,437 (768,910) 1,207,848 (768,910) 9,215,285 - 12,370,759 (2,340) 5,992,537 (203,085) 8,028,080 - 33,628,446 (205,425) 60,019,822 - (3,448,511) 1,560 (2,446,336) 189,391 (6,725,853) - (12,835,204) 190,951 (25,455,904) (14,474) 34,563,918 (783,3841 $ 43,779,203 Ending Decreases Balance $ 9,060 $ - $ - $ 9,060 3,690 - (3,690) - 12,750 - (3,690) 9,060 5,083,230 1,252,093 - 6,335,323 1,942,229 - (32,425) 1,909,804 1,033,439 4,699 (102,855) 935,283 7,477,976 - (9,464) 7,468,512 15,536,874 1,256,792 (144,744) 16,648,922 (751,190) (146,124) - (897,314) (584,841) (119,380) 3,513 (700,708) (730,631) (117,765) 96,281 (752,115) (2,093,258) (373,490) 9,464 (2,457,284) (4,159,920) (756,759) 109,258 (4,807,421) 11,376,954 500,033 (35,486) 11,841,501 $ 11,389,704 $ 500,033 $ (39,176) $ 11,850,561 EN Depreciation expense was charged to functions/programs of the government as follows: Governmental activities: General government $ 274,347 Public safety 537,687 Transportation 5 92, 668 Physical environment 863,105 Economic environment 19,600 Cultural and recreation 344,971 Total depreciation expense -governmental activities $ 2,632,378 Business -type activities: Golf Course $ 92,267 Airport 659,977 Building 5,959 Total depreciation expense -business -type activities $ 758,203 Construction Commitments The City has various construction commitments outstanding at September 30, 2011. The major commitments include the following: Remaining Major Project Spent -to -date Commitment Funding Source Stormwater Equipment $ 14,978 $ 151,076 Stormwater Fees Hardee Park Improvements 47,432 2,568 Recreation Impact Fees Schumann Park Improvements 148,433 56,027 Recreation Impact Fees Riverview Park Pavilion 380 37,800 Recreation Impact Fees Bark Park Amenities 1,450 73,550 Recreation Impact Fees Easy Street Park Improvements 486 62,514 Recreation Impact Fees Powerline Road 860,354 361,896 Contributions and DST (Discretionary Sales Tax) 512 Corridor Improvements 231,806 76,398 FDOT Grant U.S.#I Improvements 13,577 236,423 DST (Discretionary Sales Tax) Gateway Enhancements - 25,000 Riverfront CRA Tax Increment Airport Hangar Contruction 1,I28,315 32I,685 Grant and Airport Funds Total $ 2,447,211 $ 1,404,937 E. Advances Advance balances at September 30, 2011 consisted of the following amounts: Advance from General Fund to the Airport Fund $ 200,000 Advance from Discretionary Sales Tax Fund to the Airport Fund 575,000 Total $ 775,000 The balance of $575,000 advanced to the airport fund from the discretionary sales tax fund is to be repaid over a thirty year period in accordance with Resolution No. R-08-20 for the initial $285,000 advance and with Resolution No. R-10-22 authorizing an additional $290,000 advance. The balance of $200,000 advanced to the airport from general fund represents a cash loan made in 2007 without any specified terms for repayment. 41 F. Interfund Transfers Transfers are used to 1) move revenues from the fund that statute or budget requires them to be collected in to the fund that statute or budget requires for them to be expended in, and 2) utilize discretionary sales tax revenues for infrastructure improvements and equipment purchases which must be accounted for in other funds. Following is a schedule of Interfund Transfers: Transfer Out: Discretionary Nonmajor Sales Tax Riverfront Governmental Transfers In: Fund Redevelopment Funds Total General Fund $ - $ 60,000 $ 676,727 $ 736,727 Discretionary Sales Surtax Bonds 2003 Fund 1,015,787 - - 1,015,787 Transportation Improvements 105,596 1,509,597 1,615,193 Stormwater Utility Improvements 597,189 - - 597,189 Nonmajor Governmental Funds 401,134 296,899 713,729 1,411,762 Total Transfers Out $ 2,119,706 $ 356,899 $ 2,900,053 $ 5,376,658 G. Leases 1. Operating Leases -Lessee The City is obligated under certain leases for land and golf carts accounted for as operating leases. Operating leases do not give rise to property rights or lease obligations. Total costs for such leases were $197,935 for the fiscal year ended September 30, 2011. These include the Airport Proprietary Fund's lease obligation for the property used as the City's golf course. The following is a schedule by years for future minimum rental payments required under operating leases in the Golf Course Proprietary fund that have initial or remaining noncancelable lease terms in excess of one year as of September 30, 2011: Golf Course Golf Year Endine September 30. to: Airport Carts 2012 135,000 62,935 2013 135,000 160,890 2014 135,000 - 2015 135,000 - Totals $ 540,000 $ 223,825 2. Operating Leases -Lessor The City is the lessor in two communication tower leases with lease terms of up to fifty-five years. The towers have a cost of $39,285 and a carrying value of $6,810. For fiscal year 2011, total depreciation expense for the leased tower is $1,865. Following is a schedule by year of minimum future rental income on noncancelable operating leases: Governmental Year Ending September 30. Activities 2012 66,326 2013 67,641 2014 69,008 2015 70,430 2016 71,909 2017-2021 401,160 2022-2026 344,403 202 7-2031 401,492 203 2-2036 470,949 203 7-2041 555,454 2042-2046 658,267 204 7-2051 783,356 205 2-2055 734,772 Total minimum future rentals $ 4,695,167 42 The airport is the lessor of various properties (land with a cost basis of $9,060) with lease terms varying from twenty to thirty years. These include the lease to the Golf Course Proprietary Fund requiring annual payments of $135,000 through 2015. Following is a schedule by year of minimum future rental income on noncancelable operating leases: Business -type Year Ending_ SentemheL3_0, Activities 2012 338,644 2013 344,628 2014 351,748 2015 334,194 2016 202,821 2017-2021 1,097,123 2022-2026 1,155,723 2027-2031 583,630 2032-2036 356,554 Total minimum future rentals $ 4.765.065 H. Long-term Obligations 1. Revenue Bonds/Notes Revenue bonds/notes are secured by and payable from the revenues of the respective funds that issued them. a. The City entered into a twelve (12) year loan agreement in 2010 with a local bank for $2,462,000 to provide financing to repave certain roads in the City and payoff an outstanding loan. The City pledged Local Option Gas Tax and Municipal Gas Tax to repay the note payable. The funds are accumulated in the Local Option Gas Tax Special Revenue fund for repayment of principal and interest. b. The City issued a fifteen (15) year, $9,500,000 Infrastructure Sales Surtax Revenue Bonds, Series 2003 in April 2003. The City has pledged Infrastructure Sales Surtax revenues for repayment of principal and interest. C. The City issued a fifteen (15) year, $2,125,000 Infrastructure Sales Surtax Revenue Bonds, Series 2003A in December 2003. The City has pledged Infrastructure Sales Surtax revenues for repayment of principal and interest. d. The City issued a nineteen (19) year, $5,630,000 Stormwater Utility Revenue Bonds, Series 2003 in November 2003. The City has pledged Stormwater Fee Revenues along with a covenant to budget and appropriate for repayment of principal and interest. 2. Bond Coverage The City has covenanted in the Stormwater Utility Revenue Bonds, Series 2003 Bond Resolution to fix, establish, maintain and collect stormwater fees, and revise the same from time to time whenever necessary, so as to always provide in each fiscal year stormwater fee revenues and investment earnings equal to at least one hundred thirty-five percent (135%) of the annual debt service becoming due in each fiscal year. The following table indicates the degree of compliance with the bond resolution covenants in the stormwater utility fund at September 30, 2011. Gross revenues available for compliance $ 816,415 Debt service requirement $ 439,035 Percent coverage for the year ended September 30, 2011 186% 43 3. Chan2es in Lone -term Liabilities The following is a summary of changes in Long -Term Liabilities of the City for the year ended September 30, 2011: Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: Infrastructure Sales Surtax Revenue Bonds, Series 2003 $ 5,655,000 $ $ 620,000 $ 5,035,000 $ 645,000 Infrastructure Sales Surtax Revenue Bonds, Series 2003A 1,325,000 145,000 1,180,000 150,000 Stormwater Utility Revenue Bonds, Series 2003 4,055,000 270,000 3,785,000 280,000 Less deferred amount: Issuance discount- Stormwater Utility Revenue Bonds, Series 2003 (9,583) (833) (8,750) - Total bonds payable 11,025,417 1,034,167 9,991,250 1,075,000 Notes payable 2,414,000 168,000 2246,000 176,000 Compensated absences 1,651,791 481,286 615,312 1,517,765 161,305 Unfunded OPEB obligation 310,541 - 4,768 305,773 - Ternination benefits 24,123 12,736 11,387 4,620 Pollution Remediation Liability 91,200 - - 91,200 - Governmental activity long -tern liabilities $ 15,517,072 $ 481,286 $ 1,834,983 $ 14,163,375 $ 1,416,925 Beginning Ending Due within Balance Additions Reductions Balance One Year Business -type activities: Compensated absences 191,378 55,974 47,617 199,735 7,961 Unfunded OPEB obligation 29,224 - 449 28,775 - Business -type activity long -tern liabilities $ 220,602 S 55,974 $ 48,066 $ 228,510 $ 7,961 For the governmental activities, compensated absences, the unfunded OPEB obligation and termination benefits are generally liquidated by the general fund. For the business -type activities, compensated absences and unfunded OPEB obligations are allocated to and liquidated by the golf course, airport or building funds. A pollution remediation obligation was recorded for a Florida Department of Environmental (FDEP) Order dated March 10, 1997. This was related to an incident of petroleum contamination at the Public Works Department on April 22, 1991. The City was named as the party responsible for the cleanup but FDEP determined the discharge is eligible under the Petroleum Cleanup Participation Program and will not compel site rehabilitation prior to funding becoming available from that program. The program has a funding cap of $400,000, with a 25% required cost share percentage. The City must also pay for a limited contamination assessment report sufficient to determine the extent of the contamination and cleanup. Based on the information available, the City estimated its expenditure to be $91,200 dependent on the extent of work that is eventually required and recorded a long-term liability of $91,200. 44 4. Debt Service Requirements to Maturitv The annual requirement to amortize all bonded debt outstanding at September 30, 2011, including interest requirements, is as follows: Governmental Activities Roadway Infrastructure Infrastructure Sto rmwater Improvement SalesSurtax SalesS urtax Utility Note Revenue Bonds, Revenue Bonds, Revenue Bonds, Fiscal Payable Series 2003 Series 2003A Series 2003 Year 4.01% Interest 2%to4.125% Interest 2%to4% Interest 2%to4.5%o Interest 2012 176,000 89,792 645,000 193,276 150,000 46,250 280,000 159,248 2013 182,000 82,335 665,000 170,379 155,000 40,813 290,000 148,048 2014 190,000 74,855 690,000 146,106 160,000 35,000 305,000 136,448 2015 198,000 67,049 715,000 120,231 170,000 28,600 315,000 125,010 2016 206,000 59,073 745,000 93,061 175,000 21,800 325,000 112,725 2017-2021 1,164,000 160,582 1,575,000 97,213 370,000 22,200 1,850,000 347,510 2022 130,000 2,650 - - - - 420,000 18,900 $ 2,246,000 $ 536,336 $ 5,035,000 $ 820,266 $ 1,180,000 $ 194,663 $ 3,785,000 $ 1,047,889 I. Restricted Assets: Certain cash and claims to cash, that are legally restricted, have been shown as restricted in the statement of net assets as follows: Govermental Activities Debt service $ 1,739,597 Capital 1,977,666 Cemetery perpetual care 919,779 Other expenditures 1,031,113 Total $ 5,668,155 The government -wide statement of net assets reports $5,668,155 of restricted net assets, of which all are within governmental activities and are restricted by constraints placed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. J. Fund Balances: The balance sheet for governmental funds presents fund balances in specifically defined classifications, which are detailed as follows: Nonspendable: Inventory $ 65,368 Prepaid items 81,627 Advance to other funds 775,000 Permanent funds 919,779 Total $ 1,841,774 Restricted: Debt service funds $ 1,739,597 Special revenue funds 2,940,374 Capital project funds 68,405 Total $ 4,748,376 Committed: Working capital $ 2,949,139 Assigned: General employee events $ 4,715 Law enforcement events 3,903 Greer donations for police 13,293 Total $ 21,911 Unassigned: General fund residual $ 1,784,413 45 When expenditures are incurred for purposes for which other classified amounts could be used, the City considers restricted amounts are used first, followed by committed, then assigned, and then unassigned. Nonspendable amounts cannot be spent because they are not in spendable form. Restricted amounts include balances in the debt service, special revenue and capital project funds that must be used in accordance with constraints placed by creditors, grantors or other governments. Committed amounts consist of items specified in a financial policies resolution that is adopted annually by the City Council that are to be set aside in the general fund. The currently adopted financial policies state that 30% of general fund expenditures will be for working capital. Changes to this commitments would have to be made with another resolution. Assigned amounts more specific purposes are established by direction of the City Manager, who is accountable to the City Council to provide proper accounting of all transactions. Unassigned amounts is the residual classification for the general fund but may also include a negative fund balance in other governmental funds caused by an excess of amounts restricted, committed, or assigned to those purposes. V. OTHER INFORMATION A. Property Tax The City is permitted by State law to levy taxes up to 10 mills on assessed valuation. The millage rate levied by the City for the fiscal year ended September 30, 2011, was 3.3041 mills. Total tax collections were approximately 95.8% of the total tax levy. The tax levy of the City is established by City Council. Under Florida law, the assessment of all properties and the collection of municipal taxes are provided by offices of the County's Property