City of Pensacola, Florida - Florida Auditor General

City of Pensacola, Florida - Florida Auditor General

City of Pensacola, Florida Fiscal Year 2012 Comprehensive Annual Financial Report THE CITY OF PENSACOLA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REP...

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City of Pensacola, Florida Fiscal Year 2012

Comprehensive Annual Financial Report

THE CITY OF PENSACOLA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED SEPTEMBER 30, 2012

Prepared by: Financial Services Department Richard Barker, Jr. Chief Financial Officer

ACCOUNTING STAFF Mandy Bills, CPA Laura Picklap, CPA

THIS PAGE INTENTIONALLY LEFT BLANK

CITY OF PENSACOLA, FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED SEPTEMBER 30, 2012 TABLE OF CONTENTS

I.

INTRODUCTORY SECTION Letter of Transmittal

1-17

Government Finance Officer’s Association Certificate of Achievement Organizational Chart

19-20

List of Elected and Appointed Officials II.

18

21

FINANCIAL SECTION Independent Auditors’ Report

22-23

A. MANAGEMENT’S DISCUSSION AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION)

24-42

B. BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets

43-44

Statement of Activities

45-46

Fund Financial Statements Governmental Funds Financial Statements Balance Sheet

47-48

Statement of Revenues, Expenditures, and Changes in Fund Balances

49

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities

50

Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund

51

Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Housing Assistance Payments Fund

52

Proprietary Funds Financial Statements Statement of Net Assets

53-54

Statement of Revenues, Expenses, and Changes in Fund Net Assets Statement of Cash Flows

55 56-57

i

CITY OF PENSACOLA, FLORIDA TABLE OF CONTENTS (CONTINUED)

Fiduciary Funds Financial Statements Statement of Net Assets

58

Statement of Changes in Net Assets

59

Notes to Financial Statements Note I – Summary of Significant Accounting Policies Note II – Stewardship, Compliance, and Accountability Note III – Detail Notes on All Funds

60-69 69 70-99

Note IV – Other Information

100-117

Note V – Subsequent Events

118

C. REQUIRED SUPPLEMENTARY INFORMATION (OTHER THAN MD&A) Pension Funds – Schedule of Employer Contributions and Analysis of Funding Progress

119-122

D. COMBINING FINANCIAL STATEMENTS Nonmajor Governmental Funds Balance Sheet

123-126

Statement of Revenues, Expenditures, and Changes in Fund Balances

127-130

Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Local Option Sales Tax Fund

131

Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Maritime Community Park Construction Fund

132

Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Nonmajor Governmental Funds

133-145

Internal Service Funds Statement of Net Assets

146

Statement of Revenues, Expenses, and Changes in Fund Net Assets

147

Statement of Cash Flows

148-149

Fiduciary Funds Statement of Net Assets

150

Statement of Changes in Net Assets

151

ii

CITY OF PENSACOLA, FLORIDA TABLE OF CONTENTS (CONTINUED)

III.

STATISTICAL SECTION Financial Trends Changes in Net Assets

152-153

Net Assets by Component

154

Program Revenues by Function/Program

155

Fund Balances, Governmental Funds

156

Changes in Fund Balances, Governmental Funds

157-158

Revenue Capacity Assessed Value and Estimated Value of Taxable Property

159

Direct and Overlapping Property Tax Rates

160

Principal Property Tax Payers

161

Property Tax Levies and Collections

162

Taxable Sales by Category

163

Direct and Overlapping Sales Tax Rates

164

Sales Tax Revenue Payers by Industry

165

Gas Sold in Mcfs by Type of Customer

166

Gas Rates

167

Debt Capacity Ratios of Outstanding Debt by Type

168

Direct and Overlapping Governmental Activities Debt

169

Pledged-Revenue Coverage

170-171

Demographic and Economic Information Demographic and Economic Statistics

172

Principal Employers

173

Operating Information Operating Indicators by Function/Program

174-175

Capital Asset Statistics by Function/Program

176-177

Full-time-Equivalent City Government Employees by Function/Program

iii

178

CITY OF PENSACOLA, FLORIDA TABLE OF CONTENTS (CONTINUED)

IV.

OTHER AUDIT REPORTS SECTION Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

179-180

Independent Auditor’s Report on Compliance with Requirements Applicable to Each Major Federal Program, State Project and Passenger Facility Charge Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133

181-182

Schedule of Findings and Questioned Costs-Federal Programs and State Projects

183-184

Summary Schedule of Prior Year Audit Findings

185

Schedule of Expenditures of Federal Awards, Passenger Facility Charge And State Financial Assistance

186-187

Management Letter

188-191

Financial Data Schedule

192-193

iv

INTRODUCTORY SECTION LETTER OF TRANSMITTAL CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING CITY OF PENSACOLA ORGANIZATIONAL CHART LIST OF ELECTED AND APPOINTED OFFICIALS

THIS PAGE INTENTIONALLY LEFT BLANK

ASHTON J. HAYWARD, III

Mayor

America’s First Settlement Established 1559

February 14, 2013

The Honorable P.C. Wu, President And Members of the City Council City of Pensacola Pensacola, Florida

Pursuant to applicable Florida Statutes and sound financial management practices, the Comprehensive Annual Financial Report (CAFR) of the City of Pensacola, Florida, for the fiscal year ended September 30, 2012, has been prepared and is submitted herewith. The City of Pensacola's CAFR was prepared by the Financial Services Department. Responsibility for both the accuracy of the presented data and completeness and fairness of the presentation, including all disclosures, rests with the City. City management believes that the report is a fair presentation of the City's financial position and results of operations as measured by the financial activity of its various funds, that presented data is accurate in all material aspects and that all disclosures necessary to enable the reader to gain maximum understanding of the City's financial affairs have been included. This report has been presented in accordance with Generally Accepted Accounting Principles (GAAP). These principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). The Letter of Transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Pensacola’s MD&A can be found immediately following the report of the independent auditors. Mayor’s Initiatives As the Chief Executive of the City of Pensacola, the Mayor and his staff serve to administer and enforce city ordinances, direct city employees providing services to citizens, and propose and execute the city budget. In addition to these specific duties outlined in the City Charter, the Mayor also performs economic development, community outreach, and public awareness functions.

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Since taking office after the 2010 election, the Mayor’s Office has focused on creating economic opportunity, improving neighborhoods, fostering a healthier environment, restoring citizen confidence in government, and taking action for the future. Through internal staff reorganization, public outreach, and the introduction of new services like 311 Citizen Support Line, a more accountable, responsive, and efficient City government has been established. The Reporting Entity The financial reporting entity includes all funds of the primary government, as well as all of its component units. Component units are legally separate organizations for which the City is financially accountable and, for financial statement purposes, are either blended with the activities of the City or discretely presented. The criteria used to determine whether an organization should be a part of the City’s reporting entity were those outlined by Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity. The Downtown Improvement Board (DIB) and the Community Maritime Park Associates, Inc. (CMPA) have been classified as component units and are discretely presented in the City’s annual financial report as separate columns in the government-wide financial statements. The Community Redevelopment Agency (CRA), an independent agency of the City, also meets the definition of a component unit; however its financial reporting is blended with the City’s financial activity. Form of Government City Council adopted a new charter on November 25, 2009 with a fifty-five percent voter approval. The Council-Manager structure changed to a Mayor-Council form of government effective January 11, 2010; however, until inaugurated in January 2011, the City continued to operate under the Council-Manager structure. With the new structure, there are nine members of council with each member limited to three consecutive four year terms. The Mayor is not a member of Council and does not have voting power but the term is extended to a maximum of three consecutive four year terms of office as opposed to the prior two year term. Every ten years the Charter Review Commission will be established to review the City’s charter. With the new structure, the Mayor replaces the City Manager as the executive head of the City and shall appoint a City Administrator to assist in managing daily operations. The City of Pensacola provides a full range of municipal services including public works, public safety, recreation and cultural activities. In addition, the City’s enterprise activities include a gas utility, sanitation collection system, seaport, and regional airport. Accounting and Internal Controls Management of the City is responsible for establishing and maintaining internal controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss through unauthorized use or disposition; the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not for assets. The concept of reasonable assurance recognizes that the cost of a control should not

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for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and the evaluation of costs and benefits requires estimates and judgments by management. Budget Process The budget process for the City of Pensacola does not have an easily identifiable beginning or end. During the course of each fiscal year, new initiatives for services, regulations, funding sources, better methods of providing existing services, and citizen comments are brought forward for discussion, study and implementation. Although the budget document is developed at a fixed point in time, and identifies a work plan for a specific period of time, the budget process is fluid. There are a number of tools used throughout the course of the fiscal year to report on the status of the budget. City Council is briefed quarterly on comparisons of revenues and expenditures to budgeted numbers. Additionally, City Council is provided a monthly financial overview. Monthly reports are generated for public review to provide a more frequent overview of the financial status as compared to budget. At fiscal year end, the City’s CAFR, which provides end of year results, is compared to the respective budget to assist in revenue forecasting and expenditure analysis for the next budget cycle. Budget transfers within a fund (transfers of amounts from one line item to another) and Supplemental Budget Resolutions are the only means to amend an adopted budget. Two public hearings are held before the adoption of the final budget and final millage rates. Debt Administration Debt administration is the responsibility of the City’s Chief Financial Officer. Additional assistance is employed through the services of RBC Capital Markets, the City’s Financial Advisors. On December 16, 2011 the City issued a $5 million Gas System Revenue Note. The note was issued for the purpose of financing the purchase of five (5) compressed natural gas refuse trucks and to acquire, construct and equip additions, extensions or other capital improvements to the Gas Utility System. Pledged revenues for the repayment of the principal and interest will be derived from the operation of the City’s gas distribution system. On January 11, 2012, the Community Redevelopment Agency (CRA) approved, by CRA Resolution 01-2012, a $500,000 loan to the Community Maritime Park Associates (CMPA) specifically for the construction of the back of the house to the Amphitheater in addition to possible dirt work, engineering and related soft costs. The CMPA Board approved the loan January 18, 2012. The loan is to be repaid by January 15, 2013 and has an interest rate of 2.5%. On December 10, 2012, the CRA extended the term of the loan to September 15, 2013 requesting that CMPA present a plan for repayment prior to that date. On September 28, 2012, the City issued a $6.3 million Airport Revenue Note for the purpose of financing the parking lot expansion at Pensacola International Airport. Pledged revenues for the repayment of the principal and interest will be derived from the general revenues of the City’s International Airport.

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Pledged revenues for business-type debt are typically the sole pledge of net revenues from operations, however, from time to time there are pledges of specific revenue streams. In fiscal year 2012, business-type activities paid a total of $6.8 million and $3.5 million respectively for principal and interest on bonds. Revenues traditionally pledged for general government type debt include public service taxes, electric franchise fees, sales taxes and tax increment revenues. The City paid a total of $3.5 million and $4.2 million, respectively for principal and interest, for governmental activities debt during fiscal year 2012. The City typically issues debt with a levelized structure thereby eliminating large increases and decreases in principal payments from year to year. The City has no general obligation debt. The City of Pensacola issues an annual Report to Bondholders published on or before March 30th of each year. The City is in compliance with all continuing disclosure requirements. The Comprehensive Annual Financial Report and the Report to Bondholders should be read in conjunction to get a clear and complete understanding of the market effect on the City of Pensacola. Pensacola Energy (formerly Energy Services of Pensacola) Pensacola Energy, formerly Energy Services of Pensacola (ESP), a department of the City, became a City-owned utility on April 27, 1948, upon its purchase from the Gulf Power Company. Pensacola Energy supplies natural gas to approximately 58,000 service connections and is the largest municipal gas distribution system in Florida as it relates to customer base. Pensacola Energy had operating income before depreciation of $12,751,932, an increase of $4.3 million over last year. Pensacola Energy billed $37.2 million in revenues, a decrease over the previous year of $2.2 million (5.6%). Although Pensacola Energy implemented an average rate increase of 6.9% during FY 2012, revenues decreased due to a warmer than normal winter and a decrease in the Purchase Gas Adjustment (PGA) rate attributable to the decrease in the cost of natural gas which is passed through to the customer. In fiscal year 2012, the PGA rate was adjusted to include a reserve component to restore Pensacola Energy’s operating reserves. Operating expenses decreased $6.5 million (21%) from fiscal year 2011 mainly from the decreased cost of natural gas. The revenue classification for billed gas service is 54.1 percent residential, 28.1 percent commercial and 17.8 percent industrial. Fiscal year 2013 revenues of $53.4 million are budgeted lower than the previous year. Pensacola Energy budgets with anticipation of a normal winter; however, actual revenues fluctuate with the cost of gas and weather patterns. Pensacola Energy’s rates and fees are adjusted annually with the Consumer Price Index (CPI) if approved by City Council. City Council approved an average rate increase of 6.9% for fiscal year 2012. The CPI increased 2.7% for fiscal year 2013; however, no rate increase is contemplated for fiscal year 2013. Appropriations are budgeted $1.3 million (2%) less than fiscal year 2012. Pensacola Energy’s transfer to the General Fund is budgeted to remain at $8 million. The transfer is within the City Council adopted financial planning policy that permits a transfer of up to 15 percent of budget revenues.

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Sanitation Services The City has operated a solid waste collection system for over fifty years. Sanitation service is mandatory within the City limits and the city provides residential garbage, recycling and trash collection to approximately 19,000 customers. Commercial dumpster services are provided by private hauling companies that are franchised by the City and regulated by the Sanitation Services department. Sanitation had operating income before depreciation of $574,711; an increase of $429,710 (296%) over last year. Sanitation billed $6,878,677 in revenue; an increase of $620,429 (9.9%) over fiscal year 2011 revenues. Both of these increases were due to rate increases during fiscal year 2012 to fund both operating and capital needs. Residential garbage fees increased 2.7% in accordance with the CPI increase and Commercial Solid Waste Franchise Fees increased $0.50 per cubic yard in order for the function to remain self-sustaining. Operating expenses decreased marginally from last year by $190,719 (3.1%). Fiscal year 2013 total revenues of $7 million are budgeted higher than fiscal year 2012 actuals of $6.8 million (3%). The change primarily relates to the curbside recyclables program revenue sharing that was implemented in fiscal year 2012. Appropriations increased $100,300 (1.5%) mainly from Sanitation’s share of the 2011 Gas System Revenue Note used for the purchase of Compressed Natural Gas (CNG) refuse trucks. Port of Pensacola The Port of Pensacola, a department of the City, provides marine terminal services connecting water and land transportation. Revenues are generated through fees for wharfage, handling, dockage, rent, storage, security, and harbor services. Rates are established in a published, publicly available tariff. The two basic categories of freight are general cargo and bulk cargo. During fiscal year 2012, the Port billed $2.4 million in revenues, an increase of approximately $500,000 (26%) over fiscal year 2011. The increase was due to the diversification of the Port’s business base and the growth in wind energy sector exports. Operating income before depreciation increased to $772,590 or approximately $520,000 (206%) over 2011 indicating that while revenues increased, operating expenses remained constant. For many years the Port of Pensacola has been the recipient of Florida Seaport Transportation and Economic Development Trust Fund (FSTED) monies to fund capital projects. During fiscal year 2012, the Port was awarded a FSTED grant in the amount of $250,000 for maintenance dredging. Since inception of the program, the City has received a total of $4,779,251 in FSTED grant funding. During the last few fiscal years, the Port has also secured $5.3 million in FEMA Port Security grants which have provided funding to enhance security at the Port as well as other related City departments. It is anticipated that additional grant funding will be awarded in fiscal year 2013. The Port Advisory Committee was established by the Mayor in 2011 to examine Port operations and maximize the Port’s property benefit to the community. In response to the committee’s

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recommendations, the Port has secured $2 million in capital improvement funding from the State of Florida to expand its presence in the high-tech offshore service industry. Fiscal year 2013 operating revenues are budgeted at $2.2 million, approximately $123,000 (6%) higher than the prior year budget due to an increase in dockage revenue anticipated with the focus on the offshore service industry uses. Appropriations for operating expenses are budgeted slightly more than last year and represent an increase of approximately $10,000 (1%). Pensacola International Airport The City of Pensacola owns and operates the Pensacola International Airport as a department of the City. The Airport plays an important role in the national, state, and local air transportation systems. It is the primary commercial service airport serving northwestern Florida and southern Alabama with its principal service area encompassing Escambia, Santa Rosa, Walton and Okaloosa Counties in Florida and Baldwin, Escambia and Mobile counties in Alabama. During fiscal year 2012, 1.51 million passengers utilized the Airport serviced by two major/national passenger airlines and up to nine regional/commuter airlines. The Airport had operating income before depreciation of $4.4 million; a $600,000 (15.7%) increase from last year primarily due to an overall reduction in operating expenses. Airport operating revenues of $18 million remained fairly constant from the prior year, decreasing slightly (1%). The 2013 operating budget of $23.3 million is $1.15 million (5.2%) more than last year. The Airport’s agreement with the airlines provides for the airlines to fund any revenue shortfall. Air Carrier landing fees are anticipated to increase $1.8 million. Appropriations for operating expenses increased $829,000 (10%) over the prior year budget mainly for operations associated with the new terminal building expansion, oversight and planning of the Commerce Park Development and general repairs and maintenance. Current Year Events and Future Year Plans The Pensacola City Council approved the fiscal year 2012 budget of $222.1 million, an increase of $5.3 million from the 2011 budget. The General Fund anticipated an increase in revenues of $1 million (2%) despite a projected decrease in Ad Valorem Revenues of $1 million due to a reduction in property tax valuations and a .25 mills decrease in the millage rate. The increase in General Fund Revenues is mainly due to the sale of the Army Reserve Property to the Airport for the development of a 500 space remote public parking lot. The Enterprise Funds anticipated an increase in funding of $4 million primarily due to Pensacola Energy’s rate adjustment and the increase in other Enterprise Fund fees in order for them to maintain financial independence.

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Departmental events and plans Planning Services provides the public the opportunity to obtain input from administrators of Planning Services, Inspection Services, Public Works and Engineering by coordinating a standing weekly development review meeting. Planning Services continues to maintain the City's Comprehensive Plan, which was updated in 2010. Planning Services also maintains a current Land Development Code (LDC) and is working towards implementing form-based, sustainable development guidelines to create a more walkable-built environment. Planning Services staff has recently completed revisions to permitted use regulations in the City's commercial and industrial land use districts, and will be continuing updates to the Land Development Code that will include the modernization of the City's off-street parking regulations and right-of-way permitting processes. The Office of Sustainability works with the community, City departments, Escambia County, and State and Federal agencies to manage economic opportunity efforts and sustainability objectives for the City of Pensacola. This office continues to work toward positioning Pensacola as a national leader in clean energy solutions, infrastructure investment, job creation and existing business expansion. The Office of Sustainability drafted the City Council ratified Green Building Ordinance that incentivizes energy-efficient design and mechanical implementation for new construction or redevelopment. The Office manages all development and environmental issues related to two EPA designated Superfund sites and coordinates Brownfield property issues and grant applications. The Energy Services Company consultant agreement with Siemens Industries and the potential energy savings programs and contracts with them will be managed by the Office of Sustainability as well. Pensacola is a partner in the EPA’s Better Building Challenge and the Department of Energy’s Energy Star program with both programs seeking energy efficiency improvements across the City’s infrastructure. The Office of Sustainability coordinates actions pertaining to the City’s real estate programs including disposal, marketing and redevelopment. In fiscal year 2013, the Office of Sustainability will continue to manage all energy efficiency, sustainability, and environmental programs, contracts and grant applications for the City. Additionally, it will manage Economic Opportunity and Development programs and serve as the City’s point of contact for economic outreach programs and marketing efforts for external agencies. The office will direct the City’s participation in Federal and State efficiency programs including the launch of a Commercial Property Assessed Clean Energy Program (PACE) and the DOE and EPA infrastructure efficiency programs. All State, Federal, and private grant opportunities will be reviewed for City applicability.

The Pensacola Police Department continued its quest to improve ways in which public services are provided. During FY2012, one of the top priorities was a commitment to providing safer neighborhoods. This was done not only by increased usage of radar and officer presence in response to speeding complaints in various areas, but also a patrol saturation on the streets during summer months when all sworn personnel worked patrol duties in response to an increase in shootings.

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The department received $122,114 in federal and state grants. Among the items purchased were an AFIS system, which is connected to the Florida Department of Law Enforcement and enables crime scene personnel to search latent fingerprints statewide. Other grant purchases included traffic vests, radar units, a SMART trailer to monitor motorist speeds, and bulletproof vests. Graffiti incidents declined through the use of surveillance cameras moved throughout city limits. That effort will continue this year. Officers also increased random presence at known drug, alcohol and crime hot spots/businesses to hinder criminal opportunities and plan to continue that effort this year. Department personnel partnered with the Escambia County Sheriff’s Office and other agencies in August 2012 to create a multi-agency Gun Crime Response Team in an effort to curb gun violence. Team efforts resulted in the recovery of several stolen firearms and the arrests of several subjects on firearms related crimes. An increase in daytime residential burglaries resulted in officers participating in concentrated burglary details, which resulted in numerous arrests and recovery of stolen property and vehicles. Also, working relationships with other law enforcement agencies were improved through information sharing meetings, which also resulted in numerous arrests and recoveries of stolen property. PPD programs/goals for 2013 include the following:    

All public housing complexes within city limits now participate in Crime Watch Groups coordinated by the PPD. Three Neighborhood Services Division officers have been awarded certificates in crime prevention and are using that training to educate people on how to make their neighborhoods safer. Approximately 100 people will attend/graduate from Citizens Police Academies where they will learn different aspects of law enforcement provided by PPD. Officers will continue using radar in response to speeding complaints in specific areas.

The Pensacola Fire Department maintained its Insurance Service Organization (ISO) Public Protection Classification (PPC™) rating of “2” during fiscal year 2012 which places the department in the top ten percent in the United States. Before a community can receive an ISO PPC classification, the community must meet minimum facilities, staffing and practices requirements. The rating is then based on the departments’ ranking on the Fire Suppression Rating Schedule (FSRS) which assesses the departments’ ability to fight fires effectively. The Pensacola Fire Department successfully launched its new Child Passenger Safety Seat program. The program consisted in the training of twenty-six firefighters as certified car seat installers. The training and car seats were procured via a Florida DOT safety grant. The department transitioned from Mobile Data Laptop Computers to tablet devices in 2012 improving information delivery to the firefighters on fire apparatus at one third the cost of a replacement laptop computer. In 2012 the fire department conducted extensive training in the areas of hazardous materials enhancing the response level to this type of incident in the city.

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Also during fiscal year 2012, the department made progress on several major projects funded with grant dollars. An update of the City comprehensive emergency plan for all departments, including police and fire was completed. Grant monies to contract for the purchase of a fire boat were acquired. The department also received grants to build a berth for the fire boat at the Port of Pensacola as well as replace the Englewood communications tower. Neighborhood Services Department continued its active role in neighborhood enhancements in fiscal year 2012 with a more than $6 million investment of two new resource centers, Woodland Heights and Legion Field resource centers. Woodland Heights is designed to be a 13,544 square foot center that will include two multipurpose meeting rooms, a computer lab, auditorium/gym featuring a basketball court and stage, small kitchen and outside movie wall. This new resource center will serve the following Pensacola neighborhoods - Woodland Heights, Northeast and Pineglades. The Woodland Heights ground breaking ceremony occurred September 14, 2012 with construction scheduled later in 2012. Woodland Heights completion is expected in late 2013. Legion Field resource center is designed to be a 15,000 square foot center that will include a library branch, large multi-purpose room and gym, kitchen with concession windows and activity and meeting rooms. This new resource center will serve the neighborhoods on Pensacola's west side. The Legion Field ground breaking ceremony occurred December 14, 2012 with construction expected to take around 14 months. Legion Field's projected completion is February 2014. Both centers were designed to exceed energy efficiency standards and meet current green building standards. In January 2013, the West Florida Regional Library Main Downtown Branch completed a twoyear renovation and expansion that nearly doubled the library’s size. The new library includes an expanded children’s area, meeting rooms, coffee shop, bookstore and more than 50 new computers, including a 10-station computer training lab. In support of the Mayor’s green building code initiative, the new library becomes the City’s first LEED-certified building, incorporating a number of energy-efficient strategies. The improvements are expected to cut the library’s energy costs by as much as 15 percent. In January 2012, Neighborhood Services was awarded contract for management services of the Community Maritime Park. Management duties include three primary components: event scheduling, planning and coordination for the multi-use stadium, amphitheater, outside kiosk sales, rentals and food services management, and parking management. In 2012 over 25 events took place including the Grand Opening park dedication featuring the Charlie Daniels Band. In addition, 26,000 cars were parked throughout the year for both baseball related events and community events. This year revenue totaled $168,218 for parking and event management. In 2013, the department will focus on outside kiosk sales and rentals for the Community Maritime Park as well as increasing the number of community events that are hosted at the park. Neighborhood Services partnership with local corporate, non-profit, and community groups continued to expand over the last year. Through community meetings and monetary support from the local Sam's Club we installed the first Disc Golf Course in the City of Pensacola at Hitzman-Optimist Club Park. The entire course was installed by City of Pensacola staff and volunteers from the Scenic Heights Neighborhood Association. Home Depot continued their support of the Neighborhood Services Department through the sponsorship of our Annual Easter Egg Hunt, Halloween Egg Haunt, and the Grand Opening of the Maritime Park. The City of

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Pensacola's Partnership with Naval Air Station Pensacola continues to thrive through City Wide Beautification efforts and assistance with Special Events. We have made an effort to solicit volunteer assistance from the University of West Florida this past year. Many clubs and organizations have participated in numerous volunteer activities throughout the City of Pensacola. The Hollice T. Williams Community Garden continues to thrive and produce fruits and vegetables for local gardeners, as well as, provides an outlet for Neighborhood Services Staff to teach our youth and senior populations how to garden and the importance of healthy eating and a healthy lifestyle. The marketing initiatives employed during 2012 were highly successful and resulted in both increased program participation and revenues. With the development of the department's comprehensive marketing plan which included the expansion of the website, social media sites, sponsorships and print/radio advertisements the overall marketing resulted in increased sponsorship dollars and amplified our community partnerships. We hope to continue to grow our partnerships with community corporations, organizations, and non-profit groups as we assist the efforts to make the City of Pensacola a great place to live, work, and play…. “It Starts in Parks”. The Public Works and Facilities Department continues to meet its mission statement of providing courteous and quality service, while maintaining the City’s current infrastructure and constructing new infrastructure. Normal service levels have been maintained even with staff reductions. The department maintains 326 miles of roadway, 47 stormwater ponds, 75 various treatment units, 18 ditches, 2,120 inlets and 130 major stormwater outfalls. Street sweeper activities swept 17,000 miles of curbing removing 3,100 tons of debris. The department provided barricades for traffic control to 78 parades and other related events. During fiscal year 2012, the department upgraded the street markers within several neighborhoods and 159 intersections. The department also completed evaluations and enhancements for school zone areas and worked closely with several neighborhood associations to initiate and provide support for traffic calming programs including the installation of speed humps in five locations. The department added interactive speed limit signs on Burgess Road and Langley Ave as well as continue the speed limit reduction program by installing 25mph speed limit signs in eight (8) additional neighborhoods. The Main Street Streetscape Enhancement Project adjacent to the new Community Maritime Park was also completed in fiscal year 2012 and provides traffic calming, greatly enhanced pedestrian access, and increased lighting and vibrant landscape in the downtown area. The department resurfaced 347 city blocks of roadway and repaired approximately 525 feet of sidewalk. Several significant stormwater projects were also completed that provided enhanced treatment and flooding abatement in numerous areas of the City. Major projects included Cypress Street, 9th Avenue and Texar, Hewitt Street and Admiral Mason Park, which won the state Engineering Excellence Award by the Florida Stormwater Association. Through coordinated efforts with the CRA, the department was able to work with Episcopal Day School, located on Wright Street downtown, to move the car line from Palafox Street and Baylen Street and onto Wright Street, thereby improving safety for both students and the motoring public. The Baylen and Spring Street Two-Way conversion was initiated to modify 4 signalized intersections and convert 2 one-way streets to two-way traffic (16 city blocks). Through

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coordination with FDOT, the department completed signal retiming studies for nine (9) critical traffic signals located within the city limits. The department also provided technical support services to several city departments, working closely for successful completion of projects in the areas of land use, capital improvements, special events, and many others. The Community Redevelopment Agency (CRA), a 256-block Tax Increment Financing district, was established in 1980 to eliminate blight in the urban core. The past thirty years have brought a variety of public and private sector redevelopment improvements. In January 2010, the Pensacola City Council adopted the Urban Core Community Redevelopment Area Plan 2010, the first comprehensive update to the CRA Plan since 1989. The updated Plan serves as the CRA's guiding document for annual budgeting and both short-term and long-term redevelopment activities. In 2012, the CRA undertook several projects in support of the Urban Core Redevelopment Plan and continued several projects that began in 2011. In order to foster downtown job growth, the CRA entered into an economic development property incentive agreement with Hixardt Technologies, Inc., an expanding information technology company with existing office space in downtown Pensacola in 2011. The use of the CRA-owned property at 120 West Government will allow Hixardt to expand their operations and hire additional employees. Hixardt has made progress through 2012 in designing their new office space, securing financing, and hiring additional employees through new projects and contracts. In fiscal year 2012, the CRA completed the conversion of North Baylen and North Spring Streets within the downtown core from one-way to two-way traffic as identified in the CRA Plan. The first season of the Blue Wahoos baseball team at the Community Maritime Park multiuse stadium was also a tremendous success. The completion of the Community Maritime Park was a key step in the redevelopment of downtown Pensacola’s waterfront. Additionally, the Mayor’s Urban Redevelopment Advisory Committee convened and produced a thorough report identifying opportunities for downtown Pensacola. The report will continue to be reviewed for implementation into 2013. The CRA will also work closely with the Emerald Coast Utility Authority to develop a redevelopment plan as the downtown wastewater treatment plant was demolished in summer 2012. Also, the CRA will explore the creation of a Pensacola Bay ferry system in 2013 to support both downtown redevelopment and link key sites throughout the area. Housing focused on meeting the increased need for community services and housing assistance produced by the current economic climate during fiscal year 2012. Community Development Block Grant (CDBG) funds were provided for the demolition of the Former Blount School located at 113 North “C” Street as Phase II of the Westside Neighborhoods Improvement Project. The demolition of the buildings eliminated an extremely blighted core property that was abandoned for many years and created a sense of disinvestment and a destabilizing influence on the surrounding area. In 2011, CDBG funds provided for the City’s acquisition of the property, which encompasses an entire block, as Phase I of the Westside Neighborhoods Improvement.

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In fiscal year 2012, CDBG funds also provided for 1,240 code enforcement inspections within the CDBG target area; 14,890 meals for elderly and/or disabled City residents through the Council on Aging Meals on Wheels and Congregate Meals Programs; and 120 families received counseling, guidance, and educational information through the Homebuyers Club and Foreclosure Prevention Program. The counseling resulted in 19 families purchasing homes within the City. During fiscal year 2012, through the City’s CDBG Housing Rehabilitation Program, three families had their homes rehabilitated. The services of this program include project development and administration to aid moderate and low income homeowners in repairing their homes. The program’s successful outcomes include fostering affordable workforce housing and neighborhood reinvestment, providing jobs, and reducing blight while spending program funds with local businesses. The HOME Reconstruction Program provided two families with newly reconstructed homes on their own lots after demolition of their existing homes. The Section 8 Housing Choice Voucher (HCV) Program provided rental assistance for approximately 2,179 extremely low income families each month during fiscal year 2012. This reflects approximately $1 million in monthly housing assistance in our community providing payments to approximately 800 local landlords. The HCV Program stabilizes families and allows them to fulfill their other household obligations while pursuing jobs, education, and childcare, while offering attractive benefits to property owners. An average of 76 homeless veterans received rental assistance each month through the Veterans Affairs Supportive Housing Program (HUD-VASH). Participants receive VA case management services as well as rental assistance to secure housing. In support of the Mayor’s initiative to reinvest in City neighborhoods, in fiscal year 2013 Housing will implement a new First Time Homebuyer Program which will provide down payment and closing cost assistance to qualified buyers purchasing homes within the City. Additionally, to leverage reduced CDBG funding, the City’s CDBG Housing Rehabilitation Program will be modified to include an option for qualified homeowners to receive a forgivable loan to make minor emergency repairs while continuing to occupy their homes. This will reduce blight in the community and provide local jobs, as well. Pensacola Energy’s project under the Basic Ordering Agreement (BOA) for the United States Navy (Navy) is ongoing and will be completed in 2013. The project includes energy upgrades for the Navy Museum at the Naval Air Station (NAS) Pensacola. Siemens Building Technology is the subcontractor. The Navy funded the project internally; it did not require City financing. Pensacola Energy's estimated profit is $207,600. Effective at the beginning of fiscal year 2012, Pensacola Energy implemented an average rate increase of 6.9% as recommended in the Natural Gas Rate Study conducted in fiscal year 2011. The natural gas rate ordinance provides for an annual adjustment in rates based on the Consumer Price Index (CPI). The rate increase includes CPI adjustments to bring revenues at a level to support current operating conditions and the current transfer amount. The study also recommended an Infrastructure Recovery Charge as a new rate component. This charge will help capture infrastructure replacement costs associated with the plan that was submitted to the Florida Public Service Commission, Division of Pipeline Safety. Also recommended in the

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study, the Purchase Gas Adjustment rate was increased to include a reserve component to restore Pensacola Energy’s operating reserves. Pensacola Energy completed a pipeline acquisition with Gulf South Pipeline and the Navy to transfer Gulf South's pipeline assets in the urbanized areas of Escambia County to Pensacola Energy. In addition, Pensacola Energy gained the Navy as an industrial customer. Pensacola Energy completed the first public access Compressed Natural Gas (CNG) station in Escambia County. Zeit Energy was the subcontractor used to build the fueling facility in conjunction with Emerald Coast Utilities Authority (ECUA). Another private access station is under construction at the City's Public Works facility and will be completed in spring of 2013. Pensacola Energy and ECUA are negotiating a second public access site to be located in the Ellyson Industrial Park area. Discussions are ongoing with other local fleet operators for their interest in converting to CNG. The Sanitation Services and Fleet Management collected 29,064 tons of solid waste and 4,539 tons of curbside recyclables in fiscal year 2012. As part of the Mayor’s initiative to reinvest in City neighborhoods, Sanitation implemented the Neighborhood Cleanup program with the goal of providing a cleanup to each city neighborhood once per year. The ten neighborhood cleanups completed in fiscal year 2012 resulted in the removal of 502 tons of bulk waste, 1,588 old tires and 5,199 gallons of old paint. Sanitation Services has initiated several significant changes to its collection system over the past few years. In 2007, the City contracted with the Allied Waste transfer station, now owned by Escambia County, to provide transfer station services for household garbage. In 2009, Sanitation completed a two-year conversion of its yard trash collection system from three-person shuttle/collection crews to a system utilizing one-man collection trucks. Also in 2009, the City began a citywide recycling program in conjunction with a change to once-a-week garbage collection. These changes have resulted in the elimination of 15 positions that were previously dedicated to the collection of solid waste. The City's curbside recycling program achieved a 23.5 percent diversion rate in fiscal year 2012 by recycling 4,539 tons of materials that would have previously been disposed of in the local landfill. The City's total recycling rate which combines materials recovered from the curbside recycling program with the 12,583 tons of yard trash collected, totals approximately 51 percent. In 2011, the City entered into a contract with West Florida Recycling for the processing of city collected recyclables. This contract provides for revenue sharing with the City for recyclables recovered based on a percentage of their market value. In fiscal year 2012 the revenue from recyclables totaled $50,561. In fiscal year 2012, Sanitation Services in conjunction with the City’s Finance Services Department began an initiative to review the financial records of the City’s commercial solid waste franchisees for compliance with the City Code regarding franchise fee payments. This effort included the review of one franchisee and resulted in action to terminate that franchise for non-compliance. It is expected that additional compliance reviews will be performed in fiscal year 2013.

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The Port of Pensacola posted a strong fiscal year 2012. Overall, the Port’s cargo tonnage activity remained on par with fiscal year 2011 performance. Anticipated growth in wind energy sector exports did occur and is expected to continue through fiscal 2013 as the local General Electric (GE) plant continues exporting wind turbine components to overseas wind farm development projects. Additionally, the Port added a new book of business exporting new rail hopper cars for use in the Colombian coal industry, which also is expected to post strong performance in fiscal year 2013. Both these business lines result in large numbers of very lightweight components moving through the Port, adding substantially to the Port’s revenue stream but not significantly impacting tonnage. Diversification of the Port’s business base to include establishment of an offshore oil and gas support vessel services center also has positively impacted the Port’s bottom line by substantially increasing the number of billable vessel call days logged annually. As the Port continues this diversification, it anticipates stable, consistent growth in non-cargo business sectors. In response to 2011 Port Advisory Committee findings and recommendations that the Port expand its presence in the high-tech offshore service industry, $2 million in capital improvements funding has been secured from the State of Florida. Additional funding sources are currently being sought for another $38 million to $40 million in capital improvements required over the next 8 years in order to fulfill the Mayor’s vision for the Port’s growth in this industry sector. The Pensacola International Airport, formerly known as Pensacola Gulf Coast Regional Airport, was renamed in November 2011 in efforts to position Pensacola as an attractive place for businesses to locate or expand. Pensacola’s airport serves more passengers than any other airport between New Orleans and Jacksonville. The Airport completed its $50.9 million expansion and improvement project in fiscal year 2011, dedicating the new terminal in November 2011. A new entrance sign, right-turn lane, complete rehabilitation to the Loop Road, and enhanced landscaping were added in fiscal year 2012. Construction of a new approximate 500-space remote public parking lot on the site of the former Army Reserve Center Property began in fiscal year 2012 with a projected completion date of early 2013. In November 2008, Council approved a ground lease and development agreement with Sandspur Development LLC for the development of a hotel and related facility on 11.44 acres of Airport property. A lawsuit was filed in the Escambia County Circuit Court by PNS Hotel Group Ltd. opposing the hotel agreement. Successful meditation of the lawsuit was conducted in September 2010 and the Airport issued a notice-to-proceed to Sandspur Development on November 1, 2010. Site work began on the leased area in the summer of 2011 with the 127-room Hyatt Place hotel planned for this development is expected to be completed by March 2013. Further economic development efforts for the Airport include the construction of an Air Commerce Park. The Airport’s 2000 Master Plan identified 65 acres of property adjacent to the northwest quadrant of the airport for future land acquisition and the development of the park. The Airport started the commerce park land acquisition project in 2004 when the services of a relocation firm were secured. The City Council has approved the purchase of fifty-three

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residential and 22 commercial parcels to date. A multi-year Florida Department of Transportation (FDOT) grant is in place that will fund 75 percent of the cost of acquisitions. This FDOT grant contains a provision that requires the Airport to repay FDOT 25 percent of the amounts drawn within ten years. An additional Florida Department of Transportation (FDOT) grant for infrastructure has been obtained for cargo development, taxiway extension, and FAA specific security improvements. This FDOT grant will fund 50 percent of the infrastructure cost with a 50 percent match with local non-airport funding. Citywide topics In fiscal year 2012, the City lost two key staff positions: the Community Redevelopment Agency Administrator and Housing Department Director. The positions were vacated and duties were absorbed by existing staff. The City experienced an 11 percent turnover rate in fiscal year 2012, which is greater than the 2011 rate of 9 percent. Based on exit interviews, employees have cited increased compensation as the primary reason for leaving the City. In fiscal year 2013, the Engineering Department was merged with the Public Works & Facilities Department to consolidate and streamline departmental operations. The Director of Engineering was appointed as the director of the newly consolidated Public Works & Facilities Department, thereby eliminating the Director of Engineering key staff position. The City of Pensacola purchased a 27.5 acre of waterfront land for approximately $3.5 million in the spring of 2000. The vision for the property was to build a community friendly park encouraging citizen involvement and economic growth. In 2005, a group of local business men responded to the City’s Request for Proposal with a plan to build a festival park. The overall project budget for public improvements, including private party donations, is $56,007,502. The Community Maritime Park Associates (CMPA) was established to promote and oversee the development as well as manage the long term operation and maintenance of the park. On December 21, 2009, the City issued $45.6 million of Redevelopment Revenue Bonds, Series 2009 A&B to fund the construction of the public improvements. On May 27, 2010, the City used proceeds of $39.8 million to leverage a New Market Tax Credit Transaction (NMTC) transaction which provided an additional $12 million in funding. Construction was sustainably complete in spring of 2012 with the multi-use facility hosting the successful inaugural season of the Blue Wahoos; a Double A affiliated Cincinnati Reds Major League Baseball Team. With the completion of the multi-use facility and the infrastructure improvements at the Community Maritime Park, approximately 12.4 acres of land became available for private development. In August 2012, City Council approved the first land lease at the Community Maritime Park with Maritime Place, LLC, for the development of a 60,000 square foot commercial building projected to cost the tenant $12 million. The lease will generate approximately $100,000 in rental fees to the City and an estimated $230,000 in ad valorem property taxes of which $128,000 will benefit the City’s CRA. It is anticipated that construction will commence in the first quarter of 2013. In August 2012 the City and the CMPA executed an interlocal agreement for the City to contribute $75,000 per year, beginning in fiscal year 2014 to assist in the funding of the operation of public amenities and public spaces at the Community Maritime Park.

