city of palm bay, florida comprehensive annual financial...

CITY OF PALM BAY, FLORIDA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2013

City of Palm Bay, Florida Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2013 Prepared by Department of Finance

Introduction Section Letter of Transmittal ......................................................................................................................................................... i Certificate of Achievement for Excellence in Financial Reporting .................................................................................... vii Organization Chart ........................................................................................................................................................... ix Principal Officials ............................................................................................................................................................. xi Financial Section Independent Auditor’s Report .......................................................................................................................................... 1 Management’s Discussion and Analysis .......................................................................................................................... 3 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position ................................................................................................................................................ 20 Statement of Activities...................................................................................................................................................... 22 Fund Financial Statements Governmental Funds: Balance Sheet .................................................................................................................................................................. 24 Reconciliation of Balance Sheet Governmental Funds to the Statement of Net Position ................................................ 27 Statement of Revenues, Expenditures and Changes in Fund Balance ........................................................................... 28 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities ....................................................................................... 31 Proprietary Funds: Statement of Net Position ................................................................................................................................................ 32 Statement of Revenues, Expenses and Changes in Fund Net Position .......................................................................... 35 Statement of Cash Flows ................................................................................................................................................. 36 Fiduciary Funds: Statement of Fiduciary Net Position – Pension Trust Fund .............................................................................................. 38 Statement of Changes in Fiduciary Net Position – Pension Trust Fund .......................................................................... 39 Notes to Financial Statements ...................................................................................................................................... 41 Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual – General Fund .................................................................................................................................. 84 Budget and Actual – Bayfront Community Redevelopment Agency ................................................................................ 87 Schedule of Funding Progress – City of Palm Bay Retirement System ........................................................................... 88 Schedule of Funding Progress – Other Post-Employment Benefits ................................................................................. 89 Notes to Required Supplementary Information ................................................................................................................ 90 Supplementary Information Budget Comparison Schedule – BCRA Construction Fund ............................................................................................. 94 Budget Comparison Schedule – Community Investment Fund ........................................................................................ 95 Combining Balance Sheet – Nonmajor Governmental Funds .......................................................................................... 100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances- Nonmajor Governmental Balances ............................................................................................................................ 104

Table of Contents Financial Section (continued) Budgetary comparison schedules: Law Enforcement Trust Fund ...................................................................................................................................... 108 Code Nuisance Fund .................................................................................................................................................. 109 SHIP Program Fund .................................................................................................................................................... 110 Community Development Block Grant Fund ............................................................................................................... 111 HOME Grant Fund ...................................................................................................................................................... 112 Miscellaneous Donations Fund ................................................................................................................................... 113 ARRA Fund ................................................................................................................................................................. 114 Emergency Fund ......................................................................................................................................................... 115 Recreation Program Fund ........................................................................................................................................... 116 Impact Fee Trust Fund ................................................................................................................................................ 117 Environmental Fee Fund ............................................................................................................................................. 118 Sanitation Fund ........................................................................................................................................................... 119 Road Maintenance Fund ............................................................................................................................................. 120 Debt Service Funds..................................................................................................................................................... 121 Community Investment 06 Bond CIP Fund ................................................................................................................. 122 City Hall Annex 10 Bond CIP Fund ............................................................................................................................. 123 Nonmajor Enterprise Funds: Combining Statement of Net Position .............................................................................................................................. 125 Combining Statement of Revenues, Expenses and Changes in Net Position ................................................................. 126 Combining Statement of Cash Flows ............................................................................................................................... 127 Internal Service Funds: Combining Statement of Net Position .............................................................................................................................. 130 Combining Statement of Revenues, Expenses and Changes in Net Position ................................................................. 131 Combining Statement of Cash Flows ............................................................................................................................... 132 Statistical Section Government-Wide Information: Schedule 1 – Net Position by Component – Last Ten Fiscal Years ............................................................................ 137 Schedule 2 – Change in Net Position – Last Ten Fiscal Years ................................................................................... 138 Fund information: Schedule 3 – Fund Balances of Governmental Funds – Last Ten Fiscal Years ......................................................... 140 Schedule 4 – Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years ...................................... 141 Schedule 5 – Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ................. 142 Schedule 6 – Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years .......................... 143 Schedule 7 – Principal Property Taxpayers ................................................................................................................ 144 Schedule 8 – Property Tax Valuations, Levies and Collections .................................................................................. 145 Schedule 9 – Ratios of Outstanding Debt by Type ..................................................................................................... 146

