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HomeMy WebLinkAbout2008 - 2009For the Fiscal Year October 1, 2008 through September 30, 2009 The photographs on the cover of these financial statements are views of the City of Sebastian's Indian River Drive/Main Street Renovation Project completed in Fiscal Year 2009. These photographs capture the beauty of our new park, with a backdrop of the Indian River Lagoon. This area is used daily by many of our residents for their daily walks, fishing off the pier and boat launching. Elements of this project included land acquisition, a memorial wall, flagpole, restroom, boat ramp, boat trailer and chamber of commerce parking, roads, cross walks and sidewalks, directional and educational signage, pavilions, street lights, landscaping, irrigation, traffic signals, benches and trash receptacles and re- decking the dock Funding of this project was made possible by the Florida Inland Navigation District, the Florida Fish Wildlife Conservation, the Community Redevelopment Agency and Recreation Impact Fees. Total project cost was $1,538,378. Notice to proceed was issued to H D Construction, Inc., on January 20 2009 and the Ribbon Cutting Ceremony was held on July 11 2009. Photograph provided courtesy of: Robert Messersmith, Systems Analyst City of Sebastian CITY OF SEBASTIAN, FLORIDA CITY OF HOME OF PELICAN ISLAND Comprehensive Annual Financial Report For the Year Ended September 30, 2009 CITY COUNCIL Richard H. Gillmor Jim Hill Andrea Coy Don Wright Eugene Wolff Prepared By: Administrative Services Department Mayor Vice -Mayor Councilmember Councilmember Councilmember CRY OF F HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 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, 2008 Organizational Chart List of Officials i CITY OF SEBASTIAN, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2009 TABLE OF CONTENTS INTRODUCTORY SECTION Page Table of Contents ii Letter of Transmittal v Certificate of Achievement for Excellence in Financial Reporting ix Organizational Chart x List of Officials xi FINANCIAL SECTION Independent Auditors' Report 3 Management's Discussion and Analysis 5 Basic Financial Statements Government -wide Financial Statements: Statement of Net Assets 15 Statement of Activities 16 Fund Financial Statements: Balance Sheet Governmental Funds 18 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 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 Supplementary 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 Notes to the Required Supplementary Information Budget Comparisons 55 Police Officers' Pension Plan Schedule of Contributions from the Employer and other Contributing Entities 56 Combining and Individual Fund Statements and Schedules Combining Balance Sheet Nonmajor Governmental Funds 60 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds 64 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Local Option Gas Tax Special Revenue Fund 68 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Recreation Impact Fee Special Revenue Fund 69 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Stormwater Utility Special Revenue Fund 70 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Law Enforcement Forfeiture Special Revenue Fund 71 11 Page Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Stormwater Utility Revenue Bonds 2003 Debt Service Fund 72 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Discretionary Sales Surtax Revenue Bonds 2003 Debt Service Fund 73 Statement of Changes in Assets and Liabilities Agency Fund 74 Capital Assets Used in the Operation of Governmental Funds Comparative Schedule by Source 75 Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity 76 Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity 77 STATISTICAL SECTION (Unaudited) Financial Trends Net assets by Component Last Nine Fiscal Years 80 Changes in Net Assets Last Nine Fiscal Years 82 Fund Balances, Governmental Funds Last Ten Fiscal Years 86 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years 88 Program Revenues by Function/Program Last Nine Fiscal Years 90 Revenue Capacity Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years 92 Property Tax Rates, Direct and Overlapping Governments Last Ten Fiscal Years 93 Assessed Valuation and Estimated True Values of Taxable Property Last Ten Fiscal Years 94 Principal Taxpayers Year 2009 and Year 1998 96 Property Tax Levies and Collections Last Ten Fiscal Years 97 Debt Capacity Ratios of Outstanding Debt by Type Last Ten Fiscal Years 98 Computation of Legal Debt Margin September 30, 2009 99 Direct and Overlapping Governmental Activities Debt, General Obligation Bonds September 30, 2009 99 Ratios of General Bonded Debt Outstanding and Legal Debt Margin Last Ten Fiscal Years 100 Pledged Revenue Coverage Last Ten Fiscal Years 102 Economic and Demographic Information Demographic and Economic Statistics Last Ten Years 104 Principal Employers Year 2009 and 1999 106 Operating Information Full -time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 107 Operating Indicators by Function/Program Last Ten Fiscal Years 108 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 109 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 Auditing Standards 113 Independent Auditors' Management Letter 115 111 1Y OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK iv March 17, 2010 Honorable Mayor and City Council City of Sebastian, Florida Dear Council Members: Profile of the Government CI1YOF HOME OF PELICAN ISLAND We are submitting the Comprehensive Annual Financial Report of the City of Sebastian, Florida for the fiscal year ended September 30, 2009, 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, 2009. 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, 2009. 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. 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. The City of Sebastian 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 22,722 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 second Tuesday 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 Economy 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 significantly increased over the past three years. Retail sales and the service industries remain the largest sectors of employment in the Sebastian area. 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 indicates that the influx of residents to the area continues to outpace job creation. 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 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. This attracts a workforce with a higher than average education and technical skills to the vicinity. The area median age for 2000 was 49.2 per U.S Census Bureau and median household income for 2007 was $47,563 per the Florida Research Economic Database. Long -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. 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. vi The millage was increased 11.8% from 2.9917 to 3.3456 to partially offset the significant decline in taxable values that occurred this year. Construction activity in fiscal year 2009 continued to be low, with just 58 permits being issued for construction in fiscal year 2009 with a value of $11.2 million. The decline is primarily attributed to the slowdown of the housing market. Unreserved, undesignated fund balance in the general fund (43.0% of total general fund expenditure budget) exceeds the policy guidelines set by the Council for budgetary and planning purposes (i.e., minimum of 25% of total general fund expenditure budget). The City is reluctant 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 reserves to fund operating expenditures is not a prudent fiscal strategy. To this end, the budget for next year incorporates reductions in operating expenditures and the use of only a minimal amount of accumulated reserves. Major Initiatives 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 1 /4 rounds. 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 2009, a significant portion of a major contract to replace the canal walls along Collier Creek was accomplished. Traffic Transportation The City continues working on a long -term street resurfacing program for the next 10 to 15 years. City administration will also continue to program funding for streetscape projects to help maintain public safety and beautification efforts. In addition, capital improvement programming for sidewalk installation throughout the City will continue for both the short and long term as funding and resources permit. $1,250,000 of additional paving funds will be provided in February 2010 by means of refinancing the outstanding bank note. Airport The Sebastian Municipal Airport's infrastructure is being developed to attract economic development opportunities that will stimulate the business climate and create jobs in the community. 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 Safety The Police Department 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 school security surveys. The City continues to sponsor the School Resources Officer Program at the two elementary schools located within the City. In addition, the Sebastian Police Department K -9 Unit has been increased to enable this capability on every work shift. The K -9 Unit became possible as a result of numerous charitable efforts in the community. It is 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. vii Awards and Acknowledgements 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, 2008. 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. 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. Respectfully submitted, Al, inner City Manager .„4,_ft,i Kenneth W. Killgore Director of Finance viii 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, 2008 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. ix President AeAffi-p Executive Director 4- CITY CLERK I POLICE i 1 ADMINISTRATION ROAD PATROL I CODE ENFORCEMENT N. INVESTIGATIONS SUPPORT SERVICES DISPATCH CITY OF SEBASTIAN, FLORIDA ORGANIZATIONAL CHART CITIZENS OF SEBASTIAN 1 CITY COUNCIL I R CITY MANAGER ADMINISTRATIVE SERVICES GROWTH MANAGEMENT I 1 1 MANAGEMENT INFORMATION SYSTEMS BUILDING DEPARTMENT I GOLF COURSE I AIRPORT 1 BOARDS COMMISSIONS CITY ATTORNEY 4-4 PUBLIC WORKS ROADS MAINTENANCE PARKS RECREATION H CENTRAL GARAGE I CEMETERY FACILITIES MAINTENANCE STORWATER I M CITY OF SEBASTIAN, FLORIDA CITY OFFICIALS City Manager AL MINNER City Clerk SALLY A. MAIO, MMC City Attorney ROBERT GINSBURG DEPARTMENT HEADS: Police Chief MICHELLE MORRIS Director of Administrative Services DEBRA KRUEGER Director of Finance KENNETH W. KILLGORE MIS Director FRANK LOSARDO Public Works Director JERRY CONVERSE Growth Management Director REBECCA GROHALL Building Official WAYNE ESELTINE Golf Course Director GREG GARDNER Airport Director JOSEPH GRIFFIN Xi CITY OF ate HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK xi 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 1 CITY OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 2 1 17: 11 Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered 5070 North Highway A1A, Suite 250 Vero Beach, FL 32963 Tel 772 234 -8484 Fax 772-234-8488 Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida Independent Auditors' Report 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 as of and for the year ended September 30, 2009, 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and 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 of Sebastian, Florida as of September 30, 2009, 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 5, 2010 on our consideration of the City of Sebastian, Florida's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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. The management's discussion and analysis and the required supplemental information, as listed in the table of contents, are not a required part of the basic financial statements but are supplemental information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it. Member AICPA "Providing Vision and Direction to our Clients" Member AICPA Division For CPA Firms Private Companies Practice Section 3 Member FICPA Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida Page two 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. The introductory section, combining and individual nonmajor fund financial statements, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A- 133, the Florida Single Audit Act and Chapter 10.550, Rules of the Auditor General, and is also not a required part of the basic financial statements of the City of Sebastian, Florida. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. dowtionut, 4nu, Pole J aedediAito hhhe actin t .&s C: hMtst Harris, Cotherman, Jones, Price Associates, Certified Public Accountants Chartered Vero Beach, Florida March 5, 2010 4 Financial Highlights 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 The assets of the City exceeded its liabilities at the close of the fiscal year 2009 by $50,354,867 (net assets). Of this amount, $4,588,957 (unrestricted net assets) may be used to meet the government's on going obligations to citizens and creditors. The city's total net assets increased by $1,535,856 resulting from an increase of $1,059,819 from governmental activities and $476,037 from business -type activities As of the close of current fiscal year, the City's governmental funds reported combined ending fund balance of $15,155,532, a decrease of $4,370,837 in comparison with the prior year. Approximately 57% of this amount, $8,712,629, is available for spending at the City's discretion (unreserved, undesignated fund balance). At the end of the current fiscal year, unreserved, undesignated fund balance for the general fund was $5,096,901, or an 8% decrease from prior year general fund unreserved and undesignated fund balance. The key factor in this decrease was that receipts from budgeted revenues were substantially lower than the prior year. 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 5 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. 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 fifteen 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, 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 ten 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. 6 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 -56 of this report. THE CITY AS A WHOLE Financial Analysis of the City as a Whole The City's combined net assets increased $1.6 million from $48.8 million to $50.4 million or 3 Looking at the net assets and net revenues of the governmental and business -type activities, the increase occurred in both the net assets of governmental -type activities and 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: Table 1 Current and other assets Capital assets Total assets Non current liabilities Other liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Governmental Activities 2009 2008 17,084 21,016 38,673 34,468 55,757 55,484 14,782 1,530 16,312 Statements of Net Assets as of September 30, 2009 and 2008 (in thousands) 15,868 1,231 17,099 Business -type Activities 2009 2008 692 1,848 11,018 9,966 11,710 11,814 534 265 799 For more detail information see the Statement of Net Assets on page 15. 26,745 24,134 10,726 9,111 8,198 9,216 98 570 4,502 5,035 87 753 39,445 38,385 10,911 10,434 1,086 294 1,380 Total Primary Government 2009 2008 17,776 22,864 49,691 44,434 67,467 67,298 15,316 16,954 1,795 1,525 17,111 18,479 37,471 8,296 4,589 50,356 33,245 9,786 5,788 48,819 Total net assets of the governmental activities increased from $38.385 million to $39.445 million. Total net assets for business -type activities increased from $10.434 million to $10.911 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 decrease 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 Federal Aviation Administration and the Florida Department of Transportation for the City's municipal airport. The following table shows the revenue and expenses of the total primary government. REVENUES Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Other taxes Intergovernmental Other Total revenues EXPENSES General government Public safety Physical environment Transportation Economic environment Culture and recreation Golf Course Airport Building Interest and fiscal charges Total expenses Change in net assets before transfers Net assets October 1, 2008 Net assets September 30, 2009 Governmental Activities Table 2 Changes in Net Assets For the Fiscal Years Ended September 30, 2009 and 2008 (in thousands) Governmental Activities 2009 2008 1,291 1,426 228 786 1,865 836 4,802 4,670 1,821 1,729 16,406 3,170 5,421 1,348 3,438 167 1,073 730 15,347 1,059 38,385 39,444 9 5,149 4,754 1,990 1,993 16,934 3,375 5,227 1,806 2,111 113 1,421 635 14,688 2,246 36,139 38,385 Business -type Activities 2009 2008 2,205 2,309 3,496 3,735 228 786 1,357 494 3,222 1,330 6 54 3,568 2,857 1,477 1,080 534 3,091 477 10,434 10,911 1,488 1,100 605 3,193 (336) 10,770 10,434 Total Primary Government 2009 2008 4,802 4,670 1,821 1,735 19,974 5,149 4,754 1,990 2,047 19,791 3,170 3,375 5,421 5,227 1,348 1,806 3,438 2,111 167 113 1,073 1,421 1,477 1,488 1,080 1,100 534 605 730 635 18,438 17,881 1,536 1,910 48,819 46,909 50,355 48,819 Overall the total revenues increased $183 thousand from the previous year but only as a result of an increase in capital grants that more than offset declines in all other revenue source categories. The total cost of all programs increased by 3.0% ($557 thousand) for the same reason. Our analysis below separately considers the operations of governmental and business -type activities. Governmental activities revenues exceed expenses by $1.059 million. Total revenues decreased approximately $528 thousand from the previous year. The decline was primarily in categories affected by the slowdown in economic activity. Less was received in Recreation Impact fees and a downturn was noted in sales taxes and state shared revenues. Total expenses increased $659 thousand from the previous year. The largest increase in spending was in the category of transportation. The following is a graphic illustration of the comparison for governmental activities revenue and expenses. 