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In August 2009, the City entered into an agreement with the Emerald Coast Utilities Authority (ECUA) as a financial commitment to demolishing the Main Street Waste Water Treatment Plant located in the downtown area. The City has committed up to $19.5 million to the project with installments commencing in 2013. The City pledged water and sewer franchise fees and beverage license tax revenues in the agreement and subsequently entered in to an agreement with the CRA wherein the annual installments to ECUA will be paid from TIF revenues generated by the CRA. If there are insufficient TIF revenues, the City will make the payment and CRA will reimburse the City when funds are available. In fiscal year 2011, the Pension Advisory Committee was established and tasked with reviewing all three of the City’s pension plans, General, Fire, and Police, in an effort to reduce pension costs of the City in the most effective manner while minimizing the impact to the employee. The Committee’s report provided possible modifications to the existing pension plans which were subsequently sent to each pension plan’s actuary for estimating the financial impact to the City’s annual required contribution. The committee held two meetings for employees to provide their input regarding the possible modifications and continued to work with the Mayor’s office to find the best possible solution as union contract negotiations were undertaken in fiscal year 2012. During fiscal year 2012, the City completed the reduction in leave balances through union negotiations with all unions agreeing to a reduction in leave balances except for the Police Officers’ Union. The American Federation of State County and Municipal Employees (AFSCME) union agreed to the changes in the General Pension and Retirement Plan with a new three year union contract effective October 1, 2012. The changes consisted of increasing the average final compensation calculation from 2 years to 5 years, reducing the benefit multiplier from 2.1% to 1.75%, reducing the Cost of Living Adjustment for new retirees from 1.5% per year to 1%, new participants in the Deferred Retirement Option Program (DROP) will not receive a Cost of Living Adjustment while participating in DROP and the interest rate on DROP balances will be reduced to 1.3%. Based on current estimates, these changes will result in a reduction of $946,200 per year in the City’s required contributions and decrease the Unfunded Actuarial Accrued Liability by $5.78 million. The City and the police unions entered into agreements to close the Police Officers’ Retirement Fund participants effective January 1, 2013. Police officers hired on or after January 2, 2013 will become participants in the Florida Retirement System (FRS). Current officers will be given an opportunity to remain in the current Police Officers’ Retirement Fund or join FRS. Also in the agreements are several reductions in benefits for officers with less than twenty (20) years of service. The vesting period will increase from ten (10) years to twelve (12) years, the average final compensation will change from two (2) years to five (5) years, the cost of living adjustment will reduce from 3% to 2% after ten (10) years of retirement, and pensionable income will be calculated on base pay with no overtime. The DROP interest rate will reduce to 1.3% effective January 1, 2012 for new participants in DROP and they will not receive a cost of living adjustment while participating in DROP. These changes will result in a reduction in the Unfunded Actuarial Accrued Liability to the Police Officers’ Retirement Fund. In fiscal year 2013, the City will continue the union negotiation process with the Fire Union with the expectation that the Fire Union will be taking a tentative agreement to the membership closing the Firefighters’ Relief and Pension Plan with new firefighters joining FRS. 16

Independent Auditors The Florida Statutes and the City’s Bond Resolutions require an annual audit of the City’s financial records by an independent certified public accountant. The City’s fiscal year 2012 financial statements have been audited by the certified public accounting firm of Saltmarsh, Cleaveland and Gund. The goal of the independent audit was to provide reasonable assurance that the financial statements are free of material misstatement. The City is also required to undergo an annual audit to obtain reasonable assurance about compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs and state projects. Reporting Achievements The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Pensacola for its comprehensive annual financial report for the fiscal year ended September 30, 2011. 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 unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such comprehensive annual financial reports must satisfy both accounting principles generally accepted in the United States and applicable legal requirements. The City of Pensacola has been awarded a Certificate of Achievement for thirty-one of its last thirty-two fiscal years. Acknowledgements The City’s accounting staff, as always, is dedicated in preparing a timely and accurate comprehensive annual financial report. Appreciation is expressed to all those who assisted and contributed to its preparation and to City Council for the continued interest and support of a fiscally sound City government. Respectfully submitted,

Ashton J. Hayward, III Mayor

Richard Barker, Jr. Chief Financial Officer

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Certificate of Achievement for Excellence in Financial Reporting Presented to

City of Pensacola Florida For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2011 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.

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CITY OF PENSACOLA FISCAL YEAR 2012 ORGANIZATIONAL CHART

CITIZENS OF PENSACOLA

CITY COUNCIL

CITY ATTORNEY

CITY CLERK

COMMUNITY REDEVELOPMENT AGENCY

MAYOR

CITY ADMINISTRATOR

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CITY OF PENSACOLA FISCAL YEAR 2012 ORGANIZATIONAL CHART

MAYOR

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CITY ATTORNEY

CITY ADMINISTRATOR

CITY CLERK

PENSACOLA ENERGY

ENGINEERING & CONSTRUCTION SERVICES

FINANCIAL SERVICES

FIRE

HOUSING

HUMAN RESOURCES

INSPECTION SERVICES

TECHNOLOGY RESOURCES

NEIGHBORHOOD SERVICES

PENSACOLA INERNATIONAL AIRPORT

PLANNING SERVICES

POLICE

PORT OF PENSACOLA

PUBLIC WORKS & FACILITIES

SANITATION SERVICES AND FLEET MANAGEMENT

WEST FLORIDA PUBLIC LIBRARY

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CITY OF PENSACOLA, FLORIDA LISTING OF ELECTED AND APPOINTED OFFICIALS ELECTED OFFICIALS

FY 2012 MAYOR & CITY COUNCIL

Ashton J. Hayward, III Mayor

P. C. Wu, Ph.D. District 1 Sherri Myers District 2

Maren DeWeese District 3

John Jerralds District 5

Ronald P. Townsend Council Vice President District 7

Larry B. Johnson District 4

Brian Spencer District 6 Sam Hall Council President At-Large

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Megan B. Pratt At-Large

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FINANCIAL SECTION This section contains the following subsections: INDEPENDENT AUDITORS’ REPORT MANAGEMENT DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

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INDEPENDENT AUDITORS REPORT

Honorable Members of the City Council City of Pensacola, Florida

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, Community Maritime Park Associates, Inc., each major fund, and the aggregate remaining fund information of the City of Pensacola, Florida as of and for the year ended September 30, 2012, which collectively comprise the City of Pensacola, Florida’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Pensacola, Florida’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the discretely presented component unit, the Downtown Improvement Board. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Downtown Improvement Board, is based on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of the other auditors provide a reasonable basis for our opinions. In our opinion, based on our audit and the report of other auditors, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, Community Maritime Park Associates, Inc., each major fund, and the aggregate remaining fund information of the City of Pensacola, Florida, as of September 30, 2012, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison information of the General Fund and the Housing Assistance Payments Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued our report, dated February 14, 2013, on our consideration of the City of Pensacola, 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. Accounting principles generally accepted in the United States of America require that management’s discussion and analysis on pages 24 through 42 and schedules of employer contributions and analysis of funding progress for pension funds, and for other postemployment benefits on pages 119 through 122, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Pensacola, Florida’s, financial statements as a whole. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards, passenger facility charges, and state financial assistance is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A133, Audits of States, Local Governments, and Non-Profit Organizations, and as specified in the Passenger Facility Charges Audit Guide for Public Agencies, issued by the Federal Aviation Administration, and by Section 215.97, Florida Statutes, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements and schedules, the financial data schedule – Section 8 Housing Choice Vouchers Program, and the schedule of expenditures of federal awards, passenger facility charges, and state financial assistance are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

Pensacola, Florida February 14, 2013 23

Management’s Discussion and Analysis This section will provide a comparative analysis between fiscal year 2012 and 2011. The comparison amounts are shown at a summary level with additional detail provided for explanation. The format is designed to provide the reader a narrative overview of the City’s financial activity for the fiscal year ended September 30, 2012. This discussion should be read in conjunction with the Letter of Transmittal located in the Introductory Section. Financial Highlights •

The City’s assets exceeded its liabilities (net assets) as of September 30, 2012 by $341,346,175. Of this amount, $9,348,610 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. The remainder of net assets is unavailable and restricted. Unrestricted net assets decreased $13,355,219 (58.8%) from the previous year’s unrestricted net assets balance of $22,703,829 primarily due to the recognition of the City’s $19.5 million long-term contribution to Emerald Coast Utilities Authority (ECUA) for the Main Street Waste Water Treatment Plant Replacement Project. This commitment is a voluntary nonexchange transaction; therefore the long-term liability and expenditure are recorded in the City’s government-wide financial statements since the eligibility criteria were met in fiscal year 2012. In anticipation of the long-term liability being recognized in fiscal year 2012, approximately $5.1 million of the total commitment was previously reserved as restricted net assets with funding beginning in fiscal year 2009. Since the long-term liability is not due and payable in the current period, it is not recorded in the fund financial statements.



The City’s total net assets of $341,346,175 decreased $13,968,740 (3.9%) over fiscal year 2011 net assets of $355,314,915. Governmental activities decreased $15,811,756 (7.9%) due to the recognition of the $19.5 million ECUA contribution. Offsetting the $19.5 million decrease, was an increase of $3,688,244 due primarily to the completion of capital projects such as the expansion and renovation of the West Florida Regional Library Main Downtown Branch, the Main Street reconstruction and enhancement project, the Admiral Mason Park and Stormwater Retention Pond and smaller public works projects. Business-type activities increased $1,843,016 (1.2%). This increase is due to rate adjustments for the enterprise funds to finance operating, capital and reserves.



At September 30, 2012 the City’s governmental funds reported combined ending fund balances of $79,980,241, a decrease of $5,849,411 (6.8%) in comparison to the prior year. This decrease is primarily related to construction of capital projects from the Local Option Sales Tax Fund from available cash. The unassigned fund balance for governmental funds is $1,100,516 reported in the General Fund. Unassigned fund balance is the portion of fund balance which is not obligated or specifically designated and is available for any purpose.



Governmental funds’ revenues decreased $7,396,517 (8.7%) from fiscal year 2011. The decrease in governmental funds’ revenues stems from the $3 million decrease in Section 8 Housing Choice Vouchers program funding, a decrease in donations for the Maritime 24

Community Park Construction of $2.25 million as the project was completed, a decrease in Property Tax Revenues of $1 million due to the reduction in the millage rate and a decrease of $658,000 in Franchise Fees and Public Service Tax Revenues. Governmental funds’ expenditures decreased by $564,901 (0.6%) over the prior year’s total of $95,799,017. Expenditures decreased $2.8 million due to the completion of projects that received special grants awards in the prior year and $1 million from the decrease in housing assistance program payments. Offsetting these decreases was a $2.9 million increase due to the transfer of donations held by the City for Maritime Community Park Construction to the recipient organization. •

The City’s General Fund unrestricted fund balance increased by $970,147 from $10,716,789 to $11,686,936 in fiscal year 2012 primarily due to the sale of the United States (US) Army Reserve Property by the City to the Airport. Included in the committed fund balance, which is a part of unrestricted fund balance, is the Council Reserve balance of $7,684,929. The Council Reserve balance represents 15.6 percent of fiscal year 2013 budgeted General Fund revenues which exceeds the 15 percent minimum reserve goal stated in the City Council’s Fund Balance Policy. The General Fund had a decrease in restricted fund balance of $115,580 related to a decrease in contractual obligations which offsets the increase in unrestricted fund balance of $970,147 for a net increase of total fund balance of $866,730 (7.7%) from fiscal year 2011. General Fund revenues decreased over fiscal year 2011 by $1,803,667 (4.4%) while expenditures increased marginally by $474,842 (1.2%).



The City’s Enterprise Funds ended the year with net assets in the amount of $157,636,903, an increase of $1,843,016 (1.2%) over fiscal year 2011. Of the total net asset amount, $132,621,897 represents capital assets net of related debt which decreased $3,064,756 (2.3%). This decrease resulted primarily from an increase of Airport debt and a decrease of Airport capital. Operating revenues decreased by $1,281,096 (1.9%) from last year and operating expenses before depreciation decreased by $7,106,739 (13.4%) primarily due to the decrease in gas purchases. The Utility and Airport Funds experienced a decline in revenues while the Sanitation and Port Funds had an increase in revenues. The Utility Fund’s operating revenues decreased by $2,216,122 (5.6%) during fiscal year 2012 as natural gas per unit declined globally. The cost of gas is passed on to gas customers and therefore the revenue reported declined in tandem with its cost. Negating that decrease in Utility Fund revenues was a change in the calculation of the Purchase Gas Adjustment rate in order to recoup operating reserves. The Sanitation Fund’s revenues increased by $620,429 (9.9%) due to rate increases in fiscal year 2012 while the Port Fund experienced a $508,848 (26.5%) increase due to diversification of the Port’s business base and growth of the wind energy sector in fiscal year 2012. The Airport Fund’s operating revenues slightly decreased by $194,251 (1.06%) in fiscal year 2012. All funds except the Sanitation Fund experienced a decrease in operating expenses. The Utility Fund’s operating expenses decreased $6,490,552 million (20.96%), mostly attributable to the decline in the unit cost of natural gas. The Sanitation Fund’s operating 25

expenses increased marginally by $190,719 (3.1%) over last year from the transfer of two code enforcement officers from the General Fund. The Port Fund’s operating expenses decreased slightly by $11,413 (0.7%). The Airport Fund’s operating expenses decreased by $795,493 (5.5%) due to vacant positions and savings in utility cost. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. These statements have three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Following is a chart that illustrates the components of the CAFR.

COMPONENTS OF THE FINANCIAL REPORT

Management’s Discussion and Analysis

Government -wide Financial Statements

Basic Financial Statements

Required Supplementary Information (RSI)

Fund Financial Statements

Notes to the Financial Statements

Summary

Detail

26

Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Pensacola’s finances, in a manner similar to a private-sector business. The focus of the Statement of Net Assets is designed to be similar to bottom line results for the City and its governmental and business-type activities. This statement combines and consolidates governmental funds current financial resources (short-term spendable resources) with capital assets and long term obligations. The Statement of Activities distinguishes functions of the City of Pensacola that are principally supported by taxes and intergovernmental revenues (governmental activities such as police, fire, public works, recreation and general administration) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities include the airport, seaport, gas utility services and sanitation). Component Units, which are other governmental units over which the City can exercise influence, are presented as a separate column in the government-wide statements. The Downtown Improvement Board and the Community Maritime Park Associates, Inc. are the two component units of the City. The focus of the financial statements is the Primary Government, which are the operations of the City. Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Traditional users of the CAFR will find the Fund Financial Statements presentation more familiar. The focus is on “major” funds, rather than fund types, as reported in the traditional financial statement presentation. All of the City’s funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Since the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. This allows readers to better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

27

Governmental fund 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, Local Option Sales Tax Fund, Housing Assistance Payments Fund and the Maritime Community Park Construction Fund, all of which are considered to be major funds. All other governmental type funds are considered “nonmajor” and are reported in a single, aggregated column. Proprietary Funds. Proprietary funds provide the same type of information as the businesstype activities in the government-wide financial statements, only in more detail. The proprietary fund financial statements can be found in the Basic Financial Statements section of this report. The City of Pensacola maintains two types of proprietary funds: enterprise funds and internal service funds. The City uses enterprise funds to account for the assets, operation and maintenance of the City-owned natural gas service, garbage and trash service, port facility, and airport. Internal service funds are used to account for activities that provide goods and services to other City departments such as computers, telecommunications, fleet maintenance and engineering. Since internal service funds predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Fiduciary Funds. The City of Pensacola is the plan sponsor for the General Pension, Firefighters’ and Police Officers’ retirement fund. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the City’s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in net assets. These activities are excluded from the government-wide financial statements because the assets cannot be used to support or finance the City’s programs or operations. During fiscal year 2007, the City closed the General Pension requiring new general employees to participate in the Florida Retirement System (FRS) though the General Pension remains open for existing participants who chose not to participate in the FRS. Notes to the Financial Statements The notes to the financial statements provide additional information that is essential to gain a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found as part of the Basic Financial Statements section of this report. Other information This report additionally includes Required Supplementary Information (RSI) containing schedules of the City’s pension contributions and an analysis of pension funding. Combining statements for nonmajor governmental funds and internal service funds are included as well as budgetary comparisons for all debt service, capital projects, and nonmajor governmental funds. Additional information about the City can be found in the Statistical Section.

28

Government-Wide Financial Analysis The City of Pensacola adopted the government-wide financial statement presentation. This reporting structure and measurement focus using accrual accounting for all of the government’s activities was mandated by the Government Accounting Standards Board (GASB) in Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments. Comparative data for fiscal years ending September 30, 2012 and 2011 is presented. At year end, the City is reporting positive balances in two of three categories of net assets for governmental activities and all three categories for business-type activities, as well as the government as a whole. Summary Statement of Net Assets As of September 30, 2012 Governmental Activities 2012 2011 Current and other assets Internal balances Noncurrent assets Capital assets Total assets

$

45,585,580 3,892,263 50,605,462 193,725,581 293,808,886

$

Business-Type Activities 2012 2011

52,609,080 1,489,433 51,274,826 187,826,425 293,199,764

$

26,410,536 (3,892,263) 10,018,578 225,107,117 257,643,968

$

17,307,491 (1,489,433) 12,653,589 222,255,505 250,727,152

Total Primary Government 2012 2011 $

71,996,116 0 60,624,040 418,832,698 551,452,854

$

69,916,571 0 63,928,415 410,081,930 543,926,916

Current and other liabilities Noncurrent liabilities Total liabilities

17,594,197 92,505,417 110,099,614

12,927,177 80,751,559 93,678,736

9,068,287 90,938,778 100,007,065

8,261,402 86,671,863 94,933,265

26,662,484 183,444,195 210,106,679

21,188,579 167,423,422 188,612,001

Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets

170,014,519 20,560,416 (6,865,663) 183,709,272

160,201,917 27,931,083 11,388,028 199,521,028

132,621,897 8,800,733 16,214,273 157,636,903

135,686,653 8,791,433 11,315,801 155,793,887

302,636,416 29,361,149 9,348,610 341,346,175

295,888,570 36,722,516 22,703,829 355,314,915

$

$

$

$

$

$

The City’s investment in capital assets, such as land, roads, parks, buildings, machinery and equipment, amounts to 89 percent of net assets. This amount is presented less any outstanding debt related to the acquisition and accumulated depreciation of those assets. The City uses these capital assets to provide services to the citizens and consequently these assets are not available for future spending. Although our investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Restricted net assets are resources subject to external restriction on how they may be used while unrestricted assets may be used to meet the City’s ongoing obligations to citizens and creditors. Unrestricted net assets represent 10.3% of total net assets for business-type activities. Unrestricted net assets for governmental activities are negative due to the recognition of the City’s $19.5 million long-term contribution to ECUA. In anticipation of the long-term liability being recognized in fiscal year 2012, approximately $5.1 million of the total commitment was previously 29

reserved as restricted net assets with funding beginning in fiscal year 2009. Since the commitment is a long-term liability and future revenue sources have been pledged for the annual payment of $1.3 million beginning in fiscal year 2013 with the last payment in fiscal year 2027, it is expected that this commitment will continue to negatively impact unrestricted net assets for future periods. Changes in Net Assets Year Ended September 30, 2012 Governmental Activities 2012 Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions

$

General revenues: Property taxes Other taxes Intergovernmental Investment earnings Gain on sale of capital asset Other Total revenues

7,869,356 18,674,020 6,880,444

2011

$

2012

6,089,918 22,521,356 7,287,874

12,311,601 26,697,084 6,123,014 1,948,024 105,387 32,315 80,641,245

13,318,749 27,565,335 6,054,345 1,928,271

30,598,069 30,960,121 2,992,464 18,824,265 13,780,462 2,893,391 30,000 3,028,787 3,712,342

12,035,379 29,982,610 2,665,702 15,084,355 14,902,876 2,589,177 37,100 2,806,602 3,971,769

Expenses General government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Unallocated deprecation Interest on long-term debt Utility Sanitation Port Airport Total expenses

106,819,901

Increase (decrease) in net assets before transfers and other items

(26,178,656)

Transfers in (out)

Business-type Activities

$

64,137,157

Total 2011

$

7,834,262

65,459,641

$

71,549,559 22,521,356 12,680,211

350,963 71,234,934

84,075,570

25,338,365 6,179,795 2,633,916 26,110,733 60,262,809

31,570,293 5,975,566 2,675,500 24,710,561 64,931,920

30,598,069 30,960,121 2,992,464 18,824,265 13,780,462 2,893,391 30,000 3,028,787 3,712,342 25,338,365 6,179,795 2,633,916 26,110,733 167,082,710

12,035,379 29,982,610 2,665,702 15,084,355 14,902,876 2,589,177 37,100 2,806,602 3,971,769 31,570,293 5,975,566 2,675,500 24,710,561 149,007,490

762,229

12,209,916

6,303,014

(13,968,740)

42,597 66,358 392,351 72,472,725

71,951 84,837,799

31,993

(10,360,326)

Increase (decrease) in net assets

(15,811,756)

11,122,555

1,843,016

(4,057,312)

Net assets at beginning of year

199,521,028

188,398,473

155,793,887

$

72,006,513 18,674,020 14,714,706

13,318,749 27,565,335 6,054,345 1,960,264 0 422,914 156,072,733

(10,366,900)

183,709,272

2011

12,311,601 26,697,084 6,123,014 1,990,621 171,745 424,666 153,113,970

10,360,326

$

$

5,392,337

10,366,900

Net assets at end of year

2012

199,521,028

$

30

157,636,903

0

155,793,887

0

(13,968,740)

159,851,199

$

7,065,243

7,065,243

355,314,915

$

341,346,175

348,249,672

$

355,314,915

Governmental Activities Fiscal Year 2012 Program expenses matched with program revenues

Revenues by source

GASB Statement No. 34 reporting requires that functional expenses are matched with revenues that directly support the function. The net assets of the Governmental Activities decreased $15.8 million as a result of the recognition of the City’s commitment due to a long-term contribution. This $19.5 million contribution is reflected in General Government program expense and represents a significant nonrecurring increase for fiscal year 2012. The bar chart above gives a clear indication of which functions are dependant on general revenues to support their operations. Excluding General Government, Public Safety, consisting of police and fire services, has the largest differences as these functions are traditionally supported by taxes. Taxes, 31

investment earnings and other revenues are classified as general revenues of the government. Taxes continue to be the largest revenue source for governmental activities. Business-type Activities Fiscal Year 2012 Expenses compared to charges for services revenues (Including depreciation and bad debt expense)

Revenues by Source

Net assets of Business-type Activities experienced a $1.8 million increase primarily due to rate adjustments for the enterprise funds to finance operating, capital and reserves. All Funds charged fees sufficient to cover operations when excluding depreciation, bad debt expense and other post-employment benefits (OPEB).

32

Financial Analysis of the Government’s Funds The City of Pensacola uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental funds. The focus of 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 of September 30, 2012, the City’s governmental funds reported combined fund balances of $79,980,241, a decrease of $5,849,411 (6.8%) over the prior year. The decrease is mainly attributable to the construction of capital projects in the Local Option Sales Tax Fund from cash on hand. Non-spendable and restricted governmental funds balance of $70,161,073 to meet current commitments in the next fiscal year: $3,188,347 of non-spendable for prepaids and inventory, $97,700 for Saenger capital reserve, $5,044,335 for debt service requirements, $1,036,643 for housing assistance payments, $39,813,626 for the maritime park and $20,980,422 for other purposes leaving a remaining unrestricted fund balance of $9,819,168. Below is a comparative chart for the City’s “major” funds; General Fund, Local Option Sales Tax Fund, Housing Assistance Payments Fund and Maritime Community Park Construction Fund. Major Fund Information

General Fund Fiscal Year 2012 Revenues and other sources Expenditures and other outlays Increase (decrease) in fund balance Fiscal Year 2011 Revenues and other sources Expenditures and other outlays Increase (decrease) in fund balance

$ $

$ $

Local Option Sales Tax Fund

Housing Assistance Payments Fund

Maritime Community Park Construction Fund

54,173,809 $ (53,307,079) 866,730 $

6,402,641 $ (9,220,786) (2,818,145) $

11,345,450 $ (13,256,085) (1,910,635) $

3,129,447 (6,284,996) (3,155,549)

48,953,585 $ (48,913,014) 40,571 $

6,365,188 $ (9,484,894) (3,119,706) $

14,369,667 $ (14,282,764) 86,903 $

5,485,495 (3,384,820) 2,100,675

The General Fund is the chief operating fund of the City. At September 30, 2012, total fund balance in the general fund was $12,140,334, an increase of $866,730 (7.7%) from beginning fund balance. The unrestricted portion of fund balance is $11,686,936, however $7,684,929 is committed for the Council Reserve, $676,045 is committed for the tree landscape fund, $38,141 is committed for park purchases, $1,884,995 is assigned for general government projects, $183,126 is assigned for economic development incentives and $119,184 is assigned for assessments leaving an unassigned fund balance of $1,100,516. As a measure of the general fund’s liquidity, a comparison of both total and unrestricted fund balances compared with total fund operating expenditures shows percentages of 29.4% and 28.3%, respectively. The Government Finance Officer’s Association (GFOA) Best Practice recommendation is for a government to maintain in its general fund unrestricted fund balance no 33

less than two months of general fund operating expenditures. At 28.3% of unrestricted fund balance, this provides more than three months of coverage. The Local Option Sales Tax (LOST) Fund had a total fund balance at year end of $1,371,886, a decrease of $2,818,145 (67%). The decrease is from the ongoing capital equipment purchases, progress on capital projects and bond debt service. Non-spendable fund balance of $3,133,619 resulted from the prepayment of the first year principal for the Capital Funding Revenue Bonds, Series 2010 in the amount of $2,695,000 and interest in the amount of $438,619. Restricted fund balance of $3,234,190 represents restrictions placed on fund balance by third party executed contracts, primarily the Downtown Library expansion and renovation project. The monthly sales tax revenues are accumulated in this fund for purposes of repayment of the related debt issue; therefore, fund balance is unusually large. With a slowing economy and a tightening of consumer spending, the local option sales tax collections had dropped below the 2003 levels until fiscal year 2011. For the first time in four fiscal years, the local option sales tax revenue collections increased above the prior year collections and this increase continued in fiscal year 2012. Sufficient funds are projected for currently identified Penny for Progress projects and debt service obligations through the end of the current extension which expires December 31, 2017. However, unassigned fund balance is anticipated to be negative for the next few years based upon current project completion dates. The Housing Assistance Payments Fund had a total fund balance at year end of $4,674,085, a decrease of $1.9 million (29%). Fund balance of $4,673,284 is restricted for housing assistance payments as required by the Department of Housing and Urban Development (HUD). Changes to fund balance are a function of federal funding by the HUD and the operating efficiency employed by the City’s Housing department. Fluctuations can be large or small depending on the goals of the federal government programs. The Maritime Community Park Construction Fund had a total fund balance at year end of $46,572,618, a decrease of $3,155,549 (6.4%) over fiscal year 2011. The Maritime Community Park Construction fund was established to account for the capital expenditures of the Vince Whibbs, Sr. Community Maritime Park and has evolved to include several capital projects in the redevelopment district. The City issued Redevelopment Revenue Bonds, Series 2009 to fund the construction of the Park however proceeds were subsequently leveraged in a New Markets Tax Credit (NMTC) transaction to provide a $52 million construction fund that is owned and managed by the Community Maritime Park Associates. Fund balance in the amount of $41,435,484 is restricted for the Maritime Park and related debt service payments. Also accounted for in the Fund is the accumulation of fund balance in the amount of $5.1 million for the demolition of the Emerald Coast Utilities Authority Main Street Waste Water Treatment Plant.

34

Proprietary Funds. Proprietary fund statements provide the same information as in the business-type activities column of the government-wide statements, but in greater detail, and on a fund basis for enterprise funds and the internal service funds. All of the City’s enterprise funds are classified as major funds. Enterprise Funds. The City of Pensacola does not budget for depreciation, bad debt expense, or other post employment benefits. However, personnel services, operating expenses, capital outlay, and principal and interest payments are budgeted. The Utility Fund had total net assets of $28,403,126 at fiscal year end, an increase of $3,954,744 over the prior year. Operating revenue exceeded operating expenses by $11,076,679 before transfers of $8 million to the General Fund. Revenue decreased by $2.2 million (5.6%) during fiscal year 2012 and expenses decreased by $6.5 million (21%). The primary reason for the decrease in operating revenue and operating expense is a result of the reduced cost of natural gas; the cost savings of which is passed to the customer in turn reducing charges for services revenue. The Sanitation Fund had total net assets of $1,901,974 at fiscal year end, an increase of $300,703 (19%) primarily due to a rate increase to fund both operating and capital needs. The Sanitation Fund operated at a profit of $574,711 before depreciation expense by $278,638, an improvement from last year of $429,710. Revenues increased (9.9%). Since expenses only increased 3.1% it also contributed to the improvement over last year. The Port Fund had total net assets of $13,930,591 at fiscal year end, a decrease of $106,813 (0.8%) from the prior year. The port operated at a profit of $772,590 before depreciation expense of $1.1 million; an improvement from last year by $520,261. Revenues increased $508,848 (26%) from the diversification of the Port’s business base and the growth in the wind energy sector exports. Expenses decreased slightly to $11,413 (0.7%) from the prior fiscal year. The Airport Fund had total net assets of $113,401,212 at fiscal year end, a decrease of $2,305,618 over the prior year. The airport operated at a profit of $4.4 million before depreciation expense of $9.8 million; an improvement from last year of approximately $600,000. The airport has an operating agreement with the airlines which provides for revenues sufficient to meet operating expenses, debt service payments and capital expenditures, however it does not provide for depreciation or bad debt expense which is reported on the City’s financial statements as an operating expense. Operating Income (Loss) 2012 2011 Utility Fund $ 11,076,679 $ 7,104,494 Sanitation Fund 296,073 (130,976) Port Fund (293,256) (872,288) Airport Fund (5,373,898) (3,249,328) Total $ 5,705,598 $ 2,851,902 Note: Includes depreciation, other post employment benefits and bad debt expense.

35

Internal Service Funds The internal service funds are designed to recover the internal costs of general services provided to other city departments. The increase in total net assets for all internal service funds was $416,090. General Fund Budgetary Highlights Budgetary control is established within each fund at the line item. Amounts may be transferred between departmental line items or between departments within a fund. Amounts to be transferred require the approval of the Mayor or his designee; however, amounts appropriated for capital expenditures can only be transferred from capital expenditure accounts with City Council approval. The budgetary changes as described below were a necessary part for overall operations of the City’s activities reported in the General Fund. The final budget as compared with the original budget for the General Fund estimated revenues decreased by approximately $920,000 (2.3%) during fiscal year 2012. The other financing sources budget increased from original budget mainly due to the $3.5 million increase of transfers-in to the General Fund from the Stormwater Capital Projects Fund for reimbursement of expenditures incurred for certain capital improvements including stormwater projects. Additionally, the original budget for the sale of assets increased by $820,000 due to the entire amount of $3.5 million for the sale of the old US Army Reserve Property by the City to the Airport being paid rather than the initial installment of $2.65 million as was originally budgeted. Budget decreases occurred for electricity franchise fees and gas franchise fees totaling $863,600 due to a warmer than normal winter in fiscal year 2012. The final appropriations in the General Fund as compared with the original budget increased by approximately $4.6 million (9%) in fiscal year 2012. The primary reason for the increase relates to: •

• •

An increase in appropriations for the transfer from the General Fund to the Stormwater Capital Projects Fund of $3.7 million primarily for the transfer-out of the proceeds received from the sale of the US Army Reserve property since the funds are restricted to use for capital items due to financing tax laws and regulations. Transfers-out also increased due to an increased transfer to the Tax and Franchise Fee Debt Service Fund of $200,000. An increase in appropriations for amounts carryforwarded from the prior fiscal year primarily $195,000 for the cost of a disparity study and $80,000 for the cost to complete the fiscal year 2011 audit. An increase in appropriations for capital improvements mainly for the Saenger Theatre in the amount of $104,000 and the approximately $270,000 demolition of the building on the US Army Reserve Property.

36

Capital Asset and Debt Administration Capital Assets. As of year end, the City had $302,636,416 invested in capital assets, net of depreciation and related debt. Governmental activities accounted for $170,014,519 and business-type activities accounted for $132,621,897. This investment in capital assets includes land, buildings, improvements, machinery and equipment and infrastructure. Major capital asset additions during the current fiscal year include the following: Governmental Activities •

Main Library Downtown Branch expansion and renovation $7,252,474



Stormwater, street and sidewalk capital projects $3,302,850



Main Street reconstruction and enhancements $1,638,599



Admiral Mason Park and Stormwater Retention Pond $1,528,987



Exchange Park improvements $404,224



Police vehicles $378,099



Fire Pumper Truck $358,295

Business-type Activities •

Land and building acquisitions for Airport expansion $5,064,479



Airport road improvements and ramp rehabilitation $3,265,592



Compressed Natural Gas (CNG) refueling station $1,784,560



Utility improvements $1,537,695



Sanitation CNG garbage trucks $1,272,855



Utility acquisition of Gulf South Pipeline $1,090,909



Airport parking revenue control equipment $409,604



Port dredging project $332,507

37

Governmental Activities Capital Assets net of depreciation

Business-type Activities Capital Assets net of depreciation

Additional details about the City’s capital assets can be found in Section III, C, of the Notes of this report. The City has two capital plans. The first is required by Florida’s growth management legislation and is an element of the City’s comprehensive plan. The second is a broader plan and covers all infrastructure needs of the City. This plan is two-part; the first is transportation and stormwater funded by the Local Option Gasoline Tax (LOGT) with a transfer from the General Fund totaling the same amount as the Stormwater Fee collections. The second is referred to as the Penny for Progress Plan and is funded by LOST collections. Additional details of the capital plans are available in the City’s annual budget which is available on the City’s website.

38

Long-term Debt. At the end of fiscal year 2012, the City had total non-self-supporting bonded debt of $135,824,903. Governmental activities have bonds payable (direct debt) in the amount of $67,324,750 which includes the unamortized discount of $159,303 and business-type activities have bonds payable in the amounts of $68,500,153. The City also has outstanding notes payable of $23,100,000 (self-supporting debt). The City has no general obligation debt. The City does not borrow for operating needs. All of its outstanding long-term indebtedness is for capital needs only. The direct debt per capita (population 52,508) as of September 30, 2012 is as follows: Tax and Franchise Fee Debt Community Redevelopment Agency Local Option Sales Tax Debt Maritime Community Park Debt Total

$

$

3,240,000 414,053 18,190,000 45,640,000 67,484,053

Per capita $ Per capita Per capita Per capita $

62 8 346 869 1,285

The Tax and Franchise Fee Debt Service Fund is supported by revenues pledged to specific bond issues. The pledged revenues include franchise fees on electricity, public service taxes on gas, water and electricity, and the Half Cent Sales Tax. The cash reserves at fiscal year end were $3.3 million. The Local Option Sales Tax Debt is supported by sales tax collections. The fund’s current unrestricted cash balance has been eliminated; however, projected future revenue collections are sufficient to complete projects underway and those scheduled for future fiscal years, including principal and interest obligations for the Capital Funding Revenue Bonds, Series 2010A-1 and 2010A-2 which mature October 1, 2017. The Community Redevelopment Agency Fund is supported with both a covenant to budget and appropriate and a pledge of tax increment financing (TIF) revenues which secure the principal and interest payments of the note. TIF revenues are recorded in the Urban Core Redevelopment Trust Fund and transfers are made as needed to the CRA Fund for debt service obligations. The Maritime Community Park Debt is supported with a covenant to budget and appropriate from non-ad valorem revenues of the City, TIF revenues, and a Credit Agreement (Loan) between the City and CMPA arising from a New Market Tax Credit transaction. Please refer to the Notes to the Financial Statements (Note IV. G.) for a thorough explanation of the transaction. All required principal and interest payments on outstanding debt were remitted timely and in full. The reserve requirements and deposits into the debt service funds mandated by the bond covenant remain funded at or above the prescribed levels at year end. Prior to July 2008 insurance was purchased for all bonded debt issued by the City of Pensacola. The insured rating for the City’s debt will fluctuate because it is dependent on the rating of the insurance provider. The 2008 Airport Revenue Bonds were issued without insurance using only its underlying credit rating. Underlying ratings are reviewed annually with the City by ratings agencies.

39

On April 5, 2011 Standard and Poor’s affirmed a long-term rating of “A+” on the City’s outstanding 2004 Sales and Excise Revenue Bonds. On March 25, 2010 Fitch Ratings published a report on ‘Recalibration of U.S. Public Finance Ratings’. The recalibrated rating for the City’s Capital Improvement Bonds, Series 2009A&B was assigned a “AA”, an upward adjustment from the previous rating of “AA-“ which was affirmed by Fitch on October 20, 2011. Standard and Poor’s rating for the 2009A&B remained at “AA”. Fitch also recalibrated the implied general obligation rating for the City of Pensacola from an “AA” upward to an “AA+” which was affirmed on October 20, 2011. On June 4, 2010 Moody’s Investor Service – New York affirmed their existing rating of “A3” on the outstanding Airport Revenue Bond debt and on July 5, 2011 Fitch Ratings – Chicago affirmed their existing rating of “BBB+”. On January 31, 2012 Standard & Poor’s affirmed their existing rating of “BBB” on the outstanding Airport Revenue Bond debt while also affirming a stable outlook. On June 28, 2012, Fitch Ratings downgraded the Airport revenues to BBB with a negative outlook. The City of Gulf Breeze, Florida issued 2010 A&B Capital Funding Revenue Bonds dated July 20, 2010 for which the City of Pensacola, Florida was a participant and the only borrower through a Participant Loan Agreement. Moody’s Investor Services, Inc. assigned a rating of “Aa3” to the bond issue with the understanding that Assured Guaranty Municipal (AGM) is insuring payment of principal and interest. As the City is the only borrower, Moody’s Investor Services assigned an underlying rating of “Aa3” to both Series A and B based upon the City’s pledge of the Local Option Sales Tax on Series A and net revenues of the Gas System on Series B. On October 25, 2010 Standard & Poor’s revised the rating for AGM to “AA+”, outlook stable, from “AAA” citing the current state of the financial guarantee market as the reason for the downgrade. Standard & Poor’s last affirmed AGM at “AA-” with a stable outlook in June 2012. On January 17, 2013, Moody’s Investor Services downgraded the rating of AGM from “Aa3” to “A2” based on the downward reassessment of Assured’s business franchise, expected future profitability and financial flexibility. The fluctuations of the financial market and downgrades or potential downgrades of bond insurers’ ratings have had no material effect on the interest rates of the City’s outstanding bonds or the City’s underlying bond ratings. All required principal and interest payments have been remitted timely and in full. Additional detail about long-term debt can be found in the Notes to the Financial Statements; Note III, E. Long-term debt.

40

Economic Factors and Next Year’s Budgets and Rates

The City’s fiscal year 2013 budget totals $220,680,000. Of this $49.3 million is for the General Fund, $95.9 million for enterprise funds, and the remaining $75.4 million to the miscellaneous special revenue, debt service, capital projects, and internal services funds. The General Fund original budget decreased from the prior year by $2.3 million (4.7%). The decrease in the General Fund budgeted revenue is a $2 million decrease for the sale of the US Army Reserve Property which occurred in fiscal year 2012. Offsetting the decrease in revenue is a $2.9 million reduction in the transfer to the Tax and Franchise Fee Debt Service Fund as the final debt payment will be made in fiscal year 2013. The General Fund consists of governmental services such as general administration, public safety, parks and recreation, and public works. Enterprise Funds are expected to be self-supporting, on a cash-flow basis, from user fees for services. Personnel expenditures account for $63,773,100 of the City’s budget. The City had 842 total authorized positions at the beginning of fiscal year 2012, decreasing to 830 in the fiscal year 2013 beginning budget. Total funded positions have reduced by 171 vacant positions (17.1%) since the 2007 budget year level. The reductions are a result of the downturn in the economy and State of Florida property tax reform. Beginning fiscal year 2007, General Fund capital items were programmed for funding through fiscal year 2017 from the Penny for Progress Local Option Sales Tax Fund. Fiscal year 2012 marked the first year revenue projections were increased since the extension was approved in 2006. Fiscal year 2013 anticipated revenues does not anticipate any additional growth, however. Though revenues have not grown as initially anticipated, the budget for capital items remains on target because of conservative estimates put in place at the beginning of the Penny for Progress plan. Pension actuarial reports received during fiscal year 2011 were not approved by the three defined benefit Boards of Trustees. Based on the reports, the unfunded actuarial accrued liability would have increased $37.5 million from the September 30, 2010 valuation and resulted in a fiscal year 2012 annual contribution increase of $2.6 million over the current funding requirements. During fiscal year 2012, by implementing changes recommended by the Mayor’s Pension Advisory Committee and through union negotiations with the City’s General, Police and Fire unions, the majority of the above referenced annual contribution increase has been mitigated. The unions for the Police and General employees agreed to close their defined benefit plans and the City has reached a tentative agreement with the Fire Union to do the same. Actuarial reports based on the changes to the pension plans, will be forthcoming during fiscal year 2013 and the above referenced unfunded actuarial accrued liability is estimated to be reduced by at least $12 million. In the fiscal year 2013 budget, a new Economic Development Fund is established in the amount of $1 million. The fund will be used to market surplus properties, provide incentives to existing, growing business or new ventures and to provide seed money to assist with the site development. The fiscal year 2012 actual property tax valuation decreased by $60.2 million representing a 2.3 percent decline. While the declining trend continues, it is not as great as in prior years. The

41

decrease in taxable value is anticipated to result in a $278,300 decrease in General Fund ad valorem revenue from the fiscal year 2012 budget. Property tax revenues have decreased $3 million (19.6%) from the fiscal year 2007 levels as a result of both property tax reform and the economic decline. The State of Florida mandated a formula to determine the maximum millage rate that a government can levy. Based on that calculation, the maximum millage rate the City can impose is 5.5494 which equates to an additional $3.5 in potential property tax revenue. In addition, Florida State Statutes authorize levying a millage up to the statutory maximum of 10 mills by a unanimous vote of City Council or referendum. However, fiscal year 2013 estimated revenues have been prepared using the same millage rate of 4.2895 as was adopted in the fiscal year 2012 budget. The City Council formally adopted by resolution a Fund Balance Policy in fiscal year 2011 which states that a minimum reserve of 15 percent of budgeted annual revenues should be maintained in the General Fund as a Council Reserve. The minimum reserve was initially adopted as part of the Financial Planning and Administration Policy on July 23, 1998. The existing General Fund reserve balance (shown on the face of the financial statements as “Council Reserve”) increased from $7.67 million to $7.68 million in fiscal year 2012. The sale of surplus property and interest earnings are identified as sources which increase the reserve balance. The $7.68 million balance represents 15.6 percent of fiscal year 2013 budgeted General Fund revenues. This marks the fifth consecutive year the minimum reserve has been accomplished since the initial adoption of the reserve policy. The City’s financial policy states that non-recurring revenues should be used only to finance non-recurring expenditures. Fiscal year 2013 marks the fifth consecutive year that the City’s beginning General Fund budget has balanced ongoing revenues with ongoing expenditures (no drawdown of fund balance). However, the fiscal year 2012 budget did use one-time revenues in the amount of $3.47 million from the sale of assets from the US Army Reserve Property to balance the General Fund budget. This has been budgeted with the knowledge that in fiscal year 2013 the transfer to the Tax and Franchise Fee Debt Service Fund will no longer be required as the debt will be retired and will free up $2.9 million in ongoing revenues. Council revised the Financial Planning and Administration Policy in fiscal year 2007 to stipulate that the General Fund’s maximum amount of appropriated beginning fund balance should not be more than three percent of budgeted revenues. If actual revenues collected are insufficient to cover expenditures, a draw down of fund balance can be made at fiscal year end. The City continues to move in the right direction relying on on-going revenues to support recurring expenditures in spite of the continuing economic challenges. Request for Information This financial report is designed to provide a general overview of the City of Pensacola’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Chief Financial Officer, PO Box 12910, Pensacola, Florida 32521. The City of Pensacola’s website address is www.cityofpensacola.com.