Table of Contents Statistical Section (continued) Schedule 10 – Computation of Direct and Overlapping Bonded Debt – General Obligation Bonds ........................... 147 Schedule 11 – Pledged Revenue Coverage – Last Ten Fiscal Years......................................................................... 148 Schedule 12 – Demographic and Economic Statistics – Last Ten Fiscal Years ......................................................... 149 Schedule 13 – Principal Employers in the City of Palm Bay ....................................................................................... 150 Schedule 14 – Full-Time Equivalent City Government Employees by Function/Program – Last Ten Fiscal Years ........................................................................................................................................ 151 Schedule 15 – Capital Asset Statistics – Last Ten Fiscal Years ................................................................................. 152 Schedule 16 – Operating Indicators by Function/Program – Last Ten Fiscal Years ................................................... 153 Schedule 17 – Impact Fee Collections and Balances – Last Ten Fiscal Years .......................................................... 154 Schedule 18 – Utility Debt Service Applicable to Transportation Projects – Last Ten Fiscal Years ............................ 155 Schedule 19 – Historical Public Service Tax Receipts by Category – Last Ten Fiscal Years ..................................... 156 Schedule 20 – Certified Gallons of Taxable Fuel Sold in Brevard County, Florida and Local Option Gas Tax Revenue – Last Ten Years .............................................................................. 157 Schedule 21 – Distribution of Brevard County, Florida Local Option Gas Tax Revenues ........................................... 158 Schedule 22 – Utilities Debt Service Coverage – Last Ten Fiscal Years .................................................................... 159 Schedule 23 – Utility Rate Comparison with Neighboring Utilities .............................................................................. 160 Schedule 24 – Ten Largest Customers of the Water and Wastewater System .......................................................... 161 Compliance Section Schedule of Expenditures of Federal Awards and State Financial Assistance ................................................................ 163 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance .................................................. 165 Reports

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 .................................................................. 167 Independent Auditor’s Report on Compliance for each Major Federal Program and State Project and Report on Internal Control over Compliance and Report on the Schedule of Expenditures of Federal Awards and State Financial Assistance Required by OMB Circular A-133 And Chapter 10.550, Rules of the Auditor General ......................................................................................................... 169 Schedule of Findings and Questioned Costs ................................................................................................................... 172 Independent Auditor’s Management Letter ...................................................................................................................... 174

March 20, 2014 The Honorable Mayor Capote and City Council City of Palm Bay Palm Bay, Florida The Comprehensive Annual Financial Report (CAFR) of the City of Palm Bay, Florida, for the fiscal year ended September 30, 2013 is hereby submitted pursuant to Florida Statutes Section 218.39, Chapter 10.500 of the Rules of the Auditor General of the State of Florida and Section 4.05 of the City Charter. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe that the data, as presented, is accurate in all material aspects, that it is presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds and that all disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. This report consists of management’s representations concerning the finances of the City of Palm Bay. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparations of the City’s financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. As required by Florida Statutes and the City Charter, an audit of the City’s CAFR was performed by Moore Stephens Lovelace, P.A., a firm of licensed, independent certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Palm Bay for the fiscal year ended September 30, 2013 are free of material misstatement. The auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Palm Bay’s financial statements for the fiscal year ended September 30, 2013 are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