0 E 6,000 5,000 4,000 3,000 2,000 1,000 Governmental Activities Comparison for Fiscal Year 2009 and Fiscal Year 2008 e4 •ce Q���4e la ge e tQg es p A i e �eO J <D e ate o�S °p G a �Po eS S pQ eia G QQ C 4i ��b °yet e et a b e`a `t r 5 d` eV.- 61e. te< h tit` et` Q 5 tie G° lote Revenue/Expense types 2009 2008 Business -type Activities Revenues of the City's business -type activities (see Table 2) increased $711 thousand primarily because of capital grants. Expenses fell by 3.2% for all the City's business -type activities, with expenses for Building Enterprise falling by 11.7% due to staffing reductions; Airport expenses declining 1.8% due to unusually high operating expenses that were incurred the prior year and; Golf Course expenses declining .7% due to reductions in personnel costs. 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. Following is a graphic comparison of the City's business -type activities. Business -Type Activities Comparison for Fiscal Year 2009 and Fiscal Yeal 2008 i`�ce5 t p �5 i 4 tiS eOS e9 eose e OS e9 sk °S O4 e t� s G�Q�' p� `4 ette G °vt5e �,t� °e�4eg4 S Revenue/Expense types 1112009 IN 2008 FINANCIAL ANALYSIS OF THE CITY'S FUNDS 1 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, unreserved 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 $15.2 million, which is a decrease of $4.3 million from the prior year of $19.5 million. Approximately 57.4% of this total amount ($8.7 million) constitutes unreserved, undesignated fund balance, which is available for spending at the City's discretion. The remainder of fund balance is reserved or designated to indicate that it is not available for new spending because it has already been committed 1) to pay debt service ($1.6 million), 2) to fund capital projects ($3.0 million), 3) to generate income to pay for the perpetual care of the municipal cemetery ($0.8 million), or 4) for a variety of other restricted or designated purposes ($1.1 million). The general fund is the chief operating fund of the City. At the end of the fiscal year, unreserved, undesignated fund balance of the general fund was $5,096,901, while total fund balance was $5,768,114. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved, undesignated fund balance represents 42 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 $540,068 during the current fiscal year. Key factors in this reduction are as follows: Property tax revenues decreased by $368,863 due to reductions in taxable property values. Licenses and permits decreased $134,320 because most of those accounts were moved to the Building Enterprise Fund. Intergovernmental decreased $140,938 due to lower sales tax and state shared revenues. Contributions and donations decreased $271,906 because of unusually large contributions the prior year. Public utility taxes increased $90,677 and franchise fees increased $127,491. All other revenues decreased by $62,083. The discretionary sales tax revenue special revenue fund has a total unreserved and undesignated fund balance of $673,676. The decrease from the total fund balance of the prior year ($1,404,945) is mainly due to transfers made to the discretionary sales surtax revenue bonds 2003 fund to establish a cash reserve account as required by the bond covenants. The riverfront redevelopment special revenue fund has an unreserved and undesignated fund balance of $984,638. The increase from the total fund balance of the prior year ($16,404) is mainly due to the return of a portion of the transfers made for capital improvements that ended up being funded by grants. The transportation improvements capital project fund has a total fund balance of $567,307, 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 $2,080,225, all of which is reserved for stormwater capital projects. The decrease from the total fund balance of the prior year ($5,039,510) is due to expenditures made on several 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 $377,603, while the unrestricted net assets (deficit) amounted to ($160,600). Compared to the prior year in the same category, net assets are $68,764 less than the prior year, while the unrestricted net assets has a decrease of $161,233 from the prior year. This is mainly due to the use of funds for repayment of 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 $9,876,909, while the unrestricted net assets (deficit) amounted to ($389,368). Compared to the prior year in the same category, net assets have increased by $716,336 while the unrestricted net assets decreased $345,898. 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 $656,001, while the unrestricted net assets amounted to $636,485. The building fund experienced an operating loss, 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. General Fund 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 fund outstanding encumbrances. The second category includes adjustments for unanticipated revenues. The third category includes supplemental appropriations to cover unanticipated items or costs that were in excess of budgeted amounts. The main components of the increase are as follows: $18,680 supplemental appropriation to general fund dep.'talents for encumbered amounts carried forward from the prior fiscal year. $2,088 supplemental appropriation for proceeds from a JAG Grant for equipment purchases. $41,743 supplemental appropriation to police department for funds received from a public safety grant. 137,782 supplemental appropriation to police department for the required pension contribution. $36,000 supplemental appropriation to police department for unanticipated higher overtime expenditures. $4,500 supplemental appropriation for the costs of MIS Department equipment service agreements that were not budgeted. $20,000 supplemental appropriation to public works for unanticipated repair to facilities and power costs. $43,000 supplemental appropriation for higher than anticipated expenditures for unemployment compensation, contract mowing and insurance claims. 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 intergovernmental revenues, specifically the City's share of sales tax proceeds. Lower than anticipated investment earnings also contributed to the shortfall. Positive variances on expenditures resulted in a lower draw on existing fund balances than had been anticipated. 12 Capital Assets At the end of fiscal year 2009 the City had $74,095,502 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 $8,053,202, or 12.2 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 Totals Debt Governmental Activities 2009 5,699,045 11,284,488 5,704,686 7,784,213 25,125,625 CAPITAL ASSET AND DEBT ADMINISTRATION 2008 5,696,946 11,158,739 5,149,267 7,390,752 22,259,149 3,958,971 1,520,565 Table 3 Business -type Activities 2009 9,060 5,082,120 1,940,103 1,062,333 6,237,799 13 2008 9,060 3,726,258 1,866,928 922,575 6,226,110 Totals 2009 5,708,105 16,366,608 7,644,789 8,846,546 31,363,424 2008 5,706,006 14,884,997 7,016,195 8,313,327 28,485,259 207,059 115,951 4,166,030 1,63 6,516 59,557,028 53,175,418 14,538,474 12,866,882 74,095,502 66,042,300 Governmental activities had the following major increases during the fiscal year: An increase in buildings mainly due to upgrades at Schumann Park. An increase in improvements due to the capitalization of work completed on pedestrian bridges. An increase in equipment mainly due to capitalization of new police vehicles. An increase in infrastructure mainly due to the work on the Collier Creek stormwater drainage system. An increase in construction -in- progress due to the contract for work at Collier Creek. Business -type activities had the following major increases during the fiscal year: An increase in buildings mainly due to the completion of a hangar. An increase in improvements mainly due to work on the municipal airport lighting and signage. An increase in equipment mainly due to the purchase of municipal airport maintenance equipment. An increase in construction -in- progress primarily due to the project to construct an access road. On September 30, 2009, the City had $13,421,679 in bonds and notes outstanding versus $15,203,148 on September 30, 2008 a decrease of 11.7% as shown in the table on the following page: The decrease in debt is solely attributable to the retirement of debts. 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. The City's Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001 received a AAA rating from Standard Poor's. However, ratings on the insurance agencies have recently 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. Infrastructure sales surtax revenue bonds, Series 2003 Infrastructure sales surtax revenue bonds, Series 2003A Stormwater utility revenue bonds, Series 2003 Notes payable (backed by local option gas tax) Recreational facilities improvements and refunding revenue bonds, series 2001 Governmental Activities 2009 2008 6,255,000 1,470,000 4,315,000 1,089,203 Table 4 6,840,000 1,605,000 4,570,000 1,333,197 Totals 13,129,203 14,348,197 292,476 854,951 13,421,679 15,203,148 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials considered many factors when setting the fiscal year 2010 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 2009 was 14.1% up from 9.7% in the previous year. This is analogous to the economic slowdown being experienced throughout the state and nation. Again in fiscal year 2009, the city experienced a major reduction in property value (11.9% decrease) and a small decline in new construction permits (from 60 to 58). The low number of new construction permits reflects the state and national trend and is consistent with the overall housing market. These indicators were taken into account when adopting the General Fund budget for fiscal year 2010. Amounts available for appropriation in the General Fund budget are $10,809,831, a decrease of 8.8% from the original fiscal year 2009 budget of $11,850,747. 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 2009 mainly due to a slight increase in number of rounds being played. Although it reduced expenses on salaries, wages and employee benefits, increases in expenses on maintenance and depreciation resulted in it being unable to meet the bond coverage requirement on the Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001. The coverage requirement is defined as the net revenues being equal to at least 125% of the annual debt service payment. City management continues to monitor the operation and develop recommendations that could resolve the deficiency. 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 Business -type Activities 2009 2008 292,476 854,951 Totals 2009 2008 6,255,000 6,840,000 1,470,000 1,605,000 4,315,000 4,570,000 1,089,203 1,333,197 292,476 854,951 City of Sebastian, Florida Statement of Net Assets September 30, 2009 Governmental Business -type Activities Activities Total ASSETS Cash and cash equivalents 1,853,386 120,880 1,974,266 Investments 6,865,360 811,369 7,676,729 Receivables 1,453,710 79,684 1,533,394 Internal balances 485,000 (485,000) Prepaid items 86,441 26,282 112,723 Inventory 71,255 25,916 97,171 Restricted assets: Temporarily restricted: Cash and cash equivalents 1,328,206 1,328,206 Investments 3,730,677 98,320 3,828,997 Permanently restricted: Investments 672,259 672,259 Overfunded pension costs 165,630 165,630 Deferred charges 371,516 13,897 385,413 Capital assets not being depreciated: Land 5,699,045 9,060 5,708,105 Construction in progress 3,958,971 207,059 4,166,030 Capital assets (net of accumulated depreciation): Buildings 8,613,841 4,474,390 13,088,231 Improvements other than buildings 3,797,463 1,470,630 5,268,093 Machinery and equipment 1,777,849 394,498 2,172,347 Infrastructure 14,826,115 4,462,514 19,288,629 Total assets 55,756,724 11,709,499 67,466,223 LIABILITIES Accounts payable and other current liabilities 1,304,194 117,674 1,421,868 Accrued interest payable 223,432 223,432 Unearned revenues 2,784 147,164 149,948 Non current liabilities: Due within one year 1,460,471 16,716 1,477,187 Due in more than one year 13,321,489 517,432 13,838,921 Total liabilities 16,312,370 798,986 17,111,356 NET ASSETS Invested in capital assets, net of related debt 26,744,896 10,725,676 37,470,572 Restricted for: Capital projects 4,124,738 4,124,738 Debt service 1,554,128 1,554,128 Road projects 649,886 649,886 Community redevelopment 984,638 984,638 Perpetual care: Expendable 157,769 157,769 Nonexpendable 672,259 672,259 Other purposes 53,600 98,320 151,920 Unrestricted 4,502,440 86,517 4,588,957 Total net assets 39,444,354 10,910,513 50,354,867 The accompanying notes to financial statements are an integral part of this financial statement. 15 City of Sebastian, Florida Statement of Activities For the year ended September 30, 2009 Operating Capital Charges for Grants and Grants and Function /Program Expenses Services Contributions Contributions Governmental activities: General government 3,169,851 220,073 5,930 Public safety 5,420,585 95,606 203,513 Physical environment 1,347,771 908,829 500,000 Transportation 3,437,724 18,559 593,776 Economic environment 167,470 6,000 Cultural /recreation 1,073,249 66,540 765,398 Interest and fiscal charges 730,100 Total governmental activities 15,346,750 1,291,048 228,002 1,865,174 Business -type activities: Golf Course 1,477,299 1,406,956 Airport 1,079,869 438,485 1,356,914 Building 533,641 358,947 Total business -type activities 3,090,809 2,204,388 1,356,914 Total government 18,437,559 3,495,436 228,002 3,222,088 Program Revenues 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 (11,962,526) Net (Expense) Revenue and Changes in Net Assets Governmental Business -type Activities Activities Total (2,943,848) (2,943,848) (5,121,466) (5,121,466) 61,058 61,058 (2,825,389) (2,825,389) (161,470) (161,470) (241,311) (241,311) (730,100) (730,100) (11,962,526) (11,962,526) (70,343) (70,343) 715,530 715,530 (174,694) (174,694) 470,493 470,493 470,493 (11,492,033) 4,801,924 4,801,924 4,670,106 4,670,106 1,327,253 1,327,253 1,821,347 1,821,347 261,203 5,544 266,747 140,512 140,512 13,022,345 5,544 13,027,889 1,059,819 476,037 1,535,856 38,384,535 10,434,476 48,819,011 39,444,354 10,910,513 50,354,867 17 ASSETS Cash and cash equivalents Investments Accounts receivables Due from other governments Interest receivable Inventory Prepaid items Advance to other funds Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Retainage payable Due to other governments Other deposits held in escrow Total liabilities Fund balances: Reserved for: Advance to other funds Debt service Capital projects Property and casualty Cemetery care Law enforcement Emergency services Unreserved: Designated for employee events Designated for law enforcement Undesignated, reported in: General fund Special revenue funds Total fund balances Total liabilities and fund balances Net assets of governmental activities General 865,434 49,047 4,433,893 431,114 266,902 307,932 193,509 24,069 6 71,255 86,441 200,000 285,000 6,255,926 958,676 479,706 5,322 2,784 487,812 City of Sebastian, Florida Balance Sheet Governmental Funds September 30, 2009 Discretionary Riverfront Transportation Sales Tax Redevelopment Improvements 200,000 285,000 100,000 350,000 9,615 11,598 5,096,901 5,768,114 673,676 958,676 6,255,926 958,676 18 609,416 375,251 6 984,673 35 35 181,832 425,291 607,123 39,816 39,816 567,307 984,638 984,638 567,307 984,673 607,123 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. The accompanying notes to fmancial statements are an integral part of this fmancial statement. Stormwater Utility Improvements 27,853 2,604,079 81,200 2,713,132 395,450 237,457 632,907 2,080,225 2,080,225 2,713,132 Other Total Governmental Governmental Funds Funds 1,448,010 3,181,592 3,423,959 11,268,296 266,902 71,002 1,078,934 9 24,090 71,255 86,441 485,000 4,942,980 16,462,510 146,408 1,061,415 237,457 5,322 2,784 146,408 1,306,978 485,000 1,554,128 1,554,128 401,402 3,048,934 100,000 830,029 830,029 53,600 53,600 350,000 9,615 11,598 5,096,901 1,957,413 3,615,727 4,796,572 15,155,532 4,942,980 38,673,284 165,630 (326,167) (14,084,277) (223,432) 83,784 39,444,354 19 REVENUES: Taxes: Property Public utility Sales Motor fuel Franchise fees Licenses and permits Intergovernmental Impact fees Charges for services Fines Special assessments Investment earnings Contributions and donations Other revenue Total revenues EXPENDITURES: Current: General government Public safety Physical environment Transportation Economic environment Culture and recreation Debt Service: Principal Interest and fiscal charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures O1'IIER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net changes in fund balances Fund balances beginning Fund balances ending City of Sebastian, Florida Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2009 General 4,276,800 2,341,458 1,327,253 29,151 2,000,872 288,881 59,411 3,849 167,396 4,452 1,990 28,462 140,059 10,663,592 2,333,100 527,114 2,976,896 4,918,779 1,425,836 1,451,787 1,148,408 103,492 12,025,198 (1,361,606) Discretionary Riverfront Transportation Sales Tax Redevelopment Improvements 2,328,648 20 525,124 167,470 167,470 2,333,100 359,644 821,538 668,590 (2,779,369) (60,000) 821,538 (2,779,369) 608,590 (540,068) (446,269) 968,234 6,308,182 1,404,945 16,404 5,768,114 958,676 984,638 The accompanying notes to financial statements are an integral part of this financial statement. 751,423 19,931 771,354 2,209,265 2,209,265 108,159 (900,098) (791,939) (2,229,850) 2,797,157 567,307 Stormwater Utility Improvements 500,000 43,688 543,688 13,437 3,562,964 3,576,401 (1,437,911) (3,032,713) 73,428 73,428 (2,959,285) 5,039,510 2,080,225 Other Total Governmental Governmental Funds Funds 4,801,924 2,341,458 2,328,648 593,776 593,776 1,327,253 29,151 18,559 3,270,854 13,975 13,975 897,280 1,186,161 29,527 88,938 3,849 13,457 250,914 7,456 35,918 453 140,512 1,574,483 16,413,331 2,976,896 7,935 4,926,714 8,794 1,448,067 244,467 1,696,254 167,470 1,148,408 1,218,995 1,218,995 706,093 706,093 619,550 6,495,271 2,805,834 20,784,168 (1,231,351) (4,370,837) 3,524,661 5,196,376 (1,456,909) (5,196,376) 2,067,752 836,401 (4,370,837) 3,960,171 19,526,369 4,796,572 15,155,532 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, 2009 Net change in fund balances total governmental funds 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 fmancial resources, therefore, are not reported as revenues in governmental funds 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. 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. Payment of a special assessment receivable is reported as revenue in the fund financial statements. (3,849) Overfunded pension contributions are reported as expenditures in the fund financial statements and recorded as a net pension asset on the statement of net assets. 65,355 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. 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. Change in net assets of governmental activities 1,059,819 The accompanying notes to financial statements are an integral part of this fmancial statement. 22 (4,370,837) (15,802) 4,206,490 (1,318) 1,218,994 (39,214) ASSETS Current assets: Cash and cash equivalents Investments Restricted cash, cash equivalents and investments: Revenue bond covenant accounts Due from other governments Interest receivable Inventory Prepaid items Total current assets Noncurrent assets: Deferred charges Capital assets: Land Buildings Improvements other than buildings Machinery and equipment Infrastructure Construction in process Less accumulated depreciation Total noncurrent assets Total assets City of Sebastian, Florida Statement of Net Assets Proprietary Funds September 30, 2009 Enterprise Funds Golf Course Airport Building Totals 4,779 90,600 25,501 120,880 811,369 811,369 98,320 98,320 76,184 76,184 1 3,499 3,500 13,048 12,868 25,916 13,190 11,045 2,047 26,282 129,337 190,698 842,416 1,162,451 13,897 13,897 9,060 9,060 331,228 4,750,892 5,082,120 277,590 1,662,513 1,940,103 355,978 645,829 60,526 1,062,333 1,100,951 5,136,848 6,237,799 207,059 207,059 (1,333,389) (2,145,924) (41,010) (3,520,323) 746,255 10,266,277 19,516 11,032,048 875,592 10,456,975 861,932 12,194,499 LIABILITIES Current liabilities: Accounts payable 65,548 27,672 $17,143 110,363 Advance from other fund 485,000 485,000 Due to other governments 6,479 832 7,311 Unearned revenues 60,443 $86,721 147,164 Accrued termination benefits 6,171 6,171 Accrued compensated absences 224 1,834 8,486 10,544 Matured bonds payable 292,475 292,475 Total current liabilities 425,169 515,338 118,521 1,059,028 Non current liabilities: Compensated absences 65,170 45,227 73,867 184,264 Unfunded OPEB obligation 7,650 19,501 13,543 40,694 Total non current liabilities 72,820 64,728 87,410 224,958 Total liabilities 497,989 580,066 205,931 1,283,986 NET ASSETS Invested in capital assets, net of related debt 439,883 10,266,277 19,516 10,725,676 Restricted for payment of Airport rent 98,320 98,320 Unrestricted (deficit) (160,600) (389,368) 636,485 86,517 Total net assets 377,603 9,876,909 656,001 10,910,513 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, 2009 Enterprise Funds Golf Course Airport Building Totals Operating revenues: Charges for fees and rents: Building permit fees 358,948 358,948 Golf course fees pledged as security for revenue bonds 1,371,876 1,371,876 Rents 31,178 277,004 308,182 Other revenue 3,901 161,481 165,382 Total operating revenues 1,406,955 438,485 358,948 2,204,388 Operating expenses: Salaries, wages and employee benefits 350,475 245,949 403,746 1,000,170 Contractual services, materials and supplies 991,669 283,254 117,788 1,392,711 Depreciation 89,243 542,116 12,107 643,466 Total operating expenses 1,431,387 1,071,319 533,641 3,036,347 Operating income (loss) (24,432) (632,834) (174,693) (831,959) Nonoperating revenues (expenses): Interest income 806 3,158 3,964 Interest income pledged as security for revenue bonds 1,580 1,580 Interest expense (32,015) (8,550) (40,565) Bond amortization expense (13,897) (13,897) Total nonoperating revenues (expenses) (44,332) (7,744) 3,158 (48,918) Income /(loss) before capital contributions and transfers (68,764) (640,578) (171,535) (880,877) Capital contributions 1,356,914 1,356,914 Change in net assets (68,764) 716,336 (171,535) 476,037 Total net assets beginning 446,367 9,160,573 827,536 10,434,476 Total net assets ending 377,603 9,876,909 656,001 10,910,513 The accompanying notes to financial statements are an integral part of this fmancial statement. 24 Cash and cash equivalents, October 1 Cash and cash equivalents, September 30 City of Sebastian, Florida Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2009 Enterprise Funds Golf Course Airport Building Totals CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users 1,393,849 449,485 362,539 2,205,873 Cash payments to suppliers (973,644) (312,994) (106,925) (1,393,563) Cash payments for employee services (350,358) (240,987) (398,350) (989,695) Net cash provided (used) by operating activities 69,847 (104,496) (142,736) (177,385) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of capital assets (91,065) (1,604,349) (1,695,414) Receipt from capital grants 1,323,594 1,323,594 Capital contributions 5,000 5,000 Principal paid on revenue bond maturities (570,000) (570,000) Bond issuance costs 7,524 7,524 Interest paid on revenue bonds (49,860) (49,860) Interest paid on advance from other funds (8,550) (8,550) Net cash provided (used) by capital and related financing activities (703,401) (284,305) (987,706) CASH FLOWS FROM INVESTING ACTIVITIES: Interest on investments 1,788 1,424 472 3,684 Net cash provided by investing activities 1,788 1,424 472 3,684 Net increase (decrease) in cash and cash equivalents (631,766) (387,377) (142,264) (1,161,407) 103,099 90,600 836,870 1,030,569 734,865 477,977 979,134 2,191,976 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, 2009 (Continued) Enterprise Funds Golf Course Airport Building Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) (24,432) (632,834) (174,693) (831,959) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 89,243 542,116 12,107 (Increase) Decrease in assets: Accounts receivable 11,000 11,000 Inventories (3,253) 9,350 6,097 Prepaid expenses (3,839) (4,757) 2,997 (5,599) Increase (Decrease) in liabilities: Accounts payable 25,433 (33,932) 7,866 (633) Due to other governments (316) (401) (717) Unearned revenues (2,106) 3,591 1,485 Accrued termination benefits (13,268) (13,268) Accrued compensated absences (679) 3,204 17,481 20,006 Accrued OPEB liability 796 1,758 1,183 3,737 Rent concession liability (11,000) (11,000) Total adjustments 94,279 528,338 31,957 654,574 Net cash provided (used) by operating activities 69,847 (104,496) (142,736) (177,385) Cash and cash equivalents reconciliation: Current assets: Cash and cash equivalents 4,779 90,600 25,501 120,880 Investments 811,369 811,369 Restricted assets: Investments 98,320 98,320 Cash and cash equivalents at September 30 103,099 90,600 836,870 1,030,569 The accompanying notes to fmancial statements are an integral part of this financial statement. 26 643,466 ASSETS Cash and cash equivalents Interest and dividends receivable LIABILITIES NET ASSETS City of Sebastian, Florida Statement of Fiduciary Net Assets Fiduciary Funds September 30, 2009 27 Pension Trust Agency Police Officers' Performance Pension Deposits 700,130 12,760 26,685 Investments, at fair value: Local government surplus trust funds investment pool United States treasuries 191,316 United States agency notes 1,110,556 Domestic corporate bonds 1,253,111 Municipal Obligations 85,955 Domestic corporate equities 2,633,202 Total investments 5,274,140 Total assets 6,000,955 Held in trust for pension benefits 6,000,955 The accompanying notes to financial statements are an integral part of this financial statement. 220,000 220,000 232,760 Refunds payable 232,760 Total liabilities 232,760 ADDITIONS DEDUCTIONS City of Sebastian, Florida Statement of Changes in Fiduciary Net Assets Fiduciary Fund Pension Trust For the Year Ended September 30, 2009 28 Police Officers' Pension Contributions: Employer 404,104 Plan members 114,229 State 137,782 Total contributions 656,115 Investment earnings: Net decrease in fair value of investments (122,462) Interest and dividends 165,741 Total investment earnings 43,279 Less investment expenses (31,076) Net investment earnings 12,203 Total additions 668,318 Benefits 105,203 Refunded contributions 28,205 Administrative expenses 8,771 Total deductions 142,179 Change in net assets 526,139 Net assets beginning of year 5,474,816 Net assets end of year 6,000,955 The accompanying notes to financial statements are an integral part of this financial statement. City of Sebastian, Florida Notes to the Financial Statements September 30, 2009 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 22,722 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. Reporting Entity In evaluating the City as a reporting entity, management has included all component units in accordance with Governmental Accounting Standards Board (GASB) Statement No. 14, "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 Analysis 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. 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 Accounting, and Financial Statement Presentation 1. Economic Resources Measurement Focus and Accrual Basis of Accounting 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, Accounting and Financial Reporting for Nonexchange Transactions as amended by GASB Statement No. 36, Recipient Reporting of Certain Shared Nonexchange 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 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 the State Board of Administration account 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. There were no interfund loans between the Governmental funds and Proprietary funds as of September 30, 2009. 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, 2009, the airport fund has been advanced $200,000 from the general fund and $285,000 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, 2009, 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 Range 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 -15 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 Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. The nature and purpose of these reserves are explained as follows: Reserved for encumbrance represents encumbrances outstanding at year end that the City intends to honor as commitments. Reserved for debt service represents, in accordance with legal restrictions, amounts for payment of principal and interest maturing in later years. Reserved for capital projects represents amounts restricted for capital projects. Reserved for property and casualty represents amounts restricted for property and casualty claims. Reserved for cemetery care represents amounts restricted for use in cemetery maintenance. Reserved for law enforcement represents, in accordance with State Statutes, funds required to be spent on drug education and awareness activities. Reserved for emergency services represents amount restricted for natural disasters. Reserved for equipment replacement represents amounts restricted for the replacement of capital assets. Designations of unreserved fund balances are not required by law or accounting principles, but are further classifications of fund equity to identify funds that are not earmarked for specific purposes. II. RECONCILIATION OF GOVERNMENT WIDE AND FUND FINANCIAL STATEMENTS A. Explanation 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 ($15,155,532) differs from "net assets" of governmental activities ($39,444,354) 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 59,557,028 Accumulated depreciation (20,883,744) Total 38,673,284 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 165,630 Other post employment and termination benefits Accrued other post employment and termination benefits are not financial uses, therefore, are not reported in the fund. Other post employment benefits (304,288) Termination benefits (21,879) Total (326,167) 33 Long -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, 2009 were: Bonds payable: Infrastructure sales surtax revenue bonds, Series 2003 $(6,255,000) Less: Deferred charge for issuance costs 165,690 $(6,089,310) Infrastructure sales surtax revenue bonds, Series 2003A (1,470,000) Less: Deferred charge for issuance costs 64,817 (1,405,183) Stormwater utility revenue bonds, Series 2003 (4,315,000) Less: Deferred charge for issuance costs 138,017 Less: Deferred charge for bond discounts 10,416 (4,166,567) Notes payable (1,089,203) Less: Deferred charge for issuance costs 2,991 (1,086,212) Contamination liability (91,200) Compensated absences (1,245,805) Total $(14,084,277) 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 (218,899) Notes (4,533) Total (223,432) Accrued receivable Some interest receivables are not financial resources in the current period, therefore, are not reported in the funds. Interest receivables 5 83,784 34 B. Explanation of Differences Between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government -wide Statement of Activities The "net change in fund balances" for governmental funds (a decrease of $4,370,837) differs from the "change in net assets" for governmental activities (an increase of $1,059,819) 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. Long -term debt transactions Interest earnings (15,802) 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 6,495,271 Depreciation expense (2,288,781) Difference 4,206,490 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 (1,318) Special Assessment A payment of a special assessment was reported as revenue in the fund financial statements. However, this had been accrued in a previous period on the government -wide financial statements. Special assessment revenue (3,849) Pension obligation Overfunded pension contributions are reported as expenditures in the fund financial statements and recorded as a net pension asset on the statement of assets. Increase in net pension obligation 65,355 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 975,000 Notes payable principal payment made 243,994 Total 1,218,994 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. Accrued arbitrage expense 26,091 Net change in compensated absences (7,499) Net accrued bond interest expense 14,719 Net accrued notes interest expense 1,016 Amortization of issuance costs (39,741) Other post employment benefits (28,459) Termination benefits (5,341) Net adjustment (39,214) 35 III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Budgetary Information Budgets are prepared annually on a modified accrual basis with encumbrance accounting for all govemmental 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 54) IV. DETAIL NOTES ON ALL FUNDS A. Deposits At September 30, 2009, the carrying amount of the City of Sebastian's deposits with banks was $3,312,752 and the bank balance was $3,355,675. 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 party trustees and are governed by rules established by Florida Statute Chapter 185. Investment holdings consist of $4,866,010 in United States Government Agencies which are 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 are 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, 2009, the City had the following investments and effective duration presented in terms of years: Investment Maturity (Year) Investment Type Fair Value Less Than 1 From 1 -3 From 4 -6 Government -wide Local government surplus fund trust fund investment pool 5,660,131 5,660,131 United States Agencies 4,866,010 4,866,010 Certificate of deposit 1,651,844 540,759 1,111,085 12,177,985 11,066,900 1,111,085 Over 7 Fiduciary Funds Local government surplus funds trust fund "SBA 220,000 220,000 United States Treasuries 191,316 191,316 United States Agencies 1,110,556 66,991 231,828 263,808 547,929 Municipal Obligations 85,955 85,955 Domestic corporate bonds 1,253,111 102,694 155,871 627,950 366,596 Domestic corporate equities 2,633,202 2,633,202 5,494,140 3,022,887 387,699 891,758 1,191,796 Interest receivable on the government -wide and fiduciary investment portfolios amounted to $107,874 and $3,500, respectively, as of September 30, 2009. 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 -1" by Moody's and "A -1" 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, 2009, the City's investment securities were all individually rated AAA by Standard Poor's and Aaa by Moody's Investor Services. As of September 30, 2009, the city had $5,880,131 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. $5,683,046 is in Pool A and $197,085 is in Pool B. Pool A had a rating by Standard and Poor's Rating Services as "AAAm" on September 30, 2009 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. The allowable investment instruments include United States Government Obligations, Certificates of Deposit, and Repurchase Agreements with major money center banks, Commercial Paper rated A -1 by Standard Poor's or P -1 by Moody's or better, with the exception of the custodian's savings account. In addition, common stocks and equity securities having prospects of attractive returns from a combination of appreciation are also allowed. 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, 2009, 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 fends 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, 2009, the City had the following issuer concentration based on fair value: Issuer Amount Local government surplus funds trust fund "SBA 5,660,131 United States Treasuries United States Agencies 4,866,010 Municipal Obligations Certificate of deposit 1,651,844 Domestic corporate bonds Domestic corporate equities Total 12,177,985 Government -wide Percentage of Portfolio 38 46.48% 39.96% 13.56% 0.00% 0.00% 100.00% Amount Fiduciary 220,000 191,316 1,110,556 85,955 1,253,111 2,633,202 5,494,140 Funds Percentage of Portfolio 4.00% 3.48% 20.21 1.56% 0.00% 22.81% 47.93% 100.00% C. Receivable and Payable Balances Receivables Receivables at September 30, 2009 were as follows: Due From Interest Accounts Other Receivable Receivable Governments Total Governmental activities: General 107,853 266,902 307,932 682,687 Discretionary sales tax 6 193,509 193,515 Riverfront redevelopment 6 6 Transportation improvements 425,291 425,291 Stormwater utility improvements 81,200 81,200 Other governmental 9 71,002 71,011 Total governmental activities 107,874 266,902 1,078,934 1,453,710 Business -type activities: Airport 1 76,184 76,185 Building 3,499 3,499 Total business -type activities 3,500 76,184 79,684 All receivables are anticipated to be collected. Payables Payables at September 30, 2009 were as follows: Salaries Due to and Other Vendors Retainage Benefits Government Total Governmental activities: General 102,957 376,749 5,322 485,028 Riverfront redevelopment 35 35 Transportation Improvements 39,816 39,816 Stormwater utility improvements 395,450 237,457 632,907 Other governmental 146,408 146,408 Total governmental activities 684,666 237,457 376,749 5,322 1,304,194 Business -type activities: Golf course 51,424 14,124 6,479 72,027 Airport 17,395 10,277 832 28,504 Building 6,668 10,475 17,143 Total business -type activities 75,487 34,876 7,311 117,674 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, 2009, there was $2,784 reported as unearned revenues. 39 D. Capital Assets Capital asset activity for the year ended September 30, 2009 was as follows: 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 Beginning Balance 5,696,946 1,520,565 7,217,511 11,158,739 5,149,267 7,390,752 22,259,149 45,957,907 Beginning Balance 40 Increases 2,099 3,213,102 3,215,201 125,749 555,419 507,122 2,866,476 4,054,766 (2,287,911) (382,736) (1,650,643) (256,580) (5,441,254) (677,453) (9,327,498) (972,012) (18,707,306) (2,288,781) 27,250,601 1,765,985 34,468,112 4,981,186 Increases Decreases 5,699,045 (774,696) 3,958,971 (774,696) 9,658,016 11,284,488 5,704,686 (113,661) 7,784,213 25,125,625 (113,661) 49,899,012 (2,670,647) (1,907,223) 112,343 (6,006,364) (10,299,510) 112,343 (20,883,744) (1,318) 29,015,268 (776,014) 38,673,284 Decreases Ending Balance Ending Balance 9,060 9,060 115,951 138,392 (47,284) 207,059 125,011 138,392 (47,284) 216,119 3,726,258 1,355,862 5,082,120 1,866,928 88,303 (15,128) 1,940,103 922,575 148,454 (8,696) 1,062,333 6,226,110 11,689 6,237,799 12,741,871 1,604,308 (23,824) 14,322,355 (495,396) (112,334) (607,730) (364,454) (120,147) 15,128 (469,473) (563,742) (112,789) 8,696 (667,835) (1,477,089) (298,196) (1,775,285) (2,900,681) (643,466) 23,824 (3,520,323) 9,841,190 960,842 10,802,032 9,966,201 1,099,234 (47,284) 11,018,151 Depreciation expense was charged to functions /programs of the government as follows: Governmental activities: General government Public safety Transportation Physical environment Cultural and recreation Total depreciation expense governmental activities Business -type activities: Golf Course Airport Building Total depreciation expense- business -type activities Construction Commitments The City has various construction commitments outstanding at September 30, 2009. The major commitments include the following: Proiect Schumann Park Improvements Pedestrian Bridges Powerline Road Schumann/Barber Intersection Middle Stonecrop Improvements Collier Creek Improvements Blossom Ditch Phase II 1/4 Round Swale Rehabilitation Potomac Road Crossing George Street Ditch Airport Access Road Hangar Construction Total E. Advances Advance balances at September 30 Advance from General Fund to the Airport Fund Advance from Discretionary Sales Tax Fund to the Airport Fund Total Transfers In: General Fund Riverfront Redevelopment Transportation Improvements Stormwater Utility Improvements Nonmajor Governmental Funds Total Transfers Out Remaining Spent -to date Commitment 133,598 589,705 176,955 164,505 4,949,068 6,248 708,375 21,650 16,307 832,613 1,367,549 41,402 38,120 14,769 281,174 217,796 546,258 305,752 14,345 103,305 75,693 157,473 57,451 8,966,573 1,853,538 2009 consisted of the following amounts: 316,317 525,170 558,484 550,045 338,765 2,288,781 89,243 542,116 12,107 643,466 200,000 285,000 485,000 Major Funding Source Recreation Impact Fees DST (Discretionary Sales Tax) Contributions and DST (Discretionary Sales Tax) DST (Discretionary Sales Tax) Stormwater Fees Bond Proceeds and Grants DST (Discretionary Sales Tax) DST (Discretionary Sales Tax) DST (Discretionary Sales Tax) Stormwater Fees Grant and Airport Funds Grant and Airport Funds The balance of $285,000 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. 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. 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: Discretionary Sales Tax Fund 108,159 57,641 2,613,569 Riverfront Redevelopment 60,000 41 Transfer Out: Nonmajor Transportation Govemmental Improvements Funds Total 761,538 821,538 668,590 668,590 108,159 15,787 73,428 231,508 679,584 3,524,661 2,779,369 60,000 900,098 1,456,909 5,196,376 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 $235,820 for the fiscal year ended September 30, 2009. 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, 2009: 2. Operating Leases Lessor Golf Course Golf Year Ending September 30, to: Airport Carts 2010 135,000 132,075 2011 135,000 2012 135,000 2013 135,000 2014 135,000 2015 135,000 Totals 810,000 132,075 The City is the lessor in two communication tower leases with lease terms of up to fifty -five years. The tower has a cost of $39,285 and a carrying value of $8,675. For fiscal year 2009, 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 2010 60,967 2011 62,182 2012 66,326 2013 67,641 2014 69,008 2015 -2019 377,909 2020 -2024 365,995 2025 -2029 377,305 2030 -2034 441,522 2035 -2039 519,652 2040 -2044 614,709 2045 -2049 730,360 2050 -2054 871,067 2055 193,673 Total minimum future rentals 4,818,316 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 September 30, Activities 2010 319,578 2011 322,754 2012 327,132 2013 332,711 2014 339,620 2015 -2019 1,725,632 2020 -2024 1,875,267 2025 -2029 2,103,337 2030 -2034 1,433,671 2035 168,078 Total minimum future rentals 8,947,780 42 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 fifteen (15) year loan agreement in 1998 with a local bank for $3,268,890 to provide financing to repave certain roads in the City. 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 ten (10) year, $2,435,000 Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001 in March 2001. The City has pledged Golf Course revenues along with a covenant to budget and appropriate for repayment of principal and interest. c. 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. d. 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. e. 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 a. The City has covenanted in the Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001 Bond Resolution to fix, establish and maintain such rates, fees, rentals and other charges and collect such fees, rates, rentals, and other charges for the product, services, facilities and use of its facilities, and revise the same from time to time, whenever necessary, as will always provide in each fiscal year net revenues equal to at least one hundred twenty-five percent (125 of the annual debt service becoming due in such fiscal year. The following table indicates the degree of compliance with the bond resolution covenants in the Golf Course Fund at September 30, 2009. Gross revenues available for compliance (charges for services, interest, and rent revenues) Operating and maintenance expenses (excluding depreciation expense, amortization, and airport lease payment) Amount of revenue over direct operating expenses Debt service requirement Percent coverage for the year ended September 30, 2009 City management continues to closely monitor the Golf Course operation and develop recommendations to improve its financial position. b. 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, 2009. Gross revenues available for compliance 814,419 Debt service requirement 440,135 Percent coverage for the year ended September 30, 2009 185% 43 1,408,535 1,178,144 230,391 310,090 74% 3. Changes in Long -term Liabilities The following is a summary of changes in Long -Term Liabilities of the City for the year ended September 30, 2009: Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: Infrastructure Sales Surtax Revenue Bonds, Series 2003 6,840,000 585,000 6,255,000 600,000 Infrastructure Sales Surtax Revenue Bonds, Series 2003A 1,605,000 135,000 1,470,000 145,000 Stormwater Utility Revenue Bonds, Series 2003 4,570,000 255,000 4,315,000 260,000 Less deferred amount: Issuance discount- Stormwater Utility Revenue Bonds, Series 2003 (11,249) (833) (10,416) Total bonds payable 13,003,751 974,167 12,029,584 1,005,000 Notes payable 1,333,197 243,994 1,089,203 254,848 Compensated absences 1,238,307 572,748 565,250 1,245,805 187,159 Unfunded OPEB obligation 275,829 28,459 304,288 Termination benefits 16,538 5,341 21,879 13,464 Pollution Remediation Liability 91,200 91,200 Governmental activity long -term liabilities 15,867,622 697,748 1,783,411 14,781,959 1,460,471 Beginning Ending Due within Balance Additions Reductions Balance One Year Business -type activities: Bonds payable: Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001 870,000 570,000 300,000 Less deferred amount: Issuance premium 1,594 798 796 Loss on refunding (16,643) (8,323) (8,320) Total bonds payable 854,951 562,475 292,476 Compensated absences 174,802 72,580 52,574 194,807 10,544 Unfunded OPEB obligation 36,957 3,737 40,694 Termination benefits 19,439 13,268 6,171 6,171 Business -type activity Tong -term liabilities 1,086,149 76,317 628,317 534,148 16,715 For the governmental activities, compensated absences are generally liquidated by the general fund. 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 current liability of $91,200. This has been reclassified and shown as a long -term liability. 44 4. Debt Service Requirements to Maturity The annual requirement to amortize all bonded debt outstanding at September 30, 2009, including interest requirements, is as follows: Govemmental Activities Roadway Infrastructure Infrastructure Stormwater Improvement SalesSurtax SalesSurtax Utility Note Revenue Bonds, Revenue Bonds, Revenue Bonds, Fiscal Payable Series 2003 Series 2003A Series 2003 Year 4.40% Interest 2% to 4.125% Interest 2% to 4% Interest 2% to 4.5% Interest 2010 254,843 45,157 600,000 233,856 145,000 56,037 260,000 177,485 2011 266,180 33,820 620,000 214,356 145,000 51,325 270,000 169,035 2012 278,019 21,981 645,000 193,276 150,000 46,250 280,000 159,247 2013 290,161 9,839 665,000 170,378 155,000 40,813 290,000 148,048 2014 690,000 146,106 160,000 35,000 305,000 136,448 2015 -2019 3,035,000 310,506 715,000 72,600 1,705,000 494,121 2020 -2022 1,205,000 110,025 1,089,203 110,797 6,255,000 1,268,478 1,470,000 302,025 4,315,000 1,394,409 I. Restricted Assets: Business -type Activities Golf Course Refunding Bonds, Fiscal Series 2001 Year 4% to 4.2% Interest 2011 300,000 6,300 Less unamortized Bond premium 796 Loss on refunding (8,320) 292,476 6,300 Certain cash and claims to cash, that are legally restricted, have been shown as restricted in the statement of net assets as follows: Govermental Business -type Activities Activities Debt service 1,554,128 Capital projects 4,774,624 Rent 98,320 Cemetery perpetual care 830,028 Law enforcement forfeiture fund 53,600 Community redevelopment agency 984,638 Total 8,197,018 98,320 The government -wide statement of net assets reports $8,295,338 of restricted net assets, of which all is restricted by enabling legislation. 45 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, 2009, was 3.3456 mills. Total tax collections were approximately 93.38% 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 2009. C. Police Pension Plan Defined Benefit Plan Primary Government Amount Public safety 41,742 Physical environment 500,000 Transportation 18,559 Cultural/Recreation 751,423 Airport 1,351,914 Total reporting entity 2,663,638 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 biennial actuarial valuation completed October 7, 2009 to determine the required contribution for the fiscal year ending September 30, 2010. 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 actuarial report is as follows: Retirees and beneficiaries currently receiving benefits 4 Terminated employees entitled to refund of employee Contribution but not yet received 1 Fully, partially, and non vested active plan participants 38 Total 3� 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 bi- annual basis in accordance with Florida State Statute. Administration costs of the pension plan are financed by the Plan. The employee contribution rate, expressed as a percentage of compensation, was 5.0% for the 2008 -2009 fiscal year. The employer contribution rate, expressed as a percentage of compensation, was 24.7% for the 2008 -2009 fiscal year. The employer contribution is $404,104 and the State contribution is $137,782, 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. 46 Annual pension costs and related information was as follows: Contribution rates as of 9/30/08: City Plan members Annual pension cost Contributions made Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Required trend information for the Police Officers' Pension Plan was as follows: Actuarially Required Contribution 2006 2007 2008 Percentage of APC contributed 2006 2007 2008 17.8% 5.0% 334,128 376,769 10/1/2006 Frozen Entry Age Level Percentage of Pay, Closed 26 Years (as of 10/01/2006) Market Value Amount 243,301 289,390 334,128 90.00% 102.00% 113.00% The annual required contribution for the Police Officers' Pension Plan was determined as part of the October 1, 2008, actuarial valuation using the aggregate actuarial cost method. This method does not identify or separately amortize unfunded actuarial accrued liabilities. 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 1980. 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. The funding status as required by GASB Statements No. 25 and 27 is presented in the required supplemental information section on page 56. 47 The development of the Net Pension Obligation as of September 30, 2008 is as follows: 9/30/2006 Actuarially Determined Contribution (A) 243,301 289,390 334,128 Interest on NPO (11,889) (9,753) (9,948) Adjustment to (A) 15,181 12,454 11,314 Annual Pension Cost Contributions made Increase in NPO 26,695 (2,443) (41,275) NPO beginning of year (148,607) (121,912) (124,355) NPO end of year D. CWA ITU Ne2otiated Pension Plan Defined Benefit Plan (121,912) (124,355) (165,630) Plan Description: The CWA/ITU 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, 2006, 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 2007 -2008 fiscal year. Employees do not contribute to this plan. Contributions to the CWA Pension Plan for the fiscal years ended September 30, 2007, 2008 and 2009 were $254,909, $241,718, and 254,997 respectively, which are equal to 100% of the required contribution for each year. 48 9/30/2007 9/30/2008 246,593 292,091 335,494 219,898 294,534 376,769 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: 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 2008 -2009 fiscal year. Employees do not contribute to this Plan. Contributions to the 401 Defined Contribution Plan for the fiscal years ended September 30, 2007, 2008, and 2009 were $136,222, $145,596, and $152,078 respectively, which are equal to 100% of the required contribution for each year. F. Other Post Employment Benefits (OPEB1 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. 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 and a future implementation timetable (for the City in fiscal year 2008/2009) for treatment of Other Post Employment Benefits. The City had an actuary calculate future funding requirements in 2007. The purpose was to enhance the City's understanding of the OPEB obligation and to revisit potential policy implications associated therewith. 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. In 2008 and 2009, the City recorded an additional government -wide obligation of $30,943 and $32,197, 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. 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, 2009, the total accrued termination benefits for the government -wide financial statements were $28,050. The enterprise fund portion of $6,171 was also recognized in the enterprise fund financial statements. II. 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. 49 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. K. Subsequent Event On January 13, 2010, in recognition of the economic climate, the City amended the lease with LoPresti Aviation to provide a temporary rent deferment. The amendment deferred the rent payments of $30,300 between February 2010 and October 2010. Beginning in November 2010, the tenant will pay an additional $1,000 per month until the deferred amount is repaid. To raise funds for roadway improvements and to take advantage of lower interest rates, the City executed a $2,462,000 Loan Agreement with SunTrust Bank on February 17, 2010. This financing paid the principal, interest and prepayment penalty on the 1998 Loan Agreement and provided $1,250,000 of paving project funds. The Note will bear a 4.01% interest rate and be repaid over a twelve year term ending December 1, 2021. 50 Required Supplemental Information City of Sebastian, Florida Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund For the Year Ended September 30, 2009 Actual Variance with Budget Amounts Amounts on Final Budget a Budgetary Positive Original Final Basis (Negative) REVENUES: Taxes: Property 4,252,958 4,252,958 4,276,800 23,842 Public utility 2,377,000 2,377,000 2,341,458 (35,542) Franchise fees 1,305,000 1,305,000 1,327,253 22,253 Licenses and permits 55,200 55,200 29,151 (26,049) Intergovernmental 2,052,529 2,234,142 2,000,872 (233,270) Charges for services 327,301 327,301 288,881 (38,420) Fines 59,600 59,600 59,411 (189) Investment earnings 307,200 307,200 167,396 (139,804) Contributions and donations 37,900 37,900 28,462 (9,438) Other revenue 145,659 145,659 143,908 (1,751) Total revenues 10,920,347 11,101,960 10,663,592 (438,368) EXPENDITURES: Current: General government 2,993,590 3,055,970 2,975,171 80,799 Public safety 4,826,931 5,044,544 4,999,588 44,956 Physical environment 1,452,715 1,441,215 1,433,574 7,641 Transportation 1,465,116 1,463,416 1,459,984 3,432 Culture and recreation 1,112,395 1,149,395 1,148,408 987 Total expenditures 11,850,747 12,154,540 12,016,725 137,815 Excess (deficiency) of revenues over (under) expenditures (930,400) (1,052,580) (1,353,133) (300,553) OTHER FINANCING SOURCES Transfers in 849,000 827,284 821,538 (5,746) Total other financing sources 849,000 827,284 821,538 (5,746) Net changes in fund balances (81,400) (225,296) (531,595) (306,299) Fund balances beginning 6,308,182 6,308,182 6,308,182 Fund balances ending 6,226,782 6,082,886 5,776,587 (306,299) Explanation of differences: Encumbrances for equipment and supplies ordered but not received are reported in the year the orders are placed for budgetary purposes, but are reported in the year the equipment and supplies are received for GAAP purposes. Prior year encumbrances (8,473) Amount reported as ending fund balance in the statement of revenues, expenditures and changes in fund balance for the General Fund. 5,768,114 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 m Fund Balances Budget and Actual Discretionary Sales Tax Special Revenue Fund For the Year Ended September 30, 2009 Actual Variance with Budget Amounts Amounts on Final Budget a Budgetary Positive Original Final Basis (Negative) REVENUES: Taxes: Sales 2,400,000 2,400,000 2,328,648 (71,352) Investment earnings 78,000 78,000 4,452 (73,548) Total revenues 2,478,000 2,478,000 2,333,100 (144,900) O1IIER FINANCING SOURCES (USES) Transfers out (3,267,957) (3,392,957) (2,779,369) 613,588 Total other financing sources (uses) (3,267,957) (3,392,957) (2,779,369) 613,588 Net changes in fund balances (789,957) (914,957) (446,269) 468,688 Fund balances beginning 1,404,945 1,404,945 1,404,945 Fund balances ending 614,988 489,988 958,676 468,688 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, 2009 Actual Variance with Budget Amounts Amounts on Final Budget a Budgetary Positive Original Final Basis (Negative) REVENUES: Taxes: Property 528,092 528,092 525,124 (2,968) Investment earnings 26,000 26,000 1,990 (24,010) Total revenues 554,092 554,092 527,114 (26,978) EXPENDITURES: Current: Economic environment 123,100 188,100 167,470 20,630 Total expenditures 123,100 188,100 167,470 20,630 Excess of revenues over over expenditures 430,992 365,992 359,644 (6,348) OTHER FINANCING SOURCES (USES) Transfers in 45,000 668,590 623,590 Transfers out (60,000) (60,000) (60,000) Total other financing (uses) (60,000) (15,000) 608,590 623,590 Net changes in fund balances 370,992 350,992 968,234 617,242 Fund balances beginning 16,404 16,404 16,404 Fund balances ending 387,396 367,396 984,638 617,242 The accompanying notes to required supplementary information are an integral part of this schedule. 54 A. Budgetary Basis B. Budgetary Information City of Sebastian, Florida Notes to the Required Supplementary Information Budget Comparisons September 30, 2009 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 51 through page 54. All annual appropriations lapse at year -end. 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. Transfers of appropriations between departments require approval of the City council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The council made four supplementary budgetary appropriations throughout the year. The 1s quarter budget amendment highlighted a net increase of $103,538 for the general fund, which represents fund balance carried over from prior fiscal year to fund outstanding encumbrances and some appropriations of revenues from insurance and grants. The 2n quarter budget amendment highlighted a net increase of $21,925 for the general fund, which represents revenues from a grant and from a private contribution. The 3` quarter budget amendment did not change the general fund but did include appropriations of reserves in the discretionary sales tax, recreation impact fee and building funds. The 4 quarter budget amendment highlighted a net increase of $147,800 for the general fund. The main reason for this increase is 1) to recognize a pass through police pension contribution from the State, and 2) to fund the costs associated with an employee electing to use the early retirement program. C. Budgeted Expenditures Exceeded Revenues Budgeted expenditures exceeded revenues in the general fund, discretionary sales tax special revenue fund, local option gas tax special revenue fund, and the stormwater utility special revenue fund. However, this is pursuant to the legally adopted budget to expend available fund equity (cash carry forward) and does not constitute a deficit. 55 City of Sebastian, Florida REQUIRED SUPPLEMENTARY INFORMATION Police Officers' Pension Plan Governmental Accounting Standards Board Statements No. 25 and 27, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Accounting for Pensions by State and Local Governmental Employers 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 schedules: CITY OF SEBASTIAN POLICE OFFICERS' PENSION PLAN SCHEDULE OF FUNDING PROGRESS LAST SIX FISCAL YEARS Actuarial Accrued UAAL as Actuarial Liability Unfunded a of Actuarial Value of (AAL) AAL Funded Covered Covered Valuation Assets Entry Age (UAAL) Ration Payroll Payroll Date (a) (b) (c) (a/b) (c) ((b -a) /c) 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% SCHEDULE OF CONTRIBUTIONS FROM THE EMPLOYER AND OTHER CONTRIBUTING ENTITIES LAST SIX FISCAL YEARS Annual Fiscal Required City State Percentage Year Contributions Contribution Contribution Contributed 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% 2004 279,741 174,780 106,716 100.63% 2003 233,435 153,111 92,714 105.31% 56 Nonmajor Governmental Funds 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. 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 the receipt of forfeited cash and 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 the accumulation 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. Discretionary Sales Surtax Revenue Bonds Debt Service Fund This fund is used to account for the accumulation of discretionary sales tax monies pledged to pay the principal, interest, and fiscal charges on the Discretionary Sales Surtax 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. 58 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. 59 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable City of Sebastian, Florida Combining Balance Sheet Nonmajor Governmental Funds September 30, 2009 Local Law Option Recreation Stormwater Enforcement Gas Tax Impact Fee Utility Forfeiture Total ASSETS Cash and cash equivalents 18,676 251,906 45,680 13,227 329,489 Investments 15,958 835,445 724,792 48,906 1,625,101 Due from other governments 53,993 17,009 71,002 Interest receivable 2 2 4 Total assets 88,629 1,087,353 787,481 62,133 2,025,596 6,050 Special Revenue Funds 8,533 14,583 Total liabilities 6,050 8,533 14,583 Fund balances: Reserved for: Debt service Capital projects Cemetery care Law enforcement 53,600 53,600 Unreserved 82,579 1,087,353 787,481 1,957,413 Total fund balances 82,579 1,087,353 787,481 53,600 2,011,013 Total liabilities and fund balances 88,629 1,087,353 787,481 62,133 2,025,596 Stormwater Discretionary Utility Sales Surtax Revenue Revenue Bonds 2003 Bonds 2003 Total 145,309 411,516 556,825 1,000,298 1,000,298 1 4 5 145,310 1,411,818 1,557,128 144,635 Debt Service Funds 675 2,325 3,000 675 2,325 3,000 144,635 1,409,493 1,554,128 1,409,493 1,554,128 145,310 1,411,818 1,557,128 61 Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Fund balances: Reserved for: Debt service Cemetery care Law enforcement Unreserved City of Sebastian, Florida Combining Balance Sheet Nonmajor Governmental Funds September 30, 2009 (Continued) Capital Projects Funds Permanent Fund General Public Capital Capital Facilities Projects Improvements Improvements Total Cemetery ASSETS Cash and cash equivalents 5,233 524,994 530,227 31,469 Investments 798,560 Due from other governments Interest receivable 5,233 524,994 530,227 830,029 5,233 123,592 128,825 Total liabilities 5,233 123,592 128,825 Capital projects 401,402 401,402 830,029 Total fund balances 401,402 401,402 830,029 Total liabilities and fund balances 5,233 524,994 530,227 830,029 62 Total Other Governmental Funds 1,448,010 3,423,959 71,002 9 4,942,980 146,408 146,408 1,554,128 401,402 830,029 53,600 1,957,413 4,796,572 4,942,980 63 City of Sebastian, Florida Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2009 Special Revenue Funds Local Law Option Recreation Stormwater Enforcement Gas Tax Impact Fee Utility Forfeiture Total REVENUES: Taxes: Motor fuel 593,776 593,776 Intergovernmental 18,559 18,559 Impact fees 13,975 13,975 Charges for services 807,971 807,971 Fines 29,527 29,527 Investment earnings 3,703 201 6,448 267 10,619 Contributions and donations 1,456 1,456 Other revenue 453 453 Total revenues 616,038 14,176 814,419 31,703 1,476,336 EXPENDITURES: Current: Public safety Physical environment 8,794 Transportation 244,467 Debt Service: Principal 243,995 Interest and fiscal charges 56,005 Capital outlay 7,935 22,115 7,935 8,794 244,467 243,995 56,005 22,115 Total expenditures 544,467 8,794 30,050 583,311 Excess (deficiency) of revenues over (under) expenditures 71,571 14,176 805,625 1,653 893,025 OTHER FINANCING SOURCES (USES) Transfers in 217,508 217,508 Transfers out (215,784) (177,724) (1,030,147) (1,423,655) Total other financing sources (uses) (215,784) 39,784 (1,030,147) (1,206,147) Net changes in fund balances (144,213) 53,960 (224,522) 1,653 (313,122) Fund balances beginning 226,792 1,033,393 1,012,003 51,947 2,324,135 Fund balances ending 82,579 1,087,353 787,481 53,600 2,011,013 Stormwater Discretionary Utility Sales Surtax Revenue Revenue Bonds 2003 Bonds 2003 Total 443,185 (443,101) Debt service Funds 84 707 791 84 707 791 255,000 720,000 975,000 188,185 461,903 650,088 1,181,903 1,625,088 (1,181,196) (1,624,297) 501,860 2,251,783 2,753,643 501,860 2,251,783 2,753,643 58,759 1,070,587 1,129,346 85,876 338,906 424,782 144,635 1,409,493 1,554,128 65 City of Sebastian, Florida Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2009 (Continued) Excess (deficiency) of revenues over (under) expenditures 66 Capital Projects Funds General Public Capital Capital Facilities Projects Improvements Improvements Total Cemetery Permanent Fund REVENUES: Taxes: Motor fuel Intergovernmental Impact fees Charges for services 89,309 Fines Investment earnings 2,047 Contributions and donations 6,000 6,000 Other revenue Total revenues 6,000 6,000 91,356 EXPENDITURES: Current: Public safety Physical environment Transportation Debt Service: Principal Interest and fiscal charges Capital outlay 364,607 232,828 597,435 Total expenditures 364,607 232,828 597,435 (364,607) (226,828) (591,435) 91,356 OTHER FINANCING SOURCES (USES) Transfers in 361,786 191,724 553,510 Transfers out (33,254) Total other financing sources (uses) 361,786 191,724 553,510 (33,254) Net changes in fund balances (2,821) (35,104) (37,925) 58,102 Fund balances beginning 2,821 436,506 439,327 771,927 Fund balances ending 401,402 401,402 830,029 Total Other Governmental Funds 593,776 18,559 13,975 897,280 29,527 13,457 7,456 453 1,574,483 7,935 8,794 244,467 1,218,995 706,093 619,550 2,805,834 (1,231,351) 3,524,661 (1,456,909) 2,067,752 836,401 3,960,171 4,796,572 67 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, 2009 REVENUES: Actual Variance with Amounts on Final Budget Final a Budgetary Positive Budget Basis (Negative) Motor fuel taxes 650,000 593,776 (56,224) Intergovernmental 19,047 18,559 (488) Investment earnings 51,000 3,703 (47,297) Total revenues 720,047 616,038 (104,009) EXPENDITURES: Current: Transportation 239,016 244,467 (5,451) Debt service: Principal 243,986 243,995 (9) Interest and fiscal charges 56,014 56,005 9 Total expenditures 539,016 544,467 (5,451) Excess of revenues over expenditures 181,031 71,571 (109,460) OTHER FINANCING (USES) Transfers out (215,784) (215,784) Total other financing (uses) (215,784) (215,784) Net changes in fund balances (34,753) (144,213) (109,460) Fund balances beginning 226,792 226,792 Fund balances ending 192,039 82,579 (109,460) 68 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, 2009 Actual Variance with Amounts on Final Budget Final a Budgetary Positive Budget Basis (Negative) REVENUES: Impact fees 100,000 13,975 (86,025) Investment earnings 35,000 201 (34,799) Total revenues 135,000 14,176 (120,824) EXPENDITURES: Current: Culture and recreation Total expenditures Excess of revenues over expenditures 135,000 14,176 (120,824) OTHER FINANCING (USES) Transfers in 217,508 217,508 Transfers out (229,000) (177,724) 51,276 Total other fmancing (uses) (229,000) 39,784 268,784 Net changes in fund balances (94,000) 53,960 147,960 Fund balances beginning 1,033,393 1,033,393 Fund balances ending 939,393 1,087,353 147,960 69 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, 2009 EXPENDITURES: Current: Physical environment Total expenditures 70 Final Budget Actual Variance with Amounts on Final Budget a Budgetary Positive Basis (Negative) REVENUES: Charges for services 850,000 807,971 (42,029) Investment earnings 47,200 6,448 (40,752) Total revenues 897,200 814,419 (82,781) 3,500 8,794 (5,294) 3,500 8,794 (5,294) Excess of revenues over expenditures 893,700 805,625 (88,075) OTHER FINANCING (USES) Transfers out (1,606,360) (1,030,147) 576,213 Total other financing (uses) (1,606,360) (1,030,147) 576,213 Net changes in fund balances (712,660) (224,522) 488,138 Fund balances beginning 1,012,003 1,012,003 Fund balances ending 299,343 787,481 488,138 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, 2009 Actual Variance with Amounts on Final Budget Final a Budgetary Positive Budget Basis (Negative) REVENUES: Fines 8,000 29,527 21,527 Investment earnings 1,000 267 (733) Contributions 2,000 1,456 (544) Other revenues 453 453 Total revenues 11,000 31,703 20,703 EXPENDITURES: Current: Public safety 15,500 30,050 Total expenditures 15,500 30,050 Excess of revenues over expenditures (4,500) 1,653 Fund balances beginning Fund balances ending 71 51,947 51,947 (14,550) (14,550) 6,153 47,447 53,600 6,153 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, 2009 OTHER FINANCING SOURCES Transfers in Total other financing sources Fund balances beginning Fund balances ending 72 Final Budget REVENUES: Investment earnings 875 84 (791) Total revenues 875 84 (791) EXPENDITURES: Debt service: Principal 255,000 255,000 Interest and fiscal charges 186,010 188,185 (2,175) Total expenditures 441,010 443,185 (2,175) Deficiency of revenues under expenditures (440,135) (443,101) (2,966) Net changes in fund balances 61,725 501,860 501,860 501,860 501,860 Actual Variance with Amounts on Final Budget a Budgetary Positive Basis (Negative) 85,876 85,876 58,759 (2,966) 147,601 144,635 (2,966) 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, 2009 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 73 Final Budget 1,974 1,974 720,000 314,931 1,034,931 (1,032,957) 2,251,783 2,251,783 338,906 1,557,732 Actual Amounts on a Budgetary Basis 720,000 461,903 1,181,903 2,251,783 2,251,783 1,218,826 1,070,587 338,906 1,409,493 Variance with Final Budget Positive (Negative) 707 (1,267) 707 (1,267) (146,972) (146,972) (1,181,196) (148,239) (148,239) (148,239) ASSETS Cash and cash equivalents Investments, at fair value Total assets LIABILITIES Performance deposits held in escrow Total liabilities City of Sebastian, Florida Statement of Changes in Assets and Liabilities Agency Fund For the Year Ended September 30, 2009 74 Balance Balance October 1, September 30, 2008 Additions Deletions 2009 138,710 4,663 130,613 12,760 270,000 50,000 220,000 408,710 4,663 180,613 232,760 408,710 4,663 180,613 232,760 408,710 4,663 180,613 232,760 Governmental Funds capital assets: City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Comparative Schedule By Source September 30, 2009 FY 2008 FY 2009 Land 5,696,946 5,699,045 Buildings and structures 11,158,739 11,284,488 Improvement other than buildings 5,149,267 5,704,686 Machinery and equipment 7,390,752 7,784,213 Infrastructure 22,259,149 25,125,625 Capital projects 1,520,565 3,958,971 Total capital assets 53,175,418 59,557,028 Investment in Governmental Funds capital assets by sources: Federal grants 2,138,342 3,062,044 State grants 907,755 907,755 County grants 713,359 713,359 General fund 11,605,512 11,552,446 Law enforcement trust fund 38,953 61,068 Recreational impact fee 688,730 1,179,319 Stormwater utility fee 387,153 387,153 Riverfront Redevelopment 754,056 1,097,069 Cemetery trust fund 230,472 237,479 Donations 3,145,174 3,159,873 Sales taxes 9,764,073 11,911,948 Motor fuel taxes 5,544,144 5,591,414 Revenue bond debt 15,737,130 15,737,130 Capital projects 1,520,565 3,958,971 Total investment in capital assets 53,175,418 59,557,028 75 City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity September 30, 2009 Improvements Machinery Other than and Function and Activity Land Buildings Buildings Equipment Infrastructure Totals General government: Legislative 1,100 2,886 3,986 City manager 2,826 2,826 City clerk 136,974 136,974 City attorney 599 599 Finance 55,306 55,306 MIS 5,841 9,800 110,080 125,721 Facilities maintenance 133,430 15,665 69,200 218,295 Growth management 85,555 50,184 135,739 Non departmental 3,634,769 6,184,988 294,969 427,126 212,702 10,754,554 Subtotal 3,634,769 6,409,814 321,534 855,181 212,702 11,434,000 Public safety: Special operations 176,393 176,393 Administration 9,560 3,347,151 89,320 282,963 3,728,994 School resource 71,469 71,469 Road patrol 2,392,531 2,392,531 Community policing 95,917 95,917 Code enforcement 34,302 34,302 Professional Stud. 19,025 19,025 Investigations 1,700 180,660 182,360 Support services 59,877 59,877 Communications 16,404 211,655 228,059 Building department 51,838 51,838 Subtotal 9,560 3,347,151 107,424 3,576,630 7,040,765 Transportation: Engineering 2,216 2,216 Central garage 130,489 82,419 132,821 674 346,403 Roads and drainage 47,125 162,044 966,613 1,083,296 12,898,698 15,157,776 Subtotal 47,125 292,533 1,049,032 1,218,333 12,899,372 15,506,395 Physical Environment: Stormwater 1,850 1,476,979 10,393,494 11,872,323 Cemetery 272,190 82,019 78,354 56,809 22,717 512,089 Subtotal 272,190 82,019 80,204 1,533,788 10,416,211 12,384,412 Culture/Recreation: Parks and recreation 1,735,401 1,152,971 4,146,492 600,281 1,597,340 9,232,485 Subtotal 1,735,401 1,152,971 4,146,492 600,281 1,597,340 9,232,485 Total 5,699,045 11,284,488 5,704,686 7,784,213 25,125,625 55,598,057 Construction in progress 3,958,971 Total 59,557,028 76 Governmental Governmental Funds Funds Capital Assets Transfers Transfers Capital Assets Function and Activity October 1, 2008 Additions Deletions In Out September 30, 2008 General government: Legislative 3,986 City manager 2,826 City clerk 143,134 City attorney 599 Finance 54,236 MIS 105,356 Human resources 5,754 Facilities maintenance 215,085 Growth management 136,297 Non departmental 10,630,364 Subtotal 11,297,637 City of Sebastian, Florida Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity September 30, 2009 4,457 4,457 3,986 2,826 6,160 136,974 599 1,720 650 55,306 15,908 1 25,721 5,754 3,210 218,295 558 135,739 124,190 10,754,554 145,028 13,122 11,434,000 Public Saftey: Special operations 176,393 176,393 Administration 3,717,964 21,992 15,305 4,343 3,728,994 School resource 71,469 71,469 Road patrol 2,050,330 415,398 73,197 2,392,531 Community policing 95,917 95,917 Code enforcement 46,632 12,330 34,302 Professional Stnd. 19,025 19,025 Investigations 159,563 22,797 182,360 Support services 72,310 12,433 59,877 Communications 222,854 7,345 2,140 228,059 Building department 55,996 3,600 558 51,838 Subtotal 6,688,453 467,532 106,675 4,343 12,888 7,040,765 Transportation: Engineering 744,104 5,252 1,400 745,740 2,216 Central garage 344,058 2,944 599 346,403 Roads and drainage 13,085,015 1,494,427 586 578,920 15,157,776 Subtotal 14,173,177 1,502,623 1,986 578,920 746,339 15,506,395 Physical Environment: Stormwater 10,380,292 1,429,482 62,549 11,872,323 Cemetery 506,270 7,007 1,188 512,089 Subtotal 10,886,562 1,436,489 62,549 1,188 12,384,412 Culture Recreation: Parks and recreation 8,609,024 645,764 5,000 17,303 9,232,485 Subtotal 8,609,024 645,764 5,000 17,303 9,232,485 Total 51,654,853 4,056,865 113,661 790,840 790,840 55,598,057 Construction in progress 1,520,565 3,213,102 774,696 3,958,971 Total 53,175,418 7,269,967 888,357 790,840 790,840 59,557,028 77 CN HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 78 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 Page(s) Financial Trends 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 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 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 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 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. 79 80 -91 92 -97 98 -103 104 -106 107 -109 City of Sebastian, Florida Net Assets By Component Last Nine Fiscal Years (accrual basis of accounting) 80 2009 2008 2007 Governmental Activities Invested in Capital Assets, Net of Related Debt 26,744,896 24,133,550 21,469,456 Restricted 8,197,018 9,215,801 9,419,129 Unrestricted 4,502,440 5,035,184 5,249,998 Total Governmental Activities Net Assets 39,444,354 38,384,535 36,138,583 Business -Type Activities Invested in Capital Assets, Net of Related Debt 10,725,676 9,111,251 8,895,501 Restricted 98,320 570,149 570,890 Unrestricted 86,517 753,076 1,303,886 Total Business Type Activities Net Assets 10,910,513 10,434,476 10,770,277 Primary government Invested in Capital Assets, Net of Related Debt 37,470,572 33,244,801 30,364,957 Restricted 8,295,338 9,785,950 9,990,019 Unrestricted 4,588,957 5,788,260 6,553,884 Total Primary Government Net Assets 50,354,867 48,819,011 46,908,860 (I) 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. 2006 2005 2004 2003 2002 2001 17,579,683 5,068,583 11,293,877 (2) 17,103,399 5,395,879 9,081,345 16,412,401 4,059,674 7,171,123 81 16,339,222 3,235,266 5,461,224 14,242,832 3,289,670 5,865,388 12,778,007 2,270,654 5,417,630 33,942,143 31,580,623 27,643,198 25,035,712 23,397,890 20,466,291 8,798,612 7,459,945 4,264,961 1,545,867 363,827 150,722 560,581 574,105 506,006 505,435 458,014 640,973 1,896,539 738,519 1,712,657 1,471,457 1,120,224 985,863 11,255,732 8,772,569 6,483,624 3,522,759 1,942,065 1,777,558 26,378,295 24,563,344 20,677,362 17,885,089 14,606,659 12,928,729 5,629,164 5,969,984 4,565,680 3,740,701 3,747,684 2,911,627 13,190,416 9,819,864 8,883,780 6,932,681 6,985,612 6,403,493 45,197,875 40,353,192 34,126,822 28,558,471 25,339,955 22,243,849 Business -Type Activities: Charges for Services: Golf Course Airport Building (1) 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 Nine Fiscal Years (accrual basis of accounting) 82 2009 Program Revenues Governmental Activities: Charges for Services: General Government 220,073 Public Safety 95,606 Physical Environment 908,829 Economic Environment Cultural/Recreation Operating Grants and Contributions Capital Grants and Contributions Total Governmental Activities Program Revenues 66,540 228,002 1,865,174 3,384,224 1,406,956 438,485 358,947 2008 2007 353,836 422,897 85,009 92,853 903,285 891,021 83,378 786,016 835,607 3,047,131 85,945 192,676 1,014,481 2,699,873 1,438,233 1,652,288 523,989 344,813 347,189 408,875 494,098 500,428 1,356,914 3,561,302 6,945,526 5,850,640 5,606,277 3,169,851 5,420,585 1,347,771 3,437,724 167,470 1,073,249 730,100 15,346,750 1,477,299 1,079,869 533,641 3,090,809 18,437,559 2,803,509 2,906,404 3,375,178 5,226,512 1,805,755 2,111,360 113,101 1,420,734 634,891 14,687,531 1,488,472 1,099,653 605,422 3,193,547 17,881,078 (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. 3,083,609 5,377,107 1,695,066 2,276,497 605,510 1,237,398 667,950 14,943,137 1,533,900 1,046,994 905,452 3,486,346 18,429,483 2006 2005 2004 533,482 140,545 887,819 72,472 407,898 1,301,438 3,343,654 1,580,407 375,768 1,220,823 6,998 1,056,562 4,240,558 7,584,212 3,129,723 4,191,295 2,193,589 2,173,071 98,661 1,208,288 706,303 13,700,930 1,558,338 801,967 936,793 3,297,098 370,609 1,356,385 828,907 56,199 2,802,511 1,781,954 7,196,565 376,327 1,660,032 850,887 48,590 1,144,528 1,353,959 5,434,323 1,381,817 1,648,308 434,818 201,890 13,582 67,576 2,289,986 2,451,212 4,120,203 4,368,986 11,316,768 3,262,276 4,816,614 1,283,889 4,034,900 32,128 1,260,395 740,372 15,430,574 1,464,532 519,235 9,803,309 1,527,051 350,949 2003 2002 247,774 824,821 799,637 46,736 920,829 640,894 3,480,691 1,377,245 168,451 1,149,437 2,695,133 2,414,865 1,620,616 4,502,109 3,391,831 1,279,257 1,920,200 3,288,532 2,401,037 86,041 166,024 823,974 747,910 722,007 312,367 13,116,785 10,559,985 1,363,359 315,941 2001 172,135 183,502 625,924 554,350 785,683 24,869 18,753 73,013 35,050 958,229 902,001 872,490 581,941 3,512,343 2,275,597 1,365,027 1,088,104 179,373 193,649 (1) 51,087 123,673 214,175 299,334 1,809,662 1,704,760 6,175,824 5,322,005 3,980,357 2,010,288 2,945,701 508,616 2,258,181 223,207 881,260 168,749 8,996,002 1,393,551 283,726 1,676,383 2,526,514 452,116 1,630,098 241,692 768,802 160,954 7,456,559 1,341,001 313,877 (1) 1,983,767 1,878,000 1,679,300 1,677,277 1,654,878 16,998,028 17,414,341 14,994,785 12,239,285 10,673,279 9,111,437 City of Sebastian, Florida Changes in Net Assets (continued) Last Nine Fiscal Years (accrual basis of accounting) 2009 2008 2007 Net (Expense)/Revenue Governmental Activities (11,962,526) (11,640,400) $(12,243,264) Business -Type Activities 470,493 (390,038) (579,942) Total Primary Government Net Expense (11,492,033) (12,030,438) $(12,823,206) General Revenues and Other Changes in Net Assets Governmental Activities: Property Taxes, Levied for General Purposes 4,801,924 5,149,047 5,089,841 Sales and Use Taxes 4,670,106 4,753,718 4,776,691 Franchise Fees 1,327,253 1,199,762 1,106,698 State Shared Revenues 1,821,347 1,989,606 2,083,523 Interest Earnings 261,203 634,919 1,147,931 Miscellaneous 140,512 159,300 192,300 Transfers 42,720 Total Governmental Activities 13,022,345 13,886,352 14,439,704 Business -Type Activities: Interest Earnings 5,544 54,237 137,207 Miscellaneous Transfers (42,720) Total Business -Type Activities 5,544 54,237 94,487 Total Primary Government 13,027,889 13,940,589 14,534,191 Change in Net Assets Governmental Activities Business -Type Activities 1,059,819 2,245,952 2,196,440 476,037 (335,801) (485,455) Total Primary Government Change in Net Assets 1,535,856 1,910,151 1,710,985 (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. 2006 2005 2004 2003 2002 2001 $(10,357,276) (8,234,009) (7,682,462) (7,079,294) (5,483,659) (5,180,962) 943,460 2,136,436 2,490,986 1,015,833 132,385 49,882 (9,413,816) (6,097,573) (5,191,476) (6,063,461) (5,351,274) (5,131,080) 4,645,050 4,017,555 3,420,971 2,944,456 2,615,939 2,557,333 4,907,906 4,718,691 4,035,545 3,705,922 2,844,825 3,013,293 1,253,749 886,390 770,600 756,194 766,901 753,024 2,242,292 2,138,020 1,721,956 1,523,524 2,068,753 1,336,046 827,224 398,518 398,158 241,358 118,840 236,307 256,780 118,760 388,562 79,662 (1,414,205) (106,500) (445,844) (534,000) 12,718,796 12,171,434 10,289,948 8,717,116 8,415,258 7,896,003 125,498 1,414,205 (2) 1,539,703 45,709 23,774 21,789 32,122 99,521 300 261 9,072 106,500 445,844 534,000 152,509 469,879 564,861 32,122 99,521 14,258,499 12,323,943 10,759,827 9,281,977 8,447,380 7,995,524 2,361,520 3,937,425 2,607,486 1,637,822 2,931,599 2,715,041 2,483,163 2,288,945 2,960,865 1,580,694 164,507 149,403 4,844,683 6,226,370 5,568,351 3,218,516 3,096,106 2,864,444 Total General Fund City of Sebastian, Florida Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2009 2008 2007 2006 2005 General Fund Reserved 650,000 739,873 947,533 1,815,187 2,848,726 Unreserved 5,118,114 5,568,309 5,443,254 4,663,885 3,254,741 5,768,114 6,308,182 6,390,787 6,479,072 6,103,467 All Other Governmental Funds Reserved 5,771,690 (1) 9,809,650 8,299,903 10,058,183 (2) 828,819 Unreserved, Reported in: Special Revenue funds 3,615,728 3,408,537 5,321,148 5,381,276 4,735,396 Capital Projects funds (3) 8,406,953 Total All Other Governmental Funds 9,387,418 13,218,187 13,621,051 15,439,459 13,971,168 Total Governmental Funds $15,155,532 19,526,369 20,011,838 21,918,531 20,074,635 (1) The significant reduction in reserved 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 significant change in reserved fund balance from 2005 to 2006 is due to the reclassification of unreserved reported in capital projects funds to reserved. (3) The significant change in unreserved reported in capital projects funds from 2005 to 2006 is due to the reclassification of unreserved reported in capital projects funds to reserved. (4) The large increase in unreserved fund balance reported in capital projects funds from 2002 to 2003 is due to the issuance of City's Infrastructure Sales Surtax Revenue Bonds, Series 2003. 86 2004 2003 2002 2001 2000 2,693,710 1,402,398 232,088 121,256 64,341 2,421,182 2,479,452 3,690,659 3,406,083 2,786,252 5,114,892 3,881,850 3,922,747 3,527,339 2,850,593 4,208,170 1,596,981 1,503,172 1,306,269 2,021,740 3,355,229 2,211,585 1,808,288 548,174 456,461 6,795,371 9,993,933 (4) 2,384,557 2,609,201 1,562,299 14,358,770 13,802,499 5,696,017 4,463,644 4,040,500 19,473,662 17,684,349 9,618,764 7,990,983 6,891,093 87 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 City of Sebastian, Florida Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 88 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 2008 2,976,896 3,087,789 4,926,714 4,677,618 1,448,067 1,368,593 1,696,254 1,545,045 167,470 113,101 1,148,408 1,079,379 1,218,995 1,326,182 706,093 611,554 6,495,271 3,634,910 20,784,168 17,444,171 (4,370,837) (485,469) 5,196,376 5,679,896 (5,196,376) (5,679,896) 13.5% 2007 10,504,155 10,554,617 1,199,762 1,106,698 1,209,617 1,271,102 163,471 186,875 65,246 71,314 2,674,761 2,463,628 32,825 56,875 647,312 1,062,043 461,553 244,629 16,958,702 17,017,781 2,999,652 4,700,447 1,301,719 1,733,697 80,279 975,087 1,284,418 643,305 5,242,590 18,961,194 (1,943,413) 5,158,296 (5,115,576) 42,720 (4,370,837) (485,469) (1,900,693) 14.0% 14.1% 2006 2005 2004 2003 2002 2001 2000 10,269,451 1,253,749 517,605 244,370 77,776 2,852,293 337,675 819,286 827,224 294,695 17,494,124 9,483,664 886,390 936,530 1,587,675 95,699 5,561,695 385,775 11,023 398,518 144,057 2,494,863 2,974,736 3,813,908 4,349,639 1,850,642 910,794 1,672,983 3,616,076 98,661 32,128 926,846 995,406 1,248,378 1,218,023 678,682 711,736 1,451,060 3,975,015 14,236,023 18,783,553 3,258,101 707,473 3,785,981 3,745,265 (5,200,186) (3,851,765) (1,414,205) (106,500) 1,843,896 600,973 8,179,344 7,325,932 6,228,107 6,223,280 6,273,070 770,600 756,194 766,901 753,024 962,677 921,119 1,123,670 300,046 159,701 1,867,920 878,097 578,695 487,618 475,345 118,918 119,752 127,027 148,676 140,672 3,115,520 1,785,237 2,841,315 1,968,416 2,318,091 557,700 395,850 255,775 28,424 22,560 31,756 28,528 128,154 398,158 241,358 206,567 417,707 689,395 378,268 91,078 126,823 196,311 246,774 19,491,026 16,377,529 12,537,177 12,286,636 10,523,606 10,431,202 15.1% 13.0% 2,231,532 3,950,228 1,125,727 2,863,397 86,041 747,131 985,974 887,564 9,021,558 21,899,152 (5,521,623) 7,756,780 2,745,754 (3,191,598) 7,310,936 1,789,313 1,977,033 3,427,711 1,247,452 1,610,761 166,024 629,835 361,024 158,043 3,859,709 13,437,592 (900,415) 9,500,000 2,992,908 (3,526,908) 8,966,000 8,065,585 14.5% 5.4% 6.2% 5.4% 5.5% 89 2,230,870 1,647,858 1,946,702 2,588,526 2,482,393 2,129,662 508,616 452,116 345,844 1,427,992 1,084,401 1,228,234 327,911 273,927 617 732,729 612,038 555,584 344,553 222,954 212,860 174,864 152,093 151,536 2,322,794 3,402,365 4,713,604 10,658,855 10,330,145 11,284,643 1,627,781 193,461 (853,441) 900,000 2,009,173 2,130,744 2,134,510 (2,009,173) (2,130,744) (2,134,510) 900,000 1,627,781 1,093,461 (853,441) City of Sebastian, Florida Program Revenues by Function/Program Last Nine Fiscal Years (accrual basis of accounting) 2009 2008 2007 Function/Program Governmental Activities: General Government 226,003 377,305 450,267 Public Safety 299,119 515,997 249,756 Physical Environment 1,408,829 1,256,277 891,021 Transportation 612,335 619,949 721,103 Economic Environment 6,000 Cultural/Recreation 831,938 277,603 387,726 Total Governmental Activities 3,384,224 3,047,131 2,699,873 Business -type activities: Golf Course 1,406,955 1,438,233 1,652,288 Airport 1,795,399 (2) 1,018,087 845,241 Building (1) 358,948 347,189 408,875 Total Business Type Activities 3,561,302 2,803,509 2,906,404 Total Primary Government 6,945,526 5,850,640 5,606,277 (1) 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 90 2006 579,591 306,702 890,092 900,365 30,059 636,845 3,343,654 1,587,405 1,432,330 1,220,823 4,240,558 2005 587,527 1,537,557 898,821 3,392,883 779,777 7,196,565 1,395,399 2,724,804 4,120,203 2004 392,471 1,850,710 914,318 1,670,534 606,290 5,434,323 1,715,884 2,653,102 4,368,986 91 2003 1,095,902 929,952 1,136,507 1,580,076 663,459 5,405,896 1,377,245 1,317,888 2,695,133 2002 2001 172,135 785,373 785,683 3,038,913 24,869 566,959 5,373,932 1,365,517 444,145 1,809,662 226,786 633,230 779,837 2,285,809 18,753 168,335 4,112,750 1,088,104 616,656 1,704,760 7,584,212 11,316,768 9,803,309 8,101,029 7,183,594 5,817,510 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 2009 (1) 4,801,924 2,341,458 2,328,648 593,776 10,065,806 2008 (2) 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 (4) 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 (5) 2,717,564 983,236 1,861,589 665,718 6,228,107 2001 2,608,989 1,151,685 1,861,608 600,998 6,223,280 2000 (6) 2,323,566 1,044,595 1,704,749 549,800 5,622,710 (1) Fiscal Year 2009 property tax revenue reflects a change in the property tax millage rate from 2.9917 to 3.3456. (2) Fiscal Year 2008 property tax revenue reflects a change in the property tax millage rate from 3.0519 to 2.9917. (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 2006 property tax revenue reflects a change in the property tax millage rate from 4.5904 to 3.9325. (5) Fiscal Year 2002 property tax revenue reflects a change in the property tax millage rate from 5.0000 to 4.5904. (6) Fiscal Year 2000 property tax revenue reflects a change in the property tax millage rate from 6.5000 to 5.0000. Millage Rate represents the dollar of tax per one thousand dollars of taxable valuation. 92 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 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 2001 5.0000 5.0000 8.24860 8.67700 0.88000 9.55700 1.62899 2000 5.0000 5.0000 8.24360 8.61400 1.00000 9.61400 1.52091 (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 City of Sebastian, Florida Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years 93 Tax Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Assessed Value (l) 1,650,311,449 1,933,934,630 2,054,408,055 2,124,615,672 1,526,923,406 1,157,275,164 946,293,950 829,224,615 754,577,150 656,619,860 Real Property Estimated Actual Value 2,062,889,311 2,417,418,288 2,568,010,069 2,655,769,590 1,908,654,258 1,446,593,955 1,182,867,438 1,036,530,769 943,221,438 820,774,825 Source: Indian River County Property Appraiser City of Sebastian, Florida Assessed Valuation and Estimated Taxable Property Values Last Ten Fiscal Years Assessed Value 56,920,223 62,476,508 64,899,942 55,913,696 51,827,624 51,330,277 48,613,628 45,355,170 45,195,579 42,216,162 Personal Property Estimated Actual Value 56,920,223 62,476,508 64,899,942 55,913,696 51,827,624 51,330,277 48,613,628 45,355,170 45,195,579 41,533,985 (1) The assessed value of Real Property is equivalent to approximately 80 percent of estimated actual value. The City adopts a millage each year and applies the same rate to all taxable property. Exemptions Real Property 479,222,945 506,441,634 334,302,515 322,318,753 271,466,364 228,262,825 217,554,663 205,977,066 198,445,669 190,327,263 Total Taxable Value 1,148,064,078 1,318,172,635 2,119,307,997 2,180,529,368 1,578,751,030 1,208,605,441 994,907,578 874,579,785 799,772,729 698,836,022 Total Estimated Actual Value 1,423,351,926 1,634,831,349 2,632,910,011 2,711,683,286 1,960,481,882 1,497,924,232 1,231,481,066 1,081,885,939 988,417,017 862,308,810 95 Taxpayer Florida Power Light (Utility Electric) Wal -Mart Stores Inc. (Retail) IPF Sebastian LLC (Retail) Bellsouth Communications (Communication) BW US 1 Inc. (Commerical) Park Place Community LLC (Rent Retail) KB Homes Treasure Coast LLC (Construction) 512 Commerce Center LLC (Commercial) Chance Holdings LLC (Development) Pelican Isles Limited Partnership (Rental Lynch, Robert N. (Bishop) Grace's Landing Ltd Falcon Cable Media Winn Dixie Stores Inc. Sebastian Center Ltd Ringhaver Equipment Total Assessed Valuation $1,319,602,616 (1) 1999 information not available Source: Indian River County Property Appraiser's Office City of Sebastian, Florida Principal Taxpayers Year 2009 and Year 1998 83,290,304 96 2009 Real Percentage Property of Total Assessed Assessed Valuation Rank Valuation 15,809,386 1 1.20% 13,404,610 2 1.02% 9,743,746 3 0.74% 7,153,062 4 0.54% 6,946,560 5 0.53% 6,896,210 6 0.52% 6,600,600 7 0.50% 6,177,200 8 0.47% 5,492,320 9 0.42% 5,066,610 10 0.38% 1998 (1) Real Percentage Property of Total Assessed Assessed Valuation Rank Valuation 6,448,890 3 1.02% 7,843,080 2 1.24% 7,930,440 1 1.26% 2,737,650 5 0.43% 3,665,790 4 0.58% 2,111,580 6 0.34% 1,618,367 7 0.26% 1,586,073 8 0.25% 1,316,420 9 0.21% 780,155 10 0.12% 6.32% 36,038,445 5.71% $630,218,290 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 Tax Tax Collections Year Levy Collections To Tax Levy Collections Collections To Tax Levy 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 2001 2,542,544 2,455,930 97 51,690 2,507,620 99 2000 2,422,756 2,283,898 94 35,050 2,318,948 96 Source: Indian River County Property Appraiser and Tax Collector 97 Business -type Governmental Activities Activities Water Line Roadway Infrastructure Heavy Stormwater Golf Course Total Percent of Assessment Improvement Sales Tax Equipment Utility Revenue Revenue Primary Personal Per Year Bonds Notes Bonds Lease Bonds Bonds Government Income Capita 2009 $1,089,203 7,725,000 4,315,000 300,000 13,429,203 (2) 591 2008 1,333,197 8,445,000 4,570,000 590,000 14,938,197 (2) 652 2007 1,566,839 9,145,000 147,538 4,815,000 870,000 16,544,377 0.21% 738 2006 1,790,544 9,825,000 288,251 5,055,000 1,140,000 18,098,795 0.25% 835 2005 2,004,718 10,490,000 422,455 5,290,000 1,395,000 19,602,173 0.31% 978 2004 2,209,745 11,140,000 550,452 5,525,000 1,885,000 21,310,197 0.42% 1,100 2003 77,615 2,406,028 9,500,000 672,528 2,115,000 14,771,171 0.31% 802 2002 134,299 2,593,939 788,957 2,335,000 5,852,195 0.13% 341 2001 187,901 2,773,847 2,435,000 (1) 5,396,748 0.12% 324 2000 238,589 2,946,113 1,500,000 4,684,702 0.11% 290 (1) Golf Course Revenue Bonds, Series 1996 was refunded in 2001. (2) Information not available yet. City of Sebastian, Florida Ratios of Outstanding Debt by Type Last Ten Fiscal Years 98 City of Sebastian, Florida Computation of Legal Debt Margin September 30, 2009 Assessed Valuation Assessed taxable property value 668,841,133 Add back: exempt property 479,222,945 Total assessed value of taxable property 1,148,064,078 Legal debt margin: Debt limitation 5 percent of total assessed real property value (1) 57,403,204 Debt applicable to limitation Total bonded debt 12,040,000 Less: revenue bonds (12,040,000) Total applicable to limitation Legal debt margin (1) City adopted fmancial 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, 2009 The City of Sebastian has no overlapping general obligation bonded debt. 99 57,403,204 City of Sebastian, Florida Ratios of General Bonded Debt Outstanding and Legal Debt Margin Last Ten Fiscal Years 2009 2008 2007 2006 Debt Limit (1) 55,057,570 63,331,743 102,720,403 76,346,170 Total net debt applicable to limit 1,078,787 1,333,197 1,714,377 2,078,796 Legal debt margin 53,978,783 61,998,546 101,006,026 74,267,374 Total net debt applicable to the limit as a percentage of debt limit 1.96% 2.11% 1.67% 2.72% (1) Under the City's adopted financial policies, the City's outstanding general obligation debt should not exceed 5% of the assessed valuation of real property. The percentage was dropped from 10% to 5% in fiscal year 2003. 100 2005 2004 2003 2002 2001 2000 76,346,170 57,863,758 47,314,698 82,922,462 75,457,715 65,661,986 2,427,174 2,760,196 3,078,556 3,382,896 3,673,847 2,946,113 73,918,996 55,103,562 44,236,142 79,539,566 71,783,868 62,715,873 3.18% 4.77% 6.51% 4.08% 4.87% 4.49% 101 Fiscal Gross Year Revenues 2009 1,408,535 2008 1,455,749 2007 1,701,171 2006 1,628,015 2005 1,395,436 2004 1,497,053 2003 1,400,154 2002 1,386,424 2001 1,165,091 2000 1,450,487 Recreational Facilities (5) Less: Operating Expenses (2) 1,178,144 1,174,169 1,218,382 1,165,411 1,023,002 1,108,770 968,052 1,020,640 1,043,741 947,145 (5) City of Sebastian, Florida Pledged- Revenue Coverage Last Ten Fiscal Years Improvement Net Available Revenue 230,391 281,580 482,789 462,604 372,434 388,283 432,102 365,784 121,350 503,342 102 and Refunding Principal 230,391 270,000 255,000 250,000 240,000 230,000 220,000 100,000 110,000 Revenue Bonds, Series 2001 Debt Service Interest Total 30,090 260,481 41,090 311,090 51,590 306,590 61,690 311,690 71,490 311,490 80,890 310,890 89,890 309,890 104,481 204,481 96,980 206,980 Note: Detail regarding the City's outstanding debt can be found in the notes to the fmancial statements. (1) 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 1985 refunded in 1992 with Series 1992. (4) Required coverage is 1.0. (5) Golf Course closed for four months for renovations. Golf Course Bond, Series 1992 refunded with Recreational Facilities Improvement and Refunding Revenue Bonds, Series 2001. (7) Required coverage is 1.25. (8) Total revenues consist of stormwater utility fees and interest. (9) Required coverage is 1.35. Covers e 0.88 0.91 1.57 1.48 1.20 1.25 1.39 1.79 2.43 Stormwater Utility Revenue Bonds, Series 2003 Gross Debt Service Revenues Principal Interest Total Coverage 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 City of Sebastian, Florida Demographic and Economic Statistics Last Ten Years Total Per Capita Median Personal Personal Household Year Population Income (1) Income (1) Income (1) 2009 22,722 (5) $230,391 2008 22,924 (5) (5) (5) 2007 22,426 7,810,408,000 59,419 47,563 2006 21,666 7,217,159,000 55,817 45,034 2005 20,048 6,386,893,000 50,369 44,450 2004 19,365 5,071,395,000 40,677 41,522 2003 18,425 4,831,037,000 40,162 40,291 2002 17,167 4,680,414,000 39,683 39,615 2001 16,667 4,552,238,000 39,470 39,359 2000 16,181 4,207,683,000 37,110 40,063 Median Age (2) (5) (5) (5) (5) (5) (5) (5) (5) (5) 49.2 Sources: (1) Florida Research Economic Database. Information available for Indian River County only. (2) U.S. Census Bureau (3) Indian River County School Board (4) Indian River County Property Appraiser (5) Information not available yet (6) The school population appears to have declined as result of loss of job opportunities. Our community had a lot of construction jobs, which were drastically reduced as a result of the economy. School enrollment consists of Sebastian River High School, Sebastian River Middle School, Liberty Magnet, Treasure Coast Elementary, Pelican Island Elemtnary, Sebastian Elementary and Sebastian Charter Junior High School 104 Educational Attainment: Bachelor's Degree School Unemployment Total Assessed or higher (2) Enrollment (3) Rate (1) Property Value (4) (5) 3,751 (6) 14.1 1,148,064,078 (5) 4,710 (6) 9.7 1,869,826,330 (5) 5,117 6 2,119,307,997 (5) 5,604 4.1 2,180,529,368 (5) 5,258 4.0 1,578,751,030 (5) 4,917 7.6 1,208,605,441 (5) 4,340 7.5 994,907,578 (5) 4,309 7.8 874,579,785 (5) 1,371 7.4 799,772,729 23.1 1,342 6.5 698,836,022 Employer Total County Employees 62,237 Employer City of Sebastian, Florida Principal Employers Year 2009 and 1999 2009 1999 Total County Employees 43,592 Source: Indian River County Community Development Report Principal employers information available for Indian River County only. 106 Percentage Number of of Total County Employees Employment School District of Indian River County 2,295 3.69 Indian River County 1,706 2.74 Indian River Medical Center 1,671 2.68 Publix Supermarkets 1,104 1.77 The New Piper Aircraft 1,063 1.71 City of Vero Beach 561 0.90 John's Island 475 0.76 Indian River Estates 442 0.71 Wal -Mart 404 0.65 Sebastian River Medical Center 380 0.61 Visiting Nurse Association 348 0.56 CVS Warehouse/Distribution 325 0.52 Grand Harbor Management 312 0.50 Disney'Vero Beach Resort 301 0.48 Dodgertown Complex 293 0.47 Total 11,680 18.77 Percentage Number of of Total County Employees Employment The New Piper Aircraft 1249 2.87 Publix Supermarket 792 1.82 Wal -Mart 774 1.78 Sun Ag. Inc. 550 1.26 Winn Dixie Supermarkets 520 1.19 Hale Indian River Groves 505 1.16 Gracewood Fruit Packing 500 1.15 Dodgertown Complex 438 1.00 John's Island 415 0.95 Graves Brothers 400 0.92 Total 6,143 14.09 Function /program 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Totals: City of Sebastian, Florida Full -Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 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 2.5 2.5 2.0 2.0 5.0 4.0 4.0 4.0 4.0 3.0 City Clerk 3.0 3.0 4.0 4.5 4.0 4.0 4.0 5.0 5.0 5.0 City Attorney 2.0 2.0 2.0 2.0 2.0 1.0 1.0 1.0 1.0 1.0 Finance 5.0 5.0 5.0 6.0 5.0 5.0 5.0 6.0 6.0 5.0 Mgmt Information Svcs 3.0 3.0 3.0 3.0 2.0 2.0 2.0 0.0 0.0 0.0 Human Resources 2.0 3.0 3.0 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 0.0 4.0 4.0 4.0 4.0 Growth Management 5.0 5.0 5.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Public Safety: Police Department 59.0 60.0 57.0 58.0 (2) 59.0 56.5 54.5 53.0 52.5 50.0 Building Department 5.0 6.0 11.0 11.0 9.0 8.0 7.0 7.0 6.0 6.0 Code Enforcement 2.5 2.5 3.0 3.0 (2) 0.0 0.0 0.0 0.0 0.0 0.0 Transportation: Roads Drainage 10.0 10.0 11.5 12.5 12.5 14.5 11.5 (1) 23.5 26.5 27.5 Central Garage 3.5 2.5 3.5 3.5 3.0 3.0 3.0 3.0 3.0 3.0 Airport 3.0 3.0 3.0 3.5 3.5 2.5 2.5 1.5 1.0 0.5 Physical Environment: Engineering 7.0 7.0 9.0 8.0 8.0 8.0 7.5 8.0 6.5 6.5 Stormwater Utility 11.0 13.0 13.0 13.0 13.0 12.0 12.0 (1) 1.0 0.0 0.0 Cultural/Recreation: Parks Recreation 23.5 23.5 23.5 24.5 23.5 17.5 16.5 14.0 14.0 10.0 Cemetery 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Golf Course 9.0 12.5 12.5 12.5 12.5 13.5 13.5 14.5 12.5 12.5 162.5 170.0 177.5 180.5 175.5 163.0 159.5 157.0 153.5 145.5 (I) Eleven employees were moved from roads drainage to stormwater starting fiscal year 2003. (2) Code enforcement division was transferred out from the Police Department starting fiscal year 2006. Source: City of Sebastian, Florida 2000 -2010 Annual Budgets Method: Using 1.0 for each full -time employee, and 0.50 for each part-time and seasonal employee 107 City of Sebastian, Florida Operating Indicators by Function/Program Last Ten Fiscal Years Function /program 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 General Government Number of Annexation Approved 3 0 1 1 1 6 3 0 1 1 Acres of Annexed Property 26 0 3.87 3.3 25.55 484 80 0 80 6 Purchase Orders Issued 288 254 284 293 369 408 372 357 411 406 Public Safety Police Department Physical Arrest 543 662 697 744 786 653 557 515 627 738 Traffic Violations 4,849 4,418 7,221 6,291 5,457 5,431 1,939 2,528 2,781 3,562 Parking Violations 50 208 289 880 303 3,801 632 207 198 305 Building Department Construction Permits Issued New 58 60 116 506 774 577 544 363 315 317 Estimated Value of Construction (in millions) 11.2 21.0 32.3 88.3 $114.7 $112.3 82.7 38.9 29.0 (1) Transportation Road Maintenance (man hours) 600 538 888 512 100 878 850 827 (1) Asphalt for road maintenance (tons) 328 358 210 127 125 88 79 75 (1) (1) Concrete for road maintenance (yards) (2) 0 0 0 300 0 283 277 275 (1) Physical Environment Cemetery Cemetery Internments 74 68 69 76 79 86 81 73 78 85 Grave Deeds Sold 39 46 49 56 56 69 45 54 67 77 Stormwater Mile of Swales Maintained 280 280 280 280 280 280 280 280 280 (1) Mile of Ditches Maintained 50 50 50 50 50 50 50 50 50 (1) Road Crossing Maintained 30 30 30 30 30 30 30 30 30 (1) Catch Basins/Culverts 275 275 275 275 275 275 275 250 248 (0 Recreation Recreation Center attendance 13,465 12,910 14,177 8,004 5,504 7,498 0) (p (q (q Number of Discount Cards 879 950 1,004 2,690 1,000 993 855 890 746 791 Number of Golf Course Memberships 95 97 108 119 85 116 137 169 190 212 Average daily golf revenue $4,000 $3,988 $4,661 $4,441 $3,844 $4,551 $3,836 $3,798 $3,192 $4,263 (1) Information not available (2) All road maintenance utilized asphalt, no concrete curbing was installed. Sources: City of Sebastian Police Department, Growth Management, Public Works, Golf Course, and Building Department. 108 Function /program City of Sebastian, Florida Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 General Government Square Footage Occupied 21,500 21,500 21,500 21,500 21,500 5,516 5,516 5,516 5,516 5,516 Departmental Vehicles 3 3 3 3 5 2 2 2 3 3 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Square Footage of Police Department 25,600 25,600 25,600 25,600 25,600 8,700 8,700 8,700 8,700 8,700 Square Footage of Building Department 2,500 2,500 2,500 2,500 2,500 1,716 1,716 1,716 1,716 1,716 Police Vehicles 63 62 57 53 52 47 42 40 33 32 Building Inspector Vehicles 4 4 5 6 5 4 4 5 4 3 Transportation Streets (miles) 156 156 156 156 156 156 149.6 140.0 140.0 140.0 Number of Streetlights 1,240 (I) 1,229 (1) 1,309 (1) 3,808 3,555 3,543 3,543 3,531 3,531 3,319 Airport 1 1 1 1 1 1 1 1 1 1 Public Service Vehicles 18 23 21 19 14 24 18 22 19 16 Physical Environment Public Service Vehicles 7 11 10 12 13 6 7 4 4 4 Recreation Number of Parks 18 15 14 14 12 12 12 10 10 10 Recreation Centers 2 2 2 2 2 2 2 2 2 2 Park Acreage 233.79 233.79 229.37 229.37 223.37 223.37 223.37 207.85 196.47 196.47 Recreation Center Square Footage 4,859 4,859 4,859 4,859 4,859 4,859 4,859 4,859 4,859 4,859 Park Maintenance Vehicles 13 13 12 11 10 8 6 6 5 5 Golf Course 1 1 1 1 1 1 1 1 1 1 Sources: City of Sebastian Administrative Services Department and Growth Management Department (1) This number represents actual unmetered street lights in the City. (Source: Florida Power Light January Billing) 109 OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 110 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 Auditing Standards Independent Auditor's Management Letter 111 CITY OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 112 Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered 5070 North Highway A1A, 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, 2009, and have issued our report thereon dated March 5, 2010. 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. Member AICPA "Providing Vision and Direction to our Clients" Member AICPA Division For CPA Firms Private Companies Practice Section 113 Member FICPA Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered Honorable Mayor and Members of City Council City of Sebastian 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 5, 2010. 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. e N i t e 4 0 0 1 4,74., Poll 1 Qdd daliie.0 est4citici l blri Ohgiktrd Harris, Cotherman, Jones, Price Associates, Certified Public Accountants Chartered Vero Beach, Florida March 5, 2010 114 Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered 5070 North Highway A1A, Suite 250 Vero Beach, FL 32963 Tel 772-234-8484 Fax 772 234 -8488 Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida Compliance Independent Auditors' Report on Compliance 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 We have audited the compliance of the City of Sebastian, Florida with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement, and the requirements described in the Executive Office of the Governor's State Projects Compliance Supplement, that are applicable to each of its major Federal programs and State projects for the year ended September 30, 2009. The City of Sebastian, Florida's major Federal programs and 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 Federal programs and State projects is the responsibility of the City of Sebastian, Florida's management. Our responsibility is to express an opinion on the City of Sebastian, Florida's compliance based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A -133, Audits of States, Local Governments, and Non Profit Organizations; and Chapter 10.550, Rules of the Auditor General. These standards, OMB Circular A -133 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 federal program or state project occurred. An audit includes examining, on a test basis, evidence about the City of Sebastian, Florida'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 of Sebastian, Florida'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 Federal programs and State projects for the year ended September 30, 2009. Member AICPA "Providing Vision and Direction to our Clients" Member AICPA Division For CPA Firms Private Companies Practice Section 115 Member FICPA Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered Honorable Mayor and Members of City Council City of Sebastian 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 Federal programs and State projects. In planning and performing our audit, we considered the City of Sebastian, Florida's internal control over compliance with requirements that could have a direct and material effect on a major Federal program or 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 an 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 compliance requirement of a Federal program or a State project on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program or State project such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program or 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 a more than remote likelihood that noncompliance with a type of compliance requirement of a Federal program or 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 management, City Council, federal and 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. /44444., 64s440401441, 4„ w►, Petit 1 44d •ai itj Ashite ae sorior#s 0holistic/ Harris, Cotherman, Jones, Price Associates, Certified Public Accountants Chartered March 5, 2010 116 Type of Auditors' report issued on compliance for major programs and projects: SECTION I SUMMARY OF AUDITORS' RESULTS Financial Statements Type of Auditors' report issued: Internal control over financial reporting: Unqualified Material weakness(es) identified? Yes X No Reportable condition(s) identified not considered to be material weaknesses? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs and projects: Material weakness(es) identified? Yes X No Reportable condition(s) identified not considered to be material weaknesses? Yes X None reported Identification of major programs: CITY OF SEBASTIAN, FLORIDA Schedule of Findings and Questioned Costs Federal Programs and State Projects Fiscal Year Ended September 30, 2009 Name of Federal Project Federal CFDA No. U.S. Department of Environmental Protection Sebastian's Collier Canal Retrofit Project 66.46 Dollar threshold used to distinguish between Type A and Type B programs $300,000 Auditee qualified as low -risk auditee? 117 Unqualified Yes X No City Of Sebastian, Florida Schedule of Findings and Questioned Costs Page 2 State Awards Internal control over major State projects: Material weakness(es) identified? Yes X No Reportable condition(s) identified not considered to be material weaknesses? Yes X None reported Type of auditors' report issued on compliance for major projects: Unqualified Any audit findings disclosed that are required to be reported in accordance with Chapter 10.550, Rules of the Auditor General? Yes X No Identification of major State projects: Name of State Project State CSFA No. Florida Department of Transportation Construct Access Road Construct Hangars Airport Layout Plan Construct Hangars Acquire Maintenance Equipment Florida Fish and Wildlife Commission Florida Boating Improvement Program 77.006 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. 118 55.004 55.004 55.004 55.004 55.004 City of Sebastian, Florida Schedule of Expenditures of Federal Awards and State Financial Assistance For the year ended September 30, 2009 Federal State Agency Contract Pass through Entity CFDA Grant State Federal Program State Project No. No. Expenditures Matching U.S. Department of Justice Direct Programs: Office of Justice Programs Bulletproof Vest Partnership 16.607 N/A 12,735 COPS Secure Our Schools 16.71 2008CKWX064 5,162 ARRA FY2009 Recovery Act Justice Assistance Grant Program 16.804 2009 -SB -B9 -2156 21,757 Indirect Programs: Passed through Florida Department of Law Enforcement Justice Assistance Grant 16.804 2009 JAGD- INRI -3 -T8 -052 2,088 Total U.S. Department of Justice 41,742 U.S. Department of Environmental Protection Indirect Programs: Passed through Florida Department of Environmental Protection Sebastian's Collier Canal Retrofit Project 66.46 C9- 99451507 -0 500,000. Total U.S. Department of Environmental Protection 500,000 U.S. Department of Transportation Direct Programs: Design East Access Road 20.106 12 -0145- 008 -2008 172,653 Total U.S. Department of Transportation 172,653 TOTAL EXPENDITURES OF FEDERAL AWARDS: The accompanying notes are an integral part of the audit. 119 714,395 City of Sebastian, Florida Schedule of Expenditures of State Financial Assistance For the year ended September 30, 2009 State Agency Contract Pass through Entity CSFA Grant State Proiect No. No. Department of Transportation Direct Projects: Joint Participation Agreement with Florida Department of Transportation Aviation Administration: Construct Access Road Construct Hangars Construct Hangars Acquire Maintenance Equipment Florida Fish Wildlife Conservation Commission Florida Boating Improvement Program Total Florida Fish Wildlife Conservation Commission TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE: 120 55.004 55.004 55.004 55.004 District Maintenance Lighting Maintenance and Compensation Agreement 55.023 407706 -1 -94-01 409863 -1 -94-01 418164 -1 -94-01 418165 -1 -94-01 405122- 1 -72 -10 Expenditures 13,115 472,875 583,338 109,933 18,559 Total Department of Transportation 1,197,820 77.006 8092 425,291 425,291 1,623,111 The accompanying notes are an integral part of the audit. A. Reporting Entity City of Sebastian, Florida Notes to Schedule of Expenditures of State Financial Assistance September 30, 2009 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. 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. 121 CITY OF HOME OF PELICAN ISLAND THIS PAGE INTENTIONALLY LEFT BLANK 122 Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered 5070 North Highway A1A, Suite 250 Vero Beach, FL 32963 Tel 772 234 -8484 Fax 772-234-8488 Honorable Mayor and Members of City Council City of Sebastian Sebastian, Florida Independent Auditors' Management Letter We have audited the financial statements of the City of Sebastian, Florida as of and for the fiscal year ended September 30, 2009 and have issued our report thereon dated March 5, 2010. 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 5, 2010, 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)1) 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. All findings and comments in the prior year have been resolved to our satisfaction. 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. Nothing came to our attention that requires disclosure in the current year. Member AICPA "Providing Vision and Direction to our Clients" Member AICPA Division For CPA Firms Private Companies Practice Section 123 Member FICPA ,o, zj Harris, Cotherman, Jones, Price Associates Certified Public Accountants Chartered Honorable Mayor and Members of City Council City of Sebastian, Florida Page two The Rules of the Auditor General (Section 10.554(1)(i)5) require disclosure in the management letter of the following matters if not already addressed in the auditors' reports on compliance and internal control or schedule of findings and questioned costs: (1) violations of laws, rules, regulations, and contractual provisions that have occurred, or are likely to have occurred; (2) improper or illegal expenditures; and (3) control deficiencies that are not significant deficiencies, including, but not limited to: (a) improper or inadequate accounting procedures (e.g., the omission of required disclosures from the financial statements); (b) failures to properly record financial transactions; and (c) other inaccuracies, shortages, defalcations, and instances of fraud discovered by, or that come to the attention of, the auditor. 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 statement. 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 fiscal year ended September 30, 2009, 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 fiscal year ended September 30, 2009. 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. This report is intended solely for the information and use of the City of Sebastian, Florida and management, federal and state awarding agencies and pass through entities, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties. 41444,4 eiNitbtrniM, 4fM, Pt u itamgariiiew e a+kitid Pcbi,a a&rw,c s Oh,lktrd Vero Beach, Florida March 5, 2010 124