42

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BASIC FINANCIAL STATEMENTS

CITY OF PENSACOLA, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30, 2012

Primary Government Governmental Activities

Business-type Activities

Component Units Downtown Community Improvement Maritime Park Board Associates, Inc.

Total

ASSETS Current assets Cash and cash equivalents Other cash Investments Accrued interest Receivables (net of allowances) Accounts Special assessments Internal balances Due from other governments Inventory Prepaids and deposits Restricted assets Restricted cash and cash equivalents Other cash Investments Due from other governments Notes receivable Total current assets

$

$

4,663,501

7,219,045

7,788,311 1,387,279

$

$

132,969

2,730,094

209,789

3,211,434

2,253

1,383,454

6,949,558 1,235,252 41,806,628

7,472,526 1,328,207

14,422,084 1,235,252 43,134,835

28,282,201 165,443,380

28,524,548 196,582,569

56,806,749 362,025,949

380,961

245,095,910

234,360,828

479,456,738

383,214

257,643,968

$

551,452,854

341,341

11,649

0 1,765,223 66,646

$

40,709

99,290

(764,867) 1,151,199 66,646

293,808,886

$

65,171

18,521,496 1,399,468 1,911,284 1,002,802 411,969 71,996,116

23,283,140

764,867 614,024

23,498,127 925,059 4,227,824 32,552 9,554,330 178,817 0 4,482,603 612,678 5,237,107

(3,127,396) 2,876,094 28,273 1,619,265

10,733,185 12,189 1,911,284 1,002,802 411,969 48,712,976

Total noncurrent assets

$

828,768

2,335,285 178,817 3,127,396 1,606,509 584,405 3,617,842

Noncurrent assets Internal balances Unamortized bond/loan issue costs Intangible asset Restricted assets Cash and cash equivalents Investments Notes receivable Capital assets Non-depreciable Depreciable (net)

Total assets

18,834,626 925,059 3,399,056 32,552

52,743,840

$

593,003

54,127,294 $

57,338,728

(continued)

The accompanying notes are an integral part of these financial statements. 43

CITY OF PENSACOLA, FLORIDA STATEMENT OF NET ASSETS SEPTEMBER 30, 2012

Component Units Downtown Community Improvement Maritime Park Board Associates, Inc.

Primary Government Governmental Activities

Business-type Activities

Total

LIABILITIES AND NET ASSETS Liabilities Current liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other governments Wages and benefits payable Compensated absences payable Deposits Notes payable Unearned revenue Revenue bonds payable Payable from restricted assets Due to other governments Notes payable Revenue bonds payable Accrued interest payable Total current liabilities

$

$

1,797,019 405,971 303,920

$

79,595 405,168

1,909,004 6,884,053

148,374

1,300,000

18,200,000 3,793,441 2,361,442

Net assets Invested in capital assets, net of related debt Restricted for Capital projects Debt service Community redevelopment Federal housing program Other purposes Hurricane damage Renewal and replacement Operations and maintenance Unrestricted

35,963

35,296

92,505,417

90,938,778

110,099,614

100,007,065

210,106,679

285,911

170,014,519

132,621,897

302,636,416

145,993

(6,865,663) 183,709,272

$

157,636,903

$

341,346,175

199,672

54,137,774

1,000 214,652

54,137,774 55,618,148

1,579,933

161,099 $

307,092

The accompanying notes are an integral part of these financial statements. 44

167,337 1,480,374

13,980

3,162,981 7,343,774 4,602,461 4,674,085 3,805,540 2,623,975 1,000,000 2,148,333 9,348,610

1,000,000 2,148,333 16,214,273

212,731

411,969 43,750

71,259

5,845,133

5,652,400

$

452,848 191,739

22,655,000 64,550,153 (736,038) 416,873 357,818 2,251,813

3,162,981 1,691,374 4,602,461 4,674,085 3,805,540 2,623,975

$

$

18,200,000 5,236,600 2,361,442 22,655,000 124,990,850 (1,154,632) 2,700,171 357,818 8,096,946 0 183,444,195

1,443,159

60,440,697 (418,594) 2,283,298

Total liabilities

3,512,377 933,438 1,382,696 47,705 1,621,459 256,788 695,510 0 2,057,378 6,884,053 1,300,000 445,000 3,950,000 3,576,080 26,662,484

445,000 3,950,000 1,533,240 9,068,287

2,042,840 17,594,197

Noncurrent liabilities Due to other governments Compensated absences payable Claims and judgments payable Notes payable Revenue bonds payable Deferred loss on early retirement Deferred gain on early retirement Interest rate swap agreement Net OPEB liability Other liabilities Total noncurrent liabilities

Total net assets

1,715,358 527,467 1,078,776 47,705 1,621,459 177,193 290,342

140,647 $

1,720,580

CITY OF PENSACOLA, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012

Program Revenues

Expenses Function/Programs Primary government Governmental activities: General government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Unallocated depreciation Interest on long-term debt Total governmental activities

$

Business-type activities: Utility Sanitation Port Airport Total business-type activities Total primary government

30,598,069 $ 30,960,121 2,992,464 18,824,265 13,780,462 2,893,391 30,000 3,028,787 3,712,342 106,819,901

493,530 $ 1,901,310 543,851 2,387,544

Component unit: Downtown Improvement Board $ Community Maritime Park Assoc., Inc. Total component units $

7,869,356

2,611,120 $ 100,615 3,663,495 12,298,790

18,674,020

36,900,749 6,838,663 2,401,744 17,996,001 64,137,157

167,082,710 $

1,286,942 3,835,843 5,122,785

Capital Grants and Contributions

2,543,121

25,338,365 6,179,795 2,633,916 26,110,733 60,262,809 $

Operating Grants and Contributions

Charges for Services

971,853 494,446 1,466,299

$

6,880,444

1,153,682 184,468 6,496,112 7,834,262

0

72,006,513 $

$

4,608,441 578,338 249,640 1,094,401 119,281 230,343

18,674,020 $

$ $

14,714,706

$ 1,894,745 1,894,745

$

3,972,924 3,972,924

(continued)

The accompanying notes are an integral part of these financial statements. 45

CITY OF PENSACOLA, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012

Governmental Activities Function/Programs Primary government Governmental activities: General government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Unallocated depreciation Interest on long-term debt Total governmental activities

$

Net (Expenses) Revenue and Changes in Net Assets Component Units Primary Government Downtown Community Business-type Improvement Maritime Park Activities Total Board Associates, Inc.

(22,884,978) (28,379,858) (2,198,973) (11,678,825) (1,362,391) (119,927) (30,000) (3,028,787) (3,712,342) (73,396,081)

Business-type activities: Utility Sanitation Port Airport Total business-type activities

$

$

Total primary government

(73,396,081)

(22,884,978) (28,379,858) (2,198,973) (11,678,825) (1,362,391) (119,927) (30,000) (3,028,787) (3,712,342) (73,396,081)

12,716,066 658,868 (47,704) (1,618,620) 11,708,610

12,716,066 658,868 (47,704) (1,618,620) 11,708,610

11,708,610

(61,687,471)

Component unit: Downtown Improvement Board Community Maritime Park Assoc., Total component units

$

$

General revenues: Property taxes Public service taxes and franchise fee Communication service tax Local business tax Local option gasoline tax Local option sales tax Unrestricted intergovernmental revenu Unrestricted investment earnings Gain on sale of capital asset Miscellaneous Transfers Overhead transfers

12,311,601 14,252,846 3,600,306 885,161 1,557,013 6,401,758 6,123,014 1,948,024 105,387 32,315 8,000,000 2,366,900

Total general revenues, transfers, and

57,584,325

349,684

42,597 66,358 392,351 (8,000,000) (2,366,900)

12,311,601 14,252,846 3,600,306 885,161 1,557,013 6,401,758 6,123,014 1,990,621 171,745 424,666 0 0

(9,865,594)

47,718,731

349,855

Special item Forgiveness of Debt

171

2,526,272

14,531 31,447

45,978

79,854

Change in net assets

(15,811,756)

Net assets, October 1, 2011 Net assets September 30, 2012

(315,089)

$

1,843,016

(13,968,740)

114,620

199,521,028

155,793,887

355,314,915

192,472

183,709,272 $

157,636,903 $

341,346,175 $

307,092

The accompanying notes are an integral part of these financial statements. 46

2,572,250 (851,670) $

1,720,580

CITY OF PENSACOLA, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

General Fund

Housing Assistance Payments

Local Option Sales Tax

Maritime Community Park Construction

Other Governmental Funds

Total Governmental Funds

ASSETS Cash and cash equivalents Other cash Investments Accrued interest Accounts receivable Special assessments receivable Due from other funds Due from other governments Prepaids and deposits Inventories Notes receivable Restricted assets: Cash and cash equivalents Other cash Investments Accounts receivable Due from other funds Due from other governments Prepaids and desposits Notes receivable

$

10,073,677 $

$

2,330,450 $ 925,059 414,227

$

1,770,889 32,552 1,645,251 178,817 832,456 962,354 24,780

482,256 3,133,619

801

793,751

325,226

880,193

6,143,939

141,086

57,808

156,450

1,095,566

5,014,726 $ 891,345

335,102

78,803

17,307

122,596 144,592 25,530 3,617 411,969 6,730,462 12,189 1,196,309 1,733,521 1,002,802

39,813,626

Total assets

1,993,002

17,418,853 925,059 3,076,461 32,552 2,059,156 178,817 955,052 1,606,509 3,184,730 3,617 411,969 14,873,571 12,189 2,647,219 1,733,521 1,002,802 41,806,628

$

16,455,613 $

3,998,909 $

5,042,282 $

47,070,438 $

19,361,463 $

91,928,705

$

1,290,915 $ 12,667

25,280 $ 189,342 865,513 1,546,888

4,611 $

69 $

365,320 $ 325,458 213,263 488,339 47,705 24,039

1,686,195 527,467 1,078,776 2,072,342 47,705 177,193 1,621,459 4,464,664 272,663 11,948,464

LIABILITIES AND FUND BALANCE Liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Due to other governments Compensated absences payable Wages and benefits payable Deferred revenue Deposits Total liabilities

153,154 1,621,459 1,106,617 130,467 4,315,279

2,627,023

28,484

8,631

335,102

489,120

368,197

497,820

2,533,825 142,196 4,140,145

(continued)

The accompanying notes are an integral part of these financial statements. 47

CITY OF PENSACOLA, FLORIDA BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

General Fund Fund balances Non-spendable Restricted Saenger capital Housing Assistance Payments Maritime Park Other restricted Committed Park purchases Tree landscape Council Reserve Other committed Assigned Unassigned Total fund balances

24,780

Local Option Sales Tax 3,133,619

Housing Assistance Payments

Maritime Community Park Construction

801

Other Governmental Funds

Total Governmental Funds

29,147

3,188,347

12,064,016

97,700 1,036,643 39,813,626 26,024,757 38,141 676,045 7,684,929 4,207,674 2,194,163 (4,981,784) 79,980,241

97,700 1,036,643 330,918

3,234,190

3,636,641

39,813,626 6,758,992

38,141 676,045 7,684,929 2,187,305 1,100,516 12,140,334

Total liabilities and fund balances

$

16,455,613 $

(4,995,923) 1,371,886 3,998,909 $

4,674,085

46,572,618

4,207,674 6,858 (1,086,377) 15,221,318

5,042,282 $

47,070,438 $

19,361,463

Capital assets used in governmental activities are not financial resources to the governmental funds. The cost of the assets is $262,598,896 and the accumulated depreciation is $71,538,573

191,060,323

Other long-term assets are not available to pay for current period expenditures and therefore are deferred in the funds.

2,555,660

The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets.

9,050,020

Net other post employment benefits (OPEB) liability, as required by Governmental Accounting Standards Statement No. 45, are not due and payable in the current period and therefore are not reported in the governmental funds. Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds. Bonds payable Unamortized bond premium Unamortized bond discount Unamortized bond issue costs Deferred gain on refunding Deferred loss on early retirement Due to other governments Compensated absences Accrued interest payable Net assets of governmental activities

(5,349,565)

(67,484,053) (156,467) 315,770 614,024 (2,283,298) 418,594 (19,500,000) (3,469,137) (2,042,840)

(93,587,407) $

The accompanying notes are an integral part of these financial statements. 48

183,709,272

CITY OF PENSACOLA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

General Fund

Revenues: Taxes Licenses and permits Franchise fees Intergovernmental Charges for services Fines and forfeits Assessments Interest income Donations Other

$

23,275,738 61,432 7,774,176 6,123,014 1,026,274 112,019 51,729 48,204

Sales Tax $

39,084,263

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

Other

Total

Governmental

Governmental

$

Construction $

Funds $

11,260,850

978,239 206,273

9,683,375 4,610,118 225,839

883

12,678

1,859,422

69,897

5,513

37,494 199,965 19,177

6,402,641

11,343,425

3,049,447

17,404,035

77,283,811

3,955,496 1,381,167 297,820 6,637,799 181,829 2,770,640 6,231,092

7,986,834 29,892,275 2,531,637 15,962,500 13,671,431 3,009,598 30,000 14,483,196

3,504,241 221,686 25,181,770

3,504,241 4,162,404 95,234,116

(7,777,735)

(17,950,305)

16,823,219 (7,882,126) 4,830 8,945,923

28,398,726 (19,898,726) 105,387 8,605,387

1,168,188

(9,344,918)

8,207,027

41,290,479

877,237 9,220,786

13,256,085

3,063,481 6,284,996

(2,206,216)

(2,818,145)

(1,912,660)

(3,235,549)

32,118

3,221,515 13,256,085

80,000 2,025 2,025

0

(2,818,145)

80,000

(1,910,635)

(3,155,549)

1,557,013 1,071,054

Funds 31,234,509 1,132,486 7,774,176 28,045,478 5,842,665 337,858 51,729 1,958,681 199,965 706,264

104,404

(2,628,777)

Special item - Sale of capital asset

Maritime Community Park

4,031,338 28,406,704 2,233,817 6,071,068 233,517 238,958 30,000 45,077

11,495,507 (12,016,600) 98,532 (422,561)

Net Change in fund balances before special item

Housing Assistance Payments

6,401,758

611,677

Total revenues

$

3,495,507

Net Change in fund balances

3,495,507

866,730

Fund balances at beginning of year Fund balances at end of year

Local Option

(2,818,145)

11,273,604 $

12,140,334

(1,910,635)

4,190,031 $

1,371,886

(3,155,549)

6,584,720 $

4,674,085

1,168,188

49,728,167 $

46,572,618

14,053,130 $

The accompanying notes are an integral part of these financial statements. 49

(5,849,411)

15,221,318

85,829,652 $

79,980,241

CITY OF PENSACOLA, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012

Net change in fund balances - total governmental funds

$

(5,849,411)

Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital assets Less current year depreciation

14,166,329 (8,083,340)

6,082,989

Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets.

3,504,241

Some revenues reported in the statement of activities do not provide current financial resources, therefore, those revenues are not reported as revenues in governmental funds.

(235,636)

Long-term due to other governments, reported in the statement of activities, does not require the use of current financial resources, therefore, it is not reported as an expenditure in governmental funds.

(19,500,000)

Compensated absences, reported in the statement of activities, does not require the use of current financial resources, therefore, it is not reported as an expenditure in governmental funds.

290,557

Accrued interest expense, reported in the statement of activities, does not require the use of current financial resources in governmental funds. Included is the amortization of bond issuance costs, discounts, and premiums of ($380,742)

450,061

Annual other post employment benefits (OPEB) cost, as required by Governmental Accounting Standards Statement No. 45, does not require the use of current financial resources, therefore, it is not reported as an expenditure in governmental funds.

(996,846)

Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities. The proceeds from the sale of capital assets are reported as revenue in the governmental funds. However, the cost of capital assets disposed must be offset against the sale proceeds resulting in a gain/(loss) on sale of capital assets in the statement of activities. Donations of capital assets do not provide current financial resources to the governmental funds. Donations of capital assets Gain/(loss) on disposal of capital assets Change in net assets of governmental activities

416,090

58,743 (32,544)

26,199 $

The accompanying notes are an integral part of these financial statements. 50

(15,811,756)

CITY OF PENSACOLA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012

Budgeted Am ounts Original

Variance w ith Final Budget -

Final

Actual Am ounts

Positive/(Negative)

Revenues: Taxes

$

Licenses and permits

23,398,800

$

23,275,700

$

23,275,738

$

38

59,700

59,700

61,432

Franchise fees

8,637,700

7,774,100

7,774,176

76

Intergovernmental

6,084,800

6,109,200

6,123,014

13,814

Charges for services

1,051,300

1,041,100

1,026,274

(14,826)

73,300

100,700

112,019

11,319

100,000

51,729

(48,271)

40,000

30,700

48,204

17,504

636,000

570,000

611,677

41,677

39,981,600

39,061,200

39,084,263

23,063

Fines and forfeits Assessments Interest income

1,732

Donations

0

Other Total revenues Expenditures: Current General government

4,844,100

5,177,363

4,031,339

1,146,024

28,965,000

28,703,661

28,406,704

296,957

Transportation

2,205,600

2,233,817

2,233,817

0

Culture and recreation

6,244,100

6,471,742

6,071,068

400,674

Economic environment

242,500

248,250

233,517

14,733

3,000

273,028

238,958

34,070

30,000

30,000

30,000

0

53,309

45,077

8,232

42,534,300

43,191,170

41,290,480

1,900,690

(2,552,700)

(4,129,970)

(2,206,217)

1,923,753

Public safety

Physical environment Human services Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

8,000,000

11,600,000

11,495,507

(104,493)

(8,147,300)

(12,118,221)

(12,016,599)

101,622

50,000

98,500

98,532

(97,300)

(419,721)

(422,560)

32

(2,650,000)

(4,549,691)

(2,628,777)

2,650,000

3,470,222

3,495,507

25,285

866,730

1,946,199

11,273,604

10,194,135

(2,839)

Net change in fund balances before special item Special item - Sale of capital asset Net change in fund balances Fund balances at beginning of year Fund balances at end of year

$

0

(1,079,469)

0

1,079,469

0

$

0

$

12,140,334

1,920,914

$

The accompanying notes are an integral part of these financial statements. 51

12,140,334

CITY OF PENSACOLA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL HOUSING ASSISTANCE PAYMENTS FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012

Budgeted Amounts Original Revenues : Intergovernmental Interest income Other

$

Total revenues Expenditures : Current Economic environment Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Sale of capital assets Total other financing sources (uses):

14,860,800 9,500 68,700

$

Fund balances at beginning of year $

Actual Amounts

14,860,800 9,500 68,700

$

11,260,850 12,678 69,897

$

(3,599,950) 3,178 1,197

14,939,000

14,939,000

11,343,425

(3,595,575)

16,539,000 16,539,000

16,625,900 16,625,900

13,256,085 13,256,085

3,369,815 3,369,815

(1,600,000)

(1,686,900)

(1,912,660)

0

Net change in fund balances

Fund balances at end of year

Final

Variance with Final Budget Positive/(Negative)

2,025 2,025

0

(1,600,000)

(1,686,900)

(1,910,635)

1,600,000

1,686,900

6,584,720

0

$

0

$

4,674,085

The accompanying notes are an integral part of these financial statements. 52

(225,760)

2,025 2,025 (223,735) 4,897,820 $

4,674,085

CITY OF PENSACOLA, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2012 Business-type Activities - Enterprise Funds

Utility Fund

Sanitation Fund

Port Fund

Governmental ActivitiesInternal Service Funds

Total Enterprise Funds

Airport Fund

ASSETS Current assets Cash and cash equivalents Investments Accounts receivable (net) Due from other funds Due from other governments Prepaid expenses Inventory Restricted assets Cash and cash equivalents Investments Total current assets

$

Noncurrent assets Intangible asset Unamortized bond issue costs Prepaid expenses Advances to other funds Restricted assets Cash and cash equivalents Investments Capital assets Non-depreciable Depreciable (net) Total noncurrent assets Total assets

2,251,481 400,191 4,143,703 115,700

$

1,356,110 241,042 645,702

$

537,283 95,499 656,055

$

518,627 92,036 1,773,585

1,504,668 28,273

975

226,793 14,355

2,649,301 99,267

1,895,145 336,853 10,676,014

23,048 4,097 2,270,974

308,056 54,755 1,892,796

5,562,062 991,574 11,686,452

66,646 29,122

$

$

47,366,824

41,093 2,435,523 2,476,616 $

4,747,590

1,893,130 10,829,898 12,723,028 $

14,615,824

$

1,415,773 322,595 276,129 2,657,205 222,792 580,788

5,475,282

66,646 1,151,199 0 1,184,300

210,320 783,325

7,206,170 1,280,863

7,472,526 1,328,207

2,809,173 499,317

26,154,557 148,655,874 184,419,541

28,524,548 196,582,569 236,309,995

84,296 2,580,963 6,967,394

1,184,300

435,768 34,661,274 36,690,810

$

7,788,311 1,387,279 26,526,236

1,122,077

266,356 47,344

4,663,501 828,768 7,219,045 115,700 2,876,094 1,619,265 28,273

196,105,993

$

262,836,231

$

12,442,676

(continued)

The accompanying notes are an integral part of these financial statements. 53

CITY OF PENSACOLA, FLORIDA STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2012 Business-type Activities - Enterprise Funds

Utility Fund

Sanitation Fund

Port Fund

Governmental ActivitiesInternal Service Funds

Total Enterprise Funds

Airport Fund

LIABILITIES AND NET ASSETS Liabilities Current liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Compensated absences payable Deposits Deferred revenue Payable from restricted assets Notes payable Revenue bonds payable Accrued interest payable Total current liabilities

$

1,289,325 40,152 135,199 406,139 62,254

$

105,904

$

322,187

41,491 75,763 28,058 19,823

85

362,811

$

145,413

360,299 290,056 140,663 2,494,947 17,341 42,272 2,961

445,000 1,450,000 52,250 4,025,732

428,176

527,946

2,500,000 1,480,990 7,329,529

624,413 236,692

327,664 1,654,649

65,261

$

1,797,019 405,971 303,920 3,243,096 79,595 405,168 148,374

$

29,163

146,040 17,679

445,000 3,950,000 1,533,240 12,311,383

192,882

Noncurrent liabilities Compensated absences payable Advances from other funds Claims and judgments payable Notes payable Revenue bonds payable Deferred gain on early retirement Deferred loss on early retirement Interest rate swap agreement Net OPEB liability Total noncurrent liabilities

1,147,570 14,937,966

435,127 2,417,440

92,026 157,287

(698,456) 357,818 577,090 75,375,252

Total liabilities

18,963,698

2,845,616

685,233

82,704,781

105,199,328

3,392,656

20,368,519

1,176,616

12,723,028

98,353,734

132,621,897

2,665,259

1,207,563

5,338,700 1,000,000 2,148,333 6,560,445

5,652,400 1,000,000 2,148,333 16,214,273

6,384,761

425,821 57,826

4,555,000 7,995,000 416,873 (37,582)

1,443,159 1,949,167 0 22,655,000 64,550,153 416,873 (736,038) 357,818 2,251,813 92,887,945

18,100,000 56,555,153

324,306 18,458 2,361,442

495,568 3,199,774

Net Assets Investment in capital assets, net of related debt Restricted Debt service Renewal and replacement Operations and maintenance Unrestricted (deficit) Total net assets

313,700

7,720,907 $

28,403,126

725,358 $

1,901,974

$

13,930,591

$

113,401,212

The accompanying notes are an integral part of these financial statements. 54

$

157,636,903

$

9,050,020

CITY OF PENSACOLA, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Business-type Activities - Enterprise Funds Utility Fund Operating revenues: Charges for services Insurance Other Total operating revenues

$

$

321,645 37,222,394

Operating expenses: Gas purchases Salaries and employee benefits Materials and supplies Repairs and maintenance Contractual services Office and utilities Land fill fees Overhead allocation Premiums and claims expense Total operating expenses before depreciation Depreciation Operating income (loss) Nonoperating revenues (expenses): Investment interest Interest expense Amortization of bond expense Gain (loss) on disposal of capital assets Total nonoperating revenues (expenses)

Net assets at beginning of year $

$

17,996,001

$

64,137,157

$

4,921,423 196,033 2,085,218 3,229,872 2,437,533

1,161,400

910,746 23,407 61,350 132,616 426,004 13,947 90,300

703,300

11,887,888 16,023,798 1,358,141 3,282,680 5,611,446 4,513,380 961,944 2,366,900

24,470,462

6,303,966

1,658,370

13,573,379

46,006,177

13,502,350 18,257,055

12,751,932

574,711

772,590

4,424,098

18,523,331

1,408,143

1,675,253

278,638

1,065,846

11,076,679

296,073

7,583 4,630 300,703

-

3,954,744

300,703

24,448,382

1,601,271

28,403,126

$

1,901,974

9,797,996

12,817,733

426,106

5,705,598

982,037

1,975

14,826 (3,306,825) (135,833)

31,131

1,975

(3,427,832)

42,597 (3,750,632) (55,167) 66,358 (3,696,844)

(291,281)

(8,801,730)

2,008,754

184,468

3,492,995 3,002,111 1,006

184,468

6,496,112

3,677,463 3,002,111 1,006 1,153,682 (8,000,000) (165,738)

(597,700) (597,700)

(106,813)

(2,305,618)

1,843,016

416,090

155,793,887

8,633,930

14,037,404 $

13,930,591

115,706,830 $

113,401,212

The accompanying notes are an integral part of these financial statements. 55

3,735,077 167,546 41,587 518,747 291,748

(5,373,898)

(293,256)

6,138 (9,091)

392,351 64,529,508

4,700,539 14,530,441 434,218 19,665,198

3,098,760 419,382 778,319 225,014 422,594 947,997 411,900

1,153,682 (8,000,000) (6,846,318)

Change in net assets

2,401,744

Total

1,476 17,997,477

10,801,062

Contributions and transfers: Contributions Federal and state grants Passenger facility charge Passenger facility charge - Interest Contributed capital from other funds Transfers (out) Total contributions and transfers

$

Airport Fund

29,216 2,430,960

19,658 (434,716) 80,666 58,775 (275,617)

Income (loss) before contributions and transfers

6,838,663

Port Fund

40,014 6,878,677

11,887,888 7,092,869 719,319 357,793 2,023,944 1,227,249

Operating income (loss) before depreciation

Net assets at end of year

36,900,749

Sanitation Fund

Governmental ActivitiesInternal Service Funds

$

157,636,903

622 31,753 1,013,790

$

9,050,020

CITY OF PENSACOLA, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Business-type Activities - Enterprise Funds Utility Fund Cash flows from operating activities: Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for services Net cash provided by (used for) operating activities

$

Sanitation Fund

36,357,686 $ (17,209,632) (6,997,491) 12,150,563

Cash flows from noncapital financing activities: Advance from other funds Transfers (out) Net cash provided by (used for) noncapital financing activities Cash flows from capital and related financing activities: Acquisition of capital assets Acquisition of capital assets with grant monies Proceeds from sale of assets Capital contributed Contributions from customers Acquisition of capital assets with contributions Principal paid on capital debt Interest paid on capital debt Proceeds from capital debt Payment for issuance cost

(1,017,520) (8,000,000)

1,167,267

(9,017,520)

1,167,267

(3,926,411)

(1,297,401)

Airport Fund

2,136,938 $ (733,143) (903,198) 500,597

18,014,155 $ (8,589,763) (2,620,006) 6,804,386

0

(139,545) (141,365)

27,281

177,028 (8,000,000)

(177,029) (597,700)

27,281

(7,822,972)

(774,729)

(216,261)

1,233,722 3,005,705 (813,371) (5,420,000) (3,126,832) 6,300,000 (129,109)

(9,842,784) (3,594,260) 39,074 1,233,722 3,005,705 (813,371) (6,825,000) (3,504,608) 11,300,000 (160,927)

808

(700,423)

(1,298,909)

(280,910)

(6,882,207)

(9,162,449)

(215,453)

(784,388) 19,658 (764,730)

(245,139) 6,138 (239,001)

(150,254) 2,727 (147,527)

(2,364,473) 14,826 (2,349,647)

(3,544,254) 43,349 (3,500,905)

(752,998) 31,131 (721,867)

(380,540)

(2,344,203)

1,667,890

279,597

72,160

(2,400,187)

Cash and cash equivalents at beginning of year

2,745,092

1,099,561

773,179

15,687,046

$

17,727,137 (14,672,332) (3,686,959) (632,154)

(4,479,427) (3,452,895)

(9,091)

63,127,045 $ (29,594,496) (13,426,763) 20,105,786

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at end of year

Total

7,583

(1,405,000) (368,685) 5,000,000 (31,818)

Cash flows from investing activities: (Purchase)/sale of investments Interest on investments Net cash provided by (used for) investing activities

6,618,266 $ (3,061,958) (2,906,068) 650,240

31,491

Net cash provided by (used for) capital and related financing activities

Port Fund

Governmental ActivitiesInternal Service Funds

4,412,982

$

1,379,158

$

845,339

$

13,286,859

20,304,878 $

19,924,338

6,569,148 $

4,224,945

(continued)

The accompanying notes are an integral part of these financial statements. 56

CITY OF PENSACOLA, FLORIDA RECONCILIATION OF OPERATING INCOME (LOSS) PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Governmental ActivitiesInternal Service Funds

Business-type Activities - Enterprise Funds Utility Fund Operating income (loss)

$

Adjustments to reconcile operating income to net cash provided by (used for) operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in inventory (Increase) decrease in due from other funds (Increase) decrease in prepaid expense Increase (decrease) in accounts payable Increase (decrease) in contracts payable Increase (decrease) in due to other funds Increase (decrease) in deposits Increase (decrease) in claims and judgments Increase (decrease) in deferred revenue Increase (decrease) in compensated absences Increase (decrease) in net OPEB obligation Net cash provided by (used for) operating activities:

11,076,679

Sanitation Fund $

1,675,253

296,073

$

278,638

Airport Fund

(293,256) $

1,065,846

(362,915) 1,734 (115,700) (49,709) (124,935)

(101,402)

(294,022)

144 (15,882)

(48,566)

104,564 (23)

(452) (2,567) 17,500 (2,560)

(45,222) (65,072) 209,016 $

Port Fund

12,150,563

11,043 77,085 $

650,240

500,597

(5,373,898) $

9,797,996

2,288,064 3,998

(95,438) 108,791 6,804,386

$

20,105,786

982,037

426,106

(745,659) 1,734 (115,700) (67,358) (63,850) 17,500 2,341,502 3,975 0 (45,222) (157,240) 412,773

(17,341) 79,534

$

5,705,598 $

12,817,733

12,680

(7,773) 17,881 $

Total

303,165 (448) (2,244,721) (182,289) (77,003) (11,404) 815 3,943 120,342 (45,710) 93,013 $

(632,154)

Noncash investing, capital, and financing activities: Utility Fund Amortization of bond expense Contribution of capital assets from other funds Donation of capital assets Gain (loss) on disposal of capital assets Transfer of capital assets to other funds

$

66,885 73,686 1,079,996 27,284 -

Sanitation Fund $

Port Fund -

$

Airport Fund -

$

(357,424) $ -

The accompanying notes are an integral part of these financial statements. 57

Total (290,539) $ 73,686 1,079,996 27,284 -

Internal Service Funds (186) 97,700

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2012

Total Pension Trust Funds

ASSETS Other cash

$

Receivables Employer Employee Commission Recapture Total receivables

273,615

538,138 34,994 2,631 575,763

Investments Short term investments Debt Securities & Bond Mutual Funds Convertible Corporate Bonds Stock Mutual Funds Mortgage Backed Securities Commingled Trust Fund Domestic Stocks Preferred Stocks Foreign Stocks Total investments

Total assets

9,691,507 65,215,253 11,407,616 15,819,166 21,678,444 15,380,514 134,822,603 3,136,870 10,521,918 287,673,891

$

288,523,269

$

421,645

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities

421,645

Net assets Held in trust for pension benefits

$

288,101,624

The accompanying notes are an integral part of these financial statements. 58

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Total Pension Trust Funds Additions Contributions - city Contributions - employee Contributions - employee buy back Contributions - lawsuit Commission recapture Insurance proceeds - State of Florida

$

Total contributions

12,996,882 1,042,209 763,031 1,928,651 19,289 1,144,034 17,894,096

Investment income Net appreciation (depreciation) in fair value of investments Interest and dividends

41,332,553 6,646,920 47,979,473 1,414,471 46,565,002

Less investment expense Net investment income Total additions

64,459,098

Deductions Pensions paid - employees Pensions paid - widows Pensions paid - children Refunds to employees Deferred retirement option plan Health insurance assistance Administrative expenses

16,926,008 2,909,691 6,332 203,006 4,168,894 159,348 274,473

Total deductions

24,647,752

Change in net assets

39,811,346

Net assets held in trust for pension benefits Beginning of year

248,290,278

End of year

$

288,101,624

The accompanying notes are an integral part of these financial statements. 59

NOTES TO

FINANCIAL STATEMENTS

THIS PAGE INTENTIONALLY LEFT BLANK

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 TOPICAL INDEX Topic

Page(s)

Topic

Page(s)

Accounts Receivable

73

Interest Rate Swap Agreements

88

Basis of Accounting, Measurement Focus and Financial Presentation

63

Inventories

66

Investments

66

Blended Component Unit

60

Joint Ventures

61

Bond Discounts, Issuance Cost, and Refunding Gains/Losses

68

Capital Assets Policy

62

Long-term Debt

81

Capital Assets

75

Net Assets Policy

68

Cash and Cash Equivalents/Investments

66

Other Postemployment Benefits

109

Changes in Long-Term Liabilities

85

Other Significant Commitments

114

Compensated Absences

68

Pension Funds

Conduit Debt

90

Pension Plan Descriptions and Contribution Information

104

Pension Plan Financial Statements

102

Pension Plan Obligations

108

Pension Plan Three-Year Trend Information

108

Contractual, Construction, and Equipment Commitments Debt Restriction Deferred Compensation/Replacement Benefit Program

113 89 112

Litigation

113

71

Prepaid Insurance

67

Property Tax Calendar Year and Revenue Recognition

73

Reporting Entity

60

Deferred Revenue

74

Discretely Presented Component Unit

61

Encumbrances

69

Florida Ports Finance Commission Agreement

91

Restricted Assets

67

Fund Balance Deficit

81

Retiree Benefits

109

Fund Balance Disclosure

93

Revenues Pledged for Debt Repayment

Fund Balance Policy

68

Risk Management

General Budget Policies

69

Special Item

Government-Wide and Fund Financial Statements Grant Contingencies

Subsequent Events 63 113

90 100 76 118

Summary of Debt Service Requirements to Maturity

86 70

Interfund Receivables, Payables, and Transfers

79

Surplus Funds

Interfund Receivables/Payables Policy

66

Termination Benefits Unbilled Utility Services

113 73

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Pensacola (the “City”) have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. Statements and Interpretations of the GASB have been applied in the preparation of these financial statements. A. Reporting Entity On November 24, 2009 voters approved amendments to the City Charter that changed the form of government from a Council-Manager to a Mayor-Council structure commonly referred to as a “Strong Mayor” form of government. The amended Charter became effective January 2010. With the new structure, the Council shall be the governing body of the City with all legislative powers of the City vested therein, consisting of nine (9) Council Members, one (1) to be elected from each of the seven (7) election districts of the City, and two Council members elected at large. Members of Council and Mayor are limited to 3 consecutive 4 year terms. The Mayor is elected at large, has a 4 year term in office, will exercise the executive powers of the City and shall not be a member of Council. In evaluating the City as a reporting entity, management has addressed all potential component units for which the City may or may not be financially accountable and, as such, be includable within the City’s financial statements. The City (the primary government) is financially accountable if it appoints a voting majority of the organization’s governing board and 1) it is able to impose it’s will on the organization or 2) there is a potential for the organization to impose a specific financial benefit or burden to the City. Additionally, the primary government is required to consider other organizations for which exclusion of the nature and significance of their relationship with the City would cause the reporting entity’s financial statements to be misleading or incomplete. The accompanying financial statements present the City and its component units and entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City’s operation. Each discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the City. Blended Component Unit Community Redevelopment Agency (CRA) - On September 25, 1980, the Pensacola City Council declared itself the CRA pursuant to the provisions of Chapter 163, Part III, Florida Statutes. This action, adopted by Resolution Number 55-80, also outlined the rights, powers, duties, privileges and immunities invested in the nine member City Council acting as the CRA. The CRA selects a chair and a vice-chair from the nine-member agency and approves the annual operating budget. The CRA is reported as a special revenue fund of the City.

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Discretely Presented Component Unit The component unit columns in the combined financial statements include the financial data of the City’s discretely presented component units. They are reported in a separate column to emphasize that they are legally separate from the City. The accounting policies of these discretely presented component units are the same as those detailed for the City. The City’s discretely presented component units are as follows: Downtown Improvement Board (DIB) - The DIB was created in April 1972 by Chapter 72655, Laws of Florida. The DIB is considered a component unit since the Mayor of the City appoints and the Council approves the five member board. In addition, the City Council approves the budget of the Board, including the proposed millage rate. Complete financial statements of the DIB can be obtained from their administrative office as follows: Downtown Improvement Board, Post Office Box 653, Pensacola, Florida 32593. Community Maritime Park Associates (CMPA) - The CMPA, a non-profit corporation under the provisions of Chapter 617, Florida Statues, was created in 2005 for the sole purpose of developing the public and private aspects of the Vince J. Whibbs, Sr. Community Maritime Park. The CMPA is considered a component unit since the CMPA is an agency of the City of Pensacola, and the City appoints all members of the CMPA’s Board of Trustees. Complete financial statements of the CMPA can be obtained from their administrative office as follows: Community Maritime Park Associates, Inc., 222 West Main St., Pensacola, Florida 32502. Joint Ventures Excluded From the Reporting Entity The following joint ventures do not meet the criteria for inclusion in the City's financial statements since no financial benefit or burden exists, nor can the City impose its will on the entities. Escambia - Pensacola Human Relations Commission (HRC) - Created by an interlocal agreement between the Escambia County Board of County Commissioners and the Pensacola City Council in 1974, pursuant to Florida Statutes, for the purpose of promoting fair treatment and equal opportunity to all citizens of the community. The Commission is composed of nine members: four selected by the Escambia County Board of County Commissioners, four selected by the City Council, and one selected by the other eight members. There is no current or longterm debt nor does the City control the financial operations of the Commission. Complete financial statements of HRC can be obtained from their administrative office as follows: Escambia - Pensacola Human Relations Commission, 2257 North Baylen Street, Pensacola, Florida, 32501. Pensacola - Escambia County Promotion and Development Commission (PEDC) - Created in 1967 by Chapter 67-1365, Laws of Florida, amended in 1989 by House Bill 984, for the purpose of promoting and developing the industrial, commercial and tourist potential of the County, increasing employment opportunities, improving the economic environment, and expanding the tax base. The nine member commission consists of representatives from the Escambia County Board of County Commissioners, the Pensacola City Council, the Pensacola Area Chamber of Commerce, and the Town of Century and Tourist Advisory Council. 61

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Escambia County and the City of Pensacola each contribute to the operation and maintenance of the PEDC, but neither has control over the financial operations of the PEDC nor can it impose its will. Complete financial statements of PEDC can be obtained from their administrative office as follows: Pensacola - Escambia County Promotion and Development Commission, 117 West Garden Street, Pensacola, Florida, 32502. Summary financial statements including fiduciary funds of these entities are as follows:

Statement of Net Assets September 30, 2012 HRC $

Assets Liabilities Net Assets: Restricted Unrestricted Total Net Assets Total Liabilities and Net Assets

$

PEDC

16,172 $

12,092,151

1,958

11,780,533

563 13,651 14,214

61,198 250,420 311,618

16,172 $

12,092,151

Statement of Revenues, Expenditures and Changes in Net Assets for the Fiscal Year Ended September 30, 2012 HRC Revenue

$

Expenditures

PEDC

220,512 $

270,556

221,528

294,765

Excess of revenue over (under) expenditures

(1,016)

(24,209)

Net assets (Deficit) Beginning of Year Net assets (Deficit) at End of Year

15,230 14,214 $

335,827 311,618

$

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 component units. The City’s fiduciary funds are not presented in the government-wide financial statements since by definition, the assets cannot be used to address activities or obligations of the City (i.e., the assets are being held for the benefit of pension participants). The purpose of the government-wide financial statements is to provide a consolidated financial picture of all City activities. The internal service funds provide services to departments throughout the City; therefore, their direct expenses are eliminated functionally on the government-wide financial statements. Governmental activities, supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely on fees and charges to customers for support. Likewise, the primary government is reported separately from the discretely presented component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. The purpose of categorizing direct expenses according to function and revenues according to program is to provide an analysis of activities that are revenue sufficient and those that use the support of general revenues. Direct expenses are those expenses that are clearly identifiable with a specific function. 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 and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not included among program revenues are reported instead as general revenues. Individual 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. All other funds (nonmajor) are combined according to their category, governmental or business-type and are reported in a single column. Combining statements for nonmajor funds are found in the Combining Financial Statements section. C. Basis of Accounting, Measurement Focus and Financial Presentation The basis of accounting refers to when revenues, expenditures/expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied.