Office of the City Manager

120 Malabar Road SE Palm Bay, FL 32907-3009

Phone: 321.952.3413 Fax: 321.952.3412

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The independent audit of the financial statements of the City of Palm Bay was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal and state grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal and state awards. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statement in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Palm Bay’s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE CITY OF PALM BAY Palm Bay is the largest city in Brevard County and the 18th largest in Florida, with approximately 104,000 residents in over 100 square miles. The City is located centrally on Florida’s east coast, midway between Jacksonville and Miami. Port Canaveral and Kennedy Space Center, the nation’s premiere spaceport, are all nearby. The City operates under the Council-Manager form of government. The governing body of the City is the City Council, which formulates policies for the administration of the City. The City Council is composed of a mayor and four council members elected at-large for four-year terms. City Council appoints the City Manager who serves as the City's Chief Executive Officer and is responsible for the day-to-day administration of the City and the implementation of the policies established by City Council. The City provides a full range of municipal services as directed by its charter including police and fire, public works, planning, zoning, permitting, parks and recreation, water and sewer services, and general administrative services. ECONOMIC CONDITION AND OUTLOOK FY 2013 saw an improving economy despite a dramatic drop in property values and new construction over the last few years. The City’s financial recovery is due to a combination of higher tax rates paid by our residents and businesses, employee sacrifices and some reduction in services. The City continues to be financially conservative while investing in the City’s strategic priorities. Traditions and norms have changed over the last few years and the City is adapting well while providing exemplary service to our residents and businesses. Pressures on the residential real estate market in Palm Bay appear to be abating. In addition, there are similar signs of emerging stability in other important real estate markets across the county, which have been the source of new home buyers in and around our community. Combined with a favorable mortgage interest rate outlook, the housing engine which drives our population growth and tax base expansion seems to be slowly turning in a positive way. The City had an increase in its FY 2013 gross tax value of 4.85%.

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As the City emerges through the economic downturn, balancing financial stability with strategic investments continues to be a significant aspect of the City’s recovery. Fortunately, the private sector is investing in Palm Bay and the City staff has secured numerous state and federal grants for key projects that will complement and inspire additional private sector investment. The City is seeing signs of economic recovery with several significant private sector, as well as grant funded projects. The new I-95 interchange is funded in FY 2016 which will open approximately 24 square miles for mixed use development. The City is completing the northwest segment of the Parkway, also creating new opportunities for residential and commercial growth. The Harris campus upgrade will likely spur additional redevelopment in the eastern Palm Bay Road corridor. The City’s Bayfront Community Redevelopment District continues to invest in aesthetic and infrastructure improvements to the US 1 corridor, which also has tremendous potential for redevelopment. The budget preparation and execution strategies for FY 2013 continue to reflect the need to stabilize the City’s financial health. However, the FY 2014 adopted budget is based on a roll back rate of 8.6326 mills, which is a reduction from the prior rate of 9.000 mills. This reduction in tax rate is moving the City towards parity with tax rates of neighboring jurisdictions. Both an investment in road maintenance and a one time employee compensation was accomplished in FY 2013 based on savings accomplished through FY 2013. The City’s General Fund balance has been steadily increasing since FY 2010. Similarly, the FY 2014 budget continues to reflect a stabilizing trend. There are no reductions in force. Operating expenses were maintained across every department. The most notable challenge the City continues to face is its failing infrastructure. Road maintenance needs top the list of deferred capital investments, approximately $165 million. This is well beyond the capability of the City’s taxpayers to fund, other capital needs, such as facilities, vehicles and information technology infrastructure remain deferred. MAJOR INITIATIVES Harris Corporation, the City’s largest employer, has begun construction of a $100 million Engineering Center. The City (through state and federal grants) partnered with Harris to realign a connector roadway to facilitate the project. This will bring a significant investment to Palm Bay’s economy over the next few years. The City is also nearing completion of the first phase of the Palm Bay Parkway. The $13 million project is funded through state and federal grants, as well as transportation impact fees. In December, Bass Pro Shops opened a 112,000 square foot Bass Pro Shops Sportsman’s Center store, bringing 200 new jobs to Palm Bay. The upgrade to US 1 in the Bayfront Community Redevelopment District continued in FY 2013. The second phase of the project ($866,000) was funded through federal funds and redevelopment district tax increment financing. One of Palm Bay’s community icons returned this year – the “Palm Bay” letters at the Palm Bay Road interchange. The aesthetic improvement project, funded through a grant from the Florida Department of Transportation, is again part of Palm Bay’s “brand.” Palm Bay opened a new pirate-themed park and playground. The playground was funded through donations and sweat equity contributed by the community, with almost 100 volunteers participating.

