Financial Report of the City of Panama City, Florida for Fiscal Year 2010, Study notes of Accounting

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GITY OF PANAMA GITY, FLORIDA

COIUIPREHENSIVE

ANNUAL F¡NANCIAL^ REPORT

FOR THE FTSGAL YEAR ENDED^ SEPTEMBER^ 30,^ 2O{O

Prepared by:

The C¡ty of Panama Glt¡l

Account¡ng D¡Ylslon

INTRODUGTORY

SEGTION

THIS SECTION GONTAINS (^) THE FOLLOWING SUBSEGTIONS:

• (^) TABLE OF CONTENTS
• LETTER (^) OF TRANSMITTAL
• PRINGIPAL OFFICIALS

N CERTIFICATE OF ACHIEVEMENT FOR EXGELLENGE IN

F¡NANG¡AL REPORTING

C. REQUIRED SUPPLEMENTARY (^) INFORMATION (^) OTHER THAN

MANAGEMENT DISCUSSION AND ANALYSIS

Budget (^) to Actual Comparison (^) - Major (^) Funds (General Fund)

General Fund - Schedule (^) ofRevenues, Expenditures, (^) and

Changes in Fund Balances - Budget (GAAp Basis) and Actual g

Pension and Other Post Employment Benefit Schedules

Schedules ofFunding (^) Progress and Schedules (^) of Employer Contributions and

Other Contributing Entities g

D. COMBINING (^) AND INDIVIDUAL (^) FINA¡ICIAL STATEMENTS

Non-Major Governmental Funds

Combining Balance Sheet g

Combining (^) Statement (^) ofRevenues, Expenditures, and Changes in Fund (^) Balances gg

Budget to Actual Comparison - General

General Fund (^) - Schedule ofExpenditures (^) by Department -

Budget (GAAP Basis) and Actual 90

Schedule (^) of Revenues, (^) Expenditures (^) and Changes in Fund Balances - (^) Budget

(GAAP Basis) and Actual - Other Major and Non-Major Governmental Funds

Special Revenue Fund:

General Grants 9l

Community Planning and Development 92

State Housing Initiative Partnership - City 93

State Housing Initiative Partnership - County 94

Panama City Community Redevelopment Agency - St. Andrews 95

Panama City Community Redevelopment Agency - Downtown 96

Panama City Community Redevelopment Agency - Downtown North 97

Panama City Community Redevelopment Agency - Millville 9g

Debt Service Funds: Revenue (^) Note - Series 2008 Capital Improvement (^) Revenue Refunding (^) Bonds of Capital Improvement (^) Revenue Bonds (^) of

Capital Improvement Revenue Bonds of 1999

Transpoftation Improvement Revenue Bonds of 1997

Capital (^) Projects Funds: Capital Projects

Internal Service Funds

Combining Statement of Net Assets 105

Combining Statement ofRevenues, Expenses, and Changes in Fund Net Assets 106

Combining Statement of Cash Flows 107

Fiduciary Funds

Combining (^) Statement of Fiduciary Net Assets Combining (^) Statement of Changes in Fiduciary Net Assets Statement ofChanges in Assets and Liabilities

99 100 l0l 102 103

104

109 ll 111

E. (^) SUPPLEMENTALINFORMATION

Schedule (^) of Revenues, Expenses, and Changes in Fund Net Assets - Budget

(GAAP Basis) and Actual - Enterprise and Internal Service Funds

Utilities Fund Solid Waste Fund Marina Fund Equipment (^) Maintenance Fund Medical Selflnsurance (^) Fund Dental Selflnsurance (^) Fund Summary of Debt Service Requirements (^) to Maturity

STATISTICAL SECTION

Financial Trends Changes in Net Assets Net Assets by Component Program (^) Revenues by Function/Program Fund Balances, Govemmental Funds Changes in (^) Fund Balances, Govemmental Funds Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property (^) Tax Payers Property Tax Levies and (^) Collections Debt Capacity

Ratios of Outstanding Debt by Ttpe

Direct and (^) Overlapping Governmental Activities Debt Pledged-Revenue Coverage - (^) Governmental Activities Pledged-Revenue Coverage - Business-type Activities

Demographic and Economic Information

Demographic and Economic Statistics Principal Employers

Operating lnformation

Operating Indicators by Functior/Program Capital Asset Statistics by Function/Program Full-time-Equivalent City Government Employees by FunctionÆrogram

tt 113

t

115 116 t t

III.