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. 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. 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, revenues are considered to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise fees, public service taxes, communication service tax, local business tax, local option gasoline tax, local option sales tax, lease revenues and interest associated with the current fiscal period are all considered to be susceptible to accrual and therefore have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received. The City reports the following major governmental funds: General Fund - used to account for all financial resources except those required to be accounted for in another fund. All general property taxes, fines, property rentals and certain intergovernmental revenues are recorded in this fund. Typical expenditures are for administration, planning, parks and recreation, public works and public safety. Local Option Sales Tax - a capital projects fund that accounts for the local option infrastructure sales surtax (pursuant to Florida Statutes 212.055) to provide for the construction of various infrastructure improvements including park and recreation improvements, street resurfacing and reconstruction, and payment of associated debt. Housing Assistance Payments – a special revenue fund that accounts for the proceeds of specific revenue sources (other than for expendable trusts or for capital projects) that are legally restricted to expenditures for specific purposes. Maritime Community Park Construction – a capital projects fund that accounts the Maritime Community Park infrastructure improvements as well as the accumulation of funds for the payment of demolition of the ECUA Waste Water Treatment Plant. The City reports the following major proprietary funds: Utility Fund – accounts for the assets, operation and maintenance of the City-owned natural gas service. 64

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sanitation Fund – accounts for the assets, operation and maintenance of the City-owned garbage and trash services. Port Fund – accounts for the assets, operation and maintenance of the City-owned port facility. Airport Fund – accounts for the assets, operation and maintenance of the City-owned airport. Additionally, the government reports the following fund types: Internal Service Funds (ISF) account for services provided to various City departments on a cost reimbursement basis. The services provided include a central warehouse inventory, fleet maintenance, engineering, management information services and a risk management (insurance) program. ISFs are reported as a governmental activity within the government-wide financial statements. Individual fund statements are provided in the Combining Financial Statements section. Fiduciary Funds are trust funds that account for assets held by the City in a trustee capacity for individuals, other governmental units and/or other funds and include the City’s General, Firemen’s and Police Officers’ pension funds. Fiduciary funds are not included in governmentwide financial statements, however a statement of net assets and a statement of changes in net assets are included as part of the basic financial statements with individual fund statements presented in the Combining Financial Statements section. 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 City has elected not to follow subsequent private-sector guidance. Amounts reported as program revenues include 1) charges to customers for goods, services, or privileges provided, and fines and forfeitures, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Those revenues not clearly defined as program revenues are categorized as general revenue. General revenues include resources such as taxes, franchise fees, interest and sale of assets. As a general rule, the effect of interfund activity is eliminated from the government-wide financial statements. 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 enterprise and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses that do not meet this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. 65

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Assets or Equity 1. Cash and Cash Equivalents/Investments The City of Pensacola has defined cash and cash equivalents as cash held at a depository and cash on hand for operating purposes and those investments which are short term and highly liquid. Generally, those investments have original maturities of three (3) months or less. Cash equivalents normally consist of treasury bills, certificates of deposit and money market funds. All monies, which are not legally restricted to separate administration, are pooled together for investment purposes while each individual fund and/or account is maintained on a daily transaction basis. Investment earnings are distributed in accordance with the participating funds’ relative equity. 2. Investments All investments held by the City of Pensacola, including external investment pools, defined benefit pension plans, and debt securities are reported at fair value. The City has monies invested in the Local Government Surplus Funds Trust Fund Investment Pool, which is governed by the State Board of Administration. The fair value of the City’s position in the Pool is the same as the value of the pool shares; however, the fair value of the City’s position in the State Board of Administration's Fund B Surplus Funds Trust Fund is $3,824 less than the $74,935 investment in the pooled shares as of September 30, 2012. 3. Interfund Receivables/Payables Interfund receivables and payables arise from interfund transactions and are recorded by all funds affected as “due to/from other funds” for the current portion of the receivable/payable or as “advance to/from other funds” for the noncurrent portion of the receivable/payable. Government-wide financial statements eliminate transactions occurring within like-kind activities (i.e., governmental to governmental or business-type to business-type). The residual balance between activities is reported in the government-wide financial statements as “internal balances”. Fund financial statements present the entire transaction on the balance sheet as “due to/from other funds” and/or “advance to/from other funds”. 4. Inventories Inventories included in the internal service fund’s General Stock Fund consist primarily of utility stores, automotive supplies and fuel for purchase by City departments. Inventories included in the Golf Fund consist of inventories held for resale to the public. All inventories are accounted for by the consumption method and are valued at cost, which approximates market, using the first in, first out method. Appropriate allowances have been made for obsolete and surplus items.

66

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5. Prepaid Insurance The City of Pensacola accounts for property insurance premiums using the consumption method. Property Insurance Premiums for both governmental and enterprise funds are paid quarterly, with a term year beginning May 1st resulting in a prepaid insurance premium for the month of October. 6. Restricted Assets Certain assets of both governmental and business-type activities are restricted by specific provisions of bond resolutions, grant agreements, or other agreements with outside parties. Assets such as these are restricted since their use is limited. 7. Capital Assets Capital assets, which include land, buildings, equipment, improvements other than buildings, and infrastructure assets are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life greater than one year. Such assets are recorded at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at fair value as of the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. The City does not capitalize interest on borrowings used to finance the construction of general capital assets. Interest on capital assets is capitalized for proprietary funds; however, when the expense during construction is netted against the related income, the resulting amount is typically immaterial. The Utility Fund reports an intangible asset on the face of the financial statements. The intangible asset is recorded as the excess of the purchase price over the fair market value of assets acquired and is amortized on a straight-line basis over an estimated useful life of forty years. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Buildings 15 - 50 years Improvements other than buildings 15 - 50 years Infrastructure 15 - 50 years Machinery and equipment 3 - 10 years Utility lines and extensions 40 - 50 years Vehicles and heavy equipment 5 - 25 years

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 8. Compensated Absences It is the policy of the City to permit general employees to accumulate up to 500 hours of earned but unused leave benefits (Paid Time Off - PTO), fire employees may accumulate up to 720 hours of PTO, police sergeants, lieutenants and captains may accumulate up to 500 hours PTO and police officers may accumulate up to 900 hours PTO, which can be paid to the employee upon separation from service. Employees who separate service in good standing can be paid the balance of their accrued PTO. Unpaid compensated absences are recorded as a liability when the benefits are earned in both the government-wide financial statements and proprietary fund financial statements. Governmental funds within the fund financial statements are not required to record a liability of accumulated amounts of unused leave benefits. 9. Bond Discounts, Issuance Cost, and Refunding Gains and Losses 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. Capital appreciation bonds are reported at their accreted value which is computed at the end of each fiscal year. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond refunding gains and losses are deferred and amortized over the remaining life of the old debt or the life of the new debt, whichever is shorter, using the effective interest method. Bond refunding gains are presented as noncurrent liabilities while losses are presented as noncurrent assets. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs (whether or not withheld from the actual debt proceeds received), 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. 10. Fund Balance GASB Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, establishes fund balance classifications based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications are non-spendable, restricted, committed, assigned and unassigned. Each classification reflects the nature and extent to which a restriction is placed upon fund balance. 11. Net Assets The government-wide and business-type fund financial statements utilize a net asset presentation. Net assets are categorized as invested in capital assets (net of related debt), restricted and unrestricted. Invested in Capital Assets (net of related debt) is intended to reflect the portion of net assets which are associated with non-liquid, capital assets less outstanding capital asset related debt. 68

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Restricted Net Assets are liquid assets (generated from revenues and net bond proceeds) which are not accessible for general use because of third-party (statutory, bond covenant or granting agency) limitations. Unrestricted Net Assets represent unrestricted liquid assets. NOTE II. – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY General Budget Policies Prior to the beginning of each fiscal year, the Mayor submits an operating budget to the City Council. The operating budget includes proposed expenditures and the means for financing them. After acceptance by the Council the budget is legally enacted by the passage of a budget resolution. Budgetary control is established within each fund at the line item. Amounts may be transferred between departmental line items or between departments within a fund. Amounts to be transferred require the approval of the Mayor or his designee; however, amounts appropriated for capital expenditures can only be transferred from capital expenditure accounts with City Council approval. Appropriations for expenditures within a fund may only be decreased or increased with City Council approval. Expenditures for each fund may not legally exceed the total fund appropriation. A legally adopted budget is employed as a control device for the General Fund, Special Revenue Funds, and Debt Service Funds. In addition, Enterprise and Internal Service Funds are budgeted on a limited non-GAAP basis for management control purposes. The City prepares its governmental fund type budgets on a GAAP basis. All budget amounts presented in the financial statements are as originally adopted or as authorized by the City Council. Encumbrances 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 and Capital Projects Funds. The budget for the subsequent year provides a reappropriation of funds to complete transactions for outstanding encumbrances.

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS A. Deposits and Investments 1. Surplus Funds (not including pensions) As of September 30, 2012, the City had the following investments which are disclosed by specific identification. Investments

Maturity Range

State Investment Pool LGIP Fund B

39 days 4.08 years

Total Investments

Fair Value $

1 71,111

$

71,112

As of September 30, 2012, the City had a nominal balance of $1 invested in the State Board of Administration's Local Government Surplus Funds Trust Fund Investment Pool (LGIP). Standard and Poor's Ratings Services assigned its "AAAm" principal stability fund rating to LGIP. As monies become available from Fund B, they are transferred to the LGIP. As of September 30, 2012, the City had $74,935 invested in the State Board of Administration's Fund B Surplus Funds Trust Fund. Fund B’s fair value as of September 30, 2012 was $71,111 resulting in an unrealized loss of $3,824. Fund B is not yet rated by any nationally recognized statistical rating agency. All monies invested in the State Board of Administration are recorded in the Insurance Retention Fund. Credit Risk. The City’s investment policy limits investments to those securities identified in the Florida Statutes, Section 218.415(16). Additional investment types are permitted only if they are granted authority through a separate ordinance approved by the City Council. Concentration Credit Risk. The City’s investment policy requires that bank deposits be secured as provided by Chapter 280, Florida Statues, titled Security for Public Deposits Act. If statutory responsibilities are met then the deposits placed in any qualified public depository (QPD) are protected from loss, without limit. The investment policy sets no limits as to the maximum amount that any particular institution can hold or a maximum amount for an individual type of investment. Given the statutorial restriction to the highest rating and the legal obligation to collaterize certain other investments held by individual banks, the concentration risk is not viewed to be a risk by the City. Interest Rate Risk. The City’s investment policy requires that maturities on investments are limited to an average maturity not to exceed two years with the maximum maturity of any individual investment not to exceed five years. The investments held at September 30, 2012 meet the criteria of the City’s investment policy.

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) 2. Pension Funds

Investments

Fair Value

Short Term Investments Mutual Funds - Pension Plans Convertible Corporate Bonds Mortgage & Asset backed securities Commingled Index and Trust Funds Stocks

$

9,691,507 81,034,419 11,407,616 21,678,444 15,380,514 148,481,391

$

287,673,891

The City’s pension funds contain certain bonds that are actually mortgage-backed and assetbacked securities which could be classified as “derivative” investments under GASB Technical Bulletin No. 94-1. These securities are based on cash flows from interest and principal payments on underlying mortgages. Therefore, they are sensitive to prepayments by mortgagees, which may result in a decline of interest rates. The City invests in interest and principal securities (a form of mortgage-backed and asset-backed securities) in part to maximize yields and in part to hedge against a rise in interest rates. These investments are within the investment policy guidelines for the pension funds. Interest Rate Risk. The City’s General, Fire and Police Pension Plans each have funds invested in bond mutual funds. Each plan has its own investment policy, which restricts the investments that the mutual funds can hold. The policy limits the percentage of plan assets invested in bonds but does not place limits on the length of the maturities. The pension plans’ investment weighted average maturities are as follows: General Pension

Weighted Average Maturity

Amount

PIMCO Total Return PIMCO Real Return Integrity Fixed Income Management

5.93 Years 9.46 Years 7.00 Years

$ 6,103,224 7,695,557 14,375,389

Fire Pension PIMCO Total Return Integrity Fixed Income Management

Weighted Average Maturity 5.93 Years 7.00 Years

Amount $ 9,217,423 11,177,921

Police Pension

Weighted Average Maturity

Amount

Integrity Fixed Income Management Integrity Fixed Income ManagementTIPS PIMCO Diversified Income Templeton Global Bond Fund 71

4.30 Years

$11,010,380

9.70 Years 8.42 Years 2.53 Years

2,326,522 1,678,889 1,629,948

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Credit Risk. The risk that an issuer or other counterparty to an investment will not fulfill its obligations. General Pension PIMCO Total Return Bond Fund PIMCO Real Return Bond Fund Integrity Fixed Income Management

Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency

Fire Pension PIMCO Total Return Bond Fund Integrity Fixed Income Management

Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency

Police Pension Integrity Fixed Income Management Integrity Fixed Income Management – TIPS PIMCO Diversified Income Fund Templeton Global Bond Fund

Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency Not Rated by Nationally Recognized Statistical Rating Agency

Custodial Credit Risk. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City’s retirement plans will not be able to recover the value of their investments that are in the possession of an outside party. The Retirement Plans’ Board of Trustees has contracts with each of their money managers which include a requirement that coverage be provided to protect the City’s retirement plans from any losses incurred arising out of the money manager’s negligence. Therefore, the City does not have a custodial credit risk. The gross unrealized gains and losses for the marketable equity securities in the pension funds for the fiscal year ended were as follows:

General Pension and Retirement d Unrealized Gains Unrealized Losses Net Unrealized Gains (Losses)

Firefighters’ Releif and Pension Fund

Police Officers’ Retirement d

Totals

$

26,368,520 $ (9,112,274)

21,657,988 $ (8,700,969)

16,595,551 $ 64,622,059 (5,756,163) (23,569,406)

$

17,256,246 $

12,957,019 $

10,839,388 $

41,052,653

The average cost method is used in computing realized gains and losses on the sale of marketable equity securities.

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CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) B. Accounts Receivable 1. Unbilled Utility Services All utility billing is performed on a cyclical basis which gives rise to unbilled gas services at the end of any given period. The City has recorded estimated accounts receivable and the related revenues based on the number of days of unbilled services for each cycle as of the end of the fiscal year. 2. Property Tax Calendar and Revenue Recognition Escambia County Constitutional Officers perform all appraisals, assessments and collections of City property taxes as an agent for the City of Pensacola. Property valuations are determined each year as of January 1. All property taxes are levied and become due and payable on November 1. The collection period is from November 1 through March 31, with discounts allowed of 4, 3, 2 and 1 percent for early payment in November through February, respectively. All taxes become delinquent on April 1 in the year following assessment, and tax certificates are sold on all real property with unpaid taxes as of June 1. Property tax revenue recognition occurs during the fiscal year of levy (the year the property tax revenue was intended to finance). As of November 2001, the City of Pensacola assessed a stormwater fee to provide additional revenue for stormwater management improvements. The fee is billed annually by the Escambia County Property Tax Collector on the November property tax roll with the exception of government owned property which is billed directly by the City. The stormwater fee is subject to the same collection laws, discounts and penalties as are property taxes. Stormwater revenues are recognized during the fiscal year in which it is billed. 3. Accounts Receivable Accounts receivable are shown net of allowances for doubtful accounts as follows: Acounts Receivable Governmental activities: General Fund Housing Assistance Payments Fund Nonmajor Governmental Funds Internal Service Fund Total governmental activities Business-type activities: Utility Fund Sanitation Fund Port Fund Airport Fund Total business-type activities

$

$

$

$

73

1,645,251 $ 1,137,054 78,803 276,129 3,137,237 $

4,931,017 $ 769,898 656,055 1,773,585 8,130,555 $

Allowance

Net $

801,952

801,952 $

787,314 $ 124,196

911,510 $

1,645,251 335,102 78,803 276,129 2,335,285

4,143,703 645,702 656,055 1,773,585 7,219,045

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) 4. Deferred Revenue Governmental funds report deferred revenue in connection with receivables for revenues that are not considered 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. Amounts that are “unavailable” are not reported as deferred revenue in entity-wide statements. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable General Fund Special assessments $ Leases – Land/ROW receivables Prepaid lease payments Occupational license fees and fines received for subsequent year Special Revenue Funds HUD – Fraud Recovery CDBG Housing Rehab Project notes receivable CRA - Lease receivables Golf Course- Lease receivables Tennis Center- Lease receivables CMPA - Build America Bonds subsidy Grant request and draws prior to meeting all requirements $

178,817 15,212 23,167

Unearned $ 288,033 601,388

335,102 1,215,708 6,263 4,025 72 489,120 530,463

777,294 2,555,660

$

1,909,004

In Proprietary funds, the Utility Fund has deferred revenue of $145,413 which is related to the Purchase Gas Adjustment and the Airport Fund has deferred revenue of $2,961 which is for prepaid rent.

(Remainder of this page intentionally left blank)

74

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) C. Capital Assets Capital asset activity for the fiscal year ended September 30, 2012 was as follows: Beginning Balance Governmental activities: Non-depreciable assets: Land Construction in progress Total Non-depreciable assets Depreciable assets: Buildings Improvements Infrastructure Equipment Total Depreciable assets Total capital assets Less accumulated depreciation for: Buildings Improvements Infrastructure Equipment Total accumulated depreciation Governmental activities net capital assets

Increases

Decreases

Ending Balance

22,247,648 $ 7,428,377 29,676,025

3,914,306 $ 13,209,815 17,124,121

(3,495,507) $ (15,022,438) (18,517,945)

22,666,447 5,615,754 28,282,201

77,304,552 28,964,303 82,233,139 38,983,313 227,485,307 257,161,332 $

6,998,395 508,149 6,527,540 1,812,200 15,846,284 32,970,405 $

-0-0-0(1,466,785) (1,466,785) (19,984,730) $

84,302,947 29,472,452 88,760,679 39,328,728 241,864,806 270,147,007

$

17,058,161 $ 13,004,470 17,313,181 21,959,095 69,334,907 $

1,798,166 $ 967,353 3,028,787 2,726,841 8,521,147 $

-0- $ -0-0(1,434,628) (1,434,628) $

18,856,327 13,971,823 20,341,968 23,251,308 76,421,426

$

187,826,425 $

24,449,258 $

(18,550,102) $

193,725,581

$

$

$

The preceding schedule includes capital assets and accumulated depreciation for both governmental funds and the internal services funds. Per GASB 34 requirements, the internal service funds are reported on the entity-wide statements as a governmental activity. In fiscal year 2012, the net book value of assets held by Internal Service Funds is $2,665,259. Total depreciation expense for governmental activities for fiscal year 2012 is $8,509,447. The difference between depreciation expense and the increase in accumulated depreciation is $11,700, which is a result of capital assets transferred business-type to governmental activities that are different from the assets transferred from governmental to business-type activities.

75

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Beginning Balance Business-type activities: Non-Depreciable Assets: Land Construction in Progress Total Non-depreciable assets Depreciable Assets: Buildings Improvements Equipment Total Depreciable assets Total capital assets

$

Less accumulated depreciation for: Building Improvements Equipment Total accumulated depreciation Business-type activities net assets

$

$

$

Increases

Decreases

Ending Balance

21,976,365 $ 2,110,102 24,086,467

5,238,349 $ 7,668,886 12,907,235

-0- $ (8,469,154) (8,469,154)

27,214,714 1,309,834 28,524,548

145,467,927 152,816,668 27,115,960 325,400,555 349,487,022 $

1,295,432 8,054,099 2,311,144 11,660,675 24,567,910 $

(61,156) (893,937) (350,386) (1,305,479) (9,774,633) $

146,702,203 159,976,830 29,076,718 335,755,751 364,280,299

45,435,118 $ 67,571,407 14,224,992 127,231,517 $

5,316,011 $ 5,444,337 2,071,684 12,832,032 $

(61,156) $ (482,981) (346,230) (890,367) $

50,689,973 72,532,763 15,950,446 139,173,182

capital $ 222,255,505

$

11,735,878 $

(8,884,266) $ 225,107,117

Total depreciation expense for business-type activities for fiscal year 2012 is $12,817,733. The difference between depreciation expense and the increase in accumulated depreciation is $14,299, which is a result of capital assets transferred from governmental to business-type activities that are different from the assets transferred from business-type to governmental activities. An intangible asset is reported in the Utility Fund representing the excess of the purchase price paid over the fair market value of assets acquired. The intangible asset is amortized on a straight-line basis over an estimated useful life of forty years. Special Item Sale of Asset In June 2012, the Pensacola International Airport purchased from the City of Pensacola General Fund, the property located at 1200 College Boulevard in the amount of $3,495,507 for its exclusive use and control. The Pensacola International Airport plans to use this property for the expansion of its public parking facilities. The sale of this asset was recorded as a special item in the City’s fund financial statements since it is a significant transaction within control of management which is infrequent in occurrence. In the City’s government-wide financial statements, the sale of the asset nets with the capital asset transfer between governmental and business-type activities.

76

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Component Unit Capital Assets Material capital asset activity for the City’s component units fiscal year ended September 30, 2012 was as follows: Beginning Balance Community Maritime Park Associates, Inc. Non-Depreciable Assets: Construction in Progress Total Non-depreciable assets Depreciable Assets: Buildings Improvements Equipment Total Depreciable assets Total capital assets

Business-type activities net assets

Decreases/ Transfers

Ending Balance

31,655,506 $ 31,655,506

21,452,513 $ 21,452,513

(53,108,019) $ (53,108,019)

0 0

0 0 0 0 31,655,506 $

0 0 800,582 800,582 22,253,095 $

26,500,299 23,742,384 2,753,336 52,996,019 (112,000) $

26,500,299 23,742,384 3,553,918 53,796,601 53,796,601

$

0 $ 0 0 0 $

251,321 $ 236,072 565,368 1,052,761 $

0 $ 0 0 0 $

251,321 236,072 565,368 1,052,761

$

31,655,506 $

21,200,334 $

(112,000) $

52,743,840

$

$

Less accumulated depreciation for: Building Improvements Equipment Total accumulated depreciation

Increases

$

capital

Total depreciation expense for Community Maritime Park Associates, Inc for fiscal year 2012 is $1,052,761.

77

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General Government Public Safety Physical Environment Transportation Economic Environment Culture and Recreation Unallocated Infrastructure Capital assets held by governmental type internal service funds are charged to the various functions based on their usage Total depreciation expense- governmental activities

$

713,328 1,549,224 25,659 364,507 46,882 2,354,954 3,028,787 426,106

$

8,509,447

Infrastructure reported per requirement of GASB 34 is presented as a separate line item instead of a specific function/program. Business-type activities: Gas Sanitation Port Airport Total depreciation expense- business-type activities

$

1,675,253 278,638 1,065,846 9,797,996

$

12,817,733

The fifteen year lease agreement for the City owned Amtrak Station expired May 14, 2008. Rail services for the Sunset Limited route which passes through Northwest Florida have been suspended since 2005 as a result of the damages suffered by Hurricane Katrina. The carrying value for the land and building is approximately $680,330 as reported in the governmental activities.

78

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) D. Interfund Receivables, Payables, and Transfers Interfund receivables/payables balances as of September 30, 2012, are as follows: Due To Governmental activities: General Fund Local Option Sales Tax Fund Housing Assistance Fund Maritime Community Park Nonmajor Governmental Funds Internal Service Funds Total Governmental activities Business-type activities: Utility Fund Sanitation Fund Port Fund Airport Fund Total Business-type activities Total governmental and business-type activities

$

Due From $

1,546,888 28,484 8,631 488,339 146,040 2,218,382

406,139 322,187 19,823 2,494,947 3,243,096 $

5,461,478 $

Advance To

832,456 $

Advance From $

1,856,117 2,657,205 5,345,778

783,325 783,325

18,458 18,458

115,700

1,184,300

236,692 1,654,649

115,700

1,184,300

57,826 1,949,167

1,967,625 $

1,967,625

5,461,478 $

Internal balances-current reported in the government-wide statement of net assets in the amount of $3,127,396 represents the amounts receivable/payable between government and business-type activities for end of year payroll liabilities, risk management claims and inter-fund transfers. Internal balances-noncurrent reported in the government-wide statement of net assets in the amount of $764,867 represents the long-term portion of future claims payable by the businesstype funds to the Internal Service Fund-Insurance Retention Fund. The Insurance Retention Fund is reported in the government-wide statement as a governmental activity. Due to/from and Advance to/from are reported in fund financial statements as shown in the schedule above.

79

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) For the year ended September 30, 2012, interfund transfers are as follows:

Governmental activities: Major Governmental Funds General Fund

Transfer In $

Transfer Out

8,000,000 3,495,507

Operating subsidy from Utility Fund Operating subsidy from Strormwater Capital Fund $ 12,016,600

Maritime Community Park Construction (MCPC)

Purpose

UCRT, Library, Golf Course, Eastside TIF, Inspection Services, TFFDS, Stormwater Capital

80,000

Transfer from UCRT for ECUA/WWTP Relocation

500,000

Transfer from Engineering for street reconstruction

Nonmajor Governmental Funds Local Option Gasoline Tax (LOGT) Community Redevelopment Agency (CRA) Urban Core Redevelopment Trust (UCRT) West Florida Regional Library CRA Debt Service Fund Golf Course Fund Eastside Tax Increment Financing District Tax and Franchise Fee Debt Service Fund (TFFD) Stormwater Capital Fund Internal Service Fund (ISF)

3,879,536

Operating transfer from UCRT

1,441,891 4,386,619 1,327,300 427,083 110,000 35,380

City’s required contribution Transfer to MCPC, CRA and CRA Debt Service City’s portion of interlocal agreement Transfer from UCRT to pay debt service Operating subsidy from General Fund City’s required contribution

3,069,688

Transfer from General Fund to pay debt service

6,032,341 3,495,507 500,000

Capital subsidy from General Fund Operating subsidy to General Fund Transfer to LOGT for street reconstruction

8,000,000

Operating subsidy to General Fund

Business-type activities: Utility Fund Total

$ 28,398,726 $ 28,398,726

80

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Transfers reported in the government-wide statement of activities in the amount of $8,000,000 represent the net amount of transfers between government and business type activities. Fund financial statements report transfers without eliminations within same type activity and are reported as above. E. Fund Balance Deficit The CMPA Management Services Fund has a negative fund balance of $38,777 for the year ended September 30, 2012. This represents expenditures incurred on year-end public events which are to be funded by donations received in the subsequent fiscal year. F. Long-term Debt Individual Bond Issues Below are the City’s individual bond issues as well as the material bond issues for the City’s component units which were outstanding at September 30, 2012: Governmental activities: Major Funds $14,000,000 Sales & Excise Tax Refunding Revenue Bonds, Series 2004, serial bonds have a fixed interest rate of 2% - 4% with annual principal installments beginning October 1, 2004. Debt service payments are secured with the Public Service Tax Revenues, Electric Franchise Fee Revenue and Sales Tax Revenues. Final maturity of principal occurs on October 1, 2012.

$ 3,240,000

$45,640,000 Redevelopment Revenue Bonds, Series 2009A and 2009B: $6,715,000 Redevelopment Revenue Bonds, Series 2009A, serial bonds have a fixed interest rate of 4% - 4.25% with annual principal installments beginning April 1, 2013. Debt service payments are secured with Tax Increment Financing (TIF) revenues of the CRA and a covenant to budget and appropriate non-ad valorem revenues of the City. Final maturity of principal occurs on April 1, 2020.

6,715,000

$38,925,000 Redevelopment Revenue Bonds, Series 2009B (federally taxable Build America Bonds), $5,235,000 of term bonds with a fixed interest rate of 6.829% with annual principal installments beginning April 2021 and maturing April 2024, $15,890,000 of term bonds with a fixed interest rate of 7.263% maturing April 2033 and $17,800,000 of term bonds with a fixed interest rate of 7.21% maturing April 2040. Debt service payments are secured with Tax Increment Financing (TIF) revenues of the CRA, Federal Subsidy Payments and a covenant to budget and appropriate non-ad valorem revenues of the City. Final maturity of principal occurs on April 1, 2040.

38,925,000

81

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) $18,190,000 Capital Funding Revenue Bonds, Series 2010A-1 and 2010A-2: $5,910,000 Capital Funding Revenue Bonds, Series 2010A-1 were derived from participation in the Gulf Breeze Loan Pool which refinanced the existing Capital Improvement Revenue Bonds, Series 2000A. The 2010A-1 bonds are all serial bonds with a rate of 4.00% - 5.00% with annual principal installments beginning October 1, 2012. Debt service payments are secured with the Infrastructure Sales Tax revenues and to the extent of any deficiency, Communications Sales Tax revenues. Final maturity of principal occurs on October 1, 2017.

5,910,000

$12,280,000 Capital Funding Revenue Bonds, Series 2010A-2 were derived from participation in the Gulf Breeze Loan Pool which refinanced the existing Capital Improvement Revenue Bonds, Series 2000B. The 2010A-2 bonds are all serial bonds with a rate of 4.00% - 5.00% with annual principal installments beginning October 1, 2012. Debt service payments are secured with the Infrastructure Sales Tax revenues and to the extent of any deficiency, Communications Sales Tax revenues. Final maturity of principal occurs on October 1, 2017.

12,280,000

Unamortized discounts

(159,303)

Total Major Fund Types

66,910,697

Nonmajor Funds $3,271,866 Redevelopment Refunding Revenue Bonds, Series 2004 serial bonds with a fixed rate of interest at 3.71% with annual principal installments beginning April 1, 2005. Debt service payments are secured with Tax Increment Financing (TIF) revenues of the CRA and a covenant to budget and appropriate non-ad valorem revenues of the City. Final maturity of principal occurs on April 1, 2013. Total Governmental Activities

414,053 $ 67,324,750

Business-type Activities: Utility Enterprise $12,255,000 Capital Funding Revenue Bonds, Series 2010B-1 and 2010B-2: $5,345,000 Capital Funding Revenue Bonds, Series 2010B-1 were derived from participation in the Gulf Breeze Loan Pool which refinanced the existing loan for the Gas System Revenue Bonds, 2008. The 2010B-1 bonds are all serial bonds with a rate of 3.00% - 4.00% with annual principal installments beginning October 1, 2010. Debt service payments are secured with Net Revenues of the Utility System. Final maturity of principal occurs on October 1, 2017. 82

4,125,000

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) $6,910,000 Capital Funding Revenue Bonds, Series 2010B-2 refunded the outstanding principal of Gas System Revenue Bonds, Series 1999. The 2010B-2 bonds are all serial bonds with a rate of 3.00% - 4.00% with annual principal installments beginning October 1, 2010. Debt service payments are secured with Net Revenues of the Utility System. Final maturity of principal occurs on October 1, 2017.

5,320,000

$5,000,000 Gas System Revenue Note, Series 2011, taxable note has a fixed interest rate of 2.09% with annual principal installments beginning October 1, 2012. Debt service payments are secured with Net Revenues of the Utility System. Final maturity of principal occurs on October 1, 2021.

5,000,000

Total Utility Enterprise

14,445,000

Airport Enterprise $15,145,000 Airport Refunding Revenue Bonds, Series 2005A refunded the outstanding principal of Airport Revenue Bonds, Series 1997A. The 2005A bonds are all serial bonds with a rate of 3.00% - 4.375% with annual principal installments beginning October 1, 2006. Debt service payments are secured with Net Revenues of the Airport. Final maturity of principal occurs on October 1, 2027.

14,545,000

$35,780,000 Airport Capital Improvement Revenue Bonds, Series 2008A and 2008B: $29,060,000 Airport Capital Improvement Revenue Bonds, Series 2008A. $4,805,000 of serial bonds have a fixed interest rate of 5% - 5.5% with annual principal installments beginning October 2009 and maturing October 2018, $8,630,000 of term bonds with a fixed interest rate of 6% maturing October 2028 and $15,625,000 with a fixed interest rate of 6.25%. Debt service payments are secured with Passenger Facility Charge (PFC) revenues. Final maturity of principal occurs on October 1, 2038.

28,015,000

$6,720,000 Airport Capital Improvement Revenue Bonds, Series 2008B. $995,000 of serial bonds have a fixed interest rate of 5% - 5.5% with annual principal installments beginning October 2011 and maturing October 2018, $2,040,000 of term bonds with a fixed interest rate of 6% maturing October 2028 and $3,685,000 with a fixed interest rate of 6.25%. Debt service payments are secured with Net Revenues of the Airport. Final maturity of principal occurs on October 1, 2038.

6,615,000

$19,000,000 Airport Taxable Customer Facility Charge Revenue Note, Series 2008. Proceeds were derived from a Bank of America loan. Interest is paid on the first of every month and is calculated using 30 day LIBOR plus .75% per annum. Debt service payments are secured with an additional $2.50 Customer Facility Charge (CFC). The loan agreement calls for interest only payments through December 2015 at which point the loan expires and principal is due in full. 83

11,800,000

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) $12,310,000 Airport Refunding Revenue Bonds, Series 2010 refunded the outstanding principal of the Airport Revenue Bonds, Series 1997B and Airport Revenue Refunding Bonds, Series 1998A. The 2010 bonds are all serial bonds with a rate of 2.39% with annual principal installments beginning October 1, 2011. Debt service payments are secured with Net Revenues of the Airport. Final maturity of principal occurs on October 1, 2018.

10,535,000

$6,300,000 Airport Revenue Note, Series 2012, taxable note has a fixed interest rate period commencing April 1, 2013, to and including October 1, 2017, payable each April 1 and October 1 of each year, and a variable interest rate period starting November 1, 2017, to and including October 1, 2027, payable on the first day each month thereafter. The fixed interest rate is 2.5% and the variable interest rate is equal the sum of the Treasury Swap Rate plus one hundred and fifty basis points per annum (1.50%), computed on the principal amount outstanding as of such date. Principal payments commence on October 1, 2018, payable October 1 of each year. Debt service payments are secured with Net Revenues of the Airport. Final maturity of principal occurs on October 1, 2027.

6,300,000

Unamortized discounts

(654,847)

Total Airport Enterprise

77,155,153

Total Business-type Activities

$ 91,600,153

Component Units: Community Maritime Park Associates, Inc. (CMPA) $54,079,902 Community Development Entities (CDEs) Notes with interest rates ranging from .5016% to 4.641% and annual principal installments beginning October 1, 2017. Debt service payments are secured with assets of the CMPA. Final maturity of principal occurs on October 1, 2040.

$ 54,079,902

$57,872 Northwest Florida Professional Baseball, LLC (NFPB) interest free note payable due in ten equal annual installments of $5,782. Principal payments commence on December 31, 2013. Final maturity of principal occurs on December 31, 2023.

57,872

Total Community Maritime Park Associates, Inc

84

$ 54,137,774

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Changes in Long-Term Liabilities Following is a summary of changes in the long-term liabilities for the City as well as the material liabilities for the City’s component units year ended September 30, 2012: Beginning Balance Governmental activities Due to other governments Bonds Payable Claims and judgments Compensated absences OBEP Governmental activity long-term liabilities

Business-type activities Bonds Payable Notes Payable Compensated absences OBEP Business-type activity long-term liabilities Component unit CMPA notes payable

$

Increases

$ 70,845,690 2,241,100 4,550,801 4,755,273

Ending Balance

Decreases

19,500,000 $ 1,534,305 2,379,997 1,089,860

Within One Year

$ (3,520,940) (1,413,963) (2,960,164)

19,500,000 $ 1,300,000 67,324,750 6,884,053 2,361,442 3,970,634 177,193 5,845,133

$

82,392,864 $

24,504,162 $

(7,895,067) $

99,001,959 $ 8,361,246

$

72,294,962 $ 14,800,000 1,679,994 1,839,040

$ 11,300,000 750,293 412,773

(3,349,809) $ (3,445,000) (907,533)

68,945,153 $ 3,950,000 22,655,000 445,000 1,522,754 79,595 2,251,813

$

90,613,996 $

12,463,066 $

(7,702,342) $

95,374,720 $ 4,474,595

$

54,079,902 $

57,872 $

$

54,137,774 $

Bonds payable for governmental activities includes $159,303 of unamortized discounts. Bonds payable for business-type activities is reported net of unamortized discounts in the amount of $654,847. Reductions of Bonds payable include principal payments and amortization of discounts. Due to other governments includes an interlocal agreement between the City of Pensacola and the Emerald Coast Utilities Authority (ECUA) which committed the City to contribute to the Main Street Waste Water Treatment Plant Replacement Project (the Project). The City committed $19.5 million for the project and agreed to budget and appropriate water and sewer franchise fees and the beverage license tax revenues. Annual installments of $1.3 million will begin in January 2013. For accounting purposes, this is a voluntary non-exchange transaction. In December 2012, ECUA provided documentation which showed all eligibility criteria had been met as of September 30, 2012. Therefore, the long-term liability and expenditure was recorded

85

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) in the City’s government-wide financial statements. Since the long-term liability is not due and payable in the current period it is not recorded in the fund financial statements. Related to this transaction, the City entered in an agreement with the Community Redevelopment Agency (CRA) wherein the annual installments to ECUA will be paid from CRA revenues and any shortfall paid by the City will be reimbursed. Compensated absences are estimated at year end only. In addition, for the governmental activities, claims and judgments are liquidated by the insurance retention fund and compensated absences are generally liquidated by the general fund. Other Postemployment Benefits (OPEB) were calculated by an independent consultant which provided an actuarial valuation of post-employment benefits as required by GASB 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. Summary of Debt Service Requirements to Maturity Annual debt service requirements to maturity for the City’s long-term bonds and notes as well as the material long-term bonds and notes for the City’s component units are as follows; includes both fixed and variable interest rate bonds/notes: Governmental Long-Term Debt Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2040 Total Less: Current Total government debt

$

$

Principal 6,884,053 $ 3,365,000 3,520,000 3,695,000 4,290,000 9,310,000 7,310,000 9,200,000 11,580,000 8,330,000 67,484,053 (6,884,053) 60,600,000 $

Total Principal Interest and Interest 3,965,296 $ 10,849,349 3,750,297 7,115,297 3,594,706 7,114,706 3,416,988 7,111,988 3,233,478 7,523,478 14,262,311 23,572,311 12,146,936 19,456,936 9,249,107 18,449,107 5,585,624 17,165,624 1,219,572 9,549,572 60,424,315 127,908,368 (6,884,053) 60,424,315 $

121,024,315

Includes Nonmajor Fund (Community Redevelopment Agency) debt service of $414,053. Principal is shown in gross, excluding unamortized discounts of $159,503. Interest shown does not include the $19,623,545 BAB subsidy on the Redevelopment Revenue Bonds, Series 2008.

86

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Business-Type Activities Long-Term Debt Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2040 Total Less: Current Total business-type debt

$

$

Total Principal Interest and Interest 4,053,272 $ 8,448,272 3,998,872 8,518,872 3,862,683 8,527,683 3,272,737 19,862,737 2,881,085 7,841,085 12,675,386 30,880,386 9,143,023 23,988,023 5,807,570 15,192,570 3,128,125 12,968,125 307,500 5,157,500 49,130,253 141,385,253 (3,495,000)

Principal 4,395,000 $ 4,520,000 4,665,000 16,590,000 4,960,000 18,205,000 14,845,000 9,385,000 9,840,000 4,850,000 92,255,000 (3,495,000) 88,760,000 $

49,130,253 $

137,890,253

Principal is shown in gross, excluding unamortized discounts $654,847.

Component Unit Long-Term Debt Community Maritime Park Associates, Inc. (CMPA) Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2040 Total Less: Current Total component unit debt, CMPA

Principal $

- $ 5,787 5,787 5,787 337,365 7,534,616 9,467,596 11,928,740 15,035,327 9,816,769 54,137,774 -

Interest 2,008,049 $ 2,008,049 2,008,049 2,008,049 1,873,159 9,329,459 7,755,201 5,781,533 3,296,448 523,837 36,591,833 -

$

54,137,774 $

36,591,833 $

87

Total Principal and Interest 2,008,049 2,013,836 2,013,836 2,013,836 2,210,524 16,864,075 17,222,797 17,710,273 18,331,775 10,340,606 90,729,607 90,729,607

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Business-type activities long-term debt includes the 2008 Airport Taxable Customer Facility Charges Revenue Note dated February 4, 2008 for $19,000,000. The note is variable rate debt with interest calculated on 30 day LIBOR plus .75% per annum. Interest is due through December 2015 with a one-time principal payment due at that time. For purposes of the Debt Service Requirement Summary, interest is computed at 5.55%; however, actual interest rates for fiscal year 2012 ranged between 0.97% and 1.05% resulting in interest expense of $142,568. As of September 30, 2012 the outstanding balance of the Note is $11,800,000. Business-type activities long-term debt includes the Airport Revenue Note, Series 2012, dated September 28, 2012 for $6,300,000. The taxable note has a fixed interest rate period commencing April 1, 2013, to and including October 1, 2017, and a variable interest rate period starting November 1, 2017, to and including October 1, 2027. The fixed interest rate is 2.5% and the variable interest rate is equal the sum of the Treasury Swap Rate plus one hundred and fifty basis points per annum (1.50%), computed on the principal amount outstanding as of such date. For purposes of the Debt Service Requirement Summary, the variable interest rate is computed at 4.45%. As of September 30, 2012 the outstanding balance of the Note is $6,300,000. Debt Issuances Issuance of the Gas System Revenue Note, Series 2011. On December 16, 2011 the City issued $5,000,000 of Revenue Note. The note was issued for the purpose of financing purchase five (5) compressed natural gas refuse trucks and to acquire, construct and equip additions, extensions or other capital improvements to the Gas Utility System. Pledged revenues for the repayment of the principal and interest will be derived from the operation of the City’s gas distribution system. Issuance of the Airport Revenue Note, Series 2012. On September 28, 2012 the City issued $6,300,000 Revenue Note. The note was issued for the purpose of financing parking lot expansion at Pensacola International Airport. Pledged revenues for the repayment of the principal and interest will be derived from the general revenues of the City’s International Airport. Interest Rate Swap Agreements Business-Type Activities In compliance with GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, the following disclosure is made to highlight the key components of the derivative instrument used by the City to lock in an interest rate. On September 29, 1010 the City issued $12,310,000 Airport Revenue Refunding Bonds, Series 2010 with a commitment from Compass Mortgage Corporation, an Alabama corporation and the "lender", to purchase the 2010 Note. Compass Bank, an Alabama banking corporation and the "counterparty", entered into an interest rate swap agreement with the City for the purpose of hedging the financial risk of increased interest costs attributable to a notional amount equal to the principal amount of the 2010 Note to enable the City to achieve the economic result of a fixed interest rate on the refunding.