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In June 2013, the City Council voted to temporarily waive the Transportation Impact Fees on new commercial development. New bus shelters were installed around the City, funded through a partnership with Space Coast Area Transit (SCAT). With increasing ridership, Palm Bay will continue to work with SCAT to improve transportation choices for our residents. Cultural event planning in the City included hosting the City’s first annual Food Truck Wars. FUTURE PROJECTS Through several significant grant projects, the Troutman Clearmont realignment road project and the Parkway NW road project should be ready for drivers in FY 2014. At the south end of the Palm Bay Parkway, the City is working with the Florida Department of Transportation and private sector partners to complete the Project Development and Environment (PD&E) study as the first step in developing a new interchange at Interstate 95 between Grant Road and Micco Road. Design of the interchange is anticipated to follow federal approval of the PD&E, with construction possible in FY 2015. This is an outstanding opportunity for Palm Bay to grow in a sustainable way, with good land use policies already in place. In the Utilities Department, investments are focused on customer service improvements and overdue capital projects. The Department is proposing to reactivate the Troutman Reverse Osmosis Plant to further prepare for growth and improve potable water quality through blending. This will also necessitate the full activation of the Water Reclamation Facility to manage effluent. The Fire Rescue Department will take delivery of a new fire apparatus in FY 2014. In FY 2013 Fire Rescue transitioned to a co-location model with Brevard County (ambulance service provider) and through that partnership, the City will open a fire-rescue station in the southwest quadrant of the City in FY 2014. The Police and Fire Rescue Departments are also partnering on unique programs that will provide better medical and response capabilities during police tactical incidents. The Building Department staff is working towards an electronic permitting solution that will likely be brought for Council consideration in late FY 2014. This necessary step will align the City with other local governments in providing ease and transparency in permitting. The City continues to work at recruiting and retaining quality businesses. The FY 2014 budget includes funding for a Board of Advisor level investor in the Space Coast Economic Development Commission, as well as membership in all Brevard County’s Chambers of Commerce. Funding is provided for the newly established One Community Program. The program goal is to assist neighborhood groups in organizing and enhancing their area. Funding to the neighborhood groups will sponsor a community project such as neighborhood signage, landscaping or a community garden. Net proceeds from Red Light Camera citations will be used to fund youth projects in the community through the City’s new Municipal Foundation.

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ACCREDITATION AND CERTIFICATIONS

In July of 2008 the Public Works Department became the 51st Public Works Department in North America to achieve American Public Works Association Accreditation. The purpose of the accreditation program is to provide a means of formally verifying and recognizing public works agencies for compliance with the recommended practices set forth in the Public Works Management Practices Manual. It is a voluntary, self-motivated approach to objectively evaluate, verify and recognize compliance with the recommended management practices. The Public Works Department was re-accredited in February 2013. Palm Bay has been named a "Playful City USA" community by KaBoom! KaBoom! is a national non-profit organization that empowers communities to build playgrounds with the goal of a great place to play within walking distance of every child in America. Palm Bay is one of only 93 communities that have each demonstrated creative commitments to the cause of play and earned this title. The National Recreation and Parks Association and the Commission for Accreditation of Park and Recreation Agencies (CAPRA) recognize park and recreation agencies for excellence in operation and service. CAPRA is the only national accreditation of park and recreation agencies and is a valuable measure of an agency’s overall quality of operation, management and service to the community. The Palm Bay Parks and Recreation Department was awarded accreditation in February 2007 and reaccreditation in March 2012. The Police Department became accredited by the Florida Police Accreditation Coalition, Inc. (FLA-PAC) in October of 2007 and reaccredited in October 2010 and August 2013. On August 4, 2008, the Palm Bay Utilities Department became certified under the ISO 14001:2004 environmental standard. Palm Bay Utilities was the first water and wastewater utility in the State of Florida to receive such certification. Through the implementation of the Environmental Management System (EMS) known as Greenway, the Utilities Department has been able to minimize its impact on the environment and establish efficiencies that reduce costs. The program promotes environmental awareness and stewardship among employees by focusing on regulatory compliance, pollution prevention and continual improvement. Palm Bay has received the silver certification from the Florida Green Building Coalition. The Green Local Government Designation applies to local government functions and their interaction with the surrounding community. A city or county that incorporates multiple environmental, ecological and sustainability features throughout the functions they perform (e.g., conservation of resources, green utilities, pedestrian-oriented circulation) that improve the environmental performance considerably over a city or county that just minimally meets state and local regulations. The City has received the Community Rating System (CRS) Class 6 rating, which is an improvement over the previous rating of 7. The Community Rating System (CRS) is a voluntary program for National Flood Insurance Program (NFIP)-participating communities. All CRS communities must maintain completed FEMA elevation and flood proofing certificates for all new and substantially improved construction in the Special Flood Hazard Area after the date of application for CRS classification.

http://www.apwa.net/About/Accreditation/?mode=AccreditationManual

http://www.apwa.net/About/Accreditation/?mode=AccreditationManual

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CITY OF PALM BAY ORGANIZATIONAL STRUCTURE

FY 2013

CITIZENS OF PALM BAY

City Council William Capote, Mayor

Council Members

Ken Greene, Deputy Mayor Kristine Isnardi

Michele Paccione Harry Santiago, Jr.