120 121 122 123 124

125 126 127 128

t

130 131 132

133 134

135 136 137

'Dedicøted. (^) to ExcelLence (^)... People Seraíng People"

March 17,

Honorable Mayor and City Commission

City of Panama City

Panama City, Florida

The comprehensive (^) Annual Financial (^) Reporl of the city (^) of panama (^) city, Florida (The city) for (^) the fiscal year (^) ended september (^) 30,2010 is héreby submitted. - Responsibility for both the accuracy (^) of the presented data and the compieteness (^) a¡d faimess (^) of the presentation, (^) including all (^) disclosures, rests with (^) the city. we believe (^) the enclosed (^) data

is ac_curate ìn all materìal aspects and is presented in a manner designed to fairly set forlh

the (^) fina¡cial position (^) and the results (^) of operations (^) of the va¡ious funds or the^ -city.^ eil disclosures (^) necessary (^) to enable the reader (^) to gain (^) an understanding ofthe (^) city,s financial activities (^) have been included.

The September (^) 30, 2010 financial (^) statements (^) comply with (^) the requirements (^) of Govemmental (^) Accounting (^) Standards Board (^) statemènt No. 34, (^) Baiic Financial statements (^) - and (^) Management's (^) Discussion and Analysis

• for state and^ Local Gove.rnments (GASB (^) 34). Management's (^) Discussion and (^) Analysii beginning (^) on page (^3)

provides an in-depth explanation of the method of reporting and financiá

City. "onãitio'oith"

Independent Audit chapter 1 1.45 of the Florida statutes requires an independent certified

public (^) accountant financiai (^) audit for (^) fiscal year ended (^) September (^) 30, 2010, and the

opinion ofthe independent auditor has been included in this repof on page 1. In addition

to meeting the requirements (^) set foÍh in (^) the Florida state Statutes, the ãuãit (^) was designed to meet the (^) requirements (^) of the Federal (^) Single Audit (^) Act of 1996 and related (^) oMB Circular A-133. (^) The (^) standards governing (^) single audit (^) engagements require (^) the

independent auditor to repoft not only on the fair présentation of the fina¡cial ståtements,

but also on the (^) audited government's (^) intemaf (^) controls and (^) compliance with legai

requirements, with special emphasis on intemal controls and legat requirements invoivírg

the adminìstration (^) of federal awards. (^) These reports are uuãilubl" in (^) the single audi section beginning (^) on page (^13) 8.

City of Panama City.^ PO. Box 188b.^ Panama City, Florida 32402-

The Reporting Entity And Its Services

The City of Panama City was incorporated on March 12, 1926 and covers an^ area^ of approximately thirty-fou square miles. The population^ of the^ City^ for^2010 was estimated Io be 37,720. The City is the county seat of Bay^ County.^ The^ City^ has^ a

commission-ma¡ager form of government^ and provides^ a^ full^ range^ of municipal^ services

including general govemment, public safety, public improvements, planning and zoning,

and related general^ and administrative serwices. In^ addition,^ the^ City^ operates^ thlee enterprise activities (^) - water and sewer, solid waste, and marina.

Criteria considered in concluding which related activities (component^ units)^ should^ be

included in the City's combined financial statements are as follows:

Financial accountability;

Appointment of a voting majority;

Imposition of will; Financial benefit to or burden on a primary govemment;^ and Financial accountabiiity as a result of fiscal dependency.

The following component units were included, by discrete presentation for 2010, based

upon the criteria noted above:

Panama City Downtown Improvement Board

Panama City Port Authority

The Panama City Community Redevelopment^ Agency^ is^ included^ as^ a^ blended

component unit in the City's financial statements.

Relevant Financial Policies

By policy^ the City maintains three months or more^ of^ general^ fund^ expenditures^ in^ the unreserved fund balance. Due to^ the^ location^ of^ Panama^ City^ on^ the^ Gulf^ Coast^ of

Florida and the threat of hurricane activity, the City's practice is to maintain six months

of general^ fund expenditures. The 2010^ general^ fund^ unreserved^ fund^ balance remains over the targeted goal.

Economic Condition And Outlook

The City continues to be frnancially sound; however, the local area is experiencing the

economic turndown that is affecting most of the nation. Local business activities^ have declined and some business closings have occur¡ed. Merchant License Fee^ revenue decreased by (^) $588,134 during fiscal year 2010,^ of which^ approximately $500,000 is directly attributable to the relocation of a^ Walmart^ store^ from^ Panama^ City^ to^ a neighboring (^) City. The total decrease for the past two years is (^) $1,380,882, or I7Vo. CtIy

several city Departments. (^) citizens (^) will experience a more efficient (^) customer service atmosphere when the project (^) is completed.

For The Future

In (^) anticipation of (^) development of 7,000 acres (^) in Panama City North, the City has budgeted for the purchase (^) of land to construct a public works (^) maintenance complex as well (^) as construction of a road between a major north-south (^) artery in that area to the industrial park. (^) Funds have been (^) carried forwa¡d in the capital Improvement projects

Fund in the amount of $3,025,000 for these projects.

The Downtown CRA (^) is working on a Marina Master Plan update. Located (^) at the

southem point of the downtown area, the marina is home to City Hall, City Hall Annex,

and the Marina civic center. An (^) attractive and well-stocked (^) ships Store and fuel dock

services the boating community. covered and open boat slips are available to year-round

and transient tenants. The (^) renovation is (^) targeted to provide (^) an attractive gathering place

for residents and visitors, as well as a natural transitional link to the downtown businàsses

and restaurants.

Accounting System And Internal Control

The City's accounting, budgetary, and frnancial reporting systems have been designed to

conform to the (^) standards set forth by the (^) American Institute of certified public

Accountants, the Govemmental Accounting Standards Board, the Office of Management

and Budget, and the State ofFlorida.

In developing and altering the City's accounting (^) system, consideration is given (^) to the adequacy of intemal (^) accounting cont¡ols. Intemal accounting controls are designed to provide (^) reasonable, but not (^) absolute, assurance regarding:

The safeguarding of assets against loss from unauthorized use or

disposition, and the reliability of financial records for preparing financial

statements and maintaining accountability of assets.

The concept ofreasonable (^) assurance recognizes that:

o The cost ofa control should not exceed the benefits likely to be derived, and

¡ The evaluation of costs and benefits requires estimates and judgements by

management.

All intemal control evaluations occur within (^) the above framework. we believe the city's intemal (^) accounting controls (^) adequately safeguard assets and provide reasonable

assurance of proper recording of financial transactions.

As a recipient of federal a¡d state financial assistance, the govemment is arso responsible

for.ensuring that an adequate intemar (^) control (^) structure is in place (^) to ensure with applicable (^) laws and regurations related to tìose programs. (^) This intemal"o.pti*" (^) control structure (^) is subject (^) to periodic (^) evaluation by m-ug"-"nì.

As part of the govemment's single audit, tests are made to determine the adequacy of the

intemal control (^) structure (^) including (^) that portion (^) related to federa.l (^) fina¡ciai (^) *.irtuo."

programs, as well as to determine that the govemment has complied with applicable laws

and (^) regulations.

In conformance (^) with the (^) city charter (^) and Florida (^) statutes, budgetary (^) contror is

maìntained through constant review by the accounting division. óetaireã monthly budget

reports a¡e prepared (^) for each departrnent, documenting (^) revenues and expenditures.