88

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Objectives. The City’s objective for entering into the swap agreement was to effectively change its new variable interest rate bonds to a synthetic fixed rate of 2.39%. The City issued variable rate debt and simultaneously entered into an interest rate swap agreement to serve as a hedge against swings in the cash flows that would be required for the Series 2010 Airport Bonds. Terms. The significant terms of the interest rate swap agreement is as follows: Swap Related To Series 2010

Notional Amount $12,310,000.00

Effective Date 9/29/10

Fixed Rate Paid 2.39%

Variable Rate Received 65% of Libor + 98 bps

Fair Value at 9/30/2012 ($357,818)

Termination Date 10/1/18

Credit risk. The interest rate swap for the Series 2010 is held by a single counterparty whose credit rating is currently "A3" by Moody's Investors Service and "A" by Standard & Poor's. The credit risk is also mitigated by the City's right to "set-off". Interest rate risk. The City is exposed to interest rate risk on its interest rate swap. As LIBOR decreases, the City will receive a lower swap rate and pay a greater loan rate. Early Termination risk. The City has the right to "set off" which both eliminates the credit risk and termination risk. If the counterparty is unable to make their payment, then the City can withhold its payment on the loan for all amounts in excess of 2.39%. The table below presents the debt service obligation using the loan rate at September 30, 2012 (1.63%-floor) and the net swap payment. As rates vary, variable-rate bond interest payments and net swap payments will vary. Variable-Rate Bonds Fisacal Year Ending September 30, 2013 $ 2014 2015 2016 2017 2018 2019 Total $

  Principal 1,820,000 $ 1,855,000 1,900,000 1,200,000 1,225,000 1,250,000 1,285,000 10,535,000 $

  Interest Rate Interest Swaps, Net 156,888 $ 73,150 $ 126,936 59,185 96,333 44,916 71,068 33,136 51,304 23,921 31,133 14,516 10,473 4,883 544,135 $ 253,707 $

  Total 2,050,038 2,041,121 2,041,249 1,304,204 1,300,225 1,295,649 1,300,356 11,332,842

Debt Restriction There are a number of limitations and restrictions contained in the various bond indentures. The City is in compliance with all significant limitations and restrictions. The City has no legal debt margin. 89

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Revenues Pledged for Debt Repayment General Government

Public Service Tax Electric Franchise Fees Sales Taxes Infrastructure Sales Tax Communication Services Tax Tax Increment Build America Bond Subsidy

Utility Enterprise

Utility

Airport Enterprise

Airport Passenger Facility Charges Customer Facility Charges

In June 2009 the pledged revenues for the Redevelopment Refunding Revenue Note, Series 2004 were substituted. The original issuance of bonds had a pledge of tax increment financing (TIF) revenues of the Community Redevelopment Agency (CRA). This pledge of TIF revenues was substituted with a covenant to budget and appropriate from non-ad valorem revenues of the City however the payment stream for debt service will continue to be made from CRA revenues. The pledge substitution was needed to increase the strength of the newly issued 2009 Redevelopment Bonds. Conduit Debt In the past, the City of Pensacola has issued Industrial Development Bonds to provide assistance to private-sector entities for acquisition and construction of facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Neither the City, the State, nor any other political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2012, there was only one series of Industrial Development Bonds outstanding. That issue has a principal balance of $1,445,000. The bonds were issued in 1984 bearing the name of Harborview Corporation and will mature in 2014.

90

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Florida Ports Finance Commission Agreement Florida Ports Financing Commission Revenue Bonds, Series 1999 – On July 17, 1996, the Florida Ports Financing Commission (the “commission”) was created pursuant to Section 320.20(3) and Chapter 163, Part I, Florida Statutes through an Interlocal Agreement among Canaveral Port Authority, Jacksonville Port Authority and Panama City Port Authority. The commission’s purpose is to provide a cost-effective means of financing various capital projects for the State of Florida’s ports by issuing bonds and transferring the proceeds thereof to the individual ports. The Commission and SunTrust Bank, Central Florida, National Association, Orlando, Florida (the “Trustee”) entered into an Indenture of Trust, dated September 1, 1999 (the “Indenture”), which authorized the issuance of $153,115,000 Florida Ports Financing Commission Revenue Bonds (State Transportation Trust Fund), Series 1999 (the Bonds”). On October 14, 1999, the Bonds were issued to provide funds to finance the costs of acquiring and constructing capital projects undertaken by 10 ports located in the State of Florida (the “Ports”), including the City. The amount allocated to the City is not to exceed $3,000,000, which is available for approved expenditures. The Commission loaned the proceeds of the Bonds (the “Loans”) to the Ports pursuant to separate loan agreements (the “Loan Agreements”) entered into between each of the Ports individually and the Commission. The Loan Agreement entered into by the City provides that the City will repay its Loan solely from moneys due from the State Transportation Trust Funds. Pursuant to Section 320.20(4), Florida Statutes, $10,000,000 of the revenues received by the State of Florida from motor vehicle registration fees is to be deposited annually in the State Transportation Trust Fund for funding Projects (the “State Moneys”). Basic Payments under the Loan Agreement are payable solely from moneys on deposit in the State Transportation Trust Fund. The Department of Transportation and the Commission entered into a Master Agreement pursuant to which the Department of Transportation agrees to transfer the State Moneys annually into an escrow account held by the State Department of Insurance, Division of Treasury, on behalf of the Trustee which may be drawn upon by the Trustee in order to pay the debt service on the Bonds as the same becomes due. The City has assigned all of its right, title and interest to the moneys allocated to the City from State Moneys to the Trustee on behalf of the Commission, to pay its portion of debt service on the Bonds. In addition to the Basic Payments, the City agreed to pay on demand of the Commission or the Trustee additional payments constituting (a) its proportionate share of certain ongoing fees, costs and expenses related to the financing program, (b) all reasonable fees and expenses of the Commission and the administrator of the financing program, (c) its proportionate share of rebate obligations relating to the Bonds pursuant to Section 149 of the Internal Revenue Code of 1986, and (d) any unallowable costs required to be repaid by the Borrower under the Loan Agreement (the “Additional Payments”). The City has agreed to pay from legally available non-ad valorem revenues of its Port facilities (the “Port Revenues”) sufficient moneys to make such Additional Payments. Such agreement is applicable solely to the Additional Payments and does not cover the Basic Payments.

91

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) The Bonds do not create nor constitute an obligation or debt of the State of Florida or any political subdivision thereof or any public corporation, port or governmental agency existing under the laws of the State of Florida other than the Commission. The Bonds do not constitute the giving, pledging or loan of the faith and credit of the State of Florida or any political subdivision thereof or any public corporation, port or governmental agency existing under the laws of the State of Florida. The Bonds are payable solely from State Moneys as the Basic Payments of the Borrowers. The financing program of the Commission described above is in substance a grant program, inasmuch as all debt service payments on the Bonds are payable solely from moneys in the State Transportation Trust Fund. The program was structured with Loan Agreements in order to satisfy certain legal requirements. Bondholders have no recourse to the Borrowers, including the City, for payment of the principal and interest on the Bonds. The City has not recorded a liability for the loan since it does not have any obligation except for moneys due it from the State Transportation Trust Fund. As discussed above, all of such moneys have been assigned to the Trustee to pay the debt. Except to the extent the City is obligated to pay Additional Payments from the Port Revenues, the City has no other obligation on the debt and no other moneys of the Authority have been pledged, or are obligated for payment of the debt. As expenditures are incurred for the approved projects, the City records a receivable from the Commission for 50% of qualified amounts and records the amount to be reimbursed as contributed capital. As of September 30, 2012, the City has incurred $3,904,251 of eligible expenditures. Monies not expended on approved projects by individual ports (excess project funds) are returned to the funding pool and reallocated. The amount expended by the City in excess of the allocated $2.7 million was made possible through the excess funding reallocation program.

92

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) G. Fund Balance Disclosure Fund Balance information is used to identify the available resources to repay long-term debt, reduce property taxes, add new governmental programs, expand existing ones, or enhance the financial position of the City, in accordance with policies established by the City Council. In accordance with Governmental Accounting and Financial Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, the City classifies fund balance as follows. Non-Spendable Fund Balance – Amounts that are not in a spendable form or are required to be maintained intact (such as inventory or prepaids). Restricted Fund Balance – Amounts that can be spent only for the specific purposes stipulated by external resource providers (such as grantors), or enabling legislation. Restrictions may be changed or lifted only with the consent of the resource providers. Committed Fund Balance – Amounts that can be used only for the specific purposes determined by a formal action of the City’s highest level of decision making authority. Commitments may be changed or lifted only by the City Council taking the same formal action that imposed the constraint originally. An Ordinance or Resolution adopted by Council establishes a fund balance commitment as they both have equal binding authority. Assigned Fund Balance – Amounts the City intends to use for a specific purpose. The City Council via Council Action or the Mayor as authorized by City Council Policy establishes fund balance assignments. Unassigned Fund Balance – The residual classification for the general fund and includes amounts that are not contained in the other classifications. Unassigned amounts are the portion of fund balance which is not obligated or specifically designated and is available for any purpose. For classification of fund balance 1) when expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available, restricted fund balance is considered to have been spent first. 2) When expenditures are incurred for purposes for which amounts in any of unrestricted fund balance classifications can be used, committed amounts should be reduced first, followed by assigned amounts and then unassigned amounts. The City Council established a reserve policy and fund by resolution beginning in fiscal year 2011. The Council Reserve, which is required to be a minimum of 15 percent of the General Fund beginning adopted appropriations, is reported as committed fund balance in the General Fund. The Council Reserve shall not be used until current year revenues decrease by 5 percent or more of the total adopted beginning estimated revenues, including transfers and all efforts have been exhausted to fund unanticipated needs and/or emergencies, such as implementing a modified hiring freeze and expenditure reductions. Upon determination of the need, the Mayor may initiate use of the reserves through written communication to the City Council, explaining the nature of the emergency with approval by a two-thirds vote of City Council. Proceeds from 93

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) the sale of City (general government) owned surplus real property and any other funds identified in the budget will be used to increase the reserve. Interest earnings will be applied on the reserve balance each fiscal year. The City does not have a formal minimum fund balance policy. A schedule of City fund balances is provided in the following pages. Major Funds Housing Assistance Payments

Local Option Sales Tax

General Fund

Maritime Community Park Construction

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

$

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

$ 3,133,619 3,133,619

$ 801 801

39,813,626 311,737 5,137,134

1,310,121 1,036,643 3,636,641

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance

150,552 1,636 97,700

362,430

51,953

97,953

126,777

2,773,807

428,618

3,234,190

4,673,284

46,572,618

7,684,929 676,045 38,141

8,399,115

Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

-

-

-

-

-

-

1,884,995 119,184 183,126 2,187,305

Unassigned Total Fund Balance

$ 24,780 24,780

1,100,516 $

12,140,334

94

(4,995,923) $

1,371,886

$

4,674,085

$

46,572,618

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Nonmajor Funds Special Revenue Funds Community Local Option Development Gasoline Tax Block Grant

Special Grants

Community Redevelopment Agency

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

$

$ -

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

$ -

27,520

$ 817 817

-

1,047,661

920,628 913,239 1,805 10,896 137,609 1,098,458

1,047,661

-

913,239

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance

-

-

-

-

Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

-

-

-

-

Unassigned Total Fund Balance

(949,953) $

148,505

95

$

1,047,661

$

-

$

914,056

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Nonmajor Funds Special Revenue Funds Urban Core Redevelopment Trust

West Florida Public Library

Stormwater Utility Fund

Law Enforcement Trust

$

$

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

$

$ 6,724 6,724

-

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

862 862

-

13,382

374,387 7,070 1,244,721 499,990

1,244,721

499,990

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance

-

-

Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

-

-

13,382

381,457

258,353 258,353

-

-

-

Unassigned Total Fund Balance

$

1,244,721

96

$

506,714

$

272,597

$

381,457

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued)

Hurricane Damage Fund

Nonmajor Funds Special Revenue Funds Eastside Tax Increment Golf Course Fund Financing District

Inspections Fund

$

$

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

$ -

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

3,617 3,016 6,633

$ -

-

2,623,975

178,423

2,623,975

-

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance

-

3,866

Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

-

662 662

-

178,423

3,866 450,682 450,682

-

-

-

Unassigned Total Fund Balance

$

2,623,975

97

$

11,161

$

450,682

$

178,423

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Nonmajor Funds Special Revenue Funds CMPA Management Recreation Fund Tennis Fund Services Fund

Debt Service Funds Tax & Franchise Fee Debt Service

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

$

$ 878 878

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

$ 586 586

-

3,304,800

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

4,185

15,256

85,000

4,185

15,256

85,000

436,966

41,164

436,966

41,164

-

-

5,584 5,584

612 612

-

-

Unassigned Total Fund Balance

$ 12,647 12,647

3,304,800

(136,424) $

447,613

98

$

57,618

$

(38,777)

$

3,304,800

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE III. - DETAIL NOTES ON ALL FUNDS (Continued) Nonmajor Funds Debt Service Funds Capital Projects

CRA Debt Service

Stormwater Capital

Total ALL Funds

$

$

$

Fund Balance Non-spendable Inventories Prepaid expense Subtotal non-spendable fund balance

-

Restricted Maritime park bonds leveraged for NMTC Additional maritime park Wastewater treatment plant relocation 2004 Sales & Excise Tax Ref Bond debt payments 2004 Redevelopment Ref Rev Bond debt payments 2009 Redevelopment Ref Bond debt payments Stormwater projects Housing assistance payments Section 8 program administrative Hurricane projects General government Transportation Saenger capital DOJ Equitable Sharing Agreement Public safety Community development projects Public library system Culture and recreation Building inspections SHIP Program HOME Program Subtotal restricted fund balance

-

39,813,626 311,737 5,137,134 3,304,800 429,414 1,310,121 237,437 1,036,643 3,636,641 2,623,975 150,552 1,439,247 97,700 374,387 1,077,604 2,157,960 499,990 3,006,830 178,423 10,896 137,609 66,972,726

429,414 224,055

429,414

Committed Council Reserve Tree landscape Park purchases Culture and recreation Stormwater projects Eastside TIF district projects Subtotal committed fund balance

224,055

7,684,929 676,045 38,141 481,996 3,274,996 450,682 12,606,789

3,016,643 -

Assigned General government Lien amnesty Economic Development Other assigned Subtotal assigned fund balance

3,016,643

-

1,884,995 119,184 183,126 6,858 2,194,163

-

Unassigned Total Fund Balance

3,617 3,184,730 3,188,347

(4,981,784) $

429,414

99

$

3,240,698

$

79,980,241

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION A. Risk Management The City is self-insured with respect to general, auto liability and workers' compensation claims. An excess liability policy for workers’ compensation has been purchased. In any given fiscal year, insurance settlements have not exceeded insurance coverage. (Coverage limits have remained relatively constant over the past five years.) The coverage limits and deductibles are as follows: Primary Coverage Port operations Airport operations Police officers Public officials

Coverage (in millions)

Deductible

50 75 2 2

15,000 2,500 50,000 50,000

Excess Liability Coverage

Coverage (in millions)

Workers' compensation Gas Operation Gas Operation - Pollution

Per Florida Statutory Limits 35 35

Self Insured Retentions 500,000 Per Occurrence 200,000 Per Occurrence 500,000 Per Occurrence

The City has established reserves of $1,559,314 in the Insurance Retention Fund representing a contract between the City and its employees regarding health, life, dental and survivor disability insurance; a majority of which is survivor disability insurance. This amount is not available for city-wide catastrophic losses. All departments of the City participate in the self insurance program and make payments to the Insurance Retention Fund. Claims liability of $2,361,442 at September 30, 2012 is based on the requirements of Governmental Accounting Standards Board (GASB) Statements No. 10 and No. 30, which require that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is a) probable that a liability has been incurred at the date of the financial statements and b) the amount of the loss can be reasonably estimated. Claim liabilities, including incurred but not reported (IBNR) claims, are based on the estimated ultimate cost of settling the claim (including the effects of inflation and other societal and economic factors), using past experience adjusted for current trends, and any other factors that would modify past experience. Claim liabilities also include specific, incremental claim adjustment expenses. In addition, estimated amounts of salvage and subrogation and reinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. Expenses and liabilities are estimated through a case-by-case review of all claims and the application of historical experience of the outstanding claims. Estimates of IBNR losses are based on historical experience and are stratified to general, automobile and workers' compensation liabilities.

100

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION At September 30, 2012, the claims liability for automobile, general and workers’ compensation liability were $80,377, $121,610, and $2,159,455, respectively. The City’s insurance administrators do not calculate or report discounted amounts for automobile and general liability. Workers’ compensation liability is discounted at a rate of 8%. Each claim under workers’ compensation is calculated independently using the monthly payment amount and the present value factor. The undiscounted amount is not calculated, therefore unavailable for disclosure. Changes in the Fund's claims liability amount in fiscal year 2011 and 2012 were: Fiscal Year 2011 2012

Beginning of Fiscal Year Liability $2,081,195 $2,241,100

Current Year Claims and Changes in Estimates 2,340,254 1,534,305

Claim Payments (2,180,349) (1,413,963)

(Remainder of this page intentionally left blank)

101

Balance at Fiscal Year End $2,241,100 $2,361,442

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) B. Pension Plans The financial statements for the General, Fire and Police Pension Plans are presented below: STATEMENT OF NET ASSETS SEPTEMBER 30, 2012 General Pension and Retirement Fund

ASSETS Other cash

$

Receivables Employer Employee Commission Recapture Total receivables Investments Short term investments Debt Securities & Bond Mutual Funds Convertible Corporate Bonds Stock Mutual Funds Mortgage Backed Securities Commingled Trust Fund Domestic Stocks Preferred Stocks Foreign Stocks Total investments

Total assets

Firemen's Relief and Pension Fund

70,554 $

Police Officers' Retirement Fund

138,169 $

64,892 $

270,102 16,840 800 287,742

95,381 17,076 1,831 114,288

172,655 1,078

1,911,426 28,174,170 5,427,410 15,819,166 9,876,647

7,066,854 20,395,344 5,980,206

713,227 16,645,739

3,723,332 12,550,574 43,715,105 1,778,287 1,254,748 96,464,450

8,078,465 2,829,940 36,249,862 0 6,156,612 70,673,845

54,857,636 1,358,583 3,110,558 120,535,596

Total Pension Trust Funds 273,615

538,138 34,994 2,631 575,763

173,733

9,691,507 65,215,253 11,407,616 15,819,166 21,678,444 15,380,514 134,822,603 3,136,870 10,521,918 287,673,891

$

120,893,892

$

96,716,907

$

70,912,470

$

288,523,269

$

121,204

$

123,068

$

177,373

$

421,645

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Net assets Held in trust for pension benefits

121,204 $

120,772,688

102

123,068 $

96,593,839

177,373 $

70,735,097

421,645 $

288,101,624

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2012 General Pension and Retirement Fund Additions Contributions - city $ Contributions - employee Contributions - employee buy back Contributions - lawsuit Commission recapture Insurance proceeds - State of Florida Total contributions Investment income Net appreciation (depreciation) in fair value of investments Interest and dividends Less investment expense Net investment income Total additions Deductions Pensions paid - employees Pensions paid - widows Pensions paid - children Refunds to employees Deferred retirement option plan Health insurance assistance Administrative expenses

7,075,211 $ 496,722

Firemen's Relief and Pension Fund

3,025,714 $ 29,199 763,031

Total Pension Trust Funds

1,661,991 5,062

266,660 14,207 667,020

20 477,014

12,996,882 1,042,209 763,031 1,928,651 19,289 1,144,034

9,238,986

4,360,132

4,294,978

17,894,096

17,617,500 2,780,793 20,398,293 515,305 19,882,988

13,372,446 2,387,221 15,759,667 582,402 15,177,265

10,342,607 1,478,906 11,821,513 316,764 11,504,749

41,332,553 6,646,920 47,979,473 1,414,471 46,565,002

29,121,974

19,537,397

15,799,727

64,459,098

9,225,870 1,533,583

5,028,570 802,700 6,332 17,581 1,394,848

2,671,568 573,408

102,254

73,464

16,926,008 2,909,691 6,332 203,006 4,168,894 159,348 274,473

168,354 2,069,005 159,348 98,755

2,895,957 $ 516,288

Police Officers' Retirement Fund

17,071 705,041

Total deductions

13,254,915

7,352,285

4,040,552

24,647,752

Change in net assets

15,867,059

12,185,112

11,759,175

39,811,346

104,905,629

84,408,727

58,975,922

248,290,278

120,772,688 $

96,593,839 $

70,735,097 $

288,101,624

Net assets held in trust for pension benefits Beginning of year End of year

$

The State Insurance proceeds are based on Chapter 185.08 and Chapter 175.101 of the Laws of Florida.

103

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) The employee buy back contributions are based on a new provision in the Police Officers’ Retirement Fund providing for the purchase of up to five (5) years of outside law enforcement service and/or military service. The cost is 20% per year purchased based on the participant’s current pensionable salary. During fiscal year 2012, the General Pension and Retirement Fund received a $1,661,991 settlement from a former financial advisor in connection with claims that the former advisor had caused the Fund to pay excessive management fees. Since the monies arguably represent amounts that should have been credited to the Fund over the period, City contributions during that time period were greater than otherwise would have been. Thus, this amount has been reported as “contributions – lawsuit” in the combining statement of changes in fiduciary net assets to recognize the higher contributions actually made by the City over that period. C. Pension Plan Obligations Pension Plan Descriptions and Contribution Information The City maintains three contributory, defined benefit, single employer pension plans which are administered by the City’s Chief Financial Officer. The Firefighters’ Relief and Pension plan covers full-time firefighters; the Police Officers’ Retirement plan covers full-time police officers; the General Pension and Retirement plan covers non-public safety, full-time employees. The administrative costs are included in the City’s cost and contribution rate provided in the actuarial valuation. Benefits and refunds of the defined pension plan are recognized when due and payable in accordance with the terms of the plan. Prior to October 1, 1979 all non-public safety, full-time employees were required to participate in the General Pension and Retirement plan; employees hired between October 1, 1979 and October 6, 1997 were given an option to participate in the General Pension and Retirement plan or a deferred compensation plan; new employees hired between October 6, 1997 through June 17, 2007 were required to participate in the General Pension and Retirement plan. As of June 18, 2007 the General Pension and Retirement Plan was closed to new participants. Existing nonpublic safety, full-time employees were given an option to remain in the General Pension and Retirement plan or join the Florida Retirement System (FRS), multiple-employer, cost sharing public employee retirement system. Non-public safety, full-time employees hired after June 18, 2007 are required to participate in the FRS. Unlike the General Pension and Retirement plan, FRS requires employees to participate in the Federal Social Security Program. Further discussion on the potential future funding of the pension plans can be found in the Letter of Transmittal page 16.

104

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) Actuarial reports for the General Pension and Retirement plan, Firefighters’ Relief and Pension plan and Police Officers’ Retirement plan are required to be updated every three years per State Statue Chapter 112.63(2), 175.261(1)(b) and 185.221(2)(b), respectively. Membership of the General Pension and Retirement Plan, the Firefighters’ Relief and Pension Plan, and the Police Officers’ Retirement plan at September 30, 2011 (GASB Updates) consisted of the following: General Pension Firefighters’ and Retirement Relief and Pension Retirees and beneficiaries receiving benefits

Police Officers’ Retirement

567

157

119

Terminated plan members entitled to but not yet receiving benefits

56

0

7

DROP plan members

69

22

21

Active plan members

244

93

136

936

272

283

1

1

1

Total Number of participating Employers

(Remainder of this page intentionally left blank)

105

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) The benefit provisions and all other requirements of the firefighters' plan are established by Special Act of the State. The benefit provisions and all other requirements of the police officers’ and regular employees’ plans are established by City ordinance. FRS benefits are established by Chapter 121 of the Florida Statue. The accrual method of accounting is used as the basis of accounting for all four of the plans. Those provisions and requirements as of September 30, 2011 are summarized as follows: Florida Retirement System (FRS)

General Pension and Retirement

Firefighters' Relief and Pension

Police Officers' Retirement

Vesting Eligibility for retirement

6 years Age 62 with (w/) 30 yrs of svc or 30 yrs of svc w/no age requirement

6 years Age 55 w/ 20 yrs of svc or 30 yrs of svc w/no age requirement

10 years Age 52 w/10 yrs of svc or 25 yrs of svc w/no age requirement

10 years Age 55 w/10 yrs of svc or 25 yrs of svc w/ no age requirement

Monthly retirement benefit

Based on final average earnings (highest 5 yrs):

Based on final average earnings (highest 2 of last 5 yrs):

Based on final average earnings (highest 2 of last 5 yrs):

Based on final average earnings (highest 2 of last 5 yrs):

- 75% of 1st $2,400 - 50% of next $1,200 - 40% of excess or 2.1% times yrs of svc (30 yrs max) times final monthly average earnings (whichever formula provides the greater benefit) but not less than $25 per yr of svc

75% of final monthly average earnings for normal retirements with 25 or more yrs of svc or: - 75% of 1st $2,400 - 70% of next $1,200 - 65% of any add'l amount for disability retirements and normal retirements w/less than 25 yrs of svc

Percentage of average final compensation for each full year of credited service: - Hired before 10/1/79 receive 2% - Hired after 10/1/79 who elected to participate receive 3% - Hired after 10/1/79 who elected to participate receive 3%

-

-

-

Regular Class - Age 62 1.6% - Age 63 1.63% - Age 64 1.65% - Age 65 1.68% Senior Mgmt - Age 62 2% Elected Officials - Age 62 3%

Other Benefits

Postretirement COLA

Special Risk - Age 62 - 2% if hired between 12/1/70 and 9/30/74 - 3% if hired after 10/1/74 - Early retirement - Deferred retirement - Disability retirement - Health insurance subsidy - Death benefits - Deferred retirement option program 3% per year

Early retirement Deferred retirement Disability retirement Health ins. subsidy Death benefits Deferred retirement option program Up to 1.5% annually w/a corresponding increase in the CPI

Early retirement Deferred retirement Disability retirement Death benefits Deferred retirement option program

Up to 3% annually w/a corresponding increase in the CPI

Early retirement Deferred retirement Disability retirement Death benefits Deferred retirement option program

Up to 3% annually w/a corresponding increase in the CPI (Increase discretion - Pension Bd)

Contributions * Employee 3.00% 5.50% 11.00% 0.50% Employer See Below 78.50% 61.70% 51.81% Regular Class 5.18% N/A N/A N/A Senior Mgmt 6.30% N/A N/A N/A Elect Officials 10.23% N/A N/A N/A DROP 5.44% N/A N/A N/A Special Risk 14.90% N/A N/A N/A Retired 1.60% N/A N/A N/A State N/A N/A 14.21% 8.17% *All employee contributions to the pension plans and the City’s contribution to the Police Officers’ Retirement Plan are based on a percentage of pay. The remaining contribution percentages shown above are reported as a percentage of pay for comparative purposes only.

106

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) The General Pension and Retirement Plan, the Firefighters’ Relief and Pension Plan and the Police Officers’ Retirement Fund do not issue audited stand-alone financial statements but rely on the audit performed for the City. All three of the defined benefit pension plans are included within this financial report. The funded status of the General Pension and Retirement Plan as of September 30, 2011, the Firefighters’ Relief and Pension Plan as of October 1, 2011 and the Police Officers’ Retirement Fund as of October 1, 2011 is as follows (in thousands of dollars):

(1) Actuarial Value of Assets General Pension

$

(2) Actuarial Accrued Liability(AAL)

117,463 $

(4) Unfunded AAL (UAAL) (2)(1)

(3) Percentage Funded (1)/(2)

177,966

66.0%

$

60,504 $

UAAL As A Percentage Of Covered Payroll (4)/(5)

(5) Annual Covered Payroll

10,344 $

584.9%

Fire Pension

93,326

110,560

84.4%

17,236

4,696

367.0%

Police Pension

62,461

101,445

61.6%

38,984

6,766

576.2%

The schedules of funding progress, presented as required supplementary information (RSI) following the notes to the financial statements, present multiyear trend information about whether the actuarial values of the plan assets are increasing or decreasing over time relative to the AALs for benefits. Additional information as of the latest actuarial valuation follows: General Pension and Retirement Valuation date

Firefighters’ Relief and Pension

Police Officers’ Retirement

9/30/2011

10/1/2011

10/1/2011

Actuarial cost method

Entry Age Normal Cost

Entry Age Normal Cost

Individual Entry Age

Amortization method

Level Dollar Closed

Level Percentage Closed

Level Dollar Amount Closed

Remaining Amortization

16 years

30 years

20 years

Asset Valuation Method

5 year smoothed market

5 year phased in period

5 year weighted index

8.00% 4.50% - 9.50% 3.00% 1.50%

8.00% 7.30% 3.00% 2.875%

7.75% 5.00% 3.00% 2.50%

Actuarial Assumptions: Investment rate of return Projected salary increases Includes inflation at: Cost of living adjustments

The Florida Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to the Florida Division of Retirement, 2639 N. Monroe Street, Building C, Tallahassee, Florida 32399 or calling 1-850-488-6491. 107

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) Pension Plan Obligations General Pension and Retirement Annual required contributions for 9/30/11 Interest on net pension obligation Adjustment to annual required contribution Annual pension cost Contributions made Increase (decrease) in net pension obligation Net pension obligation beginning of year Net pension obligation end of year

$

7,246,614 $ 7,246,614 (7,246,614)

Firefighters’ Relief and Pension 2,650,637 $ 2,650,637 (2,650,637)

- $

$

- $

Police Officers’ Retirement 3,508,864 3,508,864 (3,508,864) -

Three-Year Trend Information Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. The annual pension cost (APC) and net pension obligation for the years ended 2010, 2011 and 2012 for the City’s three contributory, defined benefit, single employer pension plans are presented below. The years presented are the most recent years that actuarial information is available. FLORIDA RETIREMENT SYSTEM (FRS) Annual Pension Cost (APC) 9/30/2010 9/30/2011 9/30/2012

$

Percentage of APC Contributed

Net Pension Obligation

100% 100% 100%

-

885,118 843,014 443,388

GENERAL PENSION AND RETIREMENT FUND Annual Pension Cost (APC) 9/30/2010 9/30/2011 9/30/2012

$

Percentage of APC Contributed

Net Pension Obligation

100% 100% 100%

-

7,210,946 7,241,853 7,246,614

108

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) FIREFIGHTERS’ RELIEF AND PENSION FUND Annual Pension Cost (APC) 9/30/2009 9/30/2010 9/30/2011

$

Percentage of APC Contributed

Net Pension Obligation

100% 100% 100%

-

3,697,271 3,441,454 2,650,637

POLICE OFFICERS’ RETIREMENT FUND Annual Pension Cost (APC) 9/30/2009 9/30/2010 9/30/2011

$

Percentage of APC Contributed

Net Pension Obligation

100% 100% 100%

-

3,278,441 3,133,416 3,508,864

Retiree Benefits In addition to providing pension benefits, the City of Pensacola provides a health insurance benefit for retired employees who worked for the City for ten or more years and had health insurance coverage at the time of their retirement. Retirees may keep the same level of insurance coverage (single or family) they had as an active employee or they may reduce the level of coverage from family to single coverage. However, they cannot increase coverage from single to family after retirement. Approximately 368 retirees and/or families were covered during the fiscal year ended September 30, 2012. The city does not cover the cost of any retiree insurance. Other Postemployment Benefits (OPEB) Plan Description. The City of Pensacola administers a single-employer defined benefit plan which offers three plans for health care through Blue Cross Blue Shield of Florida; Health Options HMO, Blue Options PPO Health Savings Account and BlueMedicare Group PPO. Insurance is offered to both active employees and retirees however only active employees receive a premium contribution. Membership of the plan consisted of the following at December 31, 2010, the date of the latest actuarial valuation: Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active members

405

-0693

Total

1,098

109

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) In order to comply with requirements of GASB 45, the City contracted with a recognized and certified actuarial firm to provide an actuarial valuation of post-employment benefits (a copy of this report can be obtained by contacting the City of Pensacola’s Financial Services Department). Post-employment benefits, such as health care, will continue to be offered on a retiree pay all basis with no premium subsidy. The State of Florida, per Statute 112.0801, requires claims experience of the retiree group to be co-mingled with that of active employees in determining the health plan cost. According to GASB 45, the co-mingling of claims requirement equates to an implicit subsidy to retirees which creates an OPEB liability on the part of the City. Basis of Accounting. The net OPEB obligation and ARC is recorded at the fund level for proprietary activities and the allocated amount for governmental activities is presented at the government-wide level. The OPEB expense, or ARC, is included in the line item of salaries for proprietary fund statements and is allocated by function for governmental activities on the government-wide financial statements. In the year of implementation the Net OPEB Obligation and the ARC are the same amount. The Net OPEB Obligation will continue to increase if the obligation is not funded. Annual Required Contribution (ARC) Expense Governmental Activities Utility Fund Sanitation Fund Port Fund Airport Fund Insurance Retention Fund Central Services

$

996,848 209,016 77,085 17,881 108,791 9,016 83,997

Total ARC Expense

$

1,502,634

Contributions. The City does not intend to fund the actuarial liability; therefore, no employer or employee contributions were made. The contribution status as of December 31, 2010, the date of the latest actuarial valuation and the preceding years, are as follows: SCHEDULE OF EMPLOYER CONTRIBUTIONS YEAR ENDED 9/30/2010 9/30/2011 9/30/2012

ANNUAL REQUIRED CONTRIBUTION $1,723,825 $1,329,211 $1,502,634

ACTUAL CONTRIBUTIONS -0-0-0-

110

PERCENTAGE CONTRIBUTED -0-0-0-

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) Funding Status and Funding Progress. The funding status as of December 31, 2010, the date of the latest actuarial valuation and the preceding years, are as follows:

FISCAL YEAR 2010 2011 2012

ACTUARIAL VALUATION DATE 12/31/2008 12/31/2009 12/31/2010

ACTUARIAL VALUE OF ASSETS (A) -0-0-0-

ACTUARIAL ACCRUED LIABILITY (AAL) PROJECTED UNIT CREDIT (B) $33,511,399 $25,706,929 $29,153,926

UNFUNDED AAL (UAAL) (B - A) $33,511,399 $25,706,929 $29,153,926

FUNDED RATIO (A/B) -0-0-0-

COVERED PAYROLL (C) $31,848,131 $29,776,492 $28,711,114

UAAL AS OF PERCENT COVERED PAYROLL ((B - A) / C) 105.22% 86.33% 101.54%

Actuarial Methods and Assumptions. Actuarial valuations involve estimates and assumptions. As such, amounts regarding the funding status of the plan and the annual required contributions of the employer are subject to revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect a long-term perspective. Significant accrual methods and assumptions for the reporting period of September 30, 2012 were as follows:

Valuation Date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return* Medical cost trend rate* Ultimate trend rate Year of ultimate trend rate

FISCAL YEAR 2012 12/31/2010 Projected unit credit Level percent of pay, open 30 years Market value of assets 4.50% 10.50% 5.00% 2018

*Includes inflation at 3.00%

The calculation produced an unfunded obligation of $29,153,926 and an annual required contribution (ARC) as 4.30% of active payroll projected to be $1,502,634. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

111

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) Annual required contribution (ARC) $ Interest on net OPEB obligation Adjustment to interest Adjustment to ARC Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation-beginning of year

1,502,634 298,170 (59,609) (270,260) 1,470,935 1,470,935 6,626,011

Net OPEB obligation-end of year

8,096,946

$

The required schedule of funding progress presented as required supplementary information provides multi-year tend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liability for benefits. Deferred Compensation/Replacement Benefit Program The City of Pensacola also has four retirement plans which are defined contribution pension plans. These plans provide benefits at retirement to general and public safety employees of the City. At September 30, 2012 there were 692 active plan members. The plan provisions and contribution requirements are established and may be amended by the City of Pensacola City Council. The following is a schedule of employee and employer contributions.

Social Security Replacement Plan

Pension Replacement Plan

Non-Social Security Plan

Elected Officers & Part-time Employees Plan

Employee Contribution

4.7%, 5.7% or 6.7%

5.5%

$10 minimum

7.5%

City Contributions

Matches employee’s contribution up to 6.7%

0-5 yrs of service 1.5% 5-10 yrs of service 2.5% 10 or more years 6.5%

None

None

$1,763,757

$115,410

$445,546

$2,481

$1,169,996

$101,700

N/A

N/A

Employee Contribution for 9/30/12 City Contribution for 9/30/12

Employer and plan member contributions are recognized in the period that the contributions are due.

As required by Internal Revenue Code Section 457, the assets are held in trust for the employees’ benefit. The Chief Financial Officer, selected by the government as the administrator, is responsible for the administration of the plan, including approval of certain investment alternatives (funds) which are made available to plan participants. The government has a fiduciary duty to administer the plan properly and to assure that the investment alternatives made 112

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) available are reasonable. However, since plan participants select the investment fund or funds in which their deferred compensation accounts are invested, the government has no liability for investment losses which occur as a result of the investments selected by the plan participants. Termination Benefits The City of Pensacola does not offer any termination benefits to employees. Therefore, GASB Statement No. 47, Accounting for Termination Benefits, does not apply. D. Litigation The City contracted with Dooley Mack Constructors of Northwest Florida, LLC (“DM”) for the renovations and additions to the Saenger Theater. The project was completed in 2009; however, in 2010, DM filed a lawsuit against the City for damages in excess of $1.2 million. DM alleged breach of contract due to failing to adjust the contract time and contract price and that the City provided defective plans and specifications. As DM’s claims relate in part to alleged errors and omissions of the project architect, Caldwell Associates Architects, Inc., the City has demanded indemnification by Caldwell under the terms of Caldwell’s professional services contract with the City. The City is contingently liable with respect to other lawsuits and other claims incidental to the ordinary course of its operations. Although the outcome of these lawsuits is not presently determinable, in the opinion of management, based on the advice of counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the City. E. Grant Contingencies The City has received numerous state and federal grants. The disbursement of funds received under these programs is subject to review and audit by grantor agencies. Any disbursements disallowed by these agencies could become a liability of the City. In the opinion of management, any such claims should not have a material adverse effect on the financial position of the City. F. Contractual, Construction, and Equipment Commitments The City has outstanding commitments for contractual services and for the construction and acquisition of property, plant and equipment at year end. The commitments represent the difference between the contract prices of the various projects and the amounts paid on each contract. Outstanding commitments by fund at September 30, 2012 were as follows: General Fund Local Option Sales Tax Fund Utility Fund Port Fund Airport Fund Nonmajor Government Internal Service Fund

$

330,924 1,363,851 420,405 511,214 3,683,924 2,694,670 27,098

Total

$

9,032,086

113

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) G. Other Significant Commitments 1. Airport Lease – Air Traffic Control Tower. The City receives lease payments amounting to $248,000 annually from the federal government for their use of one of the Airport's air traffic control towers. The City in turn pays these lease payments to a private corporation as a repayment on the corporation's investment in the construction of the tower. The lease began on April 14, 1992. In the event the federal government terminates its lease with the City after the tenth year of the term then the amount the City is obligated to pay the corporation is a sum equal to the cost of amortizing its development loan plus interest. The amount due from the City will be reduced by the sum representing that percentage of the annual rental allocated to the corporation’s profit. In the opinion of management, the likelihood of the termination of the government’s lease with the City and this outcome is not probable. The debt service commitment, as well as the lease agreement with Financial American Services Company expires September 30, 2022. 2. City Land Lease – Port Royal. On May 1, 1997, the City entered into an agreement with Port Royal Phase II, Inc. (the Developer), a Florida corporation regarding real property known as the Baylen Street Property, Phase II. The Developer has entered into a lease term for a period of 86 years for the purpose of developing a residential project consisting of lots for sixteen singlefamily residences and eight carriage house units and parking areas. The Developer paid a lump sum of $420,000 for the initial 50 year lease. Annual lease revenue will be recognized over the 50 year period. For years 51 through 86 the Developer will make annual installments not to be less than $4,119.69 adjusted every five years by a factor of the Consumer Price Index. There is a renewal term of 100 years after the initial 86-year term. 3. Energy Services of Pensacola (ESP) Contract – Natural Gas Purchases. ESP has the option under its contract with its natural gas supplier, BP Corporation North America, to exercise several hedging options for the purchase of natural gas. This hedging strategy allows ESP to purchase a percentage of its natural gas at specified prices for future delivery. ESP, in concurrence with its commodities consultant, decide on pricing strategies due to the volatility in the market price of natural gas. ESP enters into these hedging contracts to protect itself against volatility in the market price of natural gas. However due to the instability of the market, the market price to purchase natural gas may be lower than the price at which ESP is committed to buy. Should the natural gas supplier fail to fulfill the gas hedging contracts, the terms of the contract include provisions for recovering the cost in excess of the guaranteed price from the natural gas supplier should ESP have to procure natural gas on the open market.

114

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) 4. Port Leases. The Port of Pensacola has entered into several long term leases of land and warehouse space. Listed below is a summary of the current lease terms.

TENANT

TYPE OF PROPERTY

TERM

ANNUAL RENT

Halcorp Effective 1/1/09

Land

2 1/2 years with rolling 365-day notice of cancellation thereafter

$300,000

Community Redevelopment Agency (20 years) Effective 8/1/96

Land

Years 1 - 10 Years 11 - 15 Years 16 - 20

$16,910 $27,395 $32,875

Martin Marietta Effective 12/1/01; Rent Effective 12/1/07

Land

1 year with “4” 5 year renewals

$63,228

CEMEX Ready Mix Effective 10/25/03; Rent Effective 1/1/08

Warehouse

5 years with “3” 5 year renewals

$205,920

NWF Cold Storage Effective 2/24/09

Warehouse

5 years with “2” 5 year renewals

$127,833

Offshore Inland Marine Effective 3/1/10

Warehouse

2 years with “2” 5 year renewals and “1” 2 year renewal

Variable $104,400 to $208,800 based on use

5. City Agreement – Master Development Agreement. On March 27, 2006, the City entered into a Master Development Agreement with Community Maritime Park Associates, Inc. (CMPA) regarding the terms and conditions for the development of the real property commonly referred to as the Community Maritime Park. The parties’ agreed that the City would pay the cost of design and construction of public improvements to be completed under the terms of the Master Lease. The City complied with the conditions precedent contained in the Agreement by providing project funding of $40 million through the issuance of the Redevelopment Revenue Bonds, Series 2009. The Agreement should be read in its entirety to obtain a full understanding of the terms and conditions.

115

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) 6. City Land Lease – Master Lease Agreement. On March 27, 2006, the City entered into a Master Lease Agreement with Community Maritime Park Associates, Inc. (CMPA) regarding 27 acres of waterfront property located at the 300 block of Main Street, for the purpose of developing the Community Maritime Park. CMPA’s lease term is for 60 years with annual installments of $1. The Agreement should be read in its entirety to obtain a full understanding of the terms and conditions. Community Redevelopment Agency (CRA) 1. CRA Interlocal Agreement – Project Support Payments. In May 2010, the CRA of the City of Pensacola entered into an Amended and Restated Interlocal Agreement with the Community Maritime Park Associates, Inc. (CMPA) whereby CRA shall pay monthly Project Support Payments to CMPA through 2040. Of the $94,768,509 beginning balance, the CRA has $90,484,094 in remaining Project Support Payments. Project Support Payments will be paid with Tax Increment Financing (TIF) revenues of the CRA. Annualized project support payments to be remitted by the CRA are as follows:

Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 2033-2037 2038-2040 Total

Project Support Payment $

1,894,745 1,894,745 1,894,745 1,894,745 2,251,662 16,863,450 17,264,387 17,757,212 18,378,473 10,389,930

$

90,484,094

116

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE IV. – OTHER INFORMATION (Continued) Community Maritime Park Associates, Inc. (CMPA) 1. CMPA – New Market Tax Credits. In December 2009 the City of Pensacola issued $45.6 million in Redevelopment Revenue Bonds to, among other things, provide $40 million for the construction and development of the Vince Whibbs Sr. Community Maritime Park (Park). The Community Maritime Park Associates (CMPA), a nonprofit instrumentality of the City, was created to construct and subsequently own the public improvements of the Park. The land, however, is owned by the City and leased to CMPA for a $1 per year. The primary security for the bonds is the City's covenant to annually budget and appropriate from non-ad valorem revenues of the City sufficient moneys to pay debt service on the bonds. See Note III Detailed Notes on all Funds, Debt Issuances and Refundings for additional detail on these bonds. In May 2010, the CMPA received state and federal New Markets Tax Credits (NMTC) allocations through Capital Trust Agency Community Development Entity, LLC (CTA CDE), and two other NMTC allocates (collectively the CDEs). These allocations and the related benefits were made because the development and operation of the Park is a “qualified active low-income community business” or “QALICB” under Federal law. To leverage these allocations and generate approximately $12 million of net additional proceeds for the Park by the sale of NMTC, the City lent approximately $40 million of 2009 bond proceeds to the NMTC investor. (As a result of its loan to the investor entity, the City receives monthly interest payments until the loan matures in 2040 or is prepaid at the end of the 7-year NMTC compliance period.) The proceeds of this loan, together with approximately $12 million of net markets tax credit equity provided by the NMTC investor, for a total of approximately $52 million, were invested by the NMTC investor in CMPA via the CDEs and will be drawn, subject to City approval, to pay project costs. If, however, at some point in time CMPA fails to continue to qualify as a QALICB or violates certain representations and warranties made to the CDEs, such failure may result in a recapture or loss of the NMTC. CMPA has agreed to indemnify the NMTC investor for loss or recapture of NMTC by reason of certain acts or omission of CMPA, including its failure to remain a QALICB or to complete the project within the time required under the NMTC rules or its’ engaging in certain businesses not permitted under the NMTC rules. The City, however, is not a party to, or guarantor of, this indemnity and has disclaimed all liability.

117

CITY OF PENSACOLA, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE V. - SUBSEQUENT EVENTS On October 3, 2012, Energy Services of Pensacola (ESP), a City Department, unveiled the $1.8 million Compressed Natural Gas (CNG) station located at 6722 Pine Forest Road. The station was a joint project between Pensacola Energy and Emerald Coast Utilities Authority (ECUA), a local governmental body. It will serve over 80 natural gas vehicles operated by the City, ECUA and Escambia County. Pensacola Energy hopes to open the station to the general public in 2013. On December 10, 2012, City Council approved the agreement providing for the transfer of Pensacola Energy’s exclusive franchise area on Pensacola Beach to the City of Gulf Breeze for a total sum of $470,000. The basic terms will require Pensacola to support official action by the Escambia County Commission regarding the termination of Pensacola's exclusive franchise to provide gas service to Pensacola Beach and the award of same to Gulf Breeze. The County's official action will also reaffirm Pensacola's exclusive franchise rights for the remainder of Escambia County, excluding the area served by the Town of Century. The average net revenue from this account for Pensacola Energy is $21,000. On December 10, 2012, the Community Redevelopment Agency (CRA) board extended the term of the $500,000 loan to the Community Maritime Park Associates (CMPA) for eight months. The original loan was to be repaid by January 15, 2013 and has an interest rate of 2.5%. The extension is contingent upon the CMPA presenting a plan for repayment before September 15, 2013 specifying sources of revenue and continued operations. Effective October 1, 2012, during contract negotiations, the City of Pensacola and the general employee union agreed to reduce benefits in the General Pension and Retirement Plan thus reducing the cost of the City’s contributions in future years. Effective January 1, 2013, during contract negotiations, the City of Pensacola and the Police unions agreed to close and reduce benefits in the Police Officers’ Retirement Plan thus reducing the cost of the City’s contributions in future years. New Police Officers’ hired will participate in the Florida Retirement System.

118

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REQUIRED SUPPLEMENTARY INFORMATION PENSION FUNDS AND OTHER POST EMPLOYEMENT BENIFITS SCHEDULE OF EMPLOYER CONTRIBUTIONS AND ANALYSIS OF FUNDING PROGRESS

CITY OF PENSACOLA, FLORIDA GENERAL PENSION & RETIREMENT FUND REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF EMPLOYER CONTRIBUTIONS (IN THOUSANDS OF DOLLARS) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$

Annual Required Contributions

Percentage Contributed

3,190 4,591 5,515 6,061 6,267 6,264 7,341 7,211 7,242 7,247

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

ANALYSIS OF FUNDING PROGRESS (IN THOUSANDS OF DOLLARS)

(1) ACTUARIAL VALUE OF ASSETS

FISCAL YEAR

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$

104,817 105,000 104,027 104,435 106,662 113,372 114,133 117,544 119,198 117,463

$

(2) ACTUARIAL ACCRUED LIABILITY (AAL)

(3) PERCENTAGE FUNDED (1)/(2)

140,310 155,855 160,845 157,913 157,417 163,684 163,922 169,052 174,015 177,966

74.7% 67.4% 64.7% 66.1% 67.8% 69.3% 69.6% 69.5% 68.5% 66.0%

119

(4) UNFUNDED AAL (UAAL) (2)-(1)

$

35,493 50,855 56,818 53,478 50,755 50,312 49,789 51,509 54,817 60,504

$

(5) ANNUAL COVERED PAYROLL

UAAL AS A PERCENT OF COVERED PAYROLL (4)/(5)

15,445 15,286 15,708 16,904 17,598 14,807 13,546 12,091 11,280 10,344

229.8% 332.7% 361.7% 316.4% 288.4% 339.8% 367.6% 426.0% 486.0% 584.9%

CITY OF PENSACOLA, FLORIDA FIREFIGHTERS' RELIEF AND PENSION FUND REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF EMPLOYER CONTRIBUTIONS (IN THOUSANDS OF DOLLARS) Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$

Annual Required Contributions *

Percentage Contributed

1,199 1,265 2,130 2,534 3,182 3,605 3,705 3,691 3,441 2,651

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

*Annual Required Contributions include Chapter 175 contributions

ANALYSIS OF FUNDING PROGRESS (IN THOUSANDS OF DOLLARS)

(1) ACTUARIAL VALUE OF ASSETS

FISCAL YEAR

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$

71,441 72,891 73,263 74,679 78,872 85,956 88,835 91,292 93,479 93,326

$

(2) ACTUARIAL ACCRUED LIABILITY (AAL)

(3) PERCENTAGE FUNDED (1)/(2)

83,545 85,334 85,214 92,165 97,021 100,973 107,803 104,575 106,664 110,560

85.5% 85.4% 86.0% 81.0% 81.3% 85.1% 82.4% 87.3% 87.6% 84.4%

120

(4) UNFUNDED AAL (UAAL) (2)-(1)

$

12,104 12,443 11,951 17,486 18,149 15,017 18,968 13,283 13,186 17,235

$

(5) ANNUAL COVERED PAYROLL

UAAL AS A PERCENT OF COVERED PAYROLL (4)/(5)

3,887 4,103 4,468 5,025 4,840 5,041 5,513 5,175 5,009 4,696

311.4% 303.3% 267.5% 348.0% 375.0% 297.9% 344.1% 256.7% 263.2% 367.0%

CITY OF PENSACOLA, FLORIDA POLICE OFFICERS' RETIREMENT FUND REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF EMPLOYER CONTRIBUTIONS (IN THOUSANDS OF DOLLARS) Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$

Annual Required Contributions *

Percentage Contributed

787 1150 1,992 2,959 2,937 3,190 3,441 3,278 3,133 3,509

100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

*Annual Required Contributions include Chapter 185 contributions

ANALYSIS OF FUNDING PROGRESS (IN THOUSANDS OF DOLLARS) (1) ACTUARIAL VALUE OF ASSETS (A)

FISCAL YEAR

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$

39,144 40,485 43,022 46,703 50,257 55,628 57,430 57,897 60,162 62,461

$

(2) ACTUARIAL ACCRUED LIABILITY (AAL)

(3) PERCENTAGE FUNDED (1)/(2)

41,900 48,631 54,823 58,611 62,328 67,807 69,693 69,259 71,375 101,445

93.4% 83.2% 78.5% 79.7% 80.6% 82.0% 82.4% 83.6% 84.3% 61.6%

(4) UNFUNDED AAL (UAAL) (2)-(1)

$

2,756 8,146 11,801 11,908 12,071 12,179 12,263 11,362 11,213 38,984

$

(5) ANNUAL COVERED PAYROLL

UAAL AS A PERCENT OF COVERED PAYROLL (4)/(5)

6,318 6,484 6,883 7,934 7,153 7,601 7,513 7,093 6,967 6,766

43.6% 125.6% 171.5% 150.1% 168.8% 160.2% 163.2% 160.2% 160.9% 576.2%

Notes: All numbers for the pension funds schedules of employer contributions and analysis of funding progress are obtained from the most recent actuarial reports. Further discussion on the potential future funding of the pension plans can be found on page 16 of the Letter of Transmittal.

121

CITY OF PENSACOLA, FLORIDA OTHER POST EMPLOYMENT BENEFITS (OPEB) REQUIRED SUPPLEMENTARY INFORMATION

Retirees and beneficiaries currently receiving benefits Terminated employees entitled to benefits but not yet receiving benefits Active members Total

FY 2010

FY 2011

FY 2012

469

442

405

-0-

-0-

-0-

777

727

693

1,246

1,169

1,098

SCHEDULE OF FUNDING PROGRESS

FISCAL YEAR 2010 2011 2012

ACTUARIAL VALUATION DATE 12/31/2008 12/31/2009 12/31/2010

ACTUARIAL VALUE OF ASSETS (A) -0-0-0-

ACTUARIAL ACCRUED LIABILITY (AAL) PROJECTED UNIT CREDIT (B) $33,511,399 $25,706,929 $29,153,926

UNFUNDED AAL (UAAL) (B - A) $33,511,399 $25,706,929 $29,153,926

FUNDED RATIO (A/B) -0-0-0-

COVERED PAYROLL (C) $31,848,131 $29,776,492 $28,711,114

UAAL AS OF PERCENT COVERED PAYROLL ((B - A) / C) 105.22% 86.33% 101.54%

SCHEDULE OF EMPLOYER CONTRIBUTIONS YEAR ENDED 9/30/2010 9/30/2011 9/30/2012

Valuation Date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return* Medical cost trend rate* Ultimate trend rate Year of ultimate trend rate

ANNUAL REQUIRED CONTRIBUTION $1,723,825 $1,329,211 $1,502,634

ACTUAL CONTRIBUTIONS -0-0-0-

PERCENTAGE CONTRIBUTED -0-0-0-

FISCAL YEAR 2010 12/31/2008 Projected unit credit Level percent of pay, open 30 years Market value of assets

FISCAL YEAR 2011 12/31/2009 Projected unit credit Level percent of pay, open 30 years Market value of assets

FISCAL YEAR 2012 12/31/2010 Projected unit credit Level percent of pay, open 30 years Market value of assets

4.50%

4.50%

4.50%

9.00% 5.00% 2016

10.50% 5.00% 2018

10.50% 5.00% 2018

*Includes inflation at 3.00%

122

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COMBINING FINANCIAL STATEMENTS

NONMAJOR GOVERNMENTAL FUNDS INTERNAL SERVICE FUNDS FIDUCIARY FUNDS

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NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Special Grants Fund – to account for various private, state and federal grant receipts and the expenditures thereof. Local Option Gasoline Tax Fund - to account for the receipt and expenditures of gasoline tax revenue. Community Development Block Grant Fund - to account for the community development block grant and the housing rehabilitation program federal grant receipts and the expenditures thereof. Community Redevelopment Agency - to account for the tax increment development receipts and the expenditures thereof. Urban Core Redevelopment Trust - to account for the tax increment development receipts and the expenditures thereof. West Florida Public Library Fund – to account for the receipt and expenditures of the West Florida Public Library. Stormwater Utility Fund – to account for the receipt and expenditures for the operating and maintenance activities related to stormwater. Law Enforcement Trust Fund - to account for proceeds from the sale of confiscated property. Expenditure of such funds is restricted to law enforcement purposes. Hurricane Damage Fund - to account for federal and state monies received and expended for disaster relief as a result of hurricanes. Golf Course Fund - to account for the revenues and expenditures of the Osceola Golf Course and Pro Shop. Eastside Tax Increment Financing District - to account for the tax increment revenues associated with programs and projects identified in eastside community redevelopment area. Inspections Fund – to account for the revenues and expenditures of collections as regulated under Florida Statue 553 referred to as the ‘Florida Building Code’. Recreation Fund – to account for the revenues and expenditures of recreation center and athletic activities. Tennis Fund – to account for the revenues and expenditures of the Roger Scott Tennis Center. CMPA Management Services Fund – to account for the revenues and expenditures related to the Community Maritime Park Associates Management Services Agreement.

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Debt Service Funds Debt service funds are used to account for resources accumulated and payments made for principal and interest on long-term debt of governmental funds. Tax and Franchise Fee Debt Service Fund – to account for the principal and interest payments for the sales and excise tax revenue bonds. CRA Debt Service Fund – to provide monies for payment of the 2004 Redevelopment Refunding Revenue Bonds which were issued to defease the 1994 Series. Financing is provided from assessed valuation within the redevelopment area.

Capital Projects Funds Capital project funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Stormwater Capital Fund – to account for the capital expenditures of stormwater improvements. Financing is provided by a transfer from the General Fund of matching receipts collected by the stormwater utility fee.

CITY OF PENSACOLA, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

Special Revenue Funds Local Option Gasoline Tax

Special Grants

Community Development Block Grant

Community Redevelopment Agency

ASSETS

Cash and cash equivalents Investments Accounts receivable Due from other funds Due from other governments Prepaids and deposits Inventory Notes receivable Restricted assets Cash and cash equivalents Other cash Investments Due from other funds Due from other governments Notes receivable Total assets

$

341,695 60,735

$

1,074,800 191,041

$

$

405,050 71,997 65,077

817 411,969 1,776 12,189 316 400,097 777,294 $

142,997

1,579,821 $

283,745 1,215,708

1,408,838 $

1,511,642 $

957,002

62,854

13,011 367 579 21,726

LIABILITIES AND FUND BALANCES Liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Due to other governments Compensated absences payable Deferred revenue Deposits Total liabilities

$

$

$ 273,703 87,474

1,307,757

1,215,708

1,431,316

361,177

1,098,458

1,047,661

(949,953) 148,505 $

1,579,821

123

$

39,700 193,380

3,286 47,705

Fund balances Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances

49,601 22,967

1,511,642

817 913,239

1,047,661 $

1,408,838

6,263 1,000 42,946

0 $

1,511,642

914,056 $

957,002

CITY OF PENSACOLA, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

Special Revenue Funds Urban Core Redevelopment Trust

West Florida Public Library

Stormwater Utility Fund

Law Enforcement Trust

Hurricane Damage Fund

Golf Course Fund

ASSETS

Cash and cash equivalents Investments Accounts receivable Due from other funds Due from other governments Prepaids and deposits Inventory Notes receivable Restricted assets Cash and cash equivalents Other cash Investments Due from other funds Due from other governments Notes receivable Total assets

$

$

426,980 75,894

$

125,000 6,724

$

269,515 47,905

$

323,888 57,569

$

508,416 90,368

19,592 862

247,651

187,853

44,019 1,733,521

634,598 $

31,406 5,582 5,750

3,016 3,617

1,056,868

1,244,721 $

$

337,874 $

381,457 $

2,623,975 $

49,371

LIABILITIES AND FUND BALANCES Liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Due to other governments Compensated absences payable Deferred revenue Deposits Total liabilities

$

Fund balances Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances

$

$

9,296

70,816

40,680

1,106

15,301

$

$

$

127,884

65,277

0

0

1,244,721

6,724 499,990

862 13,382 258,353

381,457

2,623,975

272,597

381,457

1,244,721

506,714 $

634,598

$

337,874

22,920 338 6,966

0

1,244,721 $

51,547 4,415

4,025 3,961 38,210

6,633 3,866 662

$

381,457

2,623,975 $

2,623,975

11,161 $

49,371

(continued)

124

CITY OF PENSACOLA, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

Special Revenue Funds Eastside Tax Increment Financing District

Inspections Fund

Recreation Fund

Tennis Fund

ASSETS

Cash and cash equivalents Investments Accounts receivable Due from other funds Due from other governments Prepaids and deposits Inventory Notes receivable Restricted assets Cash and cash equivalents Other cash Investments Due from other funds Due from other governments Notes receivable Total assets

$

382,665 68,017

$

267,078 47,472

$

336,517 59,814 4,543 122,596

$

878

$

450,682 $

314,550 $

55,123 9,798 3,433

586

524,348 $

68,940

LIABILITIES AND FUND BALANCES Liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Due to other governments Compensated absences payable Deferred revenue Deposits Total liabilities

$

17,937

$

22,386

25,690

$

1,982

9,998

1,252

7,632 72 88,172 136,127

0

Fund balances Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances

$

178,423 450,682

450,682 $

450,682

125

178,423 $

314,550

$

49,063 76,735

11,322

878 4,185 436,966 5,584

586 15,256 41,164 612

447,613

57,618

524,348

$

68,940

CITY OF PENSACOLA, FLORIDA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2012

Special Revenue Funds

Debt Service Funds

CMPA Management Services Fund

Tax & Franchise Fee Debt Service

Capital Projects Funds

CRA Debt Service

Total Nonmajor Governmental Funds

Stormwater Capital

ASSETS

Cash and cash equivalents Investments Accounts receivable Due from other funds Due from other governments Prepaids and deposits Inventory Notes receivable Restricted assets Cash and cash equivalents Other cash Investments Due from other funds Due from other governments Notes receivable Total assets

$

$

$

$

591,593 105,153

$

12,647

2,806,039

364,607

2,253,521

498,761

64,807

400,553

6,730,462 12,189 1,196,309 1,733,521 1,002,802 1,993,002

175,963

$

5,014,726 891,345 78,803 122,596 144,592 25,530 3,617 411,969

188,610

$

3,304,800 $

429,414 $

3,350,820

$

19,361,463

78,022 23,500

$

$

$

24,444 168 85,510

$

365,320 325,458 213,263 488,339 47,705 24,039 2,533,825 142,196 4,140,145

LIABILITIES AND FUND BALANCES Liabilities Accounts payable Contracts payable Contracts payable - retainage Due to other funds Due to other governments Compensated absences payable Deferred revenue Deposits Total liabilities

$

125,865

Fund balances Non-spendable Restricted Committed Assigned Unassigned Total fund balances Total liabilities and fund balances

$

227,387

0

0

110,122

12,647 85,000

3,304,800

429,414

224,055 3,016,643

(136,424) (38,777)

3,304,800

429,414

3,240,698

188,610

$

3,304,800

126

$

429,414

$

3,350,820

29,147 12,064,016 4,207,674 6,858 (1,086,377) 15,221,318 $

19,361,463

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Special Revenue Funds Local Option Gasoline Tax

Special Grants Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues

$

1,557,013

$

1,247,780

Community Redevelopment Agency $

1,092,727 96,811

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

6 118,491

2,082

1,366,277

1,559,095

1,105,062

126,925

687,613

3,256,943

48,180

598,061

2,094,724

418,799

21,749

1,381,404

2,142,904

1,106,412

3,278,692

(15,127)

Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

12,335 30,114

331,140 249,640 20,734 181,829

Excess (deficiency) of revenues over (under) expenditures

(583,809)

(1,350)

(3,151,767)

500,000

0

Net change in fund balances

(83,809)

163,632 $

148,505

3,879,536

500,000

(15,127)

Fund balances at beginning of year Fund balances at end of year

$

Community Development Block Grant

1,131,470 $

1,047,661

$

1,350 1,350

3,879,536

0

727,769

0

186,287

0

$

914,056

(continued)

127

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Special Revenue Funds Urban Core Redevelopment Trust Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues

$

$ 2,512,106

Stormwater Utility Fund $

Law Enforcement Trust $

Hurricane Damage Fund $ 1,201,312

131,292 789 1,481 19,000 3,724,479

2,517,110

Golf Course Fund

$

3,571,917

5,004

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

2,631,250 5,231 1,344

89,316 696

611,088 4,208

85

23 2,637,848

90,012

1,205,520

611,173

135,180

2,370 7,768

4,508,791

0

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

Net change in fund balances Fund balances at beginning of year Fund balances at end of year

West Florida Public Library

326,865

2,331,996 64,637

4,835,656

2,396,633

2,517,110

(1,111,177)

1,441,891 (4,386,619)

1,327,300

241,215

135,180

10,138

(45,168)

739,037

1,195,382

(127,864)

110,000

(2,944,728)

3,480 1,330,780

0

(427,618)

219,603

241,215

(45,168)

1,195,382

(17,864)

287,111

31,382

426,625

1,428,593

29,025

1,672,339 $

739,037

1,244,721

$

506,714

$

272,597 $

0

381,457

0

$

2,623,975

110,000

$

11,161

(continued)

128

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Special Revenue Funds Eastside Tax Increment Financing District Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues

$

$

Recreation Fund

Tennis Fund

$

$

1,071,054 57,533

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

792

480

58,325

1,071,534

785,832

214,421

915 1,629 154 788,530

124

214,545

761,817

249,677

8,570 907,079

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

8,570

907,079

761,817

249,677

49,755

164,455

26,713

(35,132)

35,380

0

0

85,135

164,455

26,713

(35,132)

365,547

13,968

420,900

92,750

35,380

Net Change in fund balances Fund balances at beginning of year Fund balances at end of year

Inspections Fund

$

450,682

$

178,423 $

447,613

0

$

57,618

(continued)

129

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Special Revenue Funds

Debt Service Funds

CMPA Management Services Fund Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues

$

$

CRA Debt Service $

Total Nonmajor Governmental Funds

Stormwater Capital $

$

2,331

6,303

2,331

6,303

1,557,013 1,071,054 9,683,375 4,610,118 225,839 37,494 199,965 19,177 17,404,035

438,644 2,706,257

3,955,496 1,381,167 297,820 6,637,799 181,829 2,770,640 6,231,092

270,716

48,250 318,966

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

0

357,743

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

357,743

3,105,000 191,513 3,296,513

399,241 30,173 429,414

3,144,901

3,504,241 221,686 25,181,770

(38,777)

(3,296,513)

(427,083)

(3,138,598)

(7,777,735)

3,069,688

427,083

6,032,341 (3,495,507)

3,069,688

427,083

2,536,834

16,823,219 (7,882,126) 4,830 8,945,923

0

Net change in fund balances

(38,777)

Fund balances at beginning of year Fund balances at end of year

Tax & Franchise Fee Debt Service

Capital Projects Funds

0 $

(38,777) $

(226,825)

0

3,531,625 3,304,800

130

(601,764)

429,414 $

429,414

1,168,188

3,842,462 $

3,240,698

14,053,130 $

15,221,318

CITY OF PENSACOLA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL LOCAL OPTION SALES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012

Variance w ith Final Budget Budget

Actual

Positive/(Negative)

Revenues: Taxes

$

6,401,800

Interest income Total revenues

$

6,401,758

$

(42)

900

883

(17)

6,402,700

6,402,641

(59)

104,407

104,404

3

36,218

32,118

4,100

17,170,633

8,207,027

8,963,606

Expenditures: Current General government Public Safety Culture and recreation Capital outlay Debt service Principal retirement

311,161

Interest

877,300

877,237

63

18,499,719

9,220,786

9,278,933

(12,097,019)

(2,818,145)

9,278,874

(12,097,019)

(2,818,145)

9,278,874

12,097,019

4,190,031

(7,906,988)

Total expenditures

311,161

Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances at beginning of year Fund balances at end of year

$

0

131

$

1,371,886

$

1,371,886

CITY OF PENSACOLA, FLORIDA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL MARITIME COMMUNITY PARK CONSTRUCTION FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012

Variance w ith Final Budget Budget

Actual

Positive/(Negative)

Revenues: Intergovernmental

$

Charges for services Interest income

978,200

$

$

39

206,273

6,673

1,847,800

1,859,422

11,622

5,513

5,513

3,025,600

3,049,447

23,847

5,232,900

3,221,515

2,011,385

3,063,500

3,063,481

19

8,296,400

6,284,996

2,011,404

(5,270,800)

(3,235,549)

2,035,251

Other Total revenues

978,239

199,600

Expenditures: Current Culture and recreation Debt service Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

80,000

80,000

0

80,000

80,000

0

(5,190,800)

(3,155,549)

2,035,251

5,190,800

49,728,167

44,537,367

$

0

132

$

46,572,618

$

46,572,618

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Special Grants

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures

$ 1,247,780

(4,022,166)

28,955 559,603

6 118,491

(28,949) (441,112)

5,858,504

1,366,277

(4,492,227)

894,028 250,000 123,922 827,071

331,140 249,640 20,734 181,829

562,888 360 103,188 645,242

3,919,555

598,061

3,321,494

6,014,576

1,381,404

4,633,172

(15,127)

0

Net change in fund balances Fund balances at beginning of year $

$

5,269,946

(156,072)

Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

Fund balances at end of year

Actual

$

Total revenues

Variance Positive/ (Negative)

0

(156,072)

(15,127)

156,072

163,632

0

140,945

$

148,505

0 140,945 7,560 $

148,505

(continued)

133

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Local Option Gasoline Tax

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

$

1,557,013

$

1,513

$

$ 1,741,100

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures

400 65,000

2,082

1,682 (65,000)

1,620,900

1,559,095

(61,805)

Net change in fund balances

(648,373)

12,335

12,335

1,741,100

1,105,062

(636,038)

1,274,400

687,613

586,787

7,273

3,196,917

2,094,724

1,102,193

466,700

418,799

47,901

3,252,370

2,142,904

1,109,466

1,741,100

1,106,412

634,688

1,047,661

0

(1,350)

(1,350)

(583,809)

500,000

500,000

0

500,000

500,000

0

0

1,350 1,350

1,350 1,350

1,047,661

0

0

0

0

0

0

0

(83,809)

1,131,470 $

1,092,727

48,180

(1,131,470)

Fund balances at beginning of year

$

55,453

(1,631,470)

Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

Fund balances at end of year

Actual

1,555,500

Com m unity Developm ent Block Grant Variance Positive/ Budget Actual (Negative)

Variance Positive/ (Negative)

0

1,131,470 $

1,047,661

$

1,047,661

$

0

$

0

$

0

(continued)

134

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Com m unity Redevelopm ent Agency Variance Positive/ Budget Actual (Negative) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

$

$

$

116,500

96,811

(19,689)

25,000 7,800

30,114

5,114 (7,800)

149,300

126,925

(22,375)

4,326,825

3,256,943

1,069,882

1,120,060

21,749

1,098,311

5,446,885

3,278,692

2,168,193

(5,297,585)

(3,151,767)

2,145,818

5,121,837

3,879,536

(1,242,301)

5,121,837

3,879,536

(1,242,301)

(175,748)

727,769

903,517

175,748

186,287

10,539

0

$

914,056

$

914,056

(continued)

135

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

West Florida Public Library

Urban Core Redevelopm ent Trust Variance Positive/ Budget Actual (Negative) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

Total revenues

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances

0

5,000

5,004

4

2,517,110

4

$

$

3,571,900

3,571,917

17

131,300 1,400 19,000

131,292 789 1,481 19,000

3,723,600

3,724,479

879

4,737,360

4,508,791

228,569

600,366

326,865

273,501

(8) 789 81

0

0

0

5,337,726

4,835,656

502,070

2,517,106

2,517,110

4

(1,614,126)

(1,111,177)

502,949

1,441,891 (5,631,337)

1,441,891 (4,386,619)

0 1,244,718

1,327,300

1,327,300

0

(4,189,446)

(2,944,728)

1,244,718

3,500 1,330,800

3,480 1,330,780

(20) (20)

(427,618)

1,244,722

1,672,340 $

Actual

$

2,512,106

(1,672,340)

Fund balances at beginning of year

$

2,512,106

2,517,106

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

Fund balances at end of year

$

Budget

Variance Positive/ (Negative)

0

1,672,339 $

1,244,721

(1) $

1,244,721

$

(283,326)

219,603

502,929

283,326

287,111

3,785

0

$

506,714

$

506,714

(continued)

136

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Storm w ater Utility Fund

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures

$

2,631,250 5,231 1,344 23

23

2,633,450

2,637,848

4,398

2,576,812 64,638

2,331,996 64,637

244,816 1

2,641,450

2,396,633

244,817

241,215

249,215

0

0

(8,000)

241,215

249,215

8,000

31,382

23,382

0

Net change in fund balances Fund balances at beginning of year $

$

2,623,450 10,000

(8,000)

Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

Fund balances at end of year

Actual

$

Total revenues

Variance Positive/ (Negative)

0

$

272,597

7,800 (4,769) 1,344

$

272,597

(continued)

137

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Law Enforcem ent Trust

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

$

Budget

$

Actual

$

89,300 700

89,316 696

16 (4)

90,000

90,012

12

204,988

135,180

69,808

Variance Positive/ (Negative)

$

$

1,201,300

1,201,312

12

4,200

4,208

8

1,205,500

1,205,520

20

2,370 7,768

(2,370) (7,768)

154

11,640

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances

$

154

11,640

216,628

135,180

81,448

154

10,138

(9,984)

(126,628)

(45,168)

81,460

1,205,346

1,195,382

(9,964)

0

0

0

0

Fund balances at beginning of year Fund balances at end of year

Actual

$

Hurricane Dam age Fund Variance Positive/ (Negative)

0

(126,628)

(45,168)

81,460

1,205,346

1,195,382

126,628

426,625

299,997

(1,205,346)

1,428,593

0

$

381,457

$

381,457

$

0

$

2,623,975

0 (9,964) 2,633,939 $

2,623,975

(continued)

138

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Golf Course Fund

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

608,900

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

Actual

$

Total revenues

$

Variance Positive/ (Negative) $

611,088

2,188

85

85

608,900

611,173

2,273

739,600

739,037

563

739,600

739,037

563

(130,700)

(127,864)

110,000

110,000

0

110,000

110,000

0

(20,700)

(17,864)

2,836

20,700

29,025

8,325

0

$

11,161

2,836

$

11,161

(continued)

139

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Eastside Tax Increm ent Financing District Fund Variance Positive/ Budget Actual (Negative) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$ 57,534

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year $

Budget

$ 57,533

Variance Positive/ (Negative)

Actual

$

$

$

1,071,100

1,071,054

(46)

(1)

792

792

500

480

(20)

57,534

58,325

791

1,071,600

1,071,534

(66)

332,060

8,570

323,490 928,100

907,079

21,021

126,400

Excess (deficiency) of revenues over (under) expenditures

Fund balances at end of year

$

Inspections Fund

126,400

458,460

8,570

449,890

928,100

907,079

21,021

(400,926)

49,755

450,681

143,500

164,455

20,955

35,380

35,380

0

35,380

35,380

0

0

0

0

(365,546)

85,135

450,681

143,500

164,455

20,955

365,546

365,547

1

(143,500)

13,968

157,468

0

$

450,682

$

450,682

$

0

$

178,423

$

178,423

(continued)

140

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Recreation Fund

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

Actual

$

Total revenues

$

Variance Positive/ (Negative)

$

$

779,900

785,832

1,500

915 1,629 154

781,400

788,530

7,130

781,400

761,817

19,583

781,400

761,817

19,583

0

26,713

26,713

0

0

0

0

26,713

26,713

0

420,900

420,900

0

$

447,613

5,932 (585) 1,629 154

$

447,613

(continued)

141

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Tennis Fund

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

209,300

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures

$

$

214,421

5,121

124

124

$

$

332,900

270,716

(62,184)

68,600 93,700

48,250

(20,350) (93,700)

209,300

214,545

5,245

495,200

318,966

(176,234)

264,980

249,677

15,303

420,200

357,743

62,457

75,000

Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses)

264,980

249,677

15,303

495,200

(55,680)

(35,132)

20,548

0

0

0

0

Net change in fund balances Fund balances at beginning of year Fund balances at end of year

Actual

$

CMPA Managem ent Services Fund Variance Positive/ Budget Actual (Negative)

Variance Positive/ (Negative)

$

0

(55,680)

(35,132)

20,548

0

55,680

92,750

37,070

0

0

$

57,618

$

57,618

$

0

75,000

357,743

137,457

(38,777)

(38,777)

0

0

(38,777)

(38,777)

0 $

(38,777)

0 $

(38,777)

(continued)

142

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Tax & Franchise Fee Debt Service Variance Positive/ Budget Actual (Negative) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances

0

0

3,105,000 191,600 3,296,600

3,105,000 191,513 3,296,513

0 87 87

(3,296,600)

(3,296,513)

87

3,069,800

3,069,688

(112)

3,069,800

3,069,688

(112)

(226,825)

226,800 $

$

0

(226,800)

Fund balances at beginning of year Fund balances at end of year

$

0

(25)

3,531,625 $

3,304,800

3,304,825 $

3,304,800

(continued)

143

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

CRA Debt Service Fund

Budget Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other Total revenues

$

0

Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

Actual

$

$

Storm w ater Capital Fund Variance Positive/ (Negative)

Budget

$

Actual

$

$

$

2,331

2,331

6,300

6,303

3

2,331

2,331

6,300

6,303

3

578,452 5,804,165

438,644 2,706,257

139,808 3,097,908

6,382,617

3,144,901

3,237,716 3,237,719

399,300 30,200 429,500

399,241 30,173 429,414

(429,500)

(427,083)

2,417

(6,376,317)

(3,138,598)

429,500

427,083

(2,417)

6,133,850 (3,600,000)

6,032,341 (3,495,507)

429,500

427,083

(2,417)

2,533,850

2,536,834

59 27 86

0

0

0

0

429,414

429,414

0

$

Variance Positive/ (Negative)

429,414

$

429,414

(3,842,467)

0

2,984

(601,764)

3,842,467 $

(101,509) 104,493

3,240,703

3,842,462 $

3,240,698

(5) $

3,240,698

(continued)

144

CITY OF PENSACOLA, FLORIDA COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE–BUDGET AND ACTUAL (GAAP BASIS) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

Total Nonm ajor Governm ental Funds Variance Positive/ Budget Actual (Negative) Revenues: Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeits Interest income Donations Other

$

Total revenues Expenditures: Current General government Public safety Transportation Culture and recreation Economic environment Physical environment Capital outlay Debt service Principal retirement Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures Other financing sources (uses): Transfers in Transfers (out) Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances at beginning of year Fund balances at end of year

$

145

1,555,500 1,071,100 14,353,886 4,670,950 230,600 47,555 719,603 120,500

$

1,557,013 1,071,054 9,683,375 4,610,118 225,839 37,494 199,965 19,177

$

1,513 (46) (4,670,511) (60,832) (4,761) (10,061) (519,638) (101,323)

22,769,694

17,404,035

(5,365,659)

5,933,285 2,027,116 305,453 7,067,616 827,071 3,155,264 15,385,441

3,955,496 1,381,167 297,820 6,637,799 181,829 2,770,640 6,231,092

1,977,789 645,949 7,633 429,817 645,242 384,624 9,154,349

3,504,300 221,800 38,427,346

3,504,241 221,686 25,181,770

59 114 13,245,576

(15,657,652)

(7,777,735)

7,879,917

18,169,558 (9,231,337) 3,500 8,941,721

16,823,219 (7,882,126) 4,830 8,945,923

(1,346,339) 1,349,211 1,330 4,202

(6,715,931)

1,168,188

7,884,119

6,715,931

14,053,130

7,337,199

0

$

15,221,318

$

15,221,318

INTERNAL SERVICE FUNDS Internal service funds are used to account for the financing of goods or services provided by one department to other departments of the government on a cost reimbursement basis. General Stock Account - to account for the cost of operating a central warehouse facility used by other City departments. Material purchases are recovered from the users. Insurance Retention Fund - to account for the City's self-insurance program. Central Services Fund - to account for the operation of the City Mail Room, Management Information Services, Engineering, and City Garage Facilities.

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS SEPTEMBER 30, 2012

ASSETS Current assets Cash and cash equivalents Investments Accounts receivable (net) Due from other funds Prepaid expenses Inventory Total current assets

$

70,119 12,463

$

580,788 663,370

Noncurrent assets Prepaid expense Advances to other funds Restricted assets Cash and cash equivalents Investments Capital assets Non-depreciable Depreciable (net) Total noncurrent assets Total assets

Insurance Retention Fund

General Stock Account

574,711 173,100 276,129 2,657,205 183,849

Central Services Fund

$

770,943 137,032

Total

$

38,943

3,864,994

946,918

210,320 783,325

210,320 783,325

2,809,173 499,317

2,809,173 499,317

84,296 0 $

663,370

8,251,425

84,296 2,580,963 6,967,394

2,580,963 2,580,963

4,386,431 $

1,415,773 322,595 276,129 2,657,205 222,792 580,788 5,475,282

$

3,527,881

$

12,442,676

$

29,163 132,628

$

29,163 146,040 17,679 192,882

LIABILITIES Current liabilities Accounts payable Due to other funds Deposits Total current liabilities

$

$

0

Noncurrent liabilities Compensated absences payable Advances from other funds Claims and judgments payable Net OPEB obligation Total noncurrent liabilities

161,791

17,093

Total liabilities Net assets Investment in capital assets, net of related debt Unrestricted Total net assets Total liabilities and net assets

13,412 17,679 31,091

$

0

2,361,442 51,483 2,430,018

444,085 769,756

324,306 18,458 2,361,442 495,568 3,199,774

0

2,461,109

931,547

3,392,656

663,370

84,296 5,706,020

2,580,963 15,371

2,665,259 6,384,761

663,370

5,790,316

2,596,334

9,050,020

663,370

146

$

8,251,425

307,213 18,458

$

3,527,881

$

12,442,676

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

General Stock Account Operating revenues: Charges for services Health Dental Vision Life Survivor disability Liability Other Total operating revenues

Insurance Retention Fund

$

Central Services Fund

$

0

$ 8,895,550 317,565 25,820 257,042 295,713 4,738,751 432,162 14,962,603

2,056 4,702,595

4,700,539 8,895,550 317,565 25,820 257,042 295,713 4,738,751 434,218 19,665,198

453,274 26,352 9,799 81,570 38,960

3,281,803 141,194 31,788 437,177 252,788

3,735,077 167,546 41,587 518,747 291,748

4,144,750

2,634,404 1,145,588 178,709 8,647,105 316,454 26,683 258,842 294,565 18,257,055

557,845

1,408,143

426,106

426,106

850,298

131,739

982,037

26,694

31,131 622 31,753

1,013,790

Operating expenses: Salaries and employee benefits Materials and supplies Repairs and maintenance Contractual services Office and utilities Premiums and claims expense General liability Workmen's compensation Auto Health Dental Vision Life Survivor disability Total operating expenses before depreciation

0

2,634,404 1,145,588 178,709 8,647,105 316,454 26,683 258,842 294,565 14,112,305

Operating income (loss) before depreciation

0

850,298

Depreciation Operating income (loss)

0

4,700,539

Total $

Nonoperating revenues (expenses): Investment interest Gain (loss) on disposal of capital assets Total nonoperating revenues

0

26,694

4,437 622 5,059

Income (loss) before contributions and transfers:

0

876,992

136,798

Contributions and transfers: Transfers (out) Total contributions and transfers

0

0

(597,700) (597,700)

(597,700) (597,700)

Change in net assets

0

876,992

(460,902)

416,090

663,370

4,913,324

Net assets at beginning of year Net assets at end of year

$

663,370

147

$

5,790,316

3,057,236 $

2,596,334

8,633,930 $

9,050,020

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

General Stock Account

Insurance Retention Fund

Central Services Fund

Total

Cash flows from operating activities: Cash received from customers Cash received from other funds Cash payments to suppliers for goods and services Cash payments to employees for services Net cash provided by (used for) operating activities

$

(448) $

(448)

8,971,660 $ 4,053,330 (13,832,200) (445,045) (1,252,255)

4,702,595

$

(840,132) (3,241,914)

13,673,807 4,053,330 (14,672,332) (3,686,959)

620,549

(632,154)

(597,700)

(177,029) (597,700)

(177,029)

(597,700)

(774,729)

(84,296)

(131,965) 808

(216,261) 808

(84,296)

(131,157)

(215,453)

(12,463)

(603,503) 26,694

(137,032) 4,437

(752,998) 31,131

(12,463)

(576,809)

(132,595)

(721,867)

(12,911)

(2,090,389)

(240,903)

(2,344,203)

83,030

5,474,272

Cash flows from noncapital financing activities: Advance from other funds Transfer out Net cash provided by (used for) noncapital financing activities

(177,029)

0

Cash flows from capital and related financing activities: Acquisition of capital assets Proceeds from sale of assets Net cash provided by (used for) capital and related financing activities

0

Cash flows from investing activities: (Purchase)/sale of investments Interest on investments Net cash provided by (used for) investing activities

Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents of end of year

$

70,119

148

$

3,383,883

1,011,846 $

770,943

6,569,148 $

4,224,945

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF CASH FLOWS RECONCILIATION OF OPERATING INCOME TO NET CASH INTERNAL SERVICE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

General Stock Account

Operating income (loss)

$

Insurance Retention Fund $

850,298

Central Services Fund $

131,739

Total $

982,037

Adjustments to reconcile operating income to net cash provided by (used for) operating activities: Depreciation

426,106

426,106

Change in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in inventory (Increase) decrease in due from other funds (Increase) decrease in due from other governments (Increase) decrease in prepaid expenses Increase (decrease) in accounts payable Increase (decrease) in contracts payable Increase (decrease) in due to other funds Increase (decrease) in deposits Increase (decrease) in claims and judgments Increase (decrease) in compensated absences Increase (decrease) in net OPEB obligation

Net cash provided by (used for) operating activities

303,165

303,165 (448) (2,244,721) 0 (182,289) (77,003) (11,404) 815 3,943 120,342 (45,710) 93,013

(448) (2,244,721) (179,854) (102,253) (11,404) (569) 3,943 120,342 (218) 9,016 $

(448) $

(2,435) 25,250 1,384

(45,492) 83,997

(1,252,255) $

620,549

$

(632,154)

Noncash investing, capital, and financing activities: General Stock Account Gain (loss) on disposal of capital assets Transfer of capital assets to other funds

$

-

149

Insurance Retention Fund $

-

Central Services Fund $

(186) 97,700

Total $

(186) 97,700

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FIDUCIARY FUNDS Fiduciary funds are trust funds used to account for assets held by the City in a trustee capacity for individuals, other governmental units and/or other funds.

PENSION TRUST FUNDS Pension Trust Funds account for financial operations of the City’s three pension plans. General Pension and Retirement Fund – to account for the accumulation of resources to be used for pension and retirement payments for substantially all City employees except for those in the Fire and Police Pension Funds. Resources are contributed by employees and the City at actuarially determined rates. On June 18, 2007 the City’s General Pension was closed to all new employees. Existing general employees were given the option to participate in the Florida Retirement System or remain in the City’s General Pension. Firemen’s Relief and Pension Fund – to account for the accumulation of resources to be used for pension and retirement payments for all firefighters. Resources are contributed by employees and the City at actuarially determined rates. Police Officer’s Retirement Fund – to account for the accumulation of resources to be used for pension and retirement payments for all police officers. Resources are contributed by employees and the City at actuarially determined rates.

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2012

General Pension and Retirement Fund

ASSETS Other cash

$

Receivables Employer Employee Commission Recapture Total receivables Investments Short term investments Debt Securities & Bond Mutual Funds Stock Mutual Funds Mortgage Backed Securities Commingled Trust Fund Domestic Stocks Preferred Stocks Foreign Stocks Total investments

Total assets

Firemen's Relief and Pension Fund

70,554 $

Police Officers' Retirement Fund

138,169 $

64,892 $

270,102 16,840 800 287,742

95,381 17,076 1,831 114,288

172,655 1,078

1,911,426 33,601,580 15,819,166 9,876,647

7,066,854 26,375,550

713,227 16,645,739

3,723,332 12,550,574 43,715,105 1,778,287 1,254,748 96,464,450

8,078,465 2,829,940 36,249,862 0 6,156,612 70,673,845

54,857,636 1,358,583 3,110,558 120,535,596

Total Pension Trust Funds 273,615

538,138 34,994 2,631 575,763

173,733

9,691,507 76,622,869 15,819,166 21,678,444 15,380,514 134,822,603 3,136,870 10,521,918 287,673,891

$

120,893,892

$

96,716,907

$

70,912,470

$

288,523,269

$

121,204

$

123,068

$

177,373

$

421,645

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Total liabilities Net assets Held in trust for pension benefits

121,204 $

120,772,688

150

123,068 $

96,593,839

177,373 $

70,735,097

421,645 $

288,101,624

CITY OF PENSACOLA, FLORIDA COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012

General Pension and Retirement Fund Additions Contributions - city $ Contributions - employee Contributions - employee buy back Contributions - lawsuit Commission recapture Insurance proceeds - State of Florida Total contributions Investment income Net appreciation (depreciation) in fair value of investments Interest and dividends Less investment expense Net investment income Total additions Deductions Pensions paid - employees Pensions paid - widows Pensions paid - children Refunds to employees Deferred retirement option plan Health insurance assistance Administrative expenses

7,075,211 $ 496,722

Firemen's Relief and Pension Fund

3,025,714 $ 29,199 763,031

Total Pension Trust Funds

1,661,991 5,062

266,660 14,207 667,020

20 477,014

12,996,882 1,042,209 763,031 1,928,651 19,289 1,144,034

9,238,986

4,360,132

4,294,978

17,894,096

17,617,500 2,780,793 20,398,293 515,305 19,882,988

13,372,446 2,387,221 15,759,667 582,402 15,177,265

10,342,607 1,478,906 11,821,513 316,764 11,504,749

41,332,553 6,646,920 47,979,473 1,414,471 46,565,002

29,121,974

19,537,397

15,799,727

64,459,098

9,225,870 1,533,583

5,028,570 802,700 6,332 17,581 1,394,848

2,671,568 573,408

102,254

73,464

16,926,008 2,909,691 6,332 203,006 4,168,894 159,348 274,473

168,354 2,069,005 159,348 98,755

2,895,957 $ 516,288

Police Officers' Retirement Fund

17,071 705,041

Total deductions

13,254,915

7,352,285

4,040,552

24,647,752

Change in net assets

15,867,059

12,185,112

11,759,175

39,811,346

104,905,629

84,408,727

58,975,922

248,290,278

120,772,688 $

96,593,839 $

70,735,097 $

288,101,624

Net assets held in trust for pension benefits Beginning of year End of year

$

151

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STATISTICAL SECTION This part of the City of Pensacola’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.

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 factors affecting the city’s ability to generate its property, sales taxes, and utility revenue. 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. Note the city has no general obligation debt. Demographic and Economic Information - These schedules offer demographic and economic indicators to help the reader understand the environment within which the city’s financial activities take place and to help make a comparison over time and with other governments. Operating Information - These schedules contain information about the city’s operations and resources to help the reader understand how the city’s financial information 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.

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FINANCIAL TRENDS

CITY OF PENSACOLA, FLORIDA CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (accrual basis of accounting) 2003 Expenses Governmental activities: General Government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Unallocated depreciation Interest on long-term debt Total governmental activities expenses

$

Business-type activities: Utility Sanitation Port Airport Golf Course (a) Total business-type activities expenses Total primary government expenses

Program Revenues Governmental activities: Charges for Services: General Government Public safety Transportation Culture and recreation Physical environment Operating grants and contributions (c) Capital grants and contributions Total governmental activities program revenues

2005

2006

Fiscal Year 2007 2008

2009

2010

2011

2012

10,436,763 $ 23,114,792 4,133,112 10,798,822 10,798,460 2,290,689 111,850 1,649,004 5,887,415 69,220,907

11,066,332 $ 12,288,844 $ 28,084,201 28,951,510 4,831,361 5,022,158 11,780,250 16,562,124 10,443,891 8,479,343 2,910,187 34,160,089 129,903 120,756 1,636,690 731,323 1,829,965 1,519,935 72,712,780 107,836,082

12,088,920 $ 31,110,329 6,840,783 14,850,420 8,670,298 3,470,795 91,500 875,748 1,082,666 79,081,459

13,760,551 $ 31,499,372 4,302,907 14,102,175 9,655,932 2,417,760 109,670 1,144,137 1,656,581 78,649,085

13,028,271 $ 31,837,050 4,515,948 13,463,182 13,772,416 3,037,313 115,000 1,700,181 1,272,372 82,741,733

10,607,815 $ 31,494,450 2,837,201 14,140,256 14,502,662 3,151,470 94,200 2,162,409 769,278 79,759,741

10,056,862 $ 30,887,727 2,751,634 15,355,160 14,792,350 2,965,146 51,900 2,541,975 2,923,782 82,326,536

12,035,379 $ 30,598,069 (d) 29,982,610 30,960,121 2,665,702 2,992,464 15,084,355 18,824,265 14,902,876 13,780,462 2,589,177 2,893,391 37,100 30,000 2,806,602 3,028,787 3,971,769 3,712,342 84,075,570 106,819,901

32,690,179 5,328,118 3,114,053 12,647,237 703,503 54,483,090

34,908,268 5,600,079 2,648,571 13,691,938 734,779 57,583,635

43,300,811 5,634,608 3,520,798 16,194,337 837,265 69,487,819

38,972,519 6,001,189 2,952,129 14,681,765

46,166,828 6,463,890 2,828,158 18,964,646

39,206,068 6,873,786 2,667,098 22,709,226

35,002,074 6,097,312 2,774,460 25,169,494

31,570,293 5,975,566 2,675,500 24,710,561

25,338,365 6,179,795 2,633,916 26,110,733

62,607,602

74,423,522

71,456,178

69,043,340

64,931,920

60,262,809

36,027,746 5,106,334 2,524,108 15,532,401 799,182 59,989,771

$ 123,703,997 $ 130,296,415 $ 167,825,853 $ 148,569,278 $ 141,256,687 $ 157,165,255 $ 151,215,919 $ 151,369,876 $ 149,007,490 $ 167,082,710

$

Business-type activities: Charges for Services Utility Sanitation Port Airport Golf (a) Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues

2004

$

1,387,764 $ 2,042,048 496,011 701,996 1,939,553 16,153,346 1,215,224 23,935,942

1,407,088 $ 2,184,730 826,251 699,780 1,888,305 17,464,270 995,622 25,466,046

1,322,200 $ 2,458,155 937,402 697,034 1,820,320 13,536,300 42,595,215 63,366,626

1,262,794 $ 2,338,428 970,940 760,346 2,306,040 5,815,503 22,341,613 35,795,664

417,496 $ 2,032,238 935,986 1,311,187 1,813,446 22,328,404 10,624,444 39,463,201

294,520 $ 2,069,778 729,613 1,320,242 1,913,284 17,310,191 6,834,357 30,471,985

335,438 $ 1,728,932 697,453 1,391,241 1,899,385 19,475,151 8,169,629 33,697,229

347,218 $ 1,941,582 489,382 1,762,428 2,170,463 22,751,256 4,335,871 33,798,200

439,138 $ 1,601,919 419,876 1,729,823 1,899,162 22,521,356 7,287,874 35,899,148

493,530 1,901,310 543,851 2,387,544 2,543,121 18,674,020 6,880,444 33,423,820

40,710,596 5,366,322 1,495,583 10,776,719 570,717 180,468 7,243,829 66,344,234

47,698,947 5,399,778 1,382,933 11,224,092 583,941

47,408,710 5,349,156 2,120,485 12,625,713 576,809

52,914,809 5,463,914 2,736,093 14,655,698 639,575

52,684,149 6,128,324 1,601,256 16,503,822

57,557,864 6,699,149 1,801,002 17,696,841

47,673,400 6,366,664 1,242,839 14,972,720

45,493,419 6,165,903 1,803,407 16,642,691

39,154,943 6,221,178 1,894,871 18,188,649

36,900,749 6,838,663 2,401,744 17,996,001

4,550,188 70,839,879

7,066,929 75,147,802

12,877,590 89,287,679

26,271,082 103,188,633

6,196,139 89,950,995

15,055,919 85,311,542

13,791,291 83,896,711

5,392,337 70,851,978

7,834,262 71,971,419

90,280,176 $

96,305,925 $ 138,514,428 $ 125,083,343 $ 142,651,834 $ 120,422,980 $ 119,008,771 $ 117,694,911 $ 106,751,126 $ 105,395,239

152

CITY OF PENSACOLA, FLORIDA CHANGES IN NET ASSETS LAST TEN FISCAL YEARS (accrual basis of accounting) 2003

2004

2005

2006

Fiscal Year 2007 2008

2009

2010

2011

2012

Net (Expense)/Revenue Governmental activities Business-type activities

$

(45,284,965) $ 11,861,144

(47,246,734) $ 13,256,244

(44,469,456) $ 15,158,031

(43,285,795) $ 19,799,860

(39,185,884) $ 40,581,031

(52,269,748) $ 15,527,473

(46,062,512) $ 13,855,364

(48,528,336) $ 14,853,371

(48,176,422) $ 5,920,058

(73,396,081) 11,708,610

Total primary government net expenses

$

(33,423,821) $

(33,990,490) $

(29,311,425) $

(23,485,935) $

1,395,147 $

(36,742,275) $

(32,207,148) $

(33,674,965) $

(42,256,364) $

(61,687,471)

11,535,735 $ 11,060,170 4,860,343

12,624,627 $ 11,358,867 5,676,211

12,612,006 $ 12,703,460 5,620,991

15,328,153 $ 13,209,195 3,859,998 907,014 1,748,740 6,960,630 6,492,065 2,674,332

14,963,002 $ 13,268,556 4,025,970 940,673 1,612,704 6,550,530 6,190,954 2,177,667 1,033,232

13,990,633 $ 13,999,030 3,738,973 895,570 1,605,605 5,976,299 5,807,740 1,349,471

13,686,629 $ 14,996,638 3,795,244 923,457 1,610,128 5,866,075 5,769,127 700,726

13,318,749 $ 15,093,190 3,675,699 904,327 1,569,013 6,323,106 6,054,345 1,928,271

12,311,601 14,252,846 3,600,306 885,161 1,557,013 6,401,758 6,123,014 1,948,024

684,476 123,968

27,872

34,364

38,267

71,951

32,315 105,387

General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes (c) $ 10,729,011 $ Public service taxes and franchise fees 10,810,180 Communication services tax 4,531,421 Local business tax (b) Local option gasoline tax 2,106,436 6,075,856 Local option sales tax (c) Intergovernmental revenues (c) 7,390,690 Unrestricted investment earnings (c) 562,349 Insurance recoveries Donation of capital assets Miscellaneous 272,837 Net gain (loss) on sale of asset 221,278 Gain (loss) on impairment of asset - Hurricane Ivan Transfers 5,589,800 Overhead transfers 2,928,300 Total governmental activities 51,218,158 Business-type activities: Unrestricted investment earnings Insurance recoveries Donation of capital assets Miscellaneous Net gain (loss) on sale of asset Gain (loss) on impairment of asset - Hurricane Ivan Transfers Overhead transfers Total business-type activities Total primary government

278,322

9,246

2,214,743 6,160,594 7,876,665 488,652

2,339,408 7,621,290 8,975,434 1,226,597 537,694

2,242,110 7,545,633 9,127,199 2,460,641 3,241,306

237,571

234,984

91,090 300,199

6,947,524 3,161,400 60,704,036

1,240,132 3,821,000 61,005,767

8,852,993 3,414,200 64,255,764

11,344,453 3,683,400 65,819,013

8,000,000 2,429,800 57,827,485

4,905,778 2,267,700 54,559,769

8,140,626 2,219,700 59,298,977

8,000,000 2,366,900 57,584,325

773,466

1,162,375

1,036,596

999,959 651,416

1,235,552

267,732

31,993

42,597

180,000 319,096

567,130

270,871

269,834

309,576

327,094

350,963

392,351 66,358

(3,974,027) 6,576,326 2,982,400 50,019,172

219,965

(5,589,800) (2,928,300) (8,230,532)

28,305 198,469 (6,576,326) (2,982,400) (9,111,987)

(6,947,524) (3,161,400) (8,836,362)

(1,240,132) (3,821,000) (3,331,627)

$

42,987,626 $

40,907,185 $

51,867,674 $

57,674,140 $

53,296,038 $

Change in Net Assets Governmental activities Business-type activities

$

5,933,193 $ 3,630,612

2,772,438 $ 4,144,257

16,234,580 $ 6,321,669

17,719,972 $ 16,468,233

Total primary government

$

9,563,805 $

6,916,695 $

22,556,249 $

34,188,205 $

(8,852,993) (3,414,200) (10,959,726)

(11,344,453) (3,683,400) (13,106,644)

(8,000,000) (2,429,800) (8,884,672)

(4,905,778) (2,267,700) (6,578,652)

(8,140,626) (2,219,700) (9,977,370)

(8,000,000) (2,366,900) (9,865,594)

52,712,369 $

48,942,813 $

47,981,117 $

49,321,607 $

47,718,731

25,069,880 $ 29,621,305

13,549,265 $ 2,420,829

11,764,973 $ 4,970,692

6,031,433 $ 8,274,719

11,122,555 $ (4,057,312)

(15,811,756) 1,843,016

54,691,185 $

15,970,094 $

16,735,665 $

14,306,152 $

7,065,243 $

(13,968,740)

Notes: (a) In FY07, the Golf Course was moved from an enterprise fund to a special revenue fund. (b) In FY07, the Uniform Accounting System Manual changed how local governments recorded the local business tax. Prior to FY07, the tax was classified as a licenses and in FY07 the tax is classified as a tax, moving it from general government charges for services to general government taxes. (c) 2007 and prior have been restated, where noted, to reflect only those revenues which should be reported in each category. (d) In FY12, the City made a one time $19.5 million contribution to ECUA for Main Steeet Waste Water Treatment Plant Relocation Project.

153

CITY OF PENSACOLA, FLORIDA NET ASSETS BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting)

2003 Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets

$

$

2004

2006

Fiscal Year 2007 2008

2009

2010

2011

2012

48,361,182 $ 27,212,298 14,942,445 90,515,925 $

72,919,805 $ 96,906,089 $ 117,973,303 $ 139,118,040 $ 145,873,745 $ 160,201,917 $ 170,014,519 43,946,470 $ 57,923,281 $ 30,762,070 42,813,703 41,792,153 46,006,637 37,093,415 30,099,551 28,019,701 27,931,083 20,560,416 18,579,823 13,381,959 15,374,631 13,924,384 15,535,349 13,149,449 14,505,027 11,388,028 (6,865,663) (a) 93,288,363 $ 114,118,943 $ 130,086,589 $ 156,837,110 $ 170,602,067 $ 182,367,040 $ 188,398,473 $ 199,521,028 $ 183,709,272

64,722,277 $ 3,423,211 19,475,472 87,620,960 $

65,911,984 4,146,309 21,706,924 91,765,217

Business-type activities Invested in capital assets, net of related debt Restricted Unrestricted Total business-type activities net assets

$

Primary government Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net assets

$ 113,083,459 $ 109,858,454 30,635,509 34,908,379 34,417,917 40,286,747 $ 178,136,885 $ 185,053,580

$

2005

$

$

75,547,523 $ 91,681,359 $ 119,978,282 $ 90,891,929 $ 125,156,505 $ 131,503,050 $ 135,686,653 $ 132,621,897 5,028,402 5,028,402 5,699,402 5,700,402 9,638,870 8,734,350 8,791,433 8,800,733 17,510,961 17,692,713 18,082,391 50,074,594 16,781,105 19,613,799 11,315,801 16,214,273 98,086,886 $ 114,402,474 $ 143,760,075 $ 146,666,925 $ 151,576,480 $ 159,851,199 $ 155,793,887 $ 157,636,903

$ 133,470,804 $ 164,601,164 $ 216,884,371 $ 208,865,232 $ 264,274,545 $ 277,376,795 $ 295,888,570 $ 302,636,416 47,842,105 46,820,555 51,706,039 42,793,817 39,738,421 36,754,051 36,722,516 29,361,149 30,892,920 33,067,344 32,006,775 65,609,943 29,930,554 34,118,826 22,703,829 9,348,610 $ 212,205,829 $ 244,489,063 $ 300,597,185 $ 317,268,992 $ 333,943,520 $ 348,249,672 $ 355,314,915 $ 341,346,175

Notes: (a) In FY12, the City made a one time $19.5 million contribution to ECUA for Main Steeet Waste Water Treatment Plant Relocation Project.

154

CITY OF PENSACOLA, FLORIDA PROGRAM REVENUES BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (accrual basis of accounting)

2003 Function/Programs Governmental activities: General government Public safety Transportation Culture and recreation Economic environment Physical environment Human services Total governmental activities

$

Business-type activities: Utility Sanitation Port Airport Golf Course Total business-type activities Total primary government

$

1,399,764 $ 2,155,160 504,220 4,320,524 12,923,260 2,551,471

2004

2005

Fiscal Year 2007

2006

23,854,399

1,490,846 $ 3,235,786 919,581 4,455,440 12,326,942 2,920,774 40,903 25,390,272

4,072,170 $ 3,774,577 4,300,221 10,143,442 (a) 9,318,343 31,441,843 (a) 144,744 63,195,340

5,314,738 2,789,747 5,794,746 6,813,505 10,791,610 4,346,219 35,850,565

40,710,596 5,366,322 4,126,945 15,568,654 571,717 66,344,234

47,698,947 5,399,778 1,574,247 15,582,966 583,941 70,839,879

47,408,710 5,349,156 3,229,199 18,583,928 576,809 75,147,802

52,914,809 5,463,914 3,323,749 26,945,632 (b) 639,575 89,287,679

90,198,633 $

96,230,151 $ 138,343,142

$ 125,138,244

$

5,590,979 2,715,923 3,640,571 7,503,800 16,862,124 3,219,462

2009

2011

2012

3,734,253 $ 1,903,690 746,254 11,596,641 12,839,011 2,877,380

3,153,786 $ 2,764,575 1,011,626 7,558,660 16,784,456 2,525,097

3,042,474 $ 3,727,640 801,324 9,447,660 16,263,534 2,616,516

7,713,091 2,580,263 793,491 7,145,440 12,418,071 2,773,464

39,532,859

30,471,985

33,697,229

33,798,200

35,899,148

33,423,820

52,684,149 6,218,324 2,224,705 42,151,455 (b)

57,557,864 6,699,149 1,904,284 23,789,698

47,673,400 6,366,664 2,222,280 29,049,198

45,501,820 6,165,903 1,828,028 30,400,960

39,281,504 6,232,698 2,068,779 23,268,997

38,054,431 6,838,663 2,586,212 24,492,113

89,950,995

85,311,542

83,896,711

70,851,978

71,971,419

$ 142,811,492

$ 120,422,980 $ 119,008,771 $ 117,694,911 $ 106,751,126 $ 105,395,239

Notes: (a) The increase to program revenues in the culture and recreation and physical environment activities is due to capital grants and contributions for Hurricanes Ivan, Dennis, and Katrina. (b) The increase to program revenues in the airport activity is primarily due to capital grants and contributions for Hurricane Ivan.

155

2010

3,891,303 $ 2,497,330 821,374 9,093,754 11,510,064 2,658,160

103,278,633

$

2008

CITY OF PENSACOLA, FLORIDA FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting)

2003 General Fund Reserved Unreserved Total General Fund

$ $

All Other Governmental Funds $ Reserved Unreserved, reported in: Special revenue funds Capital projects funds Debt service funds Total all other governmental funds $

2004

Pre-GASB 54 Fiscal Year 2006 2007

2005

$

2009

2010

495,195 $ 7,020,518 7,515,713 $

436,972 $ 7,999,916 8,436,888 $

701,440 $ 8,909,628 9,611,068 $

689,489 $ 10,135,396 10,824,885 $

921,523 $ 8,983,669 9,905,192 $

926,095 $ 9,803,661 10,729,756 $

1,332,323 $ 9,906,638 11,238,961 $

1,277,400 9,955,633 11,233,033

8,193,123 $

7,754,479 $

12,479,371 $

11,926,118 $

8,623,413 $

15,596,086 $

13,634,480 $

56,167,571 (a)

6,519,583 15,804,549 1,603,658 32,120,913 $

7,728,562 15,538,378 2,196,842 33,218,261 $

8,151,788 21,854,883 2,090,023 44,576,065 $

8,623,967 21,950,966 1,032,662 43,533,713 $

18,562,204 19,167,052 271,348 46,624,017 $

11,553,673 10,935,750 215,413 38,300,922 $

9,091,855 7,359,785 218,249 30,304,369 $

8,460,053 11,024,056 1,491,223 77,142,903

Post-GASB 54 Fiscal Year 2011 2012 General Fund Non-spendable Restricted Committed Assigned Unassigned Total General Fund

2008

$

12,617 $ 544,198 8,388,656 1,019,104 1,309,029 11,273,604 $

24,780 428,618 8,399,115 2,187,305 1,100,516 12,140,334

All Other Governmental Funds $ Non-spendable Restricted Committed Assigned Unassigned Total all other governmental funds $

459,554 $ 71,421,175 3,650,217 5,764 (980,662) 74,556,048 $

3,163,567 (b) 66,544,108 4,207,674 6,858 (6,082,300) 67,839,907

Note: The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003

(a) Increase in fund balance reserves is related to the combination of the 2009 Redevelopment Revenue Bonds and subsequent loan to the Community Maritime Park Associate, Inc. (b) Increase in non-spendable fund balance is related to the prepayment of bond principal in the Local Option Sales Tax fund

156

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CITY OF PENSACOLA, FLORIDA CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting)

2003

Revenues Taxes

33,850,592

32,095,945 $

32,380,241 $

32,451,822 $

875,705

1,235,120

864,844

752,488

791,950

1,132,486

Franchise fees

5,600,062

5,860,175

6,088,923

6,884,189

7,307,290

7,510,843

8,110,165

8,497,930

8,432,262

7,774,176

22,244,379

23,777,867

34,028,187

36,468,652

24,529,512

28,722,364

30,498,606

32,971,501

28,045,478

3,757,661

4,270,447

4,382,032

4,800,789

5,216,030

4,327,860

4,339,480

4,825,173

4,617,672

5,842,665

Fines and forfeits

549,669

569,923

554,047

469,118

354,393

385,063

441,251

746,929

370,689

337,858

Assessments

107,692

87,690

105,918

168,087

216,744

112,760

89,577

89,911

28,246

51,729

Interest income

659,423

578,335

1,437,059

2,935,879

3,394,311

2,711,137

1,470,144

764,193

1,961,934

1,958,681

3,293,700

3,447,600

3,652,600

4,545,600

151,279

159,617

181,161

Donations

Total revenues

$

4,046,200

$

2012

34,699,382 $

Other

36,070,618

2011

1,721,355

62,231,407 (a)

$

2010

1,831,273

Charges for overhead

35,735,447

2009

1,503,479

Rents and leases

31,810,661 $

Fiscal Year 2007 2008

2006

1,476,315

Charges for services

30,205,225 $

2005

Licenses and permits Intergovernmental

$

2004

31,234,509

(c)

(b)

4,000

53,928

77,491

86,739

75,830

2,828,116

2,689,665

1,456,457

2,381,473

199,965

894,567

1,027,807

7,067,287

765,734

2,151,466

652,214

733,049

748,346

672,779

706,264

68,943,972

73,147,529

123,344,645

92,476,295

94,806,003

78,143,217

79,556,484

80,760,274

84,680,328

77,283,811

Expenditures Current General government

10,331,772

11,037,313

11,619,232

11,747,226

13,140,542

8,099,930

7,026,818

6,971,798

8,954,870

7,986,834

Public safety

21,945,655

26,801,960

27,215,803

29,369,501

30,073,622

30,108,528

29,285,357

29,826,611

29,097,514

29,892,275

Transportation

3,927,511

4,617,127

4,770,599

6,551,328

4,078,150

2,471,682

2,510,175

2,454,335

2,283,148

2,531,637

Culture and recreation

9,940,167

10,542,926

15,181,664

13,441,009

12,649,876

11,451,051

11,828,720

12,464,329

12,189,319

15,962,500

Economic environment

11,162,317

10,901,512

8,448,711

8,647,869

9,636,721

13,668,432

14,398,618

14,700,741

14,811,906

13,671,431

Physical environment

2,263,397

2,924,615

3,408,113

2,329,484

2,921,658

2,916,615

2,890,347

2,464,243

3,009,598

111,850

129,903

120,756

91,500

109,670

115,000

94,200

51,900

37,100

30,000

7,209,555

6,976,163

11,286,300

23,583,756

22,483,692

23,176,356

24,998,552

16,154,212

18,616,603

14,483,196

Human services Capital outlay

34,090,416 (a)

Debt service Principal retirement

2,640,478

2,645,397

7,426,150

3,797,282

4,655,760

3,372,006

2,850,209

3,231,188

3,354,959

3,504,241

Interest

3,504,752

3,507,298

3,377,456

2,526,411

1,728,048

1,292,286

858,442

1,477,422

3,989,355

4,162,404

73,037,454

80,084,214

123,537,087

103,163,995

100,885,565

96,676,929

96,767,706

90,222,883

95,799,017

95,234,116

(4,093,482)

(6,936,685)

(18,533,712)

(17,211,222)

(9,462,609)

(11,118,689)

(17,950,305)

Total expenditures Excess (deficiency) of revenues over (under) expenditures

(192,442)

(10,687,700)

157

(6,079,562)

CITY OF PENSACOLA, FLORIDA CHANGES IN FUND BALANCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting)

Fiscal Year 2008 2007

2006

2005

2004

2003

2012

2011

2010

2009

Other financing sources (uses) Transfers in Transfers (out) Sale of capital assets

26,435,355

32,981,066

(20,845,555)

(24,731,992)

298,380

37,058

33,620,450 (25,498,685) 6,661

39,958,942

46,846,554

22,190,629 (d)

19,375,754

23,899,753

20,688,877

28,398,726

(32,687,643)

(39,927,214)

(13,439,238) (d)

(11,375,754)

(16,969,220)

(12,188,877)

(19,898,726)

255,330

99,547

1,072,364

724,093

Contributed capital from other funds

725,270

72,405

105,387

47,995

Contributed capital from other governments

3,264,631

Reimbursement of prior year expenditures

2,276,579

Insurance recoveries

3,241,306

1,033,232

999,781

74,429

Proceeds from debt Payment to refund debt

(20,000,000)

Bonds Issued

15,966,820

Issuance Cost

63,610,352

(262,309)

Payment to Escrow Agent

(37,498)

(634,574)

(15,035,435)

Total other financing sources (uses)

5,888,180

8,955,208

8,128,426

10,767,935

7,018,887

7,935,984

80,235

939,325

10,819,489

9,723,874

56,295,215

8,572,405

8,605,387

(7,714,223)

(7,487,348)

46,832,606

(2,546,284)

(9,344,918)

Net change in fund balances before prior period adjustments/special items

1,794,698

2,018,523

Special item - sale of capital asset

-

-

Prior period adjustments

-

-

Net change in fund balances Debt service as a percentage of noncapital expenditures

$

1,794,698 $

9.34%

2,018,523 $

8.35%

4,596,000 12,531,984

9.58%

$

-

-

-

-

-

-

3,495,507

91,230

1,231,286

215,692

-

-

-

-

171,465

7.89%

$

2,170,611 $

8.10%

(7,498,531)

6.31%

$

(7,487,348) $

5.13%

46,832,606 $

6.33%

(2,546,284) $

9.49%

(5,849,411)

9.46%

Notes: (a) The increase in intergovernmental revenues and economic environment expenditures are a result of Hurricanes Ivan, Dennis, and Katrina. (b) Starting in FY 2006, rents and leases are reflected in charges for services. (c) Starting in FY 2008, charges for overhead are reflected as a reduction to expenditures (cost recovery). (d) The decrease in transfers in(out) are from an accounting change in the Tax and Franchise Fee Debt Service Fund (TFFDS). In FY 08, revenues recorded in the TFFDS Fund are now recorded directly in the General Fund.

158

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REVENUE CAPACITY

CITY OF PENSACOLA, FLORIDA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (in thousands of dollars)

Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Personal Property $

441,745 413,014 421,212 433,775 534,628 537,581 568,137 569,930 555,898 534,538

Real Property $ 2,965,797 3,238,596 3,594,930 3,652,079 4,713,764 4,760,528 4,749,243 4,557,110 4,435,062 4,300,878

Less: Tax-Exempt Property

Central Property $

4,616 7,135 6,946 4,842 4,517 5,113 7,608 6,093 4,731 5,391

$

1,191,203 1,313,660 1,420,435 1,470,558 2,013,162 1,935,505 2,134,762 2,037,452 1,977,899 1,873,379

$

Total Taxable Assessed Value

Total Direct Tax Rate

2,220,955 2,345,085 2,602,653 2,620,138 3,239,747 3,367,717 3,190,226 3,095,681 3,017,792 2,967,428

5.0570 5.0570 5.0570 5.0570 4.9500 4.5980 4.5395 4.5395 4.5395 4.2895

Source: Escambia County Property Appraiser's Office Notes: Property is reassessed every year. Property is assessed at actual value; therefore, the assessed values are equal to actual value. Tax rates are per $1,000 of assessed value.

159

CITY OF PENSACOLA, FLORIDA DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (rate per $1,000 of assessed value)

Overlapping Rates

Fiscal Year

City Of Pensacola Total Direct Rate

City Of Pensacola Downtown Improvement Board

Escambia County School Board

Escambia County (a)

Northwest Florida Water Management District

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

5.0570 5.0570 5.0570 5.0570 4.9500 4.5980 4.5395 4.5395 4.5395 4.2895

1.0000 2.0000 2.0000 2.0000 2.0000 2.0000 2.0000 2.0000 2.0000 2.0000

8.8870 8.7880 8.4100 8.0330 7.8940 7.7200 7.7200 7.8600 7.8600 7.8210

8.7560 8.7560 8.7560 8.7560 8.7560 8.0170 6.9755 6.9755 6.9755 6.9755

0.0500 0.0500 0.0500 0.0500 0.0500 0.0450 0.0450 0.0450 0.0450 0.0400

Source: Escambia County Tax Collector Notes: (a) Escambia County property tax rates do not include MSTU rate. The MSTU rate is a rate charged to County-Only residents.

160

CITY OF PENSACOLA, FLORIDA PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO

2012 Taxable Assessed Value

Taxpayer Gulf Power Sacred Heart Hospital Simon Debartolo Group Armstrong World Industries Wal-mart Bellsouth/Southern Bell Gayfers/Higbee Pensacola POB Inc Moulton Properties Reichhold Inc/Arizona Chemical AT&T Network Telephone Corp. Cordova Community Pensacola Properties

$

Total

$

95,294,904 46,197,923 34,831,566 30,773,169 23,367,823 20,208,012 17,339,455 15,396,711 13,864,407 13,282,193 ----------

Rank 1 2 3 4 5 6 7 8 9 10

310,556,163

Source: Escambia County Tax Collector

161

2003 Percentage of Total City Taxable Assessed Value

Taxable Assessed Value

0.48% 0.23% 0.18% 0.16% 0.12% 0.10% 0.09% 0.08% 0.07% 0.07% -------------

$

72,109,050 61,125,010 29,753,640 34,048,130 ---32,748,460 ---------11,570,830 35,255,960 22,647,200 15,034,480 11,051,740

1.58%

$ 325,344,500

Rank 1 2 6 4 5

9 3 7 8 10

Percentage of Total City Taxable Assessed Value 0.68% 0.58% 0.28% 0.32% ---0.31% ---------0.11% 0.33% 0.21% 0.14% 0.10% 3.06%

CITY OF PENSACOLA, FLORIDA PROPERTY TAX LEVIES AND COLLECTIONS PAST TEN FISCAL YEARS

Fiscal Year Ended September 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Taxes Levied for the Fiscal Year (a) $

11,231,367 11,859,094 13,161,616 13,250,038 16,036,749 15,484,765 14,482,031 14,052,844 13,699,265 12,728,569

Collected within the Fiscal Year of the Levy Percentage Amount (b) of Levy $ 10,669,274 11,406,796 12,538,957 12,413,790 15,291,677 14,879,673 13,811,445 13,592,771 13,246,835 12,279,754

95.0% 96.2% 95.3% 93.7% 95.4% 96.1% 95.4% 96.7% 96.7% 96.5%

Collections in Subsequent Years (c) $

59,736 128,939 85,670 198,216 36,476 83,329 179,188 93,858 71,914 31,847

Totals Collections to Date Percentage Amount (d) of Levy $ 10,729,011 11,535,735 12,624,627 12,612,006 15,328,153 14,963,002 13,990,633 13,686,629 13,318,749 12,311,601

Source: Escambia County Tax Collector.

Notes: (a) The tax levy is based on the tax roll as certified by the Escambia County Property Appraiser. (b) Current tax collections are after applicable discounts for early payment. (c) Collections represent subsequent and current year delinquent revenues. (d) Property taxes collected are accounted for in the General Fund. Outstanding delinquent property taxes are not reported because they are considered not available at year end.

162

95.5% 97.3% 95.9% 95.2% 95.6% 96.6% 96.6% 97.4% 97.2% 96.7%

CITY OF PENSACOLA, FLORIDA TAXABLE SALES BY CATEGORY LAST TEN CALENDAR YEARS (in thousands of dollars)

2003 General merchandise stores Grocery stores Hotels and apartments Lumber and building materials Manufacturing and mining Motor vehicle dealers Office space and commercial rentals Restaurants and lunchrooms

$

681,095 171,254 104,349 234,608 68,366 687,134 170,548 365,036

Total

$ 2,482,390

$

2004

2005

2006

706,509 $ 190,511 121,330 (c) 242,896 69,282 737,529 168,992 400,885

775,301 $ 226,175 106,004 325,156 (d) 93,780 875,945 176,203 437,593

744,296 220,364 128,563 258,968 124,271 762,294 187,011 449,429

$ 2,637,934

$ 3,016,157

$ 2,875,196

Calendar Year 2007 2008 $

720,523 215,618 145,076 243,424 104,058 724,052 197,872 461,118

$ 2,811,741

$

689,995 201,809 147,407 232,226 74,887 597,693 197,947 453,222

$ 2,595,186

2009 $

680,381 207,857 147,076 206,656 63,638 514,024 191,201 458,456

$ 2,469,289

2010 $

685,603 212,553 146,774 209,492 69,889 563,280 199,864 466,225

$ 2,553,680

2012 (a)

2011 $

698,467 217,919 181,714 198,282 73,577 625,711 202,963 494,623

$ 2,693,256

$

586,649 191,200 174,908 183,146 49,843 594,532 173,983 444,330

$ 2,398,591

City direct sales tax rate (b)

Source: Florida Department of Revenue Notes: Data presented reflects Escambia County. (a) 2012 data only represents the first ten months of the calendar year. (b) The city has no direct tax rate. However, the city receives a portion of the proceeds from the Half Cent Sales Tax and the Local Option Sales Tax. The distribution of the proceeds of the Half Cents Sales Tax and the Local Option Sales Tax to the incorporated municipalities of the County are controlled by the formula set forth in Section 218.65 and 218.62, Florida Statues. (c) The 16.2% increase in hotel and apartment taxable sales in 2004 is attributable to Hurricane Ivan displaced families. (d) The 33.9% increase in lumber and building materials taxable sales in 2005 is attributable to Hurricane Ivan and Dennis protective and repair measures.

163

CITY OF PENSACOLA, FLORIDA DIRECT AND OVERLAPPING SALES TAX RATES LAST TEN FISCAL YEARS

Fiscal Year

Local Option Sales Tax Escambia County

Half Cent Sales Tax School District

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%

Source: City Budget Office Note: The city has no direct tax rate. However, the city receives a portion of the proceeds from the Local Option Sales Tax. The distribution of the proceeds of the Local Option Sales Tax to the incorporated municipalities of the County are controlled by the formula set forth in Section 218.62, Florida Statues.

164

CITY OF PENSACOLA, FLORIDA SALES TAX REVENUE PAYERS BY INDUSTRY CURRENT YEAR AND NINE YEARS AGO (in thousands of dollars)

2012 Number of Filers

Percentage of Total

2003

Tax Liability (a)

Percentage of Total

Number of Filers

Percentage of Total

Tax Liability (a)

Percentage of Total

Retail trade Services Manufacturing and mining Wholesale trade Construction Finance, insurance, and real estate Transportation and utilities Agricultural Other

2,195 1,900 119 141 153 2,293 62 54 137

31.12% $ 26.94% 1.69% 2.00% 2.17% 32.51% 0.88% 0.77% 1.92%

140,997 53,401 3,678 6,128 13,898 24,066 14,647 1,132 1,919

54.26% 20.55% 1.42% 2.36% 5.35% 9.26% 5.64% 0.44% 0.72%

2,632 2,085 98 134 189 1,970 47 44 127

35.93% $ 28.46% 1.34% 1.83% 2.58% 26.89% 0.64% 0.60% 1.73%

124,342 43,525 4,026 5,459 16,436 16,430 7,495 631 10,028

54.45% 19.06% 1.76% 2.39% 7.20% 7.19% 3.28% 0.28% 4.39%

Total

7,054

100.00% $

259,866

100.00%

7,326

100.00% $

228,372

100.00%

Source: Florida Department of Revenue Office of Research Notes: Data presented reflects Escambia County. Data is presented on the State Fiscal Year of July 1 - June 30. (a) Tax liability represents the state percentage of the tax liability paid by businesses in Escambia County. Total tax liability was not available by industry for Escambia County.

165

CITY OF PENSACOLA, FLORIDA ENERGY SERVICES OF PENSACOLA GAS SOLD IN MCFS BY TYPE OF CUSTOMER LAST TEN FISCAL YEARS (in thousands of Mcfs)

2003 Type of Customer Residential -Inside City Limits Residential -Outside City Limits Commercial -Inside City Limits Commercial -Outside City Limits Municipal Interruptible Transportation Total Total direct rate per Mcf (a)

$

2004

2005

2006

Fiscal Year 2007 2008

2009

2010

2011

2012

572 1,017 344 557 63 905 834

500 984 357 596 45 575 1,178

395 801 334 571 43 592 1,095

345 796 327 500 47 579 1,563

362 765 358 482 34 588 1,673

327 712 353 453 14 642 1,379

311 701 287 415 15 628 961

406 882 331 464 18 648 954

350 775 322 436 68 630 1,007

245 570 304 393 27 633 1,068

4,292

4,235

3,831

4,157

4,262

3,880

3,318

3,703

3,588

3,240

12.61 $

15.16 $

16.39 $

19.38 $

18.26 $

20.47 $

18.74 $

15.25 $

14.91 $

16.55

Source: Energy Services of Pensacola Notes: (a) Total direct rate per Mcf is calculated using residential in/out, commercial in/out, and municipal customers. Interruptible and transportation direct rates are not available.

166

CITY OF PENSACOLA, FLORIDA ENERGY SERVICES OF PENSACOLA GAS RATES LAST TEN FISCAL YEARS Residential - Inside City Limits Fixed Base PGA & WNA Monthly Rate per Rate per Charge Mcf Mcf (a)

Fiscal Year 2003 2004 2005 2006 2007(b) 2008 2009 2010 2011 2012

$

6.00 6.00 6.00 6.00 7.00 7.00 7.28 7.25 7.25 8.95

$

5.28 5.28 5.28 5.28 6.27 6.27 6.53 6.50 6.50 7.52

$

6.43 8.95 10.21 13.14 11.05 12.87 10.72 7.38 7.15 8.27

Residential - Outside of City Limits Fixed Base PGA & WNA Monthly Rate per Rate per Charge Mcf Mcf (a) $

Commercial - Outside of City Limits Fixed Base PGA & WNA Monthly Rate per Rate per Charge Mcf Mcf (a)

Fiscal Year 2003 2004 2005 2006 2007(b) 2008 2009 2010 2011 2012

$

12.00 12.00 12.00 12.00 14.00 14.00 14.56 14.50 14.50 18.00

$

6.95 6.95 6.95 6.95 7.97 7.97 8.30 8.27 8.27 9.29

$

6.34 8.74 10.01 13.01 10.93 12.70 10.57 7.57 6.85 7.37

7.00 7.00 7.00 7.00 8.00 8.00 8.32 8.29 8.29 10.00

$

15.00 15.00 15.00 15.00 16.00 16.00 16.64 16.57 16.57 20.00

$

Municipal Base Rate per Mcf

Fixed Monthly Charge $

6.95 6.95 6.95 6.95 7.97 7.97 8.30 8.27 8.27 9.29

$

1.95 1.95 1.95 1.95 2.30 2.30 2.39 2.38 2.38 2.93

6.47 9.04 10.32 13.30 11.10 12.94 10.78 7.30 7.15 8.31

Commercial - Inside City Limits Fixed Base PGA & WNA Monthly Rate per Rate per Charge Mcf Mcf (a) $

4.48 7.01 8.26 11.19 9.75 12.41 10.39 7.53 6.76 6.36

$

5.28 5.28 5.28 5.28 6.27 6.27 6.53 6.50 6.50 7.52

$

6.46 8.81 9.91 12.99 10.92 12.62 10.52 7.59 6.84 7.37

Interruptible and Transportation (c) Fixed Base PGA & WNA Monthly Rate per Rate per Charge Mcf Mcf (a)

PGA & WNA Rate per Mcf (a) $

10.00 10.00 10.00 10.00 12.00 12.00 12.48 12.43 12.43 15.85

$

0.00 0.00 0.00 0.00 150.00 150.00 150.00 150.00 150.00 200.00

$

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

$

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Source: Pensacola Energy Notes: (a) The Purchase Gas Adjustment (PGA) is a monthly adjustment to the gas rate due to increases in the cost of gas purchased for resale. The Weather Normalization Adjustment (WNA) is an adjustment to the gas rate to account for fluctuations in consumption due to colder or warmer weather during the months of October through March of the previous or current fiscal year. PGA and WNA rates are based on a yearly average. Both the base rate and the PGA/WNA rates need to be taking into consideration when determining the yearly rate per Mcf. (b) The increase to the fixed monthly charges and base rates took effect in the beginning of the monthly June 2007 billing cycle. (c) Interruptible and transportation rates per Mcf are not reported as rates are negotiated on a customer by customer bases. (d) The increase to rates took effect in the beginning of the monthly October 2011billing cycle

167

DEBT CAPACITY

CITY OF PENSACOLA, FLORIDA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (dollars in thousands, except for per capita)

Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Governmental Activities Local Option Community Sales Tax Redevelopment Bonds Bonds

Tax and Franchise Fee Bonds $

25,125 24,243 21,991 19,213 16,355 13,328 10,836 9,315 6,345 3,240

$

25,275 24,040 22,750 21,405 20,000 20,000 20,000 18,190 18,190 18,190

$

3,815 3,272 2,926 2,605 2,273 1,927 1,569 1,198 813 414

Maritime Community Park Construction Bonds $

45,640 45,640 45,640

Gas Revenue Bonds $

13,810 12,755 11,650 10,495 9,280 9,681 16,479 12,255 10,850 14,445

Business-type Activities Tax and Airport Franchise Fee Revenue Bonds (Port) Bonds $

Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. (a) See demographic and economic statistics schedule for personal income and population data. These ratios are calculated using Escambia County population and personal income for the corresponding calander year.

168

3,306 1,558 1,524 1,502 1,480 1,457 1,339 -

$

41,634 39,549 35,550 34,425 33,569 77,550 83,902 77,450 76,930 77,810

Total Primary Government $

112,965 105,417 96,391 89,645 82,957 123,943 134,125 164,048 158,768 159,739

Percentage of Personal Income (a) 1.81% 1.68% 1.49% 1.33% 1.14% 1.66% 1.82% 2.50% 2.38% 2.36%

Per Capita (a) $

372 343 317 290 266 390 425 551 532 531

CITY OF PENSACOLA, FLORIDA DIRECT AND OVERLAPPING GOVERMENTAL ACTIVITIES AS OF SEPTEMBER 30, 2012 (dollars in thousands)

Debt Outstanding

Governmental Unit

Estimated Share of Direct and Overlapping Debt

Estimated Percentage Applicable

Other Debt Escambia County Sales Tax Revenue Bonds Tourism Development Revenue Bonds Capital Improvement Bonds/Notes Escambia County School District State Board of Education Bonds Certificates of Participation

$

77,575 8,395 18,750

18.2200% 18.2200% 18.2200%

6,235 41,603

0.8790% 0.8790%

$

14,134 1,530 3,416

55 366

Subtotal, overlapping debt

19,500

City direct debt

74,343

Total direct and overlapping debt

$

93,843

Source: Debt outstanding provided by Escambia County Clerks office. Estimated percentages for Escambia County is obtained from the Florida Legislative Committee on Intergovernmental Relations. Estimated percentages for Escambia County School Board is obtained by dividing the city's population by the counties population (see the Demographic and Economic and Statistics schedule) and multiplying it by the .5% half cent sales tax. Notes: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Pensacola. This process recognizes that, when considering the city's ability to issue and repay long term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every tax payer is a resident - and therefore responsible for repaying the debt - of each overlapping government.

169

CITY OF PENSACOLA, FLORIDA PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (dollars in thousands) Tax and Franchise Fee Bonds Public Service Tax

Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$

5,141 5,194 5,264 5,815 5,896 5,747 5,879 6,487 6,649 6,466

Half cent Sales Tax $

3,810 3,931 4,408 4,487 4,093 3,825 3,443 3,397 3,673 3,716

Electric Franchise Fee $

5,600 5,860 4,063 4,623 4,972 5,049 5,802 6,240 6,159 5,504

Occupational Licenses Tax

Gas Tax $

Local Option Sales Tax Bonds

63 2 -

$

868 871 -

Debt Service Principal Interest $

1,869 1,111 1,173 2,093 2,880 3,050 2,610 2,860 2,970 3,105

$

Coverage

2,715 2,758 3,188 1,644 830 681 542 434 319 192

3.38 4.10 3.15 3.99 4.03 3.92 4.80 4.89 5.01 4.76

Community Redevelopment Bonds Tax Increment Revenues

Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$

2,417 2,825 3,387 3,443 5,399 5,126 4,653 4,317 4,068 3,959

245 260 346 321 333 345 358 371 385 399

$

$

6,076 6,161 7,621 7,546 6,961 6,551 5,976 5,866 6,323 6,402

Debt Service Principal Interest $

1,185 1,235 1,290 1,345 1,405 -

$

880 1,204 1,391 1,829 859 585 299 113 563 877

Coverage 2.94 2.53 2.84 2.38 3.07 11.20 19.99 51.91 11.23 7.30

Gas Revenue Bonds

Debt Service Principal Interest $

Local Option Sales Tax

Utility Charges for Services (a)

Coverage

236 223 84 108 97 84 72 58 (j) 44 (j) 2,115 (j)

5.02 5.85 7.88 8.03 12.56 11.95 10.82 10.06 9.48 1.57

$

40,711 47,699 47,699 53,437 52,914 57,790 47,926 45,743 39,439 37,222

Less: Operating Expense (b) $

32,203 34,642 35,967 43,724 39,455 46,833 38,601 34,312 30,961 24,470

Net Available Revenue $

8,508 13,057 11,732 9,713 13,459 10,957 9,325 11,431 8,478 12,752

Debt Service Principal Interest $

975 1,055 1,105 1,155 1,215 1,368 1,205 525 1,405 1,405

$

707 662 613 560 504 456 451 404 251 390

Coverage 5.06 7.60 6.83 5.66 7.83 6.01 5.63 12.30 5.12 7.10

Airport Revenue Bonds Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Airport Revenues $

10,777 11,224 12,630 14,669 16,512 17,700 13,719 15,645 16,162 16,188

Expenses Less Grant

Total $

6,393 6,764 7,947 9,429 10,117 10,559 12,021 14,296 14,369 12,687

$

Operating/ (b) Maintenance

1 $ 66 102 300 (96) (d) 144 248 21 33

6,392 6,764 7,881 9,327 9,817 10,655 11,877 14,048 14,348 12,654

Debt Service Principal Interest

Net Revenue $

4,385 4,460 4,749 5,342 6,695 7,045 1,842 1,597 1,814 3,534

$

1,125 $ 1,185 1,260 1,279 1,295 1,365 1,440 1,520 (f) 100 1,980

2,378 2,314 2,246 1,572 1,735 1,659 1,579 (e) 1,492 (e) 1,162 1,284

Coverage before Transfer 1.25 1.27 1.35 1.87 2.21 2.33 0.61 0.53 1.44 1.08

Capital Fund Transfer (c) 1,010 1,069 1,033 1,513 2,303 2,492 2,380 3,250 876 2,459

Coverage after Transfer 1.54 1.58 1.65 2.40 2.97 3.15 1.40 1.61 2.13 1.84

(continued)

170

CITY OF PENSACOLA, FLORIDA PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (dollars in thousands)

Airport Revenue Note CFC Customer Facility Charge

Fiscal Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

$

1,255 998 2,027 1,809

Less: Operating Expense

886

Net Available Revenue

1,255 998 2,027 923

Airport Revenue Bonds PFC

Debt Service Principal Interest

$

-

$

Coverage

245 195 139 145

5.12 5.12 14.58 6.37

Passenger Facility Charge (i)

(g)

$

2,844 2,978 3,082 3,003

Debt Service Principal Interest

$

185 420 440

$

1,097 1,735 1,719 1,698

Source: City Finance Office Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Interest consist of both variable and fixed rates. (a) 2003 operating revenues are deflated by a deferred revenue posting of $2.3 million; 2004 operating revenues are inflated by the same posting. (b) Operating expenses are net of depreciation expenses. (c) The capital fund transfer is a prepaid revenue amount which is comprised of the prior year's coverage plus non-obligated capital improvements and any excess operating funds. (d) Negative operating expenses were a result of prior year expenditure reclasses (e) Excludes debt payments which were paid with bond proceeds. (f) Excludes debt payments which were paid with sinking fund reserves. (g) The coverage table is for illustrative purposes as required by GAAP. See CFC Bank of America Note. (h) The coverage table is for illustrative purposes as required by GAAP. See PFC Rate Maintenance covenant in Resolution 17-08 for coverage requirements. (i) A portion of the Passenger Facilities Charge revenue shown are for Pay/Go projects and are not available to become PFC Pledged Revenue for deposit into the Bond Fund for the payment of Debt Service. (j) Excludes debt payments which were paid with bond proceeds and federal subsidy payments.

171

Coverage 2.59 1.55 1.44 1.40

(h)

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DEMOGRAPHIC AND ECONOMIC INFORMATION

CITY OF PENSACOLA, FLORIDA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN CALANDER YEARS

Calendar Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Escambia Personal Pensacola County Income Population Population (in thousands) 56,307 303,310 $ 6,253,039 56,366 307,226 6,289,531 54,827 303,623 6,486,905 55,033 309,647 6,757,426 55,311 311,624 7,306,960 56,373 317,553 7,478,373 55,637 315,545 7,357,247 (a) 297,619 (a) 6,566,070 51,923 51,839 298,259 6,679,510 52,508 300,701 6,777,801

Per Capita Personal Income $ 20,616 20,472 21,365 21,823 23,448 23,550 23,316 22,062 22,395 22,540

Median Age 36 36 35 36 37 37 37 37 38 38

School Enrollment 43,724 43,699 42,960 42,442 42,390 40,391 40,404 40,049 39,658 39,870

Source: Unemployment data through 2011 provided by the Florida Research and Economic Database. Unemployment data for 2012 provided by the Bureau of Labor Statistics. Population, personal income and median age data provide by the University of West Florida, HAAS center. School enrollment data provided by Escambia county school system, public relations office. Notes: All data is applicable to Escambia County except for Pensacola population. (a) Decrease in population numbers are based on the United States Census in 2010.

172

Unemployment Rate 4.3% 3.5% 4.1% 3.3% 3.8% 5.6% 9.9% 11.1% 10.4% 8.3%

CITY OF PENSACOLA, FLORIDA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO

2012 Employees

Rank

2003 Percentage of Total MSA Employment

Employees

Rank

Percentage of Total MSA Employment

Employer Local Government Federal Government State Government Sacred Heart Health System Baptist Health Care Lakeview Center Ascend Performance Materials Gulf Power Company West Florida Regional Medical Center University of West Florida Solutia, Inc. (formerly Monsanto Co.)

15,700 6,800 6,300 5,000 3,763 2,000 1,400 1,400 1,300 1,231 ----

Total

44,894

1 2 3 4 5 6 7 8 9 10 ----

8.31% 3.60% 3.33% 2.65% 1.99% 1.06% 0.74% 0.74% 0.69% 0.65% ----

15,790 7,403 5,970 3,500 3,470 1,500 ---1,400 1,200 2,267 1,800

23.76%

44,300

Source: Pensacola Area Chamber of Commerce, Enterprise Florida Inc., Reference USA, and Florida Research and Economic Development Labor Market Statistics. Notes: Principal employer information is only available on a calendar year basis and for the Pensacola Metropolitan Statistical Area. Actual numbers are not available, therefore estimates are presented.

173

1 2 3 4 5 8 ---9 10 6 7

8.94% 4.19% 3.38% 1.98% 1.96% 0.85% ---0.79% 0.68% 1.28% 1.02% 25.07%

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OPERATING INFORMATION

CITY OF PENSACOLA, FLORIDA OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS

Governmental activities: General Government Permits issued Building inspections conducted Police Residential burglary responses Commercial burglary responses Emergency responses Physical arrests Traffic violations Fire Emergency responses Fires extinguished Inspections Transportation (a) Traffic signals maintained Traffic warning signals maintained Street lights maintained Street name markers replaced Traffic control signs replaced Parking meters replaced Culture and recreation Parks and recreation Number of programs offered City resident program participants County resident program participants Golf Course Rounds played Tournaments held Tournament participants Libraries Items circulated Public computer use Program Attendance Information Transactions City resident library card usage County resident library card usage

2006

Fiscal Year 2007

2003

2004

2005

7,382 -

7,249 -

16,301 (d) -

8,746 19,665

7,610 18,989

402 198 98,686 4,031 12,519

392 223 103,503 3,960 14,036

207 146 102,517 4,582 11,409

401 198 96,531 4,490 10,793

410 198 97,602 4,059 10,617

5,532 267 1,340

5,738 310 1,354

6,332 264 1,147

5,655 265 1,615

5,624 248 1,344

478 33 239 56 379 35

408 42 228 47 584 35

281 62 288 83 525 35

297 52 219 479 110 40

324 132 231 251 265 50

-

-

-

496 234,889 115,691

450 301,389 135,406

37,007 -

36,950 -

32,603 -

37,427 92 4,942

27,428 82 4,808

1,083,813 127,621 16,375 65,199 24,413 59,225

1,147,516 136,446 17,086 60,982 23,267 54,942

1,014,058 148,208 12,674 84,039 29,646 71,348

948,830 166,164 13,358 57,303 30,739 77,596

680,577 (e) 138,553 11,551 71,318 30,286 77,523

2008

7,415 18,918

2009

2010

2011

2012

5,448 13,982

5,259 11,305

5,444 11,056

5,659 11,482

363 118 93,019 3,958 9,890

521 173 84,155 3,894 8,095

426 144 92,991 3,375 5,795

478 137 86,845 3,402 6,040

640 144 94,911 3,316 6,018

5,823 264 1,111

6,011 207 1,689

6,117 227 1,527

5,855 212 1,655

6,050 222 1,652

280 52 194 164 679 -

271 35 151 188 484 -

254 347 180 195 489 -

293 38 197 204 659 -

369 288,489 74,053

244 459,634 62,324

269 431,517 40,955

30,866 76 4,500

35,543 80 4,500

34,713 65 3,656

14,452 21 1,092

36,643 56 3,149

747,294 159,004 11,335 74,349 24,373 61,475

778,052 168,654 10,011 78,982 33,081 86,325

820,091 174,053 12,535 97,616 36,736 95,194

744,487 162,112 10,913 80,132 36,459 95,158

746,146 149,746 13,364 88,407 31,401 83,438

310 95 217 193 242 - (h)

206 294,848 (j) 58,571

258 363,183 52,763

(continued)

174

CITY OF PENSACOLA, FLORIDA OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2003 Economic environment Homes repaired/rehabilitated New homes constructed First-time homebuyers assisted Lots acquired for infill housing Families assisted Housing inspections conducted Congregate meals/meals on wheel provided Day care assistance provided, number of children Physical environment (a) Miles of paved streets swept Business-type Activities: Utility Average daily consumption in mmbtu's (c) Maximum daily consumption in mmbtu's In City customer connections Outside City customer connections Sanitation Customers Refuse collected (tons) Garbage Green Waste Recycling (new in FY 2009) Construction/Demolition (C&D) Port Tonnage exported Tonnage imported Number of vessels in port Airport Mainland carriers Regional commuter services Passengers enplaned Passengers deplaned Air freight enplaned in pounds Mail enplaned in pounds Total flights (private and commercial)

2004

2005

2006

Fiscal Year 2007

2008

2009

2010

2011

2012

36 12 6 1 2,162 1,042 184 235

49 23 22 4 1,994 4,807 351 355

51 45 14 3 1,952 3,295 1,269 815

41 49 59 1,600 3,999 1,300 295

28 47 21 1 1,685 3,336 978 335

34 46 52 2,163 4,700 1,030 -

39 3 35 2,269 4,440 1,342 -

14 7 113 2,163 4,077 1,667 -

11 4 54 2,260 3,776 1,903 -

3 2 120 2,179 5,034 1,241 -

20,000

22,000

22,500

23,610

25,680

27,378

24,740

25,989

16,266

29,232

10,158 40,983 19,046 39,663

9,653 37,483 17,427 (g) 41,648 (g)

8,729 34,799 17,396 41,828

7,983 31,313 17,448 41,953

8,923 33,131 17,468 41,999

9,182 33,926 17,032 42,312

8,124 29,524 16,648 41,767

9,286 36,096 16,545 41,344

8,707 32,611 16,581 41,091

7,404 23,363 16,580 40,990

19,000

19,000

19,300

19,150

19,167

19,122

18,965

18,958

18,962

19,095

23,064 17,170

24,030 15,428

26,987 13,057

24,344 10,654

23,009 10,358

22,213 11,023

1,407

1,694

551 (b)

3,004

3,313

2,847

18,490 9,716 1,189 2,828

15,720 11,170 3,974 1,659

14,724 12,201 4,444 1,442

14,805 12,583 4,539 1,676

125,771 378,039 477

66,626 441,286 425

45,175 448,831 145

139,706 709,103 189

26,899 357,532 64

13,950 233,822 16

45,857 223,558 36

55,502 207,089 51

67,003 157,156 69

4 7 672,397 677,906 2,917,762 1,166,787 124,777

4 7 740,608 737,998 2,739,046 1,320,534 127,848

4 7 799,907 797,595 2,157,396 392,944 129,269

4 10 811,291 805,956 2,029,739 71,176 114,887

4 8 700,662 697,840 681,481 (i) 102 96,233

4 6 719,648 720,098 212,729 54 125,552

2 11 780,621 780,919 225,829 165 117,053

2 9 756,229 758,769 4,229,417 105,333

26,318 (f) 498,925 (f) 85 (f) 4 8 835,121 825,424 2,675,816 875 108,636

4 8 814,279 811,324 2,594,147 303 109,141

Sources: Various city departments. Notes: No operating indicators are available for the human services function. For those indicators that are null, data is not available. (a) Data provided is based on estimates. (b) 40,458 cubic yards of C&D were also collected that year. (c) MMBTU stands for one million British Thermal Unit. (d) Fluctuation due to Hurricane Ivan. (e) The Santa Rosa Library was transferred to the County durring FY07. (f) Decrease due to a major tenant being inoperative a considerable length of time to make major renovations to their capital equipment. (g) In fiscal year 2004, new software was purchased which provided a more accurate count between in-city and outside city customers. (h) The responsibility of the City's parking garages, lots and meters were transferred to the Downtown Improvement Board during FY 2008. (i) In January 2009, Airborne Express stopped using the Airport's cargo ramp for its local operations. (j) In 2010 and prior playground attendence was considard a separate program; starting in FY11 playground attendence is not considard a separate program.

175

CITY OF PENSACOLA, FLORIDA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS

Governmental Activities: General Government Police Stations Patrol units Fire Stations Apparatus Transportation (a) Miles of street Traffic warning signals Traffic control signals Traffic control signs Culture and recreation Parks and recreation Parks Acreage Golf course Par Acreage Yardage Libraries Number of libraries Number of bookmobiles Number of volumes Economic environment (a) Street lights Street name markers Parking garages and lots, Number and size Parking meters Berths Physical environment Street Sweepers

2003

2004

2005

2006

2007

1 139

1 140

1 140

1 140

1 140

7 28

7 28

7 28

7 28

328 51 93 5,150

328 51 93 5,248

328 47 94 5,524

95 509

95 509

72 98 6,400

Fiscal Year 2008

2009

2010

2011

2012

1 135

1 130

1 134

1 140

1 140

7 28

7 31

6 31

6 31

6 31

6 31

328 47 96 6,138

328 49 96 7,210

330 48 95 7,284

332 45 92 7,292

332 43 90 8,193

332 51 90 10,033

332 60 92 10,293

95 509

94 508

93 483

93 483

93 483

92 478

92 478

93 517

72 98 6,400

72 98 6,400

72 98 6,400

72 123 6,400

72 123 6,400

72 123 6,400

72 123 6,400

70 123 6,400

70 123 6,400

3 2 307,384

3 2 330,392

3 2 339,687

3 2 359,005

3 1 297,639

3 0 289,128

3 0 301,434

3 0 292,291

3 0 296,373

7,500 2,400 3 @550 sp 745 -

7,645 2,400 3 @550 sp 745 -

7,700 2,400 3 @550 sp 571 -

7,792 2,459 3 @550 sp 669 -

7,815 2,889 3 @550 sp 653 -

7,757 5,676 3

7,780 5,676 3

8

8

8

8

8

2 (b) 2 294,084 (b)

7,855 2,910 3 @550 sp (d) 627 (d) 3 (c) 6

7,790 2,905 3 7

7,694 (f) 5,287 (f) 3 6

7

7

(continued)

176

CITY OF PENSACOLA, FLORIDA CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS

2003 Business-type activities: Utility Miles of gas mains Sanitation Collection trucks - residential Garbage Collection trucks - trash collection Container Grapplers Shuttle Dump Tractor Shuttle trailers Collection trucks - residential Recycling Port Warehouses Berths Airport Runway 17-35 length and width in square feet Runway 8-26 length and width in square feet Terminal building in square feet

2004

2005

2006

2007

Fiscal Year 2008

1,487

1,507

1,526

1,563

1,588

1,613

17

16

16

16

16

17

2 9 10 2 1 20

2 8 9 2 1 20

2 8 9 2 1 20

2 8 9 2 1 20

2 8 9 2 1 20

2 8 9 2 1 20

8 8

8 8

8 8

8 8

8 8

7000x150 6000x150 159,000

7000x150 6000x150 159,000

7000x150 7000x150 159,000

7000x150 7000x150 159,000

7000x150 7000x150 159,000

8 5 (c) 7000x150 7000x150 159,000

2009

1,623

2011

2012

1,627

1,630

1,632

12

12

12

2 9 2 1 1 8

2 9 2 1 1 8

2 9 2 1 1 8

2 9 2 1 1 8

4 (e)

4

4

4

8 5

7 5

7 5

7 5

7000x150 7000x150 159,000

7000+150 7000+150 181,808

7000+150 7000+150 181,808

7000+150 7000+150 181,808

12 (e)

Sources: Various city departments. Notes: No capital asset indicators are available for the economic environment and human services function. For those indicators that are null, data is not available. (a) Data provided is based on estimates. (b) The Santa Rosa Library was transferred to the County in FY07. (c) Three berths were transfered out Port's control during FY08. Two were moved to Culture and Recreation and one to Economic Environment. (d) The responsibility of the City's parking garages, lots and meters were transferred to the Downtown Improvement Board in FY 2008. (e) The City started a recycling program in fiscal year 2009. Four trucks were moved out of residentail garbage and into residential recycling. (f) The change is due to a physical count of inventory.

177

2010

CITY OF PENSACOLA, FLORIDA FULL-TIME-EQUIVALENT CITY GOVERNMENT POSITIONS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS Function/Program Governmental activities: General government Mayor City manager City clerk City council Legal Human Resources Civil service Financial services Planning Services Planning & neighborhood development Garage MIS CRA Public safety Police Fire Inspection services Street cleaning Transportation Public Works Culture and recreation Neighborhood services (d) Golf Course Library Economic environment Housing Physical environment Stormwater utility Engineering Business-type activities: Utility Sanitation Port Airport

2003

2004

2005

Full-time-Equivalent Employees as of September 30, 2006 2007 2008 2009

2010

2011

2012

0 11 3 0 6 13 3 58 0 12 23 20 3

0 9 3 0 6 13 3 57 33 (a) 0 (a) 24 20 3

0 8 3 0 6 12 3 57 32 0 24 20 3

0 7 3 0 6 14 3 57 32 0 24 19 4

0 7 3 0 6 14 3 54 32 0 24 18 4

0 7 3 0 6 14 3 52 14 (b) 0 22 18 4

0 7 3 0 3 8 2 32 10 0 18 17 2

0 5 3 0 3 7 2 32 10 0 18 16 2

6 0 3 0 3 7 2 31 12 0 17 16 2

11 0 3 1 4 9 0 29 8 0 17 17 2

233 139 19 0

230 139 0 (a) 0

229 136 0 0

229 142 0 0

226 142 0 0

220 138 18 (b) 0

212 115 14 0

209 114 11 0

204 111 9 0

205 111 10 0

15

16

16

17

17

16

12

12

12

54 (c)

92 5 33

92 5 33

92 7 41

92 7 42

92 7 49

92 7 49

80 5 52

80 5 40

73 5 40

28 (c) 5 36

28

28

27

27

25

25

23

23

23

22

34 11

32 10

32 10

32 11

32 11

32 11

31 11

29 12

29 13

29 12

111 62 14 48

112 62 11 49

112 62 11 49

112 59 10 49

113 60 12 50

113 57 12 51

131 51 10 62

122 47 10 63

121 43 10 68

117 41 10 61

996

990

992

998

1001

984

911

875

860

842

Source: City Budget Office Notes: (a) As part of reorganization, Community Development created; combining Planning and Neighborhood Dev. and Inspection Services. (b) Inspection Services moved to a Special Revenue Fund. (c) As part of reorganization, parks employees moved to public works. (d) Number of employees represent full time budgeted positions. Parks and recreation has part-time temporary employees to help facilitate programs during the summer.

178

OTHER AUDIT REPORTS SECTION

THIS PAGE INTENTIONALLY LEFT BLANK

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Honorable Members of the City Council City of Pensacola, Florida

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, Community Maritime Park Associates, Inc., each major fund, and the aggregate remaining fund information of the City of Pensacola, Florida (the City) as of and for the year ended September 30, 2012, which collectively comprise the City’s basic financial statements and have issued our report thereon dated February 14, 2013. 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 Management of the City is responsible for establishing and maintaining effective 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 opinions 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of 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 deficiencies, 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.

179

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. However, we noted certain matters that we reported to management of the City in a separate letter dated February 14, 2013. This report is intended solely for the information and use of the City of Pensacola, the State of Florida, and applicable federal agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Pensacola, Florida February 14, 2013

180

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR FEDERAL PROGRAM, STATE PROJECT AND PASSENGER FACILITY CHARGE PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

Honorable Members of the City Council City of Pensacola, Florida Compliance We have audited the City of Pensacola, Florida’s (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement, the requirements described in the Executive Office of the Governor’s State Projects Compliance Supplement, and the compliance requirements described in the Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration, that could have a direct and material effect on each of the City’s major federal programs, state projects and its passenger facility charges for the year ended September 30, 2012. The City’s major federal programs and state projects are identified in the summary of auditor’s 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, state projects, and its passenger facility charges is the responsibility of the City’s management. Our responsibility is to express an opinion on the City’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; Chapter 10.550, Rules of the Auditor General and Federal Aviation Administration; Passenger Facility Charge Audit Guide for Public Agencies. Those standards, OMB Circular A-133, Chapter 10.550, Rules of the Auditor General and Passenger Facility Charge Audit Guide for Public Agencies, 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, state project, and the passenger facility charge program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City’s compliance with those requirements.

181

In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs, state projects, and passenger facility charge program for the year ended September 30, 2012. Internal Control Over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs, state projects, and passenger facility charge program. In planning and performing our audit, we considered the City’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program, state project, and passenger facility charge program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program, state project, and passenger facility charge program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program, state project, or passenger facility charge program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance 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 compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the City of Pensacola, the State of Florida, and applicable federal agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Pensacola, Florida February 14, 2013

182

CITY OF PENSACOLA FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2012

A. SUMMARY OF AUDIT RESULTS 1. The independent auditor’s report expresses an unqualified opinion on the financial statements of the City of Pensacola, Florida. 2. No significant deficiencies in internal control relating to the audit of the financial statements are reported in the Independent Auditor’s Report on Compliance and Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the City of Pensacola, Florida, which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs and state projects are reported in the Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Program and State Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133. 5. The auditor’s report on compliance for major federal award programs and state projects for the City of Pensacola expresses an unqualified opinion. 6. No instances of audit findings that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 are reported in this schedule. 7. The programs tested as major programs/projects were: Federal Programs Section 8 Housing Choice Vouchers (CFDA No. 14.871) Airport Improvement Program (CFDA No. 20.106) State Projects Aviation Development Grants (CSFA No. 55.004) 8. The threshold for distinguishing Types A and B programs was $518,000 for major federal programs and $300,000 for major state projects. 9. The City of Pensacola, Florida was determined to be a low-risk auditee pursuant to OMB Circular A-133.

183

CITY OF PENSACOLA FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2012

B. FINDINGS - FINANCIAL STATEMENTS AUDIT None.

C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL PROGRAMS None.

D. FINDINGS AND QUESTIONED COSTS - MAJOR STATE PROJECTS None.

184

CITY OF PENSACOLA FLORIDA SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED SEPTEMBER 30, 2012

There were no prior year audit findings.

185

CITY OF PENSACOLA, FLORIDA ESTIMATED SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, PASSENGER FACILITY CHARGE AND STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2012

Federal/State Agency, Pass-Through Entity, Federal Program/State Project

Federal CFDA Number/ State CSFA Number

Contract Grant Number

Expenditures

FEDERAL AWARDS U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Community Development Block Grant Housing Rehabilitation Aid to Private Agencies

14.218 14.218 14.218

B-09/10-MC-12-0016 B-09/10-MC-12-0016 B-09/10-MC-12-0016

$

Passed through Escambia County Florida: Community Development Block Grant Total Community Development Block Grants

14.218

B-09-UC-12-0012

194,861 1,106,412

HOME Investment Partnerships Program

14.239

B-10-UC-12-0012

147,855

Section 8 Housing Choice Vouchers Program

14.871

FL092

Total U. S. Department of Housing and Urban Development

115,919 624,493 171,139

13,256,085 14,510,352

U. S. DEPARTMENT OF JUSTICE Bulletproof Vest Partnership Program Bulletproof Vest Partnership Program

16.607 16.607

2010-BU-BX-1005-3493 2011-BU-BX-1105-5216

Total Bulletproof Vest Partnership Program Justice Assistance Grant Program Cluster: Edward Byrne Memorial Justice Assistance Program

12,379 16.738

Passed through the State of Florida, Department of Law Enforcement: Edward Byrne Memorial Justice Assistance Program 16.738 Edward Byrne Memorial Justice Assistance Program 16.738 Total Edward Byrne Memorial Justice Assistance Program Law Enforcement Trust Fund

8,484 3,895

N/A

2011-DJ-BX-3237

34,725

2012-JAGC-ESCA-3-C4-090 2012-JAGC-ESCA-5-4X-246

68,775 4,069 107,569

N/A

26,276

Total U. S. Department of Justice

146,224

U. S. DEPARTMENT OF TRANSPORTATION Airport Improvement Program

20.106

N/A

Total U. S. Department of Transportation

2,081,337 2,081,337

U.S. DEPARTMENT OF ENERGY ARRA Energy Efficiency & Conservation Block Grant Program

81.128

DE-FOA-0000013

Total U.S. Department of the Energy

54,541 54,541

U.S. DEPARTMENT OF HOMELAND SECURITY Hurricane Isaac - 75% - Federal Hurricane Isaac - 12.5% - State Total Disaster Grants - Public Assistance

97.036 97.036

13-IS-3S-01-27-01-516 13-IS-3S-01-27-01-516

11,136 1,856 12,992

Assistance to Firefighters Grant Program

97.044

EMW-2010-FO-04394

28,960

Pass through Pensacola Bay Area Chamber of Commerce, Port Security Grant Program Port Security Grant Program Port Security Grant Program Port Security Grant Program Total Port Security Grant Program

97.056 97.056 97.056 97.056

2008-GB-T8-K035 2009-PU-T9-K008 2010-PU-T0-K028 2011-PU-K00171

8,972 235,205 170,170 3,450 417,797

97.067 97.067

12-CI-A6-01-27-02-148 12-CC-A6-01-27-02-149

6,000 6,891 12,891

Pass through State of Florida, Florida Division of Emergency Management: Homeland Security Grant Program Homeland Security Grant Program Total Homeland Security Grant Program Total U.S. Department of Homeland Security

472,640

186

Passenger Facility Charge Revenue

CITY OF PENSACOLA, FLORIDA ESTIMATED SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, PASSENGER FACILITY CHARGE AND STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2012

Federal/State Agency, Pass-Through Entity, Federal Program/State Project

Federal CFDA Number/ State CSFA Number

Contract Grant Number

Expenditures

Passenger Facility Charge Revenue

FEDERAL AWARDS CONTINUED U.S. DEPARTMENT OF AGRICULTURE Passed through State of Florida, Florida Department of Health: Child and Adult Care Food Program

10.558

A-2573

8,989

Total U.S. Department of Agriculture

8,989

TOTAL EXPENDITURES OF FEDERAL AWARDS

$

PASSENGER FACILITY CHARGE

$

17,274,083 2,880,444 1 3,003,117 2

STATE FINANCIAL ASSISTANCE FLORIDA DEPARTMENT OF STATE AND SECRETARY OF STATE Division of Library and Information Services: State Aid to Libraries

45.03

12-ST-91

128,577

Total Florida Department of State and Secretary of State

128,577

FLORIDA HOUSING FINANCE CORPORATION SHIP Program

52.901

SHIP 2011

33,975

Total Florida Housing Finance Corporation

33,975

FLORIDA DEPARTMENT OF TRANSPORTATION Aviation Development Air Commerce Park Land Acquisition Aviation Development Airport Expansion Total Aviation Development Grants

55.004 55.004

AO986 AQF11

1,282,767 128,891 1,411,658

Seaport Warehouse Improvement and Dredging Seaport Shoreside Utility Improvements Total Seaport Grants

55.005 55.005

AP127 AQ782

147,389 37,079 184,468

Area Wide Coordinate Signal Timings Total Transit Corridor Program Grants

55.013

AOM42

188,317 188,317

Bayfront Parkway Medians Total State Highway Project Reimbursement

55.023

416533-8-58-14

249,640 249,640

Total Florida Department of Transportation

2,034,083

TOTAL EXPENDITURES OF STATE FINANCIAL ASSISTANCE

$

2,196,635

NOTE TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, PASSENGER FACILITY CHARGE AND STATE FINANCIAL ASSISTANCE NOTE A - SIGNIFICANT ACCOUNTING POLICIES The schedule of expenditures of federal awards and passenger facility charge is presented on the accrual basis of accounting in accordance with generally accepted accounting principles. 1 2

Includes debt service of $2,126,863 Includes interest earnings of $1,613

NOTE B - FLORIDA DEPARTMENT OF TRANSPORTATION AVIATION RECEIPTS Actual reimbursements received during fiscal year 2012 for AO986 totaled $1,108,220.50 Actual reimbursements received during fiscal year 2012 for AQF11 totaled $0.00

187

MANAGEMENT LETTER

Honorable Members of the City Council City of Pensacola, Florida

We have audited the financial statements of the City of Pensacola, Florida, as of and for the fiscal year ended September 30, 2012, and have issued our report thereon dated February 14, 2013. 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 Passenger Facility Charge Audit Guide for Public Agencies, issued by the Federal Aviation Administration. We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and Compliance and Other Matters, Independent Auditor’s Report on Compliance with Requirements that could have a Direct and Material Effect on each Major Federal Program and State Project and on Internal Control over Compliance, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated February 14, 2013, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditor’s reports or schedule: Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address significant findings and recommendations made in the preceding annual financial audit report. Corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include 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 Pensacola, Florida complied with Section 218.415, Florida Statutes. Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we have the following recommendation:

188

Technology Resources Department Auditor’s Comment: During the audit we reviewed controls in the Technology Resources Department and discussed certain matters with management. Our discussions and procedures indicated a need for various improvements, including the following areas: (1) testing of the disaster recovery plan; (2) review of security and event logs; and (3) vendor management. The Technology Resources Department is aware of these matters and intends to address them in its comprehensive plan. We recommend that the comprehensive plan include: (1) annual testing of the disaster recovery plan, along with periodic training for employees on their responsibilities related to the disaster recovery plan; (2) implementation of a formalized log management process to ensure appropriate and timely review of the security and event logs; and (3) implementation of a structured vendor management process for all critical vendors. We recommend that the status of these items be monitored by the City’s Business Process Review program. The City may also consider an external review of the Technology Resources Department to identify other opportunities for improvement. Management’s response: Management agrees with the auditor’s comment. Management is in the process of revamping the security and management program which will include:          

Updated security policies and procedures Vendor management process and procedures Periodic DR and all critical system testing Vulnerability and risk assessment completed on an annual basis and includes both internal and external testing Automated log and system alert management City-wide security awareness training Governance and oversight Security newsletters and proactive incident management All implementations built around a platform of Continual Service Improvement Development of a City-wide strategic technology plan

189

Updating of Policies and Procedures Auditor’s Comment: Clearly established policies and procedures, updated on a timely basis, are a critical part of the governmental environment. We noted that the City’s policies and procedures were reviewed and updated in advance of the change to the Mayor-Council form of government in January 2011. The City has operated for two years under this new form of government, and we believe certain policies and procedures now warrant additional clarification. We believe the following areas in particular should be updated and clarified: (1) various purchasing policies and procedures, including the role of price and qualifications in the procurement process; (2) circumstances in which contract work begins before the written contract is executed; and (3) reimbursements for use of personal vehicles and for local meals and entertainment. We also recommend that the City establish a regular schedule for reviewing and updating policies and procedures in the future. Management’s response: Management agrees with the auditor’s comment. Management will review, update and clarify policies and procedures where needed as well as implementing an ongoing review process.

Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. Section 10.554(1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings. Section 10.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This information is included in the notes to the City of Pensacola, Florida’s financial statements. Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit, we determined that the City of Pensacola, Florida did not meet any of the conditions described in Section 218.503(1), Florida Statutes.

190

Section 10.554(1)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for the City of Pensacola, Florida for the fiscal year ended September 30, 2012, filed with the Florida 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, 2012. In connection with our audit, we determined that these two reports were in agreement. Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, we applied financial condition assessment procedures. It is management’s responsibility to monitor the City of Pensacola, Florida’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 same. Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties.

Pensacola, Florida February 14, 2013

191

CITY OF PENSACOLA, FLORIDA FINANCIAL DATA SCHEDULE SECTION 8 HOUSING CHOICE VOUCHERS PROGRAM CATALOGUE OF FEDERAL DOMESTIC ASSISTANCE NUMBER 14.871 FOR THE YEAR ENDED SEPTEMBER 30, 2012 Line Item #

111 113 100 128 128.1 120 142 150 190

Account Description

Amount

Assets: Current Assets: Cash: Unrestricted Other restricted Total cash

$

Receivables: Fraud recovery Allowance for doubtful accounts - Fraud Total receivables

3,669,737 1,036,643 4,706,380 1,137,054 (801,952) 335,102

Prepaid expenses and other assets

801

Total current assets

5,042,283

Total assets

$

5,042,283

$

4,611 335,102 28,484 368,197

Liabilities: 312 342 347 310 300

Current liabilities: Accounts payable <= 90 days Deferred revenue Inter Program - Due To Total current liabilities Total liabilities

368,197

Equity: 509.2 512.2 513 600

Fund Balance Reserved Unreserved, undesignated fund balance

1,036,643 3,637,443

Total equity/net assets

4,674,086

Total liabilities and equity/net assets

192

$

5,042,283

CITY OF PENSACOLA, FLORIDA FINANCIAL DATA SCHEDULE SECTION 8 HOUSING CHOICE VOUCHERS PROGRAM CATALOGUE OF FEDERAL DOMESTIC ASSISTANCE NUMBER 14.871 FOR THE YEAR ENDED SEPTEMBER 30, 2012 Line Item #

Account Description

Amount

70600 71100 71400 71500 71600 72000 700

Revenues Other revenue: HUD PHA Operating Grants Investment Income - unrestricted Fraud Recovery Other revenue Gain or loss on sale of capital assets Investment Income - restricted Total revenues

91100 91200 91500 91810 91900 93100 93200 93300 93600 94200 94300 96120 96200 96210 96900

Expenses Administrative salaries Auditing fees Employee benefit contributions - administrative Allocated Overhead Other operating - administrative Water Electricity Gas Sewer Maintenance and operations - materials and other Maintenance and operations - contracts Liability insurance Other general expenses Compensated absences Total operating expenses

97000

97300 97350 90000 10000

$

11,217,897 9,928 42,953 69,897 2,025 2,750 11,345,450 649,877 35,000 367,729 100,000 2,631 684 11,274 656 688 186,329 23,270 8,381 352 (21,526) 1,365,346

Excess operating revenue over operating expenses

9,980,104

Other expenses: Housing Assistance Payments HAP Portability-In

11,823,974 66,764

Total expenses

13,256,084

Excess (deficiency) of total revenue over (under) total expenses

$

(1,910,634)

11030 11040

Beginning Equity Prior period adjustments, equity transfers and correction of errors

$

6,584,720

11170 11180

Administrative Fee Equity Housing Assistance Payments Equity

$ $

3,637,443 1,036,643

11190 11210

Unit Months Available Number of Unit Months Leased

28,776 27,059

193

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