City Clerk

City Manager

City Attorney

Deputy City Manager

Utilities Administration

Business Operations Distribution/Collections

Engineering Enterprise GIS

Plant Operations

Parks and Recreation Administration

Facility Maintenance Parks

Recreation

Public Works Admin/Eng. Services

Construction Fleet Services Infrastructure

ROW Beautification Sanitation Services Stormwater Utility Surveying Services

Economic Development Office

Police Code Compliance Communications

Center Executive Division

Investigations Patrol

Police Athletic League Support Services

Fire

Administration Emergency Services

Bayfront Community Redevelopment

Agency

Communications &

Information Technology Administration

Growth Management Administration

Building Division Land Development

Finance Accounting

Administration Purchasing & Contracts

Revenue

Human Resources Employee Health

Insurance Risk Management

ADVISORY BOARDS AND COMMITTEES

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LIST OF PRINCIPAL OFFICIALS

As of date of transmittal MAYOR WILLIAM CAPOTE DEPUTY MAYOR KEN GREENE COUNCIL MEMBER KRISTINE ISNARDI COUNCIL MEMBER MICHELE PACCIONE COUNCIL MEMBER HARRY SANTIAGO JR. CITY MANAGER SUSAN HANN, P.E. DEPUTY CITY MANAGER CHAD SHOULTZ, CFP® CITY ATTORNEY ANDREW LANNON CITY CLERK ALICE PASSMORE COMMUNICATIONS & INFOMATION TECHNOLOGY DIRECTOR LISA MORRELL FINANCE DIRECTOR YVONNE MCDONALD, CGFO FIRE CHIEF JAMES STABLES, CFO HUMAN RESOURCES DIRECTOR SHANTE AFAKIA GROWTH MANAGEMENT DIRECTOR DAVID WATKINS, AICP PARKS AND RECREATION DIRECTOR HEIDI LAPIN, CPRP POLICE CHIEF DOUGLAS MULDOON PUBLIC WORKS DIRECTOR ELIA TWIGG, P.E. UTILITIES DIRECTOR DAN ROBERTS, P.E.

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INDEPENDENT AUDITOR’S REPORT The Honorable Mayor and

Members of the City Council City of Palm Bay, Florida Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Bay, Florida (the “City”), as of and for the fiscal year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the City of Palm Bay Police and Firefighters Retirement System, which represent 100 percent of the assets, liabilities and revenues of the Pension Trust Fund. 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 City of Palm Bay Police and Firefighters Retirement System, 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of September 30, 2013, and the respective changes in financial position, and, where applicable, cash flows, for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.

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The Honorable Mayor and Members of the City Council City of Palm Bay, Florida

INDEPENDENT AUDITOR’S REPORT (Concluded)

Other Matters

Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and the required supplementary information, as listed in the table of contents, 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.

Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements as a whole. The introductory section, combining and individual major and non-major fund financial statements and schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual major and non-major fund financial statements and schedules 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. Such 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 combining and individual major and non-major fund financial statements and schedules are fairly stated, in all material respects, in relation to the financial statements as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated March 19, 2014, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants

Orlando, Florida March 19, 2014

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City of Palm Bay, Florida Management’s Discussion and Analysis The City of Palm Bay, Florida’s (the “City”) Management’s Discussion and Analysis (the “MD&A”) presents this overview and analysis of the City’s financial activities for the fiscal year ended September 30, 2013. Please read it in conjunction with the letter of transmittal in the introductory section, and the City’s financial statements following the MD&A. Financial Highlights

• The assets and deferred outflows of resources of the City exceeded its liabilities at the close of fiscal year 2013 by $157.1 million (net position). Of this amount, $5.7 million (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors.

• At September 30, 2013, the City’s governmental funds reported combined ending fund balances of

$20.8 million, as compared to $19.7 million as of September 30, 2012. A key component of this increase is the restatement of the beginning fund balance to reflect fiscal year 2012 prepaid contributions made to the fire and police pension fund.

• At September 30, 2013, the City’s General Fund reported an unassigned balance of $9.8 million or 17.8% of the total 2013 General Fund expenditures and transfers out.

• The City’s outstanding long-term debt decreased by $13.8 million during fiscal year 2013. The City

issued $2.26 million in debt for governmental activities. The issuance of the 2012 Public Service Tax Refunding Revenue Note was to refund prior revenue bond issues.

• The City’s business-type activities reported total net position of $85.7 million, which is an increase

of $1.7 million or 2% in comparison to the prior year. Approximately 10% of the total, or $8.8 million, is unrestricted.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise 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 themselves. The financial statement focus is on both the City as a whole (government-wide) and on the major individual funds. The following chart shows the relationship between the CAFR and the basic financial statements and Required Supplementary Information (“RSI”).

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Introductory Section

Financial Section

Statistical Section

Basic financial

statements and RSI

Management’s Discussion and Analysis

Government-wide Financial Statements

Governmental Fund Financial Statements

Proprietary Fund Financial Statements

Fiduciary Fund Financial Statements

Notes to the Financial Statements

Additional Required Supplementary Information

Information of Individual funds and discretely Presented component units and other Supplementary information not required by GAAP

General Information on the government structure, services and environment

Trend data and nonfinancial data

CAFR

City of Palm Bay, Florida Management’s Discussion and Analysis

Relationship between Comprehensive Annual Financial Report (CAFR)

And Basic Financial Statement and Required

Supplementary Information (RSI)

Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. As described below, these statements do not include the City’s fiduciary funds because resources of these funds cannot be used to finance the City’s activities. However, the financial statements of fiduciary funds are included in the City’s fund financial statements, because the City is financially accountable for those resources, even though they belong to other parties. The government-wide financial statements consist of the following two statements: The statement of net position presents information on all of the City’s assets and deferred outflow/inflows of resources held and liabilities owed, with the difference between the two reported as net position. Assets are reported when the City acquires ownership over the assets and liabilities reported when they are incurred, regardless of the timing of the related cash flows. For example, the City reports buildings and infrastructure assets, even though they are not available to pay the obligations incurred by the City. On the other hand, the City reports liabilities even though these liabilities might not be paid until several years into the future. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Although the purpose of the City is not to accumulate net position, in general, as this amount increases it indicates that the financial position of the City is improving over time. The statement of activities presents the revenue and expenses of the City. The items presented on the statement of activities are measured in a manner similar to the approach used in the private-sector in that revenues are recognized when earned and expenses are reported when incurred, regardless of the timing of related cash flows. Accordingly, revenues are reported even when they may not be collected for several months after the end of the accounting period and expenses are recorded even though they may not have used cash during the current period.

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City of Palm Bay, Florida Management’s Discussion and Analysis Both of these financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, physical environment, transportation, economic environment, and culture/recreation. The business-type activities of the City include water, sewer, stormwater utilities; sanitation and building inspections. The government-wide financial statements can be found immediately following the MD&A. Fund financial statements Unlike government-wide financial statements, the focus of fund financial statements is directed to specific activities of the City rather than the City as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City 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. In general, these financial statements have a short-term emphasis and, for the most part, measure and account for cash and other assets that can easily be converted to cash. Fund liabilities include amounts that are to be paid within a short period of time after the end of the fiscal year. The difference between a fund’s total assets and total liabilities is labeled as the fund balance, and generally indicates the amount that can be used to finance the next fiscal year’s activities. The operating statement for governmental funds reports only those revenues and expenditures that were collected or paid during the current period or very shortly after the end of the year. Such information may be useful in evaluating a government’s near-term financing requirements. For the most part, the balances and activities accounted for in governmental funds are also reported in the governmental activities columns of the government-wide financial statements. However, because a different accounting basis is used to prepare the fund financial statements and the government-wide financial statements, there are often significant differences between the totals presented. For this reason, there is an analysis after the balance sheet that reconciles the total fund balances to the amount of net position presented in the governmental activities column on the statement of net position. Also, there is an analysis after the statement of revenues, expenditures, and changes in fund balances that reconciles the total change in fund balances for all governmental funds to the change in net position as reported in the governmental activities column the statement of activities. The City maintains several individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, Bayfront Community Redevelopment Agency, Community Investment Program and BCRA Construction fund, which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements in the other supplemental information section of this report. The City adopts an annual appropriated budget for its general, all special revenue (except for the Miscellaneous Donations Fund), all capital projects, and all debt service funds. Budgetary comparison schedules have been provided for these funds to demonstrate budgetary compliance.