Budgetary Controls

Th9 (^) lrJv maintains budgetary controls to ensure (^) compliance (^) with the regal provisions embodied (^) in the annual (^) appropriated (^) budget approved (^) by (^) the City -Commission. Activities (^) of the (^) General Fund, (^) utilities Furù, (^) solid (^) waste -Fund, Ma¡ina Fund, Debt Service (^) Fund, Dental and Medical (^) Self-Insurance (^) Funds, Community plarni;; (^) anl Development (^) Fund, state (^) Housing Initiative partnership (^) city, (^) state Háusi.rg rnrtiative

Partnership County, General Grants Fund, and the Community Redevelopmåt

ag"n"y areas (^) are included (^) in the appropriated (^) annual budget. (^) rnã city (^) also maintaiãs an encumbrance (^) accounting (^) system as one technique (^) in accomplishing (^) budgetary cont¡ols. Encumbered amounts lapse at (^) the year (^) end. (^) Enìumbrances (^) ur" g"oi.ally (^) ."uppropriated

as part^ of the following year's budget.

Reporting Achievement

The Govemment Finance officers' Association of the united states and canada (GFOA)

awarded a certificate of Achievement for Excellence in Financial Reporting i;

ìh. ðiti of Panama (^) city, (^) Florida, for its comprehensive (^) A¡nuar Fina¡cial (^) Råport (^) ior the

year fiscá

ended (^) september (^30) , 2009. This (^) was the (^) seventeenth consecutive year that the city has (^) received this prestigious (^) award.

In order to be awarded a certificate of Achievement, a government unit must publish

an easily readable and (^) efficiently organized (^) comprehensivã Annuar Financial (^) neport. rhis

report must satisfy both generally accepted accounting principles and applicable regal

requirements.

A certificate of Achievement is varid (^) for a period (^) of one year (^) only. we believe (^) that our current (^) comprehensive (^) Annual Financial Report (^) continues to (^) meet the certificate of l"hi:I:T:r,lrogram's requirements^ and^ we^ áre^ submitting^ ir^ to^ rhe^ GFOA^ ro^ derermine

its eligibility for another certificate

CITY OF PANAMA CITY

PRINCIPAL OFFICIALS

COMMIS SION-MANAGER FORM^ OF^ GOVERNMENT

CITY COMMISSION

Scott Clemons, Mayor

Jonathan E. (^) Wilson John Kady

Mayor-Pro Tempore

Billy Rader Nancy Wengel

CITY MANAGER

Kenneth R. Hammons

CITY CLERK-TREASURER

Teni Lillard

INDEPENDENT AUDITORS

Tipton, Marler, Garner & Chastain

ORGANIZATIONAL CHART Fiscal Year 2010

CITIZ,ENS OF PANAMA CITY

City Commissioners

Cþ Manager

Kenneth R. Hammons

Ø

tl

Non-General Fund

Gene¡¡l Fu¡d Dedicaled to^ Excellcnce^ - People^ Seming People

vÍ

FINANGIAL SEGTION

T}IIS SECTION CONTAINS THE^ FOLLOWING SUBSEGTIONS:

• (^) INDEPENDENT AUDITOR'S REPORT å MANAGEMENT DISCUSSION AND^ ANALYS¡S
• BASIG F¡NANGIAL STATEMENTS ¡ REQUIRED SUPPLEMENTARY INFORMATION^ OTHER

THAN MANAGEMENT DISCUSSION^ AND ANALYSIS

• GOMBINING AND^ INDIVIDUAL^ FINANGIAL^ STATEMENTS
• SUPPLEMENTAL INFORMATION

ry $

ripton, Marler,

^* ff,."*m^

CeftÍfi ed Public Accounranrs

INDEPENDENT AUDITOR'S REPORT

Honorable Mayor, City Commissioners,

and (^) City Manager

City of Panama City. Florida

We have audited the accompanying financial statements of the govemmental activities, the business-

type (^) activities, (^) the discretely (^) presented component units, (^) eãch major fund, and (^) ihe aggregate remaining (^) fund information (^) of the city (^) of panama (^) city, Florida, (^) ai of and for the year (^) ended

September 30,2010, which collectively comprise the City;s basic financial statements as listed in the

table (^) of contents. These f,rnancial statements are the (^) responsibility of the (^) City of panama (^) City, Florida's (^) management. Our responsibility (^) is to express uo opinion (^) on these financial (^) statements based on our audit.

We conducted ou¡ 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 wã

plan and perform (^) the audit to obtain (^) reasonable assurance (^) about whether the financial (^) statements are

fiee 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 thé àccounting

principles used and the significant estimates made by management, as well as evahiating the overall

financial (^) statement presentation. (^) We (^) believe that our audit provides (^) a reasonable (^) bäsis for our opinions.

In our opinion, the financial statements ¡eferred to above present fairly, in all material tespects, the

respective financial position of the governmental (^) activities, the businesi-type activities, (^) the àiscretely

prcsented component units, each major fund, and the aggregate remaining fund information of the

city (^) of Panama (^) city, Florida, as (^) of September 30, 2010,

position and cash flows, -d^ th"^ ..rp"ãtive^ changes^ in^ financial

where applicable, (^) thereof (^) for the year then (^) ended in cãnformity with accounting principles (^) generally (^) accepted in (^) the United (^) States of America.

In accordance wilh Governmenl Auditing Standards, we have also issued our report dated March 16,

2011, (^) on our consideration (^) of the City of Panama (^) City, Florida's internal (^) cõnÍol over financial reporting (^) and on our (^) tests of its (^) compliance with (^) certain provisions (^) of laws, regulations, conúacts, and grant (^) agreements (^) and other matters. (^) The purpose (^) of ihat report is to descri-be (^) the scope of our

testing of intemal control over financial reporting ãnd compliancè and the results of that te;dng, and

not to provide an opinion on the intemal control over financial reporting or on compliance. That

report (^) is an integral (^) part ofan (^) audit performed (^) in accordance with (^) Goveriment Auditing (^) Standards

and should be considered in assessing the results of our audit.

50Ì West tgth Srreer Panama Ciry, Floúda (^32405) (850) (^) 769-9491 ¡^ Fax: (850) 785-9s www.cpagroul).com

-1- 600 Grand^ Panama^ BIvd.,^ Suite^360 Panama City Beach,Floriàa 32407 (850) 233-1360 r^ Fax: (850) 2331941 wlvw.cPagroup.cor¡

CITY OF PANAMA CITY, FLORIDA MANAGEMENT'S DISCUSSION^ AND^ ANALYSN

YEAR ENDED SEPTEMBER 30,2O1O

The City of Panama City's Management Discussion and^ Analysis provides^ an^ ovewiew

of the City's financial activities for the fiscal year^ ended^ September^ 30,^ 2010'^ The discussion and analysis focuses on significant^ financial^ issues^ and should^ be^ read^ in

conjunction with the Transmittal Letter beginning on^ page^ i^ and^ the^ City's^ financial

statements begirrning on page^ 14.

F'INANCIAL HIGHLIGHTS

Þ (^) Total assets exceed total liabilities in the amount of $152,275,106, of^ which $106,358,652 is^ athibutable^ to^ capital^ assets.^ Govemmental^ activities^ include $43,997,797 in^ unreshicted net^ assets^ and $4,804,128 in^ restricted^ net assets.^ For

business-t¡pe activities unrestricted net assets 1otøl $22,504,288 and reshicted^ net

assets total (^) $4,050,490.

Þ The change fil net assets of the City is^ $3,584,202. The^ governmental activities increased by (^) $1,091,370 and the^ business-type^ activities^ increased^ by^ $2,492,832. The significant change in total net assets from^ the previous^ fiscal^ year^ is,^ in^ part,

attributable to the blending of the^ Panama^ City^ Community^ Redevelopment^ Agency

into the financial statements of the City beginning October 1,^ 2009.^ The^ Panama^ City

Community Redevelopment Agency was previously reported^ as^ a^ discretely

presented component unit to the City and^ the beginning net^ asset^ balance^ for^ fiscal

year ended 2010 was restated to reflect this transition. Overall, the^ City's^ financial

position improved during fiscal year 2010.

Þ The governmental^ actìvities revenue recognized an overall^ decrease^ of^ $1,210, (3.4%) from the prior (^) fiscal year. A decrease was again reported in the^ Half-cent

Sales Tax revenw (3.7%)^ but the^ State^ Revenue Sharing experienced^ a^ slight^ increase

of .67o from the prior fiscal year. Charges for Services also declined^ by^ 8.8%^ from

the prior fiscal year. Licenses and Permits were 7 .80/o less^ than frscal year 2009,^ with

the Merchant^ License^ Tax^ category^ reporting^ a^ decrease^ of$588,134.^ Taxes^ reported

an overall .9o% decrease despite gains^ in Delinquent ad^ valorem,^ Local Option^ Gas Tax, Utility Serwice Tax, and Franchise Fees. Investment eamings increased^ slightly

by 527 p42^ from the prior f,rscal year.

Þ (^) The business activities operating revenue increased by $530,517 (2.1%)'^ Eamings^ on investments declined by (^) $91,720. Water and Sewer Utilities^ fund^ impact^ fees

increased slightly from the prior fiscal year^ by $161,600.

Þ (^) The govemmental activities overall expenses increased by 52,093,987 (6.3%).^ This increase from last fiscal year, again, reflects the blending of^ the^ Panama^ City

Community Redevelopment Agency into the City's financial^ statements^ beginning

October 1,2009. General govemment expenses increased^ by^ $432,653 and^ Public

Safety had increased expenses of (^) $785,328. Business-type activities expenses decreased by (^) S9a3,266 (4.1%). The Solid Waste fund had the highest decrease^ of

expenses at 28.2'r/o. The Water and Sewer Utilities fund and^ the^ Marina^ both^ had

respective increases of 1.1% and37.6Yo.

Þ At the end of the current fiscal year, unreserved fund balance (the amount available to meet ongoing obligations to citizens and creditors) in the General fund^ was s2r,464,954.

Þ The City of Panama City reported a total debt decrease of $1,900,228 during^ fiscal

year (^) 2010. The decrease is a result of debt service pa).rnents on existing bonds; no new debt was issued during the year.^ There was a^ net^ increase^ of^ $7,563 in

compensated absences to account for^ the increase^ in^ employee^ sick^ and annual^ leave

balances. The net OPEB^ obligation^ as^ of^ September^ 30,2010^ was $1,426,000.

USING THIS ANNUAL R.EPORT

This year's^ annual report was prepared^ in conforma¡ce with^ Govemmental Accounting Standards Board Statement No. 34. The Management's Discussion and Analysis is intended to serve as an introduction to the City of Panama City's basic^ financial

statements. The financial statements comprise three components: a)^ government-wide

financial statements^ beginning on page^ 14,^ b)^ fund financial statements^ beginning^ on

page 17, and c) notes to the (^) financial stotements beginning on page 26. This repof also contains other supplementary information in addition to^ the^ basic^ fina¡cial^ statements themselves.

Government-wide Financial Statements

Ttrc government-wide financial statements are designed to provide^ readers with^ a^ broad

overview of the City of Panama City's finances, in a manner^ similar to^ a pdvate-sector

business. They are prepared using the accrual basis of^ accounting,^ which^ accounts^ for all

ofthe current year's revenues and expenses regardless of when cash is paid^ or received.

The statement of net assets presents information on a1l of the City's assets^ and^ liabilities,

with the difference between the t\¡io reporte d as net^ ¿ssels.^ Over^ time,^ increases^ and decreases in the net assets a¡e indicators of whether the^ City's^ financial position^ is

improving or deteriorating. Assets, liabilities, and net assets are teported separateiy for

governme ntal activitie s øJ1d bus ine s s-type actiritie s.

The statement of qctivities^ reports all of the City's revenues, expenses, and changes in^ net

assets for the fiscal year. Both govemmental and business-type activities are presented^ to

summarize the gross and net cost of various City functions. Govemmental activities include administration, police,^ fire, public^ works, parks,^ a¡d^ recreation.^ Costs^ of governmental (^) activities are principally (^) supported by taxes and intergovemmental

revenues. Business-type activities ìnclude water and sewer utilities, solid waste, and