Appraiser and Tax Collector. Ad Valorem taxes are levied on property values as of January 1. The fiscal year for which taxes are levied begins October 1. Taxes are due November 1 and become delinquent on April 1. All taxes unpaid as of May 30 are subject to a tax certificate sale. Property tax revenues are recognized in the fiscal year for which they are levied and also become due and payable. B. Grants from Other Governmental Units Federal, State and local government grants represent an important source of supplementary funding used to finance infrastructure, recreation, law enforcement, and environmental activities beneficial to the community. These grants are recorded in the General, Special Revenue, Capital Project, and Enterprise funds. A grant receivable is recorded when the project funds have been expended and the City has a right to reimbursement and expects to receive the grant within a year under the related grant. The grants normally specify the purpose for which the funds may be used and are subject to audit by the grantor agency or its representative. The following is the amount of grant revenue for fiscal year 2011. Amount Physical environment $ 61,959 Transportation 185,453 Airport 899,700 Total reporting entity $ 1,147,112 C. Police Pension Plan - Defined Benefit Plan Plan Description. The Police Officers' Pension Plan is a Florida Statute Chapter 185 single -employer defined benefit plan. Only City police officers participate in the Police Pension Plan. The state provides a contribution to the Police Pension Plan through a distribution of funds collected from insurance premium taxes. The Pension plan data provided in these Financial Statements are from the actuarial valuation as of October 1, 2010 to determine the required contribution for the fiscal year ending September 30, 2011. Although the Police Officers' Pension Plan provides separate reporting, which may be obtained in the Finance department, it is also a component unit (reporting as a Pension Trust Fund) of the City's financial reporting entity. Employee membership data as of the October 1, 2010 actuarial valuation is as follows: Retirees and beneficiaries currently receiving benefits 4 Disability retirees 2 Terminated employees not currently receiving benefits 2 Fully, partially, and non -vested active plan participants 36 Total 44 M Benefit Provisions and Contribution Requirements The Police Officers' Pension Plan provides retirement and disability benefits to plan members and beneficiaries. This Plan is administered by a separate local Board of Trustees. Chapter 185, Florida Statutes, as amended governs all benefit provisions of the Plan. Contribution requirements, in accordance with Chapter 185, Florida Statutes, are established by City ordinance, as provided in Chapter 58, Article III of the Sebastian City Code. The City Council has the authority to amend funding requirements. Funding Policy. The employer, employee, and State contribution requirements are applicable to the Plan and actuarially determined on a frequency of at least every 3 years in accordance with Florida State Statute. Administration costs of the pension plan are financed by the Plan. For the 2010-201 I fiscal year, the employee contribution rate, expressed as a percentage of compensation, was 5.0% and the employer contribution rate was 24.5%. The employer contribution amounted to $592,903. The State contribution was $I33,477, which represents state shared revenue that is levied on property and casualty insurance premiums and collected by the State. The State contribution was recognized and recorded in the general fund and the corresponding expenditure was recorded as public safety expenditure. The City is required to contribute the remaining amounts to ensure that the Plan is actuarially sound. Annual pension costs and related information provided for disclosure in the October 1, 2010 actuarial valuation was as follows: Contribution rates as of 9/30/10: C ity Plan members Annual pension cost Contributions made Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increase* *Includes inflation at Post retirement COLA 24.7% 5.0% $ 567,146 $ 566,910 10/1/2010 Frozen Entry Age Level Percentage of Pay, Closed 24 Years (as of 10/01/2008) Market Value 8.0% 6.0% 3.0% 0.0% Required trend information for the Police Officers' Pension Plan was as follows: Actuarially Percentage Net Year Required of APC Pension Ending Contribution Contributed Obligation 9/30/2010 $ 567,146 100% $ (141,337) 9/30/2009 $ 419,657 96% $ (146,254) 9/30/2008 $ 334,128 113% $ (165,630) The annual required contribution for the Police Officers' Pension Plan was determined as part of the October 1, 2010, actuarial valuation using the aggregate actuarial cost method. Because this method does not identify or separately amortize unfunded actuarial accrued liabilities, information about funded status and funding progress is presented using the entry age actuarial cost method and is intended to serve as a surrogate for the funded status and funding progress of the plan. The actuarial assumptions included (a) an 8.0% rate of return (net of administrative costs) and (b) projected salary increases of 6% per year, including inflation at 3%. Reserves All of the net assets of the Police Pension Plan are legally reserved for plan participant benefits. Basis of Accounting Financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due, and the employer has made formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. Method Used to Value Investments and Concentration of Investments. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Mortgages are valued on the basis of future principal and interest payments, and are discounted at prevailing interest rates for similar instruments. Investments that do not have an established market are reported at estimated fair value. Investments in securities of a single organization (excluding mutual funds and those issued or guaranteed by the U.S. government) held by the pension plan did not exceed five percent of the total plan assets. Development of Net Pension Obligation (NPO) This municipal Defined Benefit Plan has been subject to the minimum funding standards since the adoption of the "Florida Protection of Public Employee Retirement Benefit Act" (Part VII of Chapter 112, Florida Statutes) in I980. Accordingly, the sponsor has funded the actuarially determined required contributions for all years from October 1, 1987, through the transition date, October 1, 1997. Thus, the NPO on October 1, 1997, is $0. 47 The development of the Net Pension Obligation as provided for disclosure by the actuary is as follows: Actuarially Determined Contribution (A) Interest on N PO Adjustment to (A) Annual Pension Cost Contributions made Increase in NPO NPO beginning of year NPO end of year 9/30/2008 9/30/2009 9/30/2010 $ 334,128 $ 419,657 $ 567,146 (9,948) (13,250) (11,700) 11,314 17,073 16,380 335,494 423,480 571,826 376,769 404,104 566,910 (41,275) 19,376 4,916 (124,355) (165,630) (146,254) $ (165,630) $ (146,254) $ (141,338) Multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing relative to the actuarial accrued liability for benefits over time is presented below: SCHEDULE OF FUNDING PROGRESS Actuarial UAAL as Actuarial Accrued Unfunded a % of Actuarial Value of Liability AAL Funded Covered Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll Date (a) (b) (c) (alb) (d) ((b-a)/d) 10/1/2010 $ 7,086,302 $ 7,824,780 $ 738,478 90.56% $ 2,313,473 31.92% 10/1/2008 5,474,816 6,127,531 652,715 89.35% 2,143,131 30.46% 10/1/2006 4,711,294 5,389,815 678,521 87.41% 1,769,613 38.34% 10/1/2004 3,536,724 4,251,736 715,012 83.18% 1,480,974 48.28% 10/1/2002 2,616,301 3,336,111 719,810 78.42% 1,184,967 60.75% 10/1/2000 2,200,969 2,200,969 - 100.00% 1,157,403 0.00% D. CWA / ITU Negotiated Pension Plan — Defined Benefit Plan Plan Description: The CWA/1TU Negotiated Pension Plan (NPP), which began in 1967, is a multi -employer, defined benefit plan. The Plan is available to any Communication Workers of America (CWA) bargaining unit member, and benefits are portable from one contributing employer to another. Normal Pension: Minimum age 65: 5 years of Service Credit required if any portion of service credit was earned after January 1, 1989. 10 years of Service Credit required if employees' coverage ended before January 1, 1989. Once the Service Credit amount is accrued, the employee is vested and cannot lose the right to a pension. Early Pension: Minimum age 60: 20 years of Service Credit required if employed after January 1, 1989. 25 years of Service Credit required if employment ended before January 1, 1993. Pension amounts are permanently reduced based on age on the effective date, because the payments are expected to be made for a longer period of time. Disability Pension: No minimum age and the pension amount is not reduced for age; there must be a Social Security Disability Award, 10 years of actual Service Credit and a contribution for covered employment must have been made within five calendar years preceding the entitlement date to Social Security Disability Pension. An application must be filed with the Plan within 6 months of the Social Security Notice of Award date to receive pension retroactive to the Social Security entitlement date. Lump Sum Disability Benefit: If the employee is in receipt of a Social Security Disability Award and is vested, but not immediately eligible to receive any pension described above, the employee may be eligible for a lump sum equal to total contributions credited on the employees behalf (or 36 times the Normal Pension amount, if greater). If the employee is immediately eligible for a pension but not yet receiving one, the employee can still qualify for a lump sum if the employee submits two physicians' written statements that the disability will lead to death within one year of the date of application. Death Benefit: if the employee dies before becoming a pensioner and has at lease $250 contributed on the employees' behalf, a lump sum death benefit equal to total contributions credited on the employees' behalf or 36 times the Normal Pension amount, if greater, will be paid to employees' beneficiary. If the employee is married at the time of death, the spouse will have the choice of a lump sum or a monthly survivor benefit. Withdrawal Benefit: If the employee did not earn enough Service Credit to qualify for a Normal Pension, the employee may be eligible for a lump sum withdrawal benefit, based on total contributions, after the employee has incurred a break in service. Benefit Provisions and Contribution Requirements: The NPP provides retirement and disability benefits to plan members and beneficiaries. The plan is administered at the Plan Office in Colorado Springs, Colorado. Contribution requirements are established by the CWA contract, effective date October 1, 2011, which is negotiated every 3 years, and approved by City Council. Funding Policy: Administration costs of the pension plan are financed by the plan. The employer contribution rate, expressed as a percentage of compensation, was 9.00% for the 2009-2010 fiscal year. Employees do not contribute to this plan. Contributions to the CWA Pension Plan for the fiscal years ended September 30, 2009, 2010 and 2011 were $254,997, $234,219 and $223,113 respectively, which are equal to 100%of the required contribution for each year. E. 401 Plan — Defined Contribution Plan Plan Description: The ICMA Retirement Corporation's 401 Retirement Plan is a Defined Contribution Plan "qualified" under Section 401 (a) of the Internal Revenue Code. Each participant has a plan account to which contributions are made. Plan benefits are based on the total amount of money in the employees' account at retirement or other eligible event. The Plan is available to all management staff and may be rolled over to another "qualified" employer plan that accepts rollovers, or Traditional IRA's. Periodic Payments: Retirement benefits can be paid monthly, quarterly, semi-annual (at six-month intervals only) or annual payments until assets are fully paid out. Rollover: Retirement benefits can be rolled over to another employer plan (including a 457 deferred compensation plan) that accepts rollovers, or to a Traditional IRA. Lump Sum: Retirement benefits can paid either partially or by total distribution of the employees' account balance. Annuities: Retirement benefits can be utilized to purchase an annuity. Benefit Provisions and Contribution Requirements: The 401 provides retirement benefits to plan members and beneficiaries. The plan is administered by the ICMA Retirement Corporation. Contribution requirements are established by the City of Sebastian, Management Benefit Package, revised October 1, 2006, and approved by the City Manager. Funding Policy: The administration costs of the pension plan are financed by the Plan. The employer contribution rate, expressed as a percentage of compensation, was 9.00% for the 2010-2011 fiscal year. Employees do not contribute to this Plan. Contributions to the 401 Defined Contribution Plan for the fiscal years ended September 30, 2009, 2010, and 2011 were $152,078, $126,377 and $132,656 respectively, which are equal to 100%of the required contribution for each year. F. Other Post Emplovment Benefits (OPEB) Pursuant to Section 112.0801, Florida Statutes, the City is required to permit participation in the health insurance program by 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. The City, by policy, has elected to provide qualified retirees with partial subsidy. In this respect, the City operates a single -employer plan. Employees are eligible to receive benefits from the Retiree Medical Plan upon retirement, if they are enrolled in the active medical plan immediately prior to retiring and achieved at least 20 years of service in a full time capacity. The City pays 50% of the costs of single coverage group health insurance for up to 2 years after retirement. No retirees are currently receiving medical benefits. Based on GASB Statement 43 and 45, which set forth the guidelines for treatment of Other Post Employment Benefits, the City had an actuary calculate future funding requirements in 2007. The actuary's 2007 estimate, using the Projected Unit Credit Method, produced an unfunded obligation of $281,842 and an annual required contribution of $40,089. The City elected to fund the OPEB obligation on a pay-as-you-go basis. The entire unfunded obligation was recognized in the government -wide financial statements. The enterprise fund portion ($33,365) was also recognized in the enterprise fund financial statements. As such, a separate audited GAAP basis postemployment benefit plan report is not available. In 2008 and 2009, the City recorded an additional government -wide obligation of $30,943 and $32,I97, respectively, based on the annual required contribution reduced by the expected future benefit payments. The additional enterprise fund portion was calculated as $3,592 in 2008 and $3,737 in 2009. The City had an actuary calculate the OPEB obligation for 2010 and recognized a reduction in the government -wide obligation of $5,217. The enterprise fund portion was calculated as a decrease of $1 1,470. The actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Calculations are based on the types of benefits provided with the plan at the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. Calculations reflect a long- term perspective and assumptions used include techniques designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value of assets. The schedule of funding progress shown below is required to present multi -trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The City elected to fund the OPEB on a pay-as-you-go basis and consequently, reports a zero balance for the actuarial value of assets. M• SCHEDULE OF FUNDING PROGRESS Actuarial UAAL as Actuarial Accrued Unfunded a % of Value of Liability AAL Funded Covered Covered Fiscal Assets (AAL) (UAAL) Ratio Payroll Payroll Year (a) (b) (c) (a/b) (d) ((b a)/d) 2011 $ $ 311,771 $ 311,771 0.00% $ 6,239,431 5.00% 2010 $ $ 306,554 $ 306,554 0.00% $ 6,057,700 5.06% The actuarial assumptions included the following: Amortization period —Open, level percentage of compensation over a 30 year period. Retirement age for active employees — Based on historical average. Mortality — RP-2000 Combined Healthy Mortality Table projected to 2010. Turnover — Historical data by age. Healthcare cost trend rate — nine percent (9%) in 2010, decreasing to five percent (5110) in 2017. Health insurance premiums — Actual 2010 premiums were used to calculate the values of benefits to be paid. Payroll growth rate — three percent (3%) per year. Inflation rate — three percent (3%) per year. Interest rate — four percent (4%) rate of return on invested assets, to reflect the long-term expectation of investment returns. The determination of the Net Other Post Employment Benefit obligation (OPEB) is as follows: 9/30/2009 9/30/2010 9/30/2011 Annual required contribution $ 40,089 $ 26,557 $ 26,557 Interest on Net OPEB obligation - 13,799 13,799 Adjustment to annual required contribution - (13,182) (13,182) Annual OPEB cost 40,089 27,174 27,174 Less assumed contributions 7,892 32,391 32,391 Increase (decrease) in net OPEB obligation 32,197 (5,217) (5,217) Net OPEB obligation - beginning of year 312,785 344,982 339,765 Net OPEB obligation - end of year $ 344,982 $ 339,765 $ 334,548 Percentage of annual OPEB cost contributed 20% 1 19% 1 19% G. Termination Benefits The City offered its employees an early retirement incentive program in 2006-2007 fiscal year. The eligibility requirements were that the employee was either an exempt management employee or an hourly employee including police officers with at least 15 years of service in a full time capacity and within three years of reaching the age of 65 (the age eligible for Medicare benefit). The benefits include a one time lump sum payment based on the year of service and single coverage group health insurance for up to 3 years after retirement. The lump sum payment was calculated by multiplying $1,000 for each full year of service. The group health insurance will terminate when the retiree reaches the age of 65 and eligible for Medicare benefits. As of September 30, 2011, the total accrued termination benefits for the government -wide financial statements were $12,736. No portion of the accrued termination benefits related to the enterprise funds. H. Insurance The City is exposed to various risks of loss related to torts; theft of or damage to and destruction of assets; errors and omissions; and natural disasters. The City purchases commercial insurance with various deductibles for different types of losses. The cost of this insurance is accounted for in the general fund, golf course fund, airport fund, and building fund. Settled claims have not exceeded this commercial coverage in the past three fiscal years. I. Litigation Various suits and claims are currently pending against the City. It is impossible for the City to accurately quantify the exposure involved given the jury's latitude in assessing compensatory and punitive damages, and the court's latitude in awarding attorney's fees. The City intends to vigorously defend against these lawsuits and believes it has a good chance of prevailing on their merits. The City is contingently liable with respect to lawsuits and other claims incidental to the ordinary course of its operations. In the opinion of management and based on the advice of legal counsel, the ultimate disposition of lawsuits will not have a material adverse effect on the financial position of the City. J. Grants Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. If any expenditures were disallowed as a result of these audits, the claims for reimbursement to the grantor agency would become a liability of the City. In the opinion of management, any such adjustments would not be significant. 50 Required Supplemental Information 51 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund For the Year Ended September 30, 2011 Actual Variance with Budget Amounts Amounts on Final Budget - a Budgetary Positive Original Final Basis (Negative) REVENUES: Taxes: Property $ 3,122,353 $ 3,122,353 $ 3,156,158 $ 33,805 Public utility 2,607,270 2,607,270 2,392,345 (214,925) Franchise fees 1,450,085 1,450,085 1,184,686 (265,399) Licenses and permits 44,650 44,650 23,646 (21,004) Intergovernmental 1,836,540 1,970,017 2,002,032 32,015 Charges for services 286,550 286,550 260,838 (25,712) Fines 65,500 65,500 80,654 15,154 Investment earnings 89,500 89,500 53,185 (36,315) Contributions and donations 23,850 54,888 47,409 (7,479) Other revenue 191,315 193,736 142,227 (51,509) Total revenues 9,717,613 9,884,549 9,343,180 (541,369) EXPENDITURES: Current: General government 2,558,426 2,563,803 2,539,576 24,227 Public safety 4,762,875 4,941,466 5,073,186 (131,720) Physical environment 1,197,689 1,197,689 1,129,621 68,068 Transportation 1,007,723 1,007,723 932,190 75,533 Culture and recreation 927,627 927,627 915,275 12,352 Total expenditures 10,454,340 10,638,308 10,589,848 48,460 Excess (deficiency) of revenues over (under) expenditures (736,727) (753,759) (1,246,668) (492,909) OTHER FINANCING SOURCES Transfers in 736,727 736,727 736,727 Total other financing sources 736,727 736,727 736,727 Net changes in fund balances - (17,032) (509,941) (492,909) Fund balances - beginning 5,684,096 5,535,011 5,535,011 Fund balances - ending $ 5,684,096 $ 5,517,979 $ 5,025,070 $ (492,909) The accompanying notes to required supplementary information are an integral part of this schedule. 52 City of Sebastian, Florida Schedule of Revenue, Expenditures, and Changes in Fund Balances - Budget and Actual Discretionary Sales Tax Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Budget Amounts Amounts on Final Budget - a Budgetary Positive Original Final Basis (Negative) REVENUES: Taxes: Sales $ 2,325,000 $ 2,325,000 $ 2,358,676 $ 33,676 Investment earnings 24,593 24,593 5,377 (19,216) Total revenues 2,349,593 2,349,593 2,364,053 14,460 OTHER FINANCING SOURCES (USES) Transfers out (2,164,057) (2,164,057) (2,119,706) 44,351 Total other financing sources (uses) (2,164,057) (2,164,057) (2,119,706) 44,351 Net changes in fund balances 185,536 185,536 244,347 58,811 Fund balances - beginning 1,379,095 1,379,095 1,379,095 - Fund balances - ending $ 1,564,631 $ 1,564,631 $ 1,623,442 $ 58,811 The accompanying notes to required supplementary information are an integral part of this schedule. 53 City of Sebastian, Florida Schedule of Revenue, Expenditures, and Changes in Fund Balances - Budget and Actual Riverfront Redevelopment Agency Special Revenue Fund For the Year Ended September 30, 2011 REVENUES: Taxes: Property Investment earnings Other revenue Total revenues EXPENDITURES: Current: Economic environment Total expenditures Excess of revenues over over expenditures OTHER FINANCING SOURCES (USES) Transfers out Total other financing sources (uses) Net changes in fund balances Fund balances - beginning Fund balances - ending Actual Variance with Budget Amounts Amounts on Final Budget - a Budgetary Positive Original Final Basis (Negative) $ 298,942 $ 298,942 $ 297,620 $ (1,322) 1,440 1,440 5,152 3,712 - - 16,264 16,264 300,382 300,382 319,036 18,654 120,727 120,727 188,918 (68,191) 120,727 120,727 188,918 (68,191) 179,655 179,655 130,118 (49,537) (290,000) (382,494) (356,899) 25,595 (290,000) (382,494) (356,899) 25,595 (110,345) (202,839) (226,781) (23,942) 682,591 682,591 682,591 - $ 572,246 $ 479,752 $ 455,810 $ (23,942) The accompanying notes to required supplementary information are an integral part of this schedule. 54 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Discretionary Sales Surtax Revenue Bonds 2003 Debt Service Fund For the Year Ended September 30, 2011 REVENUES: Investment earnings Total revenues EXPENDITURES: Debt service: Principal Interest and fiscal charges Total expenditures Deficiency of revenues under expenditures OTHER FINANCING SOURCES Transfers in Total other financing sources Net changes in fund balances Fund balances - beginning Fund balances - ending Budget Amounts Original Final $ 22,854 $ 22,854 22,854 22,854 765,000 254,579 1,019,579 (996,725) 765,000 254,579 1,019,579 (996,725) Actual Amounts on a Budgetary Basis $ 5,748 5,748 765,000 254,612 1,019,612 (1,013,864) Variance with Final Budget - Positive (Negative) $ (17,106) (17,106) 997,557 997,557 1,015,787 18,230 997,557 997,557 1,015,787 18,230 832 832 1,923 1,091 1,409,793 1,409,793 1,554,654 144,861 $ 1,410,625 $ 1,410,625 $ 1,556,577 $ 145,952 55 City of Sebastian, Florida Notes to the Required Supplementary Information — Budget Comparisons September 30, 2011 A. Budgetary Basis Annual budgets are adopted for all governmental funds except the capital project funds, which are approved on a "life of the project basis", and the permanent fund, which is not budgeted. Since all accounting principles applied for purposes of developing data on a budgetary basis differ significantly from those used to present financial statements in conformity with U.S. generally accepted accounting principles, reconciliations of the resultant timing differences have been provided on page 52 through page 55. All annual appropriations lapse at year-end. B. Budgetary Information The appropriated budget is prepared by fund, function, and department. The government's department heads, with the City Manager's approval, may make transfers of appropriations within a department or division. Shifts in appropriations within fund totals may be done on the authority of the City Manager. Transfers of appropriations between funds require approval of the City Council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations made by the City Council) is the fund level. The City Council made four supplementary budgetary appropriations throughout the year. The I" quarter budget amendment highlighted an increase of $2,004,631 to cover transfers for year-end open purchase orders and unfinished capital projects that were carried forward from the prior fiscal year. The 2"d quarter budget amendment highlighted reductions of $205,686 for completed or cancelled purchases that were less than budgeted. The 3`d quarter budget amendment made adjustments for a net reduction of $58,552 to several capital projects. The 4`h quarter budget amendment highlighted adjustments to capital projects to correspond with discussions at the time, amounting to a net reduction of $98,182. C. Budgeted Expenditures Exceeded Revenues Budgeted expenditures exceeded revenues in the general fund, riverfront redevelopment special revenue fund, discretionary sales surtax revenue bonds 2003 debt service fund, parking in -lieu -of special revenue fund, law enforcement forfeiture special revenue fund and stormwater utility revenue bond 2003 debt service fund. However, this is pursuant to the legally adopted budget to expend available fund equity (cash carry forward) and does not constitute a deficit. The parking in -lieu -of special revenue fund was initiated during the year and as there were no immediate plans to expend the amounts collected, no budget appropriations were made. 56 City of Sebastian, Florida REOUIRED SUPPLEMENTARY INFORMATION Police Officers' Pension Plan Governmental Accounting Standards Board Statements No. 25 and 27, Financial Reportine for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Accounting for Pensions by State and Local Governmental Emplovers require supplementary information be reported on the local pension plans in addition to that provided in the Notes to the Financial Statements. This information, as amended by Statement No. 50, is presented in the following schedule: SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND OTHER CONTRIBUTING ENTITIES Annual Fiscal Required City State Percentage Year Contributions Contribution Contribution Contributed 2011 S 726,380 S 592,903 S 133,477 100.00% 2010 701,998 566,910 134,852 99.97% 2009 557,439 404,104 137,782 97.21% 2008 456,928 376,769 122,800 109.33% 2007 407,011 294,534 117,621 101.26% 2006 360,922 219,898 117,621 93.52% 2005 330,257 240,166 117,621 108.34% Other Post Employment Benefits (OPEB) Governmental Accounting Standards Board Statements No. 43 and 45, Reporting for Postemplovment Benefit Plans Other Than Pension Plans and Accounting and Financial Reporting by Emplovers for Postemplovment Benefits Other Than Pensions, establishes accounting and reporting requirements for state and local government employers that provide OPEB. This information is presented in the following schedule: SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER Annual Fiscal Required City Percentage Year Contributions Contribution Contributed 2011 $ 26,557 $ 26,557 100.00% 2010 26,557 26,557 100.00% 2009 40,089 40,089 100.00% Note: The City has elected to fund the OPEB on a pay-as-you-go basis. 57 CITY OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK Nonmaj or Governmental Funds 59 HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK .Z Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes. Local Option Gas Tax Fund — This fund is used to account for the government's share of motor fuel tax revenues that are legally restricted to transportation related expenditures within the government's boundaries. Parking In -Lieu -Of Fund — This fund is used to account for charges based on providing future parking spaces in public areas in place of meeting those requirements within property planned to be approved for development. Recreation Impact Fee Fund — This fund is used to account for recreation impact fees that are restricted for use in the expansion or construction of recreational facilities. Stormwater Utility Fee Fund — This fund is used to account for fees collected on a per unit basis that are restricted for the purposes of managing the City's Stormwater system. Law Enforcement Forfeiture Fund — This fund is used to account for receipts of forfeited cash or equipment associated with police activities and is restricted to police related equipment purchases and community education initiatives. Debt Service Fund Debt service funds are used to account for accumulations of pledged funds that are legally restricted to pay debts. Stormwater Utility Revenue Bonds Debt Service Fund — This fund is used to account for the accumulation of stormwater utility fees pledged to pay the principal, interest, and fiscal charges on the Stormwater Utility Revenue Bonds. Capital Projects Funds Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. General Capital Projects Fund — This fund is used to account for the construction of non-stormwater related improvements and general capital construction projects. Governmental resources and State grant revenues are used to finance the improvements in this fund. Capital Improvements Fund — This fund is used to account for the accumulated resources associated with infrastructure improvements such as parks and building. Public Facilities Improvements Fund — This fund accounts for the resources associated with debt for the purpose of constructing and equipping a new city hall complex and renovation and expansion of the police station. Permanent Fund Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government's programs. Cemetery Permanent Fund — This fund is used to account for principal trust amounts received, sale of cemetery lots and related interest income. One-half of the cemetery lot sales and the interest portion of the trust can be used to maintain the community cemetery. 61 City of Sebastian, Florida Combining Balance Sheet Nonmajor Governmental Funds September 30, 2011 Special Revenue Funds Local Law Option Parking Recreation Stormwater Enforcement Gas Tax In -Lieu -Of Impact Fee Utility Forfeiture Total ASSETS Cash and cash equivalents $ 6,847 $ 2,630 $ 11,314 $ 7,602 $ 7,805 $ 36,198 Investments 7,778 10,002 836,873 432,063 58,780 1,345,496 Due from other governments 44,947 - - 10,595 - 55,542 Prepaid items - - - - - - Total assets 59,572 12,632 848,187 450,260 66,585 1,437,236 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 1,010 - - 104 - 1,114 Due to other funds - - - - - - Total liabilities 1,010 - - 104 - 1,114 Fund balances: Nonspendable - - - - - - Restricted 58,562 12,632 848,187 450,156 66,585 1,436,122 Total fund balances 58,562 12,632 848,187 450,156 66,585 1,436,122 Total liabilities and fund balances $ 59,572 $ 12,632 $ 848,187 $ 450,260 $ 66,585 $ 1,437,236 62 Debt Service Funds Capital Projects Funds Permanent Stormwater Fund Total Utility General Other Revenue Capital Capital Governmental Bonds 2003 Projects Improvements Total Cemetery Funds $ 3,377 $ - $ 3,309 $ 3,309 $ 37,162 $ 80,046 100,019 - - - $882,617 2,328,132 - - 61,959 61,959 - 117,501 $79,624 - - - - 79,624 183,020 - 65,268 65,268 919,779 2,605,303 2,701 2,701 - 3,815 60,000 60,000 - 60,000 62,701 62,701 - 63,815 - - - - $919,779 919,779 183,020 - 2,567 2,567 - 1,621,709 183,020 - 2,567 2,567 919,779 2,541,488 $ 183,020 $ - $ 65,268 $ 65,268 $ 919,779 $ 2,605,303 63 City of Sebastian, Florida Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2011 Special Revenue Funds Local Law Option Parking Recreation Stormwater Enforcement Gas Tax In -Lieu -Of Impact Fee Utility Forfeiture Total REVENUES: Taxes: Motor fuel $ 557,930 $ - $ - $ - $ - $ 557,930 intergovernmental 9,353 - - - - 9,353 Impact fees - - 42,250 - - 42,250 Charges for services - - - 805,969 - 805,969 Fines - - - - 880 880 Investment earnings 9,623 4 7,223 10,446 26 27,322 Contributions and donations - - - - - - Other revenue - 12,628 - - - 12,628 Total revenues 576,906 12,632 49,473 816,415 906 1,456,332 EXPENDITURES: Current: Public safety - - - - 1,600 1,600 Physical environment - - - 104 - 104 Transportation 259,591 - - - 259,591 Debt Service: Principal 168,000 - - - - 168,000 Interest and fiscal charges 96,463 - - - - 96,463 Capital outlay - - 5,118 - 5,881 10,999 Total expenditures 524,054 - 5,118 104 7,481 536,757 Excess (deficiency) of revenues over (under) expenditures 52,852 12,632 44,355 816,311 (6,575) 919,575 OTHER FINANCING SOURCES (USES) Transfers in - - - - - Transfers out (1,386,945) - (302,478) (954,996) - (2,644,419) Total other financing sources (uses) (1,386,945) - (302,478) (954,996) - (2,644,419) Net changes in fund balances (1,334,093) 12,632 (258,123) (138,685) (6,575) (1,724,844) Fund balances - beginning 1,392,655 - 1,106,310 588,841 73,160 3,160,966 Fund balances - ending $ 58,562 $ 12,632 $ 848,187 $ 450,156 $ 66,585 $ 1,436,122 El Debt Service Fund Capital Projects Funds Stormwater Utility General Revenue Capital Capital Bonds 2003 Projects Improvements Total 128 128 5,000 5,000 61,962 61,962 360 5,360 62,322 67,322 Permanent Fund Total Other Governmental Cemetery Funds $ 557,930 71,315 42,250 55,160 861,129 - 880 6,883 34,333 - 5,360 12,628 62,043 1,585,825 - - - - - 1,600 - - - - - 104 - - 27,405 27,405 - 286,996 270,000 - - - - 438,000 170,077 - - - - 266,540 - 421,111 624,940 1,046,051 - 1,057,050 440,077 421,111 652,345 1,073,456 - 2,050,290 (439,949) (416,111) (590,023) (1,006,134) 62,043 (464,465) 440,018 416,111 555,633 971,744 - 1,411,762 - - (253,907) (253,907) (1,727) (2,900,053) 440,018 416,111 301,726 717,837 (1,727) (1,488,291) 69 - (288,297) (288,297) 60,316 (1,952,756) 182,951 - 290,864 290,864 859,463 4,494,244 $ 183,020 $ $ 2,567 $ 2,567 $ 919,779 $ 2,541,488 65 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Local Option Gas Tax Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Motor fuel taxes $ 610,000 $ 557,930 $ (52,070) Intergovernmental 9,353 9,353 - Investment earnings 4,168 9,623 5,455 Total revenues 623,521 576,906 (46,615) EXPENDITURES: Current: Transportation 250,000 259,591 (9,591) Debt service: Principal 168,000 168,000 - Interest and fiscal charges 96,463 96,463 - Total expenditures 514,463 524,054 (9,591) Excess of revenues over expenditures 109,058 52,852 (56,206) OTHER FINANCING SOURCES (USES) Transfers out (1,461,429) (1,386,945) 74,484 Debt proceeds - - - Total other financing sources (uses) (1,461,429) (1,386,945) 74,484 Net changes in fund balances (1,352,371) (1,334,093) 18,278 Fund balances - beginning 1,392,655 1,392,655 - Fund balances - ending $ 40,284 $ 58,562 $ 18,278 i1 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Parking In -Lieu -Of Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Investment earnings $ - $ 4 $ 4 Other revenue - 12,628 12,628 Total revenues - 12,632 12,632 EXPENDITURES: Current: Transportation - - - Total expenditures - - - Excess of revenues over expenditures - 12,632 12,632 Fund balances - beginning - - - Fund balances - ending $ - $ 12,632 $ 12,632 67 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Recreation Impact Fee Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Impact fees $ 28,024 $ 42,250 $ 14,226 Investment earnings 2,767 7,223 4,456 Total revenues 30,791 49,473 18,682 EXPENDITURES: Current: Culture and recreation - 5,118 (5,118) Total expenditures - 5,118 (5,118) Excess of revenues over expenditures 30,791 44,355 13,564 OTHER FINANCING (USES) Transfers in - - - Transfers out (566,364) (302,478) 263,886 Total other financing (uses) (566,364) (302,478) 263,886 Net changes in fund balances (535,573) (258,123) 277,450 Fund balances - beginning 1,106,310 1,106,310 - Fund balances - ending $ 570,737 $ 848,187 $ 277,450 68 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Stormwater Utility Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Charges for services $ 835,000 $ 805,969 $ (29,031) Investment earnings 8,200 10,446 2,246 Total revenues 843,200 816,415 (26,785) EXPENDITURES: Current: Physical environment 100 104 (4) Total expenditures 100 104 (4) Excess of revenues over expenditures 843,100 816,311 (26,789) OTHER FINANCING (USES) Transfers out (1,138,877) (954,996) 183,881 Total other financing (uses) (1,138,877) (954,996) 183,881 Net changes in fund balances (295,777) (138,685) 157,092 Fund balances - beginning 588,841 588,841 - Fund balances - ending $ 293,064 $ 450,156 $ 157,092 •1 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Law Enforcement Forfeiture Special Revenue Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Fines $ 8,000 $ 880 $ (7,120) Investment earnings 250 26 (224) Contributions 2,000 - (2,000) Other revenues - - Total revenues 10,250 906 (9,344) EXPENDITURES: Current: Public safety - 7,481 (7,481) Total expenditures - 7,481 (7,481) Excess of revenues over expenditures 10,250 (6,575) (16,825) Fund balances - beginning 73,160 73,160 - Fund balances - ending $ 83,410 $ 66,585 $ (16,825) 70 City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Stormwater Utility Revenue Bonds 2003 Debt Service Fund For the Year Ended September 30, 2011 Actual Variance with Amounts on Final Budget - Final a Budgetary Positive Budget Basis (Negative) REVENUES: Investment earnings $ 1,122 $ 128 $ (994) Total revenues 1,122 128 (994) EXPENDITURES: Debt service: Principal 270,000 270,000 - Interest and fiscal charges 169,911 170,077 (166) Total expenditures 439,911 440,077 (166) Deficiency of revenues under expenditures (438,789) (439,949) (1,160) OTHER FINANCING SOURCES Transfers in 438,877 440,018 1,141 Total other financing sources 438,877 440,018 1,141 Net changes in fund balances 88 69 (19) Fund balances - beginning 182,951 182,951 - Fund balances - ending $ 183,039 $ 183,020 $ (19) 71 City of Sebastian, Florida Statement of Changes in Assets and Liabilities Agency Fund For the Year Ended September 30, 2011 Balance Balance October 1, September 30, 2010 Additions Deletions 2011 ASSETS Cash and cash equivalents $ 11,930 $ - $ - $ 11,930 Investments, at fair value 220,000 - - 220,000 Total assets $ 231,930 $ - $ - $ 231,930 LIABILITIES Performance deposits held in escrow $ 231,930 $ - $ - $ 231,930 Total liabilities $ 231,930 $ - $ - $ 231,930 72 City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Comparative Schedule By Source September 30, 2011 Governmental Funds capital assets: FY 2010 FY 2011 Land $ 8,007,437 $ 8,007,437 Buildings and structures 12,061,711 12,370,759 Improvement other than buildings 5,738,546 5,992,537 Machinery and equipment 7,742,063 8,028,080 Infrastructure 30,891,580 33,628,446 Capital projects 951,144 1,207,848 Total capital assets $ 65,392,481 $ 69,235,107 Investment in Governmental Funds capital assets by sources: Federal grants $ 6,140,108 $ 6,202,067 State grants 907,755 907,755 County grants 713,359 713,359 General fund 11,296,100 11,280,701 Law enforcement trust fund 49,883 55,764 Recreational impact fee 1,203,687 1,516,679 Stormwater utility fee 4,880,968 4,895,946 Riverfront Redevelopment 1,675,466 1,932,055 Cemetery trust fund 236,479 236,479 Donations 3,165,873 3,196,121 Sales taxes 12,844,066 14,159,551 Motor fuel taxes 5,590,464 6,811,354 Revenue bond debt 15,737,130 16,119,428 Capital projects 951,143 1,207,848 Total investment in capital assets $ 65,392,481 $ 69,235,107 73 City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity September 30, 2011 Improvements Machinery Otherthan and Function and Activity Land Buildings Buildings Equipment Infrastructure Totals General government: Legislative $ - $ - $ - $ 4,245 $ - $ 4,245 City manager - - - 1,612 - 1,612 City clerk - - - 25,817 - 25,817 Finance - - 1,100 58,411 - 59,511 MIS - 5,841 53,131 568,221 - 627,193 Facilities maintenance - 133,430 15,665 68,250 - 217,345 Growth management - 85,555 - 35,350 - 120,905 Non -departmental 3,634,769 6,184,990 126,636 204,374 52,700 10,203,469 Subtotal 3,634,769 6,409,816 196,532 966,280 52,700 11,260,097 Public safety: Special operations - - - 127,484 - 127,484 Administration 9,560 3,347,152 89,320 282,963 - 3,728,995 School resource - - - 69,943 - 69,943 Road patrol - - - 2,545,372 - 2,545,372 Community policing - - - 42,139 - 42,139 Code enforcement - - - 31,749 - 31,749 Investigations - - 1,700 231,355 - 233,055 Support services - - - 59,026 - 59,026 Communications - - 16,404 209,808 - 226,212 Building department - - - 37,980 - 37,980 Subtotal 9,560 3,347,152 107,424 3,637,819 - 7,101,955 Transportation: Engineering - - - - - - Central garage - 130,489 82,419 142,091 674 355,673 Roads and drainage 47,125 162,044 972,302 969,403 13,932,560 16,083,434 Subtotal 47,125 292,533 1,054,721 1,111,494 13,933,234 16,439,107 Economic Environment: Non -departmental 2,308,392 1,040,589 - - - 3,348,981 Subtotal 2,308,392 1,040,589 - - - 3,348,981 Physical Environment: Stormwater - - 1,850 1,626,449 17,960,496 19,588,795 Cemetery 272,190 82,019 78,354 56,809 22,717 512,089 Subtotal 272,190 82,019 80,204 1,683,258 17,983,213 20,100,884 Culture/Recreation: Parks and recreation 1,735,401 1,198,650 4,553,656 629,229 1,659,299 9,776,235 Subtotal 1,735,401 1,198,650 4,553,656 629,229 1,659,299 9,776,235 Total $ 8,007,437 $ 12,370,759 $ 5,992,537 $ 8,028,080 $ 33,628,446 68,027,259 Construction in progress 1,207,848 Total $ 69,235,107 74 Function and Activity General government: Legislative City manager City clerk City attorney Administrative Services MIS Facilities maintenance Growth management Non -departmental Subtotal Public Safety: Special operations Administration School resource Road patrol Community policing Code enforcement Professional standards Investigations Support services Communications Building department Subtotal Transportation: Engineering Central garage Roads and drainage Subtotal Economic Environment: Non -departmental Subtotal Physical Environment: Stormwater Cemetery Subtotal Culture & Recreation: Parks and recreation Subtotal Total Construction in progress Total City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity September 30, 2011 Governmental Governmental Funds Funds Capital Assets Transfers Transfers Capital Assets October 1, 2010 Additions Deletions In Out September 30, 2011 $ 8,231 $ - $ 750 $ - $ 3,236 $ 4,245 1,612 - - - - 1,612 134,766 - - - 108,949 25,817 55,306 3,800 695 1,100 - 59,511 412,728 101,833 1,758 114,389 - 627.192 217,345 - - - - 217,345 123,823 - - - 2,917 120,906 10,203,469 - - - - 10,203,469 11,157,280 105,633 3,203 115,489 115,102 11,260,097 176,393 - 48,909 - - 127,484 3,728,994 - - - 3,728,994 69,943 - - - - 69,943 2,313,919 342,148 118,490 19,025 11,230 2,545,372 42,139 - - - - 42,139 32,600 - - - 851 31,749 19,025 - - - 19,025 - 242,053 9,034 18,031 - - 233,056 59,026 - - - - 59,026 226,212 - - - - 226,212 51,838 - - - 13,858 37,980 6,962,142 351,182 185,430 19,025 44,964 7,101,955 1,088 - - - 1,088 - 357,038 - - - 1,365 355,673 15,391,843 822,188 2,480 2,917 131,034 16,083,434 15,749,969 822,188 2,480 2,917 133,487 16,439,107 3,092,392 256,589 - - - 3,348,981 3,092,392 256,589 - - - 3,348,981 17,586,510 1,869,365 11,972 144,892 - 19,588,795 512,089 - - - - 512,089 18,098,599 1,869,365 11,972 144,892 - 20,100,884 9,380,955 386,390 2,340 11,230 - 9,776,235 9,380,955 386,390 2,340 11,230 - 9,776,235 64,441,337 3,791,347 205,425 293,553 293,553 68,027,259 951,144 1,025,614 768,910 - - 1,207,848 $ 65,392,481 $ 4,816,961 $ 974,335 $ 293,553 $ 293,553 $ 69,235,107 75 CITY OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 76 Statistical Section This part of the City of Sebastian, 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 city's overall financial health. Contents Pa e s Financial Trends 78-91 These schedules contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. Revenue Capacity 92-95 These schedules contain information to help the reader assess the city's most significant local revenue source, the property tax, and the municipal sales tax. Debt Capacity 96-101 These schedules present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. Economic and Demographic Information 102-104 These schedules offer economic and demographic indicators to help the reader understand the environment within which the city's financial activities take place. Operating Information 105-107 These schedules contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the city provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in 2001; schedules presenting government -wide information include information beginning in that year. 77 City of Sebastian, Florida Net Assets By Component Last Ten Fiscal Years (accrual basis of accounting) 2011 2010 2009 Governmental Activities Invested in Capital Assets, Net of Related Debt $ 31,541,953 $ 28,938,587 $ 26,744,896 Restricted 5,668,155 8,757,043 8,197,018 Unrestricted 4,052,751 3,889,011 4,502,440 Total Governmental Activities Net Assets $ 41,262,859 $ 41,584,641 $ 39,444,354 Business -Type Activities Invested in Capital Assets, Net of Related Debt $ 11,850,561 $ 11,389,704 $ 10,725,676 Restricted - - 98,320 Unrestricted (deficit) (644,620) (342,340) 86,517 Total Business -Type Activities Net Assets $ 11,205,941 $ 11,047,364 $ 10,910,513 Primary government Invested in Capital Assets, Net of Related Debt $ 43,392,514 $ 40,328,291 $ 37,470,572 Restricted 5,668,155 8,757,043 8,295,338 Unrestricted 3,408,131 3,546,671 4,588,957 Total Primary Government Net Assets $ 52,468,800 $ 52,632,005 $ 50,354,867 (') The large increases in unrestricted net assets from 2003 to 2004 and from 2004 to 2005 are mainly due to increase in State revenue sharing. sales and use taxes, and tax revenues (2) The large increase in unrestricted net assets from 2005 to 2006 is mainly due to increase in tax revenues, franchise fees, and interest earnings. 78 2008 2007 2006 2005 2004 2003 2002 $ 24,133,550 $ 21,469,456 $ 17,579,683 $ 17,103,399 $ 16,412,401 $ 16,339,222 $ 14,242,832 9,215,801 9,419,129 5,068,583 5,395,879 4,059,674 3,235,266 3,289,670 5,035,184 5,249,998 11,293,877 12, 9,081,345 � 7,171,123 �'� 5,461,224 5,865,388 $ 38,384,535 $ 36,138,583 $ 33,942,143 $ 31,580,623 $ 27,643,198 $ 25,035,712 $ 23,397,890 $ 9,111,251 $ 8,895,501 $ 8,798,612 $ 7,459,945 $ 4,264,961 $ 1,545,867 $ 363,827 570,149 570,890 560,581 574,105 506,006 505,435 458,014 753,076 11303,886 1,896,539 738,519 1,712,657 1,471,457 1,120,224 $ 10,434,476 $ 10,770,277 $ 11,255,732 $ 8,772,569 $ 6,483,624 $ 3,522,759 $ 1,942,065 $ 33,244,801 $ 30,364,957 $ 26,378,295 $ 24,563,344 $ 20,677,362 $ 17,885,089 $ 14,606,659 9,785,950 9,990,019 5,629,164 5,969,984 4,565,680 3,740,701 3,747,684 5,788,260 6,553,884 13,190,416 9,819,864 8,883,780 6,932,681 6,985,612 $ 48,819,011 $ 46,908,860 $ 45,197,875 $ 40,353,192 $ 34,126,822 $ 28,558,471 $ 25,339,955 W9 Program Revenues Governmental Activities: Charges for Services: General Government Public Safety Physical Environment Economic Environment Cultural/Recreation Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues Business -Type Activities: Charges for Services: Golf Course Airport Building (i> Operating Grants and Contributions Capital Grants and Contributions Total Business -Type Activities Program Revenues Total Primary Government Program Revenues Expenses Governmental Activities: General Government Public Safety Physical Environment Transportation Economic Environment Cultural/Recreation Interest and Fiscal Charges Total Governmental Activities Expenses Business -Type Activities: Golf Course Airport Building (1) Total Business -Type Activities Expenses Total Primary Government Expenses City of Sebastian, Florida Changes in Net Assets Last Ten Fiscal Years (accrual basis of accounting) 2011 2010 2009 $ 197,945 $ 203,915 $ 220,073 92,350 118,368 95,606 868,059 881,338 908,829 61,353 62,046 66,540 196,534 210,050 228,002 838,242 3,178,618 1,865,174 2,254,483 4,654,335 3,384,224 1,3 82,421 1,335,647 1,406,956 485,229 468,698 438,485 401,021 356,264 358,947 900,340 904,853 1,356,914 3,169,011 3,065,462 3,561,302 $ 5,423,494 $ 7,719,797 $ 6,945,526 $ 2,766,575 $ 3,309,381 $ 3,169,851 5,546,632 5,720,933 5,420,585 1,55 8,974 1,947,605 1,347,771 2,263,367 1,863,551 3,437,724 208,518 135,885 167,470 1,227,198 1,240,383 1,073,249 546,103 566,410 730,100 14,117,367 14,784,148 15,346,750 1,355,266 1,188,788 470,406 3,014,460 $ 17,131,827 1,388,158 1,067,525 496,800 2,952,483 $ 17,736,631 1,477,299 1,079,869 533,641 3,090,809 $ 18,437,559 (1) The building operation was reclassified from being part of the general fund operation to an enterprise fund operation at the beginning of fiscal year 2006. 80 2008 2007 2006 2005 2004 2003 2002 $ 353,836 $ 422,897 $ 533,482 $ 370,609 $ 376,327 $ 247,774 $ 172,135 85,009 92,853 140,545 1,356,385 1,660,032 824,821 625,924 903,285 891,021 887,819 828,907 850,887 799,637 785,683 - - - - - - 24,869 83,378 85,945 72,472 56,199 48,590 46,736 73,013 786,016 192,676 407,898 2,802,511 1,144,528 920,829 958,229 835,607 1,014,481 1,301,438 1,781,954 1,353,959 640,894 872,490 3,047,131 2,699,873 3,343,654 7,196,565 5,434,323 3,480,691 3,512,343 1,43 8,233 1,652,288 1,5 80,407 1,381,817 1,648,3 08 1,377,245 1,365,027 523,989 344,813 375,768 434,818 201,890 168,451 179,373 347,189 408,875 1,220,823 - - - - - - 6,998 13,582 67,576 - 51,087 494,098 500,428 1,056,562 2,289,986 2,451,212 1,149,437 214,175 2,803,509 2,906,404 4,240,558 4,120,203 4,368,986 2,695,133 1,809,662 $ 5,850,640 $ 5,606,277 $ 7,584,212 $ 11,316,768 $ 9,803,309 $ 6,175,824 $ 5,322,005 $ 3,375,178 $ 3,083,609 $ 3,129,723 $ 3,262,276 $ 2,414,865 $ 1,620,616 $ 2,010,288 5,226,512 5,377,107 4,191,295 4,816,614 4,502,109 3,391,831 2,945,701 1,805,755 1,695,066 2,193,589 1,283,889 1,279,257 1,920,200 508,616 2,111,360 2,276,497 2,173,071 4,034,900 3,288,532 2,401,037 2,258,181 113,101 605,510 98,661 32,128 86,041 166,024 223,207 1,420,734 1,237,398 1,208,288 1,260,395 823,974 747,910 881,260 634,891 667,950 706,303 740,372 722,007 312,367 168,749 14,687,531 14,943,137 13,700,930 15,430,574 13,116,785 10,559,985 8,996,002 1,488,472 1,533,900 1,558,338 1,464,532 1,527,051 1,363,359 1,393,551 1,099,653 1,046,994 801,967 519,235 350,949 315,941 283,726 605,422 905,452 936,793 - - - - 3,193,547 3,486,346 3,297,098 1,983,767 1,878,000 1,679,300 1,677,277 $ 17,881,078 $ 18,429,483 $ 16,998,028 $ 17,414,341 $ 14,994,785 $ 12,239,285 $ 10,673,279 81 City of Sebastian, Florida Changes in Net Assets (continued) Last Ten Fiscal Years (accrual basis of accounting) Net (Expense)/Revenue Governmental Activities Business -Type Activities Total Primary Government Net Expense General Revenues and Other Changes in Net Assets Governmental Activities: Property Taxes, Levied for General Purposes Sales and Use Taxes Franchise Fees State Shared Revenues Interest Earnings Miscellaneous Transfers Total Governmental Activities Business -Type Activities: Interest Earnings Miscellaneous Transfers Total Business -Type Activities Total Primary Government Change in Net Assets Governmental Activities Business -Type Activities Total Primary Government Change in Net Assets 2011 2010 2009 $ (11,862,884) $ (10,129,813) $ (11,962,526) 154,551 112,979 470,493 $ (11,708,333) $ (10,016,834) $ (11,492,033) $ 3,453,778 $ 4,164,128 $ 4,801,924 4,751,021 4,765,200 4,670,106 1,184,686 1,228,692 1,327,253 1,868,555 1,825,215 1,821,347 111,943 144,432 261,203 171,119 149,453 140,512 - (7,020) - 11,541,102 12,270,100 13,022,345 4,026 15,658 5,544 - 1,194 - 7,020 - 4,026 23,872 5,544 $ 11,545,128 $ 12,293,972 $ 13,027,889 $ (321,782) ") $ 2,140,287 $ 1,059,819 136,851 136,851 476,037 $ (184,931) $ 2,277,138 $ 1,535,856 (2) The large increase in transfers from 2005 to 2006 is mainly due to the one time transfer of building reserve to building fund due to the reclassification of fund type for the building operation. (3) The reduction in the change in net assets for governmental funds, can be attributed to less income being received, resulting in a smaller spread between revenues and expenditures, thereby using net assets for revenue shortfalls. 82 2008 2007 2006 2005 2004 2003 2002 $ (11,640,400) $(12,243,264) $(10,357,276) $ (8,234,009) $ (7,682,462) $ (7,079,294) $ (5,483,659) (390,038) (579,942) 943,460 2,136,436 2,490,986 1,015,833 132,385 $ (12,030,438) $(12,823,206) $ (9,413,816) $ (6,097,573) $ (5,191,476) $ (6,063,461) $ (5,351,274) $ 5,149,047 $ 5,089,841 $ 4,645,050 $ 4,017,555 $ 3,420,971 $ 2,944,456 $ 2,615,939 4,753,718 4,776,691 4,907,906 4,718,691 4,035,545 3,705,922 2,844,825 1,199,762 1,106,698 1,253,749 886,390 770,600 756,194 766,901 1,989,606 2,083,523 2,242,292 2,138,020 1,721,956 1,523,524 2,068,753 634,919 1,147,931 827,224 398,518 398,158 241,358 118,840 159,300 192,300 256,780 118,760 388,562 79,662 - - 42,720 (1,414,205) (106,500) (445,844) (534,000) - 13,886,352 14,439,704 12,718,796 12,171,434 10,289,948 8,717,116 8,415,258 54,237 137,207 125,498 45,709 23,774 21,789 32,122 - - - 300 261 9,072 - - (42,720) 1,414,205 12) 106,500 445,844 534,000 - 54,237 94,487 1,539,703 152,509 469,879 564,861 32,122 $ 13,940,589 $ 14,534,191 $ 14,258,499 $ 12,323,943 $ 10,759,827 $ 9,281,977 $ 8,447,380 $ 2,245,952 $ 2,196,440 $ 2,361,520 $ 3,937,425 $ 2,607,486 $ 1,637,822 $ 2,931,599 (335,801) (485,455) 2,483,163 2,288,945 2,960,865 1,580,694 164,507 $ 1,910,151 $ 1,710,985 $ 4,844,683 $ 6,226,370 $ 5,568,351 $ 3,218,516 $ 3,096,106 83 General Fund Nonspendable Committed Assigned Unassigned Total General Fund All Other Governmental Funds Nonspendable Restricted Total All Other Governmental Funds Total Governmental Funds City of Sebastian, Florida Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2011 2010 2009 2008 2007 $ 346,995 $ 352,248 $ 357,696 $ 381,528 $ 368,609 2,949,139 3,063,585 3,083,463 3,502,560 3,742,617 21,911 31,656 1,983 33,453 19,055 1,784,413 (3) 2,164,910 2,324,972 2,390,641 2,260,507 5,102,458 5,612,399 5,768,114 6,308,182 6,390,788 1,494,779 859,463 830,029 771,927 694,506 4,748,376 7,897,580 8,557,389 �� 12,446,260 12,926,545 6,243,155 8,757,043 9,387,418 13,218,187 13,621,051 $11,345,613 $14,369,442 $15,155,532 $19,526,369 $ 20,011,839 (1) The significant reduction in restricted fund balance reported in All Other Governmental Funds from 2008 to 2009, is a result of the significant completion of the Indian River Drive/Main Street and Pedestrian Bridge Projects, along with the significant construction completed on the Collier Canal Retrofit Project. (2) The large increase in restricted fund balance for All Other Governmental Funds 2002 to 2003 is due to the issuance of City's Infrastructure Sales Surtax Revenue Bonds, Series 2003. (3) Reduction in unassigned fund balance to fund operations. 84 2006 2005 $ 106,192 $ 160,964 $ 4,844,674 5,546,959 9,856 3,761 1,518,350 391,783 131 6,479,072 6,103,467 2004 2003 2002 59,921 $ 141,667 $ 28,147 5,411,621 �� 3,924,363 131 2,743,933 5,140 7,706 8,221 (361,790) 131 (191,886) 131 1,142,446 5,114,892 3,881,850 3,922,747 656,160 578,367 542,999 463,402 445,939 14,783,299 13,392,801 13,815,771 13,339,097 �� 5,250,078 15,439,459 13,971,168 14,358,770 13,802,499 5,696,017 $ 21,918,531 $ 20,074,635 $ 19,473,662 $17,684,349 $ 9,618,764 85 City of Sebastian, Florida Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Revenues Property and Other Local Taxes Franchise Fees Charges for Services Licenses and Permits Fines Intergovernmental Impact Fees Special Assessments Investment Earnings Miscellaneous Total Revenues Expenditures Current: General Government Public Safety Physical Environment Transportation Economic Environment Cultural and Recreation Debt service: Principal Retirement Interest and Fiscal Charges Capital Outlay Total Expenditures Excess of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Debt Proceeds Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Debt Service as a Percentage of Noncapital Expenditures 2011 2010 $ 8,762,729 $ 9,525,074 1,184,686 1,228,692 1,121,967 1,154,739 23,646 33,182 81,534 90,948 2,249,447 4,572,550 42,250 26,000 103,795 228,216 224,823 169,039 13,794,877 17,028,440 2,539,211 2,699,289 5,030,708 4,938,147 1,166,309 1,210, 823 1,217,521 1,405,310 188,918 129,352 903,836 977,780 1,203,000 2,142,190 521,152 577,593 4,048,051 6,189,026 16,818,706 20,269,510 (3,023,829) (3,241,070) - 2,462,000 5,376,658 4,486,626 (5,376,658) (4,493,646) 2,454,980 $ (3,023,829) $ (786,090) 13.5% 19.3% 2009 $ 10,065,806 1,327,253 1,186,161 29,151 88,938 3,270,854 13,975 3,849 250,914 176,430 16,413,331 2,976,896 4,926,714 1,448,067 1,696,254 167,470 1,148,408 1,218,995 706,093 6,495,271 20,784,168 (4,370,837) 5,196,376 (5,196,376) $ (4,370,837) 13.5% 86 2008 2007 2006 $ 10,504,155 $ 10,554,617 $ 10,269,451 1,199,762 1,106,698 1,253,749 1,209,617 1,271,102 517,605 163,471 186,875 244,370 65,246 71,314 77,776 2,674,761 2,463,628 2,852,293 32,825 56,875 337,675 - - 819,286 647,312 1,062,043 827,224 461,553 244,629 294,695 16,958,702 17,017,781 17,494,124 3,087,789 2,999,652 4,677,618 4,700,447 1,368,593 1,301,719 1,545,045 1,733,697 113,101 80,279 1,079,379 975,087 1,326,182 1,284,418 611,554 643,305 3,634,910 5,242,590 17,444,171 18,961,194 (485,469) (1,943,413) 2005 2004 2003 2002 $ 9,483,664 $ 8,179,344 $ 7,325,932 $ 6,228,107 886,390 770,600 756,194 766,901 936,530 962,677 921,119 1,123,670 1,587,675 1,867,920 878,097 578,695 95,699 118,918 119,752 127,027 5,561,695 3,115,520 1,785,237 2,841,315 385,775 557,700 395,850 255,775 11,023 28,424 22,560 31,756 398,518 398,158 241,358 206,567 144,057 378,268 91,078 126,823 19,491,026 16,377,529 12,537,177 12,286,636 2,494,863 2,974,736 2,231,532 1,977,033 2,230,870 3,813,908 4,349,639 3,950,228 3,427,711 2,588,526 1,850,642 910,794 1,125,727 1,247,452 508,616 1,672,983 3,616,076 2,863,397 1,610,761 1,427,992 98,661 32,128 86,041 166,024 327,911 926,846 995,406 747,131 629,835 732,729 1,248,378 1,218,023 985,974 361,024 344,553 678,682 711,736 887,564 158,043 174,864 1,451,060 3,975,015 9,021,558 3,859,709 2,322,794 14,236,023 18,783,553 21,899,152 13,437,592 10,658,855 3,258,101 707,473 (5,521,623) (900,415) 1,627,781 - - - - 7,756,780 9,500,000 - 5,679,896 5,158,296 3,785,981 3,745,265 2,745,754 2,992,908 2,009,173 (5,679,896) (5,115,576) (5,200,186) (3,851,765) (3,191,598) (3,526,908) (2,009,173) - 42,720 (1,414,205) (106,500) 7,310,936 8,966,000 - $ (485,469) $ (1,900,693) $ 1,843,896 $ 600,973 $ 1,789,313 $ 8,065,585 $ 1,627,781 14.0% 14.1% 15.1% 13.0% 14.5% 5.4% 6.2% 87 Function/Program Governmental Activities: General Government Public Safety Physical Environment Transportation Economic Environment Cultural/Recreation Total Governmental Activities Business -type activities: Golf Course Airport Building Total Business -Type Activities Total Primary Government City of Sebastian, Florida Program Revenues by Function/Program Last Ten Fiscal Years (accrual basis of accounting) 2011 2010 2009 $ 243,039 $ 209,144 $ 226,003 234,437 304,630 299,119 930,018 881,338 1,408,829 743,383 614,305 612,335 - 2,556,872 6,000 103,606 88,046 831,938 2,254,483 4,654,335 3,384,224 1,3 82,421 1,33 5,647 1,406,955 1,385,569 1,373,551 1,795,399 (2) 401,021 356,264 358,948 3,169,011 3,065,462 3,561,302 $ 5,423,494 $ 7,719,797 $ 6,945,526 ( I ) The building operation was reclassified from being part of the general fund operation to an enterprise fund beginning of fiscal year 2006. (2) The significant increase in business -type activities for the airport from 2008 to 2009 is mainly due to capital grant funding from the Florida Department of Transportation and the Federal Aviation Administration 88 2008 2007 2006 2005 2004 2003 2002 $ 377,305 $ 450,267 $ 579,591 $ 587,527 $ 392,471 $ 1,095,902 $ 172,135 515,997 249,756 306,702 1,537,557 1,850,710 929,952 785,373 1,256,277 891,021 890,092 898,821 914,318 1,136,507 785,683 619,949 721,103 900,365 3,392,883 1,670,534 1,580,076 3,038,913 - - 30,059 - - - 24,869 277,603 387,726 636,845 779,777 606,290 663,459 566,959 3,047,131 2,699,873 3,343,654 7,196,565 5,434,323 5,405,896 5,373,932 1,438,233 1,652,288 1,587,405 1,395,399 1,715,884 1,377,245 1,365,517 1,018,087 845,241 1,432,330 2,724,804 2,653,102 1,317,888 444,145 347,189 408,875 1,220,823 - - - - 2,803,509 2,906,404 4,240,558 4,120,203 4,368,986 2,695,133 1,809,662 $ 5,850,640 $ 5,606,277 $ 7,584,212 $ 11,316,768 $ 9,803,309 $ 8,101,029 $ 7,183,594 E3: City of Sebastian, Florida Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Property Taxes Public Utility Sales Tax Motor Fuel Total 2011 (6) $ 3,453,778 $ 2,392,345 $ 2,358,676 $ 557,930 $ 8,762,729 2010 4,164,128 2,437,050 2,328,150 595,746 9,525,074 2009 (5) 4,801,924 2,341,458 2,328,648 593,776 10,065,806 2008 (4) 5,149,047 2,250,781 2,502,937 601,390 10,504,155 2007 (3) 5,089,841 2,216,381 2,560,310 688,085 10,554,617 2006 (2) 4,645,050 2,183,164 2,724,742 716,495 10,269,451 2005 4,017,555 2,005,124 2,713,567 747,418 9,483,664 2004 3,420,971 1,854,632 2,180,913 722,828 8,179,344 2003 2,944,456 1,780,717 1,925,205 675,554 7,325,932 2002 (1) 2,717,564 983,236 1,861,589 665,718 6,228,107 (1) Fiscal Year 2002 property tax revenue reflects a change in the property tax millage rate from 5.0000 to 4.5904. (2) Fiscal Year 2006 property tax revenue reflects a change in the property tax millage rate from 4.5904 to 3.9325. (3) Fiscal Year 2007 property tax revenue reflects a change in the property tax millage rate from 3.9325 to 3.0519. (4) Fiscal Year 2008 property tax revenue reflects a change in the property tax millage rate from 3.0519 to 2.9917. (5) Fiscal Year 2009 property tax revenue reflects a change in the property tax millage rate from 2.9917 to 3.3456. (6) Fiscal Year 2011 property tax revenue reflects a change in the property tax millage rate from 3.3456 to 3.3041. Millage Rate represents the dollar of tax per one thousand dollars of taxable valuation. •E City of Sebastian, Florida Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years City of Sebastian Indian River County School Board Debt Total Total Debt Total Fiscal Operating Service City County(') Operating Service School Year Millage Millage Millage Millage Millage Millage Millage Other(2) 2011 3.3041 - 3.3041 6.28600 7.92000 0.00000 7.92000 1.35050 2010 3.3456 - 3.3456 6.26930 7.29600 0.30000 7.59600 1.33570 2009 3.3456 - 3.3456 6.28610 6.76000 0.28000 7.04000 1.11204 2008 2.9917 - 2.9917 5.14850 7.26800 0.27000 7.53800 1.38160 2007 3.0519 - 3.0519 5.36610 7.16300 0.28000 7.44300 1.47940 2006 3.9325 - 3.9325 5.69040 7.88000 0,36000 8.24000 1.60850 2005 4.5904 - 4.5904 7.35050 8.01900 0.48000 8.49900 1.43029 2004 4.5904 - 4.5904 7.93960 8.17900 0.53100 8.71000 1,69278 2003 4.5904 - 4.5904 8.03020 8.10200 0.63000 8.73200 1,43875 2002 4.5904 - 4.5904 8.08410 8.40200 0.68000 9.08200 1.14845 (1) Millage includes General Fund, M.S.T.U.s, Emergency Services District and Land Bonds. (2) All Special Taxing Districts. Source: Indian River County Property Appraiser's Office a City of Sebastian, Florida Assessed Valuation and Estimated Taxable Property Values Last Ten Fiscal Years Real Property Personal Property Fiscal Assessed Estimated Assessed Estimated Year Value Actual Value Value Actual Value 2011 $ 1,392,267,434 $ 1,740,334,293 $ 55,234,086 $ 55,234,086 2010 1,650,311,449 2,062,889,311 56,920,223 56,920,223 2009 1,933,934,630 2,417,418,288 62,476,508 62,476,508 2008 2,054,408,055 2,568,010,069 64,899,942 64,899,942 2007 2,124,615,672 2,655,769,590 55,913,696 55,913,696 2006 1,526,923,406 1,908,654,258 51,827,624 51,827,624 2005 1,157,275,164 1,446,593,955 51,330,277 51,330,277 2004 946,293,950 1,182,867,438 48,613,628 48,613,628 2003 829,224,615 1,036,530,769 45,355,170 45,355,170 2002 754,577,150 943,221,438 45,195,579 45,195,579 Source: Indian River County Property Appraiser Fiscal Year information is provided from previous Tax Year. 92 Tax Total Total Exempt Taxable Estimated Property Value Actual Value 460,752,786 $ 986,748,734 $ 1,795,568,379 558,090,532 1,149,141,140 2,119,809,534 676,808,522 1,319,602,616 2,479,894,796 334,302,515 1,785,005,482 2,632,910,011 322,318,753 1,858,210,615 2,711,683,286 271,466,364 1,307,284,666 1,960,481,882 228,262,825 980,342,616 1,497,924,232 217,554,663 777,352,915 1,231,481,066 205,977,066 668,602,719 1,081,885,939 198,445,669 601,327,060 988,417,017 93 City of Sebastian, Florida Principal Taxpayers Fiscal Year 2011 and 2002 Taxpayer & (Business Type) Florida Power & Light (Utility/Electric) Wal-Mart Stores Inc. (Retail) Park Place Community LLC (Rental/Retail) BW US 1 Inc. (Commerical) Bellsouth Communications (Utility/Telephone) IPF / Sebastian LLC (Retail) Pelican Isles Limited Partnership (Rental) Hartwell Groves, Inc. (Commercial) Sebastian Inlet Marina & Trading Co., Inc. (Restaurant/Hotel) Sebastian Medical Suites (Healthcare) James T Turner (MHP/Rentals) Ruth Guest House, Inc. (Rental/Retail) Oyster Point Resort Condo (Time Share/Rental) Henry A. Fisher (Real Estate) Charter Communications (Utility / Cable) Total Assessed Valuation 2011 Real Percentage Property of Total Assessed Assessed Valuation Rank Valuation $ 14,770,105 1 12,118,757 2 6,838,017 3 6,486,540 4 6,291,362 5 6,166,560 6 4,843,970 7 4,589,390 8 4,332,598 9 3,891,480 10 $ 70,328,779 $105,630,210 Source: Indian River County Property Appraiser's Office 94 2002 Real Percentage Property of Total Assessed Assessed Valuation Rank Valuation 13.98% $ 10,610,764 2 11.47% 11,455,234 1 6.47% - 6.14% 6,081,550 4 5.96% 8,326,393 3 5.84% - 4.59% - 4.34% 4.10% 3,119,345 8 3.68% - - 3,784,200 5 - 3,748,510 6 - 3,249,733 7 3,115,000 9 2,904,492 10 66.57% $ 56,395,221 $ 874,445,310 0.70% 0.95% 0.36% 0.43% 0.43% 0.37% 0.36% 0.33% 6.45% City of Sebastian, Florida Property Tax Levies And Collections Last Ten Fiscal Years Percent of Percent of Total Current Current Tax Delinquent Total Total Tax Tax Tax Collections & Penalty Tax Tax Collections Year Levy Collections To Tax Levy Collections Collections To Tax Levy 2011 $ 3,260,316 $ 3,144,864 96 % $ 11,294 $ 3,156,158 97 % 2010 3,844,658 3,716,797 97 17,723 3,734,520 97 2009 4,441,535 4,225,106 95 51,694 4,276,800 96 2008 4,919,994 4,634,338 94 2,906 4,637,244 94 2007 4,747,938 4,537,100 96 9,429 4,546,529 96 2006 4,426,281 4,300,217 97 39 4,300,256 97 2005 3,888,488 3,723,912 96 1,712 3,725,624 96 2004 3,216,940 3,130,521 97 34,247 3,164,768 98 2003 2,862,650 2,725,515 95 26,908 2,752,423 96 2002 2,635,277 2,489,854 94 36,421 2,526,275 96 Source: Indian River County Property Appraiser and Department of Revenue, Certification of Final Taxable Value, DR-422 95 City of Sebastian, Florida Ratios of Outstanding Debt by Type Last Ten Fiscal Years Business -type Governmental Activities Activities Water Line Roadway Infrastructure Heavy Stormwater Golf Course Assessment Improvement Sales Tax Equipment Utility Revenue Revenue Year Bonds Notes Bonds Lease Bonds Bonds 2011 $ $2,246,000 $ 6,215,000 $ $ 3,785,000 $ 2010 - 2,414,000 6,980,000 4,055,000 - 2009 - 1,089,203 7,725,000 4,315,000 300,000 2008 1,333,197 8,445,000 4,570,000 590,000 2007 - 1,566,839 9,145,000 147,538 4,815,000 870,000 2006 1,790,544 9,825,000 288,251 5,055,000 1,I40,000 2005 2,004,718 10,490,000 422,455 5,290,000 1,395,000 2004 - 2,209,745 11,140,000 550,452 5,525,000 1,885,000 2003 77,615 2,406,028 9,500,000 672,528 - 2,115,000 2002 134,299 2,593,939 - 788,957 - 2,335,000 (2) Information not available yet. Total Percent of Primary Personal Per Government Income Capita $ 12,246,000 (2) 558 13,449,000 (2) 587 13,429,203 0.18% 591 14,938,197 0.19% 652 16,544,377 0.21 % 738 18,098,795 0.25% 835 19,602,173 0.31 % 978 21,310,197 0.42% 1,100 14,771,171 0.31% 802 5,852,195 0.13% 341 M City of Sebastian, Florida Computation of Legal Debt Margin September 30, 2011 Assessed Valuation Assessed property value for tax year 2010 $ 1,447,501,520 Deduct: exempt property 460,752,786 Total Operating Taxable Value for Debt Service $ 986,748,734 Legal debt margin: Debt limitation - 5 percent of total assessed real property value �� $ 49,337,437 Debt applicable to limitation Total bonded debt $ 12,246,000 Less: revenue bonds (10,000,000) Total applicable to limitation 2,246,000 Legal debt margin $ 47,091,437 City adopted financial policies state the City will limit its total outstanding general obligation debt to five percent of the assessed valuation of taxable property. City of Sebastian, Florida Direct and Overlapping Governmental Activities Debt General Obligation Bonds September 30, 2011 The City of Sebastian has no overlapping general obligation bonded debt. Gffi City of Sebastian, Florida Ratios of General Bonded Debt Outstanding and Legal Debt Margin Last Ten Fiscal Years Debt Limit (1) Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of debt limit 2011 2010 2009 2008 $ 49,337,437 $ 57,457,057 $ 65,980,131 $ 89,250,274 (2,246,000) 2,414,000 1,089,203 1,333,197 $ 51,583,437 $ 55,043,057 $ 64,890,928 $ 87,917,077 -4.55% 4.20% 1.65% 1.49% (1) Under the City's adopted financial policies, the City's outstanding general obligation debt should not exceed 5% of the assessed valuation of taxable property. The percentage was dropped from 10% to 5% in fiscal year 2003. 98 2007 2006 2005 2004 2003 $ 92,910,531 $ 65,364,233 $ 49,017,131 $ 38,867,646 $ 33,430,136 $ 1,566,840 1,790,544 2,004,718 2,209,745 2,406,028 $ 91,343,691 $ 63,573,689 $ 47,012,413 $ 36,657,901 $ 31,024,108 $ 1.69% 2.74% 4.09% 5.69% 7.20% 2002 30,066,353 2,593,939 27,472,414 8.63 % 99 City of Sebastian, Florida Pledged -Revenue Coverage Last Ten Fiscal Years Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001 Less: Net Fiscal Gross Operating Available Debt Service Year Revenues(') Expenses (2) Revenue Principal Interest Total Coverage 2011 $ - $ - $ - $ - $ - $ - 0.00 2010 c5� 1,341,555 1,129,651 211,904 300,000 21,700 321,700 0.66 2009 1,408,535 1,178,144 230,391 570,000 49,860 619,860 0.37 2008 1,455,749 1,174,169 281,580 270,000 41,090 311,090 0.91 2007 1,701,171 1,218,382 482,789 255,000 51,590 306,590 1.57 2006 1,628,015 1,165,411 462,604 250,000 61,690 311,690 (3> 1.48 2005 1,395,436 1,023,002 372,434 240,000 71,490 311,490 (3� 1.20 2004 1,497,053 1,108,770 388,283 230,000 80,890 310,890 (3> 1.25 2003 1,400,154 968,052 432,102 220,000 89,890 309,890 c3> 1.39 2002 1,386,424 1,020,640 365,784 100,000 104,481 204,481 c3> 1.79 �4> Note: Detail regarding the City's outstanding debt can be found in the notes to the financial statements. (') Total revenues including charges for services, rents, and interest. (2) Total direct operating expenses excludes depreciation, amortization, annual Airport lease payment, and one time hurricane repair and upgrade. (3) Golf Course Bond, Series 1992 refunded with Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001. (4) Required coverage is 1.25. (5) Final payment was paid on September 30, 2010. (6) Total revenues consist of stormwater utility fees and interest. (7) Required coverage is 1.35. 100 Stormwater Utility Revenue Bonds, Series 2003 Gross Debt Service Revenues(6) Principal Interest Total Coverage�'� $ 816,415 $ 270,000 $ 169,035 $ 439,035 1.86 858,664 260,000 177,485 437,485 1.96 814,419 255,000 185,135 440,135 1.85 856,568 245,000 191,873 436,873 1.96 932,183 240,000 197,273 437,273 2.13 908,576 235,000 201,973 436,973 2.08 792,886 235,000 206,673 441,673 1.80 779,724 105,000 104,386 209,386 3.72 101 City of Sebastian, Florida Demographic and Economic Statistics Last Ten Years Total Per Capita Median Personal Personal Household School Year Population Income(1) Income(1) Income(1) Enrollment(2) 2011 21,929 (4) (4) (4) 5,228 2010 22,922 (4) (4) (4) 5,167 2009 22,722 $ 7,610,327,000 $ 56,303 $ 43,685 (5) 3,751 2008 22,924 7,669,062,000 57,107 48,267 (5) 4,710 2007 22,426 7,810,408,000 59,419 47,563 5,117 2006 21,666 7,217,159,000 55,817 45,034 5,604 2005 20,048 6,386,893,000 50,369 44,450 5,258 2004 19,365 5,071,395,000 40,677 41,522 4,917 2003 18,425 4,831,037,000 40,162 40,291 4,340 2002 17,167 4,680,414,000 39,683 39,615 4,309 Sources: (') Florida Research & Economic Database (FRED). Information available for Indian River County only. (2) Indian River County School Board (3) Indian River County Property Appraiser (4) Information not available yet (5) The school population appears to have declined as result of loss of job opportunities. Our community lost many construction jobs as a result of the declining economy. School enrollment consists of Sebastian River High School, Sebastian River Middle School, Liberty Magnet, Treasure Coast Elementary, Pelican Island Elementary, Sebastian Elementary and Sebastian Charter Junior High School 102 Unemployment Rate (1) 12.9 % 14.4 13.0 7.9 5.5 4.1 4.7 6.7 6.8 7.2 State Unemployment Rate 10.6 11.9 10.5 6.3 4.1 3.4 3.8 4.7 5.3 5.7 Property Taxes Per Capita % $ 157.50 $ 181.67 211.33 224.61 226.96 214.39 200.40 176.66 159.81 158.30 Total Taxable Property Value (3) 986,748,734 1,149,141,140 1,319,602,616 1,785,005,482 1,858,210,615 1,307,284,666 980,342,616 777,352,915 668,602,719 601,3 27,060 103 City of Sebastian, Florida Principal Employers in Indian River County Year 2011 and 2002 2011 Employer School District of Indian River County (Government) Indian River County (Government) Indian River Medical Center (Healthcare) Publix Supermarkets (Food / Beverage) Wal-Mart (Retail) Piper Aircraft, Inc. (Manufacturer) Sebastian River Medical Center (Healthcare) John's Island (Residential / Resort) City of Vero Beach (Government) Visiting Nurse Association (Healthcare) Sun Ag, Inc (Agricultural) Indian River Estates (Retirement / Life Care) Disney'Vero Beach Resort (Resort Hotel) CVS Warehouse/Distribution (Distribution) Grand Harbor Management (Developer) City of Sebastian (Government) Total Total County Employees 2002 Employer School District of Indian River County (Government) Indian River Memorial Hospital (Healthcare) Indian River County (Government) The New Piper Aircraft (Manufacturer) Publix Supermarkets (Food / Beverage) City of Vero Beach (Government) Wal-Mart (Retail) Sun Ag, Inc (Agricultural) Hale Indian River Groves (Agricultural) John's Island (Residential / Resort) Gracewood Fruit Packing (Agricultural) Dodgertown Complex (Convention / Sports) Total Total County Employees Source: Indian River County Community Development Report Percentage Number of of Total County Employees Employment 2,013 3.26 % 1,354 2.19 1,608 2.61 1,006 1.63 727 1.18 700 1.13 569 0.92 550 0.89 492 0.80 399 0.65 380 0.62 350 0.57 300 0.49 300 0.49 295 0.48 166 0.27 11,209 18.17 % 61,700 Percentage Number of of Total County Employees Employment 1860 3.78 % 1451 2.95 1372 2.79 1000 2.03 715 1.45 681 1.38 672 1.37 550 1.12 672 1.37 475 0.97 465 0.95 450 0.91 10,363 21.07 % 49,195 * Principal employers information available for Indian River County only. 104 City of Sebastian, Florida Full -Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Function/grogram General Government: City Council 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 City Manager 2.0 2.5 2.5 2.5 2.0 2.0 5.0 4.0 4.0 4.0 City Clerk 3.0 3.0 3.0 3.0 4.0 4.5 4.0 4.0 4.0 5.0 City Attorney 0.0 0.0 (5) 2.0 2.0 2.0 2.0 2.0 1.0 1.0 1.0 Administrative Services 5.0 5.0 Finance 0.0 0.0 (3) 5.0 5.0 5.0 6.0 5.0 5.0 5.0 6.0 Mgmt Information Svcs 4.0 3.0 3.0 3.0 3.0 3.0 2.0 2.0 2.0 0.0 Human Resources 0.0 0.0 (3) 2.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Facilities Maintenance 2.0 2.0 2.0 2.0 2.0 2.0 2.0 0.0 4.0 4.0 Growth Management 4.0 5.0 5.0 5.0 5.0 4.0 4.0 4.0 4.0 4.0 Public Safety: Police Department 58.0 58.0 59.0 58.0 57.0 58.0 (2) 59.0 56.5 54.5 53.0 Building Department 5.0 5.0 5.0 6.0 11.0 11.0 9.0 8.0 7.0 7.0 Code Enforcement 3.0 (5) 2.5 2.5 2.5 3.0 3.0 (2) 0.0 0.0 0.0 0.0 Transportation: Roads & Drainage 12.0 12.0 (4) 10.0 10.0 11.5 12.5 12.5 14.5 11.5 23.5 Central Garage 2.5 3.5 3.5 2.5 3.5 3.5 3.0 3.0 3.0 3.0 Airport 3.0 3.0 3.0 3.0 3.0 3.5 3.5 2.5 2.5 1.5 Physical Environment: Cemetery 1.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Engineering 0.0 0.0 (4) 7.0 7.0 9.0 8.0 8.0 8.0 7.5 8.0 Stormwater Utility 12.0 12.0 11.0 13.0 13.0 13.0 13.0 12.0 12.0 � 1.0 Cultural/Recreation: Parks & Recreation 21.0 23.0 23.5 23.5 23.5 24.5 23.5 17.5 16.5 14.0 Golf Course 10.5 10.5 9.0 9.0 12.5 12.5 12.5 13.5 13.5 14.5 Totals: 150.5 154.5 162.5 164.5 177.5 180.5 175.5 163.0 159.5 157.0 Eleven employees were moved from roads & drainage to stormwater starting fiscal year 2003. (2) Code enforcement division was transferred out of the Police Department starting fiscal year 2006, and transferred back in fiscal year 2009 Finance and Human Resources were combined to form Administrative Services starting fiscal year 2010. (4) Engineering department was dismantled, intern program was ceased, and (2) employees were transferred to Roads & Drainage and (1) employee was transferred to Stormwater (5) City Attorney position was contracted out, and assistant went full time to code enforcement. Source: City of Sebastian, Florida 2002-2012 Annual Budgets Method: Using 1.0 for each full-time employee, and 0.50 for each part-time and seasonal employee 105 City of Sebastian, Florida Operating Indicators by Function/Program Last Ten Fiscal Years Function/program 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 General Government Number of Annexations Approved 0 1 3 0 1 1 1 6 3 0 Acres of Annexed Property 0 5.9 26 0 3.87 3.3 25.55 484 80 0 Purchase Orders Issued 228 216 288 254 284 293 369 408 372 357 Public Safety Police Department Physical Arrest 500 487 543 662 697 744 786 653 557 515 Traffic Violations 5,941 4,083 4,849 4,418 7,221 6,291 5,457 5,431 1,939 2,528 Parking Violations 242 87 50 208 289 880 303 3,801 632 207 Building Department Construction Permits Issued (3) 51 36 23 55 104 506 774 577 544 363 Estimated Value of Construction (in millions) $ 10.2 $ 6.6 $ 5.1 $ 13.3 $ 22.5 $ 88.3 $114.7 $1 12.3 $82.7 $38.9 Transportation Road Maintenance (man hours) 700 1,264 600 538 888 512 100 878 850 827 Asphalt for road maintenance (tons) 50 103 328 358 210 127 125 88 79 75 Concrete for road maintenance (yards) (2) 0 0 0 0 0 300 0 283 277 275 Physical Environment Cemetery Cemetery Internments 54 66 74 68 69 76 79 86 81 73 Grave Deeds Sold 34 33 39 46 49 56 56 69 45 54 Stormwater Mile of Swales Maintained 280 280 280 280 280 280 280 280 280 280 Mile of Ditches Maintained 50 50 50 50 50 50 50 50 50 50 Road Crossing Maintained 40 40 30 30 30 30 30 30 30 30 Catch Basins/Culverts 325 315 275 275 275 275 275 275 275 250 Recreation Recreation Center attendance 8,649 11,701 13,465 12,910 14,177 8,004 5,504 7,498 (1) (1) Number of Discount Cards 735 844 879 950 1,004 2,690 1,000 993 855 890 Number of Golf Course Memberships 94 96 95 97 108 119 85 116 137 169 Average daily golf revenue $3,787 $3,673 $4,000 $3,988 $4,661 $4,441 $3,844 $4,551 $3,836 $3,798 Information not available c2) All road maintenance utilized asphalt, no concrete curbing was installed. (3) New Commercial and Residential Only Sources: City of Sebastian Police Department, Growth Management, Public Works, Golf Course, and Building Department. 106 Function/program General Government Square Footage Occupied Departmental Vehicles Public Safety Police Stations Square Footage of Police Department Square Footage of Building Department Police Vehicles Building Inspector Vehicles Transportation Streets (miles) Number of Streetlights (1) Airport Public Service Vehicles Physical Environment Public Service Vehicles Recreation Number of Parks Recreation Centers Park Acreage Recreation Center Square Footage Park Maintenance Vehicles Golf Course City of Sebastian, Florida Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 21,500 21,500 21,500 21,500 21,500 21,500 21,500 5,516 5,516 5,516 3 3 3 3 3 3 5 2 2 2 1 25,600 1 25,600 1 25,600 1 25,600 1 25,600 1 25,600 1 25,600 1 8,700 1 8,700 1 8,700 2,500 2,500 2,500 2,500 2,500 2,500 2,500 1,716 1,716 1,716 67 63 63 62 57 53 52 47 42 40 3 3 4 4 5 6 5 4 4 5 156 156 156 156 156 156 156 156 149.6 140.0 L236 1,230 1,240 1,229 1,309 3,808 3,555 3,543 3,543 3,531 1 1 1 1 1 1 1 1 1 1 19 22 18 23 21 19 14 24 18 22 9 15 7 11 10 12 13 6 7 4 18 18 18 15 14 14 12 12 12 10 2 2 2 2 2 2 2 2 2 2 315.01 315.01 233.79 233.79 229.37 229.37 223.37 223.37 223.37 207.85 4,859 4,859 4,859 059 4,859 4,859 4,859 4,859 4,859 4,859 14 13 13 13 12 11 10 8 6 6 1 1 1 1 1 1 1 1 1 1 Sources: City of Sebastian Administrative Services Department and Parks and Recreation Division (') This number represents actual unmetered street lights in the City. (Source: Florida Power & Light - January Billing) 107 THIS PAGE INTENTIONALLY LEFT BLANK SINGLE AUDIT SECTION The Single Audit Section contains various independent auditor's reports and schedules as required by the Florida Single Audit Act, Chapter 215.97, Florida Statutes for state and local governments that receive state assistance. ➢ Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditinq Standards ➢ Independent Auditor's Management Letter 109 THIS PAGE INTENTIONALLY LEFT BLANK 110 Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered 5070 North Highway AlA, Suite 250 Vero Beach, FL 32963 Tel 772-234-8484 Fax 772-234-8488 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 Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida We have audited the financial statements of the City of Sebastian, Florida (the "City") as of and for the year ended September 30, 2011, and have issued our report thereon dated March 13, 2012. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. "Providing Vision and Direction to our Clients" Member AICPA Member AICPA Division For CPA Firms Member FICPA Private Companies Practice Section ill Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page two We noted certain matters that we reported to management of the City of Sebastian, Florida in a separate letter, Independent Auditors' Management Letter, dated March 13, 2012. This report is intended solely for the information and use of the City of Sebastian, Florida and management, state awarding agencies and pass -through entities, and the Auditor General of the State of Florida, and is not intended to be and should not be used by anyone other than these specified parties. �,4=4ar, -664&wU Vero B ach, Florida March 13, 2012 112 Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered 5070 North Highway AIA, Suite 250 Vero Beach, FL 32963 Tel 772.234.8484 Fax 772-234-8488 Independent Auditors' Report on Compliance with Requirements Applicable to Each Major State Project and on Internal Control Over Compliance in Accordance with the Department of Financial Services State Projects Compliance Supplement Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida Compliance We have audited the compliance of the City of Sebastian, Florida (the "City") with the types of compliance requirements described in the Department of Financial Services State Projects Compliance Supplement, that are applicable to each of its major state projects for the year ended September 30, 2011. The City's major state projects are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major state projects is the responsibility of the City of Sebastian, Florida's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; Chapter 69I-5, Schedule of Expenditures of State Financial Assistance, Rules of the Department of Financial Services; and Chapter 10.550, Rules of the Auditor General. These standards, Chapter 691-5 and Chapter 10.550, Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state project occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City of Sebastian, Florida complied, in all material respects, with the requirements referred to above that are applicable to each of its major state projects for the year ended September 30, 2011. "Providing Vision and Direction to our Clients" Member A1CPA Member AICPA Division For CPA Firms Member F1CPA Private Companies Practice Section 113 Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page two Internal Control Over Compliance The management of the City of Sebastian, Florida is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to state projects. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major state project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express our opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a state project on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a state project such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a state project that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a state project will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the City of Sebastian, Florida and management, state awarding agencies and pass -through entities, and the Auditor General of the State of Florida, and is not intended to be and should not be used by anyone other than these specified parties. 171 - i ifk4JtimavXJ' �/L�. , Vero Beach, Florida March 13, 2012 114 CITY OF SEBASTIAN, FLORIDA Schedule of Findings and Questioned Costs State Projects Year Ended September 30, 2011 Section I - Summary of Auditors' Results Internal control over major State projects: Material weakness(es) identified? Reportable condition(s) identified not considered to be material weaknesses? Type of auditors' report issued on compliance for projects: Any audit findings disclosed that are required to be reported in accordance with Chapter 10.550, Rules of the Auditor General? Yes X No Yes X None reported Unqualified Opinion Yes X No The audit did not disclose any noncompliance that is material to the financial statements. Identification of major State projects: State CFDA Number Name of State Project 55.004 Joint Participation Agreement with Florida Department of Transportation Aviation Administration Dollar threshold used to distinguish between Type A and Type B projects: $300,000 Section II - Financial Statement Findings No matters were reported. Section III - Findings and Questioned Costs - Major State Projects No matters were reported. Section IV - Prior Year Findings and Questioned Costs - Major State Projects No matters were reported. 115 City of Sebastian, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance For the year ended September 30, 2011 Federal/ State Agency Pass -through Entity Federal Program / State Project Federal Highway Administration Indirect Program: Passed through Florida Department of Transportation Landscaping Improvements on CR512 Total Federal Highway Administration U.S. Department of Housing & Urban Development Direct Programs: Community Development Block Grant Total U.S. Department of Housing & Urban Development TOTAL EXPENDITURES OF FEDERAL AWARDS: Contract CFDA Grant No. No. 20.205 APZ-00, FM No. 418031-1-58-01 $ 14.216 B-10-MC-12-0058 Transfers to Expenditures Subrecipients 176,100 176,100 61,959 61.959 238,059 S The accompanying notes are an integral part of the audit. 116 City of Sebastian, Florida Schedule of Expenditures of State Financial Assistance For the year ended September 30, 2011 State Agency Contract Pass -through Entity CSFA Grant State Pro iect No. No. Department of Transportation Direct Projects: Joint Participation Agreement with Florida Department of Transportation Aviation Administration: Construct Hangars 55.004 416287-1-94-01 District Maintenance Lighting Maintenance and Compensation Agreement 55.023 405122-1-78-10 Total Department of Transportation TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE: Exuenditures S 899,700 9,553 909,253 909,253 The accompanying notes are an integral part of the audit. 117 City of Sebastian, Florida Notes to Schedule of Expenditures of State Financial Assistance September 30, 2011 The accounting policies and presentation of the Single Audit Report of City of Sebastian, Florida, (the "City") have been designed to conform to generally accepted accounting principles as applicable to governmental unites, including the reporting and compliance requirements of the Audits of State, Local Governments, and Non -Profit Organizations and the Florida Single Audit Act. A. Reporting Entitv The reporting entity consists of City of Sebastian, the primary government, and each of its component units. The City includes a Schedule of Expenditures of Federal Awards and State Financial Assistance in the Single Audit Section. B. Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of measurements made, regardless of the measurement focus. The modified accrual basis of accounting is followed in the Schedule of Expenditures of State Financial Assistance. Under the modified accrual basis, revenues are recognized when they become measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considered revenues to be available if they are collected within one year after the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. 118 Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chattered 5070 North Highway AIA, Suite 250 Vero Beach, FL 32963 Tel 772.234-8484 Fax 772.234.8488 Independent Auditors' Management Letter Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida We have audited the financial statements of the City of Sebastian, Florida as of and for the fiscal year ended September 30, 2011 and have issued our report thereon dated March13, 2012. We conducted our audit in accordance with United States generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the Florida Single Audit Act. We have issued our Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards, Independent Auditors' Report on Compliance and Internal Control with Requirements Applicable to Each Major Program and State Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated March 13, 2012, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the state of Florida and require that certain items be addressed in this letter. The Rules of the Auditor General (Section 10.554(1)(i) l) require that we address in the management letter, if not already addressed in the auditors' reports on Compliance and Internal Control or Schedule of Findings and Questioned Costs, whether or not recommendations made in the preceding annual financial audit report have been followed. There were no findings or comments in the prior year. As required by the Rules of the Auditor General (Section 10.554(1)(i)2), the scope of our audit included a review of the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, we determined that the City of Sebastian, Florida complied with Section 218.415, Florida Statutes. The Rules of the Auditor General (Section 10.554(1)(i)3) require that we address in the management letter any findings and recommendations to improve financial management, accounting procedures, and internal controls. The following finding came to our attention during the audit: "Providing Vision and Direction to our Clients" Member AICPA Member AICPA Division For CPA Firms Member FICPA Private Companies Practice Section 119 Harris, Cotherman, Jones, Price sz. Associates Certified Public Accountants - Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page two We noted that the City is not properly maintaining all documentation required under the City's purchasing card policy. The policy requires that requests for new cardholders be made by submitting a "Purchasing Card Request". Additionally, the policy requires that each cardholder sign a "Cardholder Agreement". We noted several instances where these two forms were not maintained for various cardholders. We suggest that the City request that all current cardholders sign new forms. In the future, these agreements should be maintained for all cardholders. This same issue was identified in the previous year's audit and has not been corrected. The Rules of the Auditor General (Section 10.554(1)(i)4) require that we address violations of provisions of contracts or grant agreements or abuse that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. The Rules of the Auditor General (Section 10.554(1)(i)5) provide that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings. The Rules of the Auditor General (Section 10.554(1)(i)6) also require that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. The legal authority for the City of Sebastian, Florida is disclosed in the notes to the financial statements. The City of Sebastian, Florida's component unit, the Police Officer's Pension Plan, was established under Section 58-46 through 58-54 Code of Ordinances in October 1989. As required by the Rules of the Auditor General (Section 10.554(1)(i)7.a), the scope of our audit included a review of the provisions of Section 218.503(1), Florida Statutes, regarding financial emergencies. In connection with our audit, we determined that the City of Sebastian, Florida has not met any of the financial emergency conditions described in Section 218.503(1), Florida Statutes. As required by the Rules of the Auditor General (Section 10.554(1)(i)7.b.), we determined that the annual financial report for the City of Sebastian, Florida for the year ended September 30, 2011, filed with the Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the year ended September 30, 2011. As required by the Rules of the Auditor General (Section 10.554(1)(i)7.c and 10.556(7)), we applied financial condition assessment procedures. It is management's responsibility to monitor the entity's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by the same. 120 Harris, Cotherman, Jones, Price & Associates Cettified Public Accountants - Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page three Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this letter is intended solely for the information and use of management and the Florida Auditor General of the State of Florida, and is not intended to be and should not be used by anyone other than these specified parties. Vero Beach, Florida March 13, 2012 121 ®lY®F HOME OF PELICAN ISLAND March 21, 2012 Honorable Mayor and Members of the City Council City of Sebastian, Florida Subject: Response to Management Letter Comments Dear Mayor and City Council Members: The Auditors have provided a management letter comment which was noted during the course of the audit for the 2010-2011 fiscal year. A management letter comment is a recommendation for improvement of the City's financial management, accounting procedures and internal control. The response below is provided to document the City's actions as a result of that comment. Documentation Required By The Citv's Purchasina Card Policv The City has consolidated the two documents that were previously required into one form and is in the process of having all current card holders sign the new form and acknowledge that they have received a copy of the current policy document. It is expected that this task will be complete before March 28, 2012 and that any new cardholders will be properly documented in order to resolve this comment. City of Sebastian 122 ro t Am 5FIRASTIM HOME OF PELICAN ISLAND To: City Council From: Ken Killgore, Finance Director Date: March 21, 2012 Subject: Comprehensive Annual Financial Report for FY2011 Enclosed is a printed copy of the City's Comprehensive Annual Financial Report for FY2011, as well as a letter to the City Council from the City's auditing firm. No action is expected from the City Council regarding the letter. It is just a requirement by their professional standards that the letter be provided to you at the time the audit is completed. The printed Report will be formally presented by the auditors at the March 28th City Council meeting. Please let me know, should you need any further information. Cc: City Manager City Clerk Director of Administrative Services Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered 5070 North Highway AIA, Suite 250 Vero Beach, FL 32963 Tel 772-234-8484 Fax 772-234-8488 March13, 2012 City Council City of Sebastian Sebastian, Florida We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Sebastian, Florida for the year ended September 30, 2011. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards and OMB Circular A-133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated October 11, 2011. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of Sebastian, Florida are described in Note I to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2011. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City of Sebastian, Florida's financial statements were the overfunded pension costs, the unfunded OPEB obligation, and the pollution remediation liability. "Providing Vision and Direction to our Clients" Member AICPA Member AICPA Division For CPA Firms Member FICPA Private Companies Practice Section Harris, Cotherman, Jones, Price & Associates Certified Public Accountants - Chartered City of Sebastian, Florida March13, 2012 Page 2 Management's estimate of the overfunded pension costs is based on an actuarial valuation. Management's estimate of the unfunded OPEB obligations is based on an actuarial valuation. Management's estimate of the pollution remediation liability is based on the City of Sebastian, Florida's best estimate of its share of the clean-up costs. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representation We have requested certain representations from management that are included in the management representation letter dated March13, 2012. Harris, Cotherman, Jones, Price &. Associates Certified Public Accountants - Chartered City of Sebastian, Florida March13, 2012 Page 3 Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Information in Documents Containing Audited Financial Statements With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of the City Council and management of the City of Sebastian, Florida and is not intended to be and should not be used by anyone other than these specified parties. P. Ross Cotherman, II, CPA Director