5

City of Palm Bay, Florida Management’s Discussion and Analysis The basic governmental fund financial statements may be found immediately following the government-wide financial statements. Proprietary funds The City maintains two different types of proprietary funds. The City uses Enterprise Funds to account for business-type activities that charge fees to customers for the use of specific goods or services. These funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the fiscal activities relating to water, sewer, stormwater utilities, sanitation and the activities of the Building Division. The internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses the internal service funds to account for its risk management, employee benefit programs and fleet services activities. Because these activities predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Utilities Fund, which is considered to be a major fund of the City; nonmajor funds which are comprised of Building Inspection, Sanitation and Storrmwater Fund in addition to the aggregate of the Internal Service Funds. The City’s proprietary fund financial statements are presented on pages 32-37 Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is similar to proprietary funds. The City only has one fiduciary fund, the Pension Trust Fund. The City’s fiduciary fund financial statements are presented on pages 38-39. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 41-82 of this report. Other information In addition to the basic financial statements and accompanying notes, required supplementary information is included which presents budgetary comparison schedules for the City’s General Fund and the major special revenue fund. The City adopts an annual appropriated budget for its governmental funds. This section includes a comparison between the City’s adopted and final budget and actual financial results to demonstrate compliance with the budget. In addition, information concerning the City’s progress in funding its obligation to provide pension benefits to its employees as well as other post employment benefits is presented. Required supplementary information can be found following the notes to the financial statements. The combining statements referred to earlier in connection with non-major governmental funds are presented in the other supplemental information section of this report. Combining and individual fund schedules can be found after the required supplementary information.

6

City of Palm Bay, Florida Management’s Discussion and Analysis Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflow of resources exceeded liabilities and by $157.1 million at the close of the fiscal year ended September 30, 2013. At the end of the fiscal year, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as governmental and business-type activities. As shown in the table below, the largest portion of the City’s net position (82%) reflects its investment in capital assets (e.g., land, buildings, equipment, and infrastructure) less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets, except for some properties held for resale, are not available for future spending. Although the City’s investment in its 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. The City has restricted net position of ($22.2 million) for capital improvement projects and special revenues. These resources are subject to external restrictions on how the funds may be used. The remaining balance of unrestricted net position ($5.7 million) may be used to meet the government’s ongoing obligations to citizens and creditors. There was a net increase of $1.2 million in net position in connection with the City’s governmental activities. A detailed explanation is provided on page 8 of this report. There was a net increase of $1.7 million in net position reported in connection with the City’s business-type activities, which include the Utilities Fund, Sanitation Fund, Stormwater Utility Fund and the Building Inspections Fund. A detailed explanation is provided on page 11 of this report.

Net Position

2013 2012 2013 2012 2013 2012

Current and Other Assets 65,173,147$ 71,429,066$ 50,460,942$ 48,719,833$ 115,634,089$ 120,148,899$ Capital Assets (Net) 99,542,337 95,827,120 119,112,418 120,458,157 218,654,755 216,285,277 Deferred Outflow of Resources 12,853,550 20,234,011 - - 12,853,550 20,234,011

Total Assets and Deferrals Outflow of Resources 177,569,034 187,490,197 169,573,360 169,177,990 347,142,394 356,668,187

Current and Other Liabilities 7,324,376 7,554,652 7,380,663 6,144,322 14,705,039 13,698,974 Long-Term Liabilities 98,869,675 109,790,581 76,479,879 79,034,923 175,349,554 188,825,504

Total Liabilities 106,194,051 117,345,233 83,860,542 85,179,245 190,054,593 202,524,478

Net Investment in Capital Assets 66,933,138 62,197,018 62,299,381 60,343,032 129,232,519 122,540,050 Restricted 7,587,515 7,900,735 14,614,847 14,318,054 22,202,362 22,218,789 Unrestricted (Deficit) (3,145,670) 47,211 8,798,590 9,337,659 5,652,920 9,384,870

Total Net Position 71,374,983$ 70,144,964$ 85,712,818$ 83,998,745$ 157,087,801$ 154,143,709$

Governmental Activities Business-type Activities Total Activities

7

City of Palm Bay, Florida Management’s Discussion and Analysis There was an overall increase in the City’s net position of $2.9 million. This includes an increase in net position of $934,175 for a prior period adjustment due to a classification error; in addition to significant increases in grant reimbursements. A comparative analysis of government-wide changes in net position is as follows:

2013 2012 2013 2012 2013 2012

Revenues:

Program Revenues

Charges for Services 5,781,784$ 10,764,993$ 33,812,755$ 26,861,196$ 39,594,539$ 37,626,189$

Operating Grants and Contributions 1,938,613 3,139,324 - 54,425 1,938,613 3,193,749

Capital Grants and Contributions 10,132,184 610,535 259,698 921,157 10,391,882 1,531,692

General Revenues - -

Property Taxes 22,247,692 22,759,737 - - 22,247,692 22,759,737

Other Taxes 18,861,011 18,353,486 - - 18,861,011 18,353,486

Other 9,463,091 8,210,612 434,058 491,183 9,897,149 8,701,795

Total Revenues 68,424,375 63,838,687 34,506,511 28,327,961 102,930,886 92,166,648

Expenses:

General Government 15,899,479 7,838,165 - - 15,899,479 7,838,165

Public Safety 33,939,602 33,687,869 - - 33,939,602 33,687,869

Physical Environment 769,669 872,935 - - 769,669 872,935

Transportation 9,036,843 12,984,446 - - 9,036,843 12,984,446

Economic Environment 2,337,960 1,576,831 - - 2,337,960 1,576,831

Culture/Recreation 3,899,965 3,890,650 - - 3,899,965 3,890,650

Interest on Long-Term Debt 3,149,007 3,441,661 - - 3,149,007 3,441,661

Water and Wastewater - - 22,726,306 23,238,071 22,726,306 23,238,071

Building Inspections - - 703,220 712,026 703,220 712,026

Stormwater - - 3,408,174 3,164,194 3,408,174 3,164,194

Sanitation - - 5,050,744 - 5,050,744 -

Total expenses 69,032,525 64,292,557 31,888,444 27,114,291 100,920,969 91,406,848

Change in Net Assets before transfers (608,150) (453,870) 2,618,067 1,213,670 2,009,917 759,800

Transfers in (out) 903,994 1,326,699 (903,994) (1,326,699) - -

Change in Net Position 295,844 872,829 1,714,073 (113,029) 2,009,917 759,800

Beginning Net Position 70,144,964 69,272,135 83,998,745 84,111,774 154,143,709 153,383,909

Prior Period Adjustment 934,175 - - - 934,175 -

Ending Net Position 71,374,983$ 70,144,964$ 85,712,818$ 83,998,745$ 157,087,801$ 154,143,709$


Governmental Activities As mentioned previously, governmental activities increased the City’s net position by $1.2 million and governmental fund revenues showed an increase of $4.59 million or 7.2%, key elements of this change are as follows:

• Charges for Services income reported in the governmental activities decreased by $4.98 million from

the prior year. This change is in part due to converting the sanitation fund into an enterprise fund.

• Revenues from capital grants and contributions increased by $9.5 million due to reimbursement for prior year expenses from various agencies.

• Governmental expenses increased by $4.7 million or 7.4% as compared with the prior year. A significant reason for this change is a decrease in the fire and police net pension assets of $7.5 million.

8

City of Palm Bay, Florida Management’s Discussion and Analysis The following tables show the components of program and general revenues as a percentage of total governmental activities:

Expenses and Program Revenues – Governmental Activities

Functions/Programs Expenses % of Total

Program Revenues

% of Total

Net (Expense) Revenue

General Government 15,899,479$ 23.0% 2,970,519$ 16.6% (12,928,960)$ Public Safety 33,939,602 49.2% 5,162,870 28.9% (28,776,732) Physical Environment 769,669 1.1% 223,441 1.3% (546,228) Transportation 9,036,843 13.1% 6,070,795 34.0% (2,966,048) Economic Environment 2,337,960 3.4% 1,789,262 10.0% (548,698) Culture/Recreation 3,899,965 5.6% 1,635,694 9.2% (2,264,271) Interest on Long-Term Debt 3,149,007 4.6% - 0.0% (3,149,007)

69,032,525$ 100% 17,852,581$ 100% (51,179,944)$

The following chart compares expenses and program revenues for the governmental activities:

Expenses and Program Revenue – Governmental Activities

$-

$5

$10

$15

$20

$25

$30

$35

$40

Millions

Expenses

Program Revenues

9

City of Palm Bay, Florida Management’s Discussion and Analysis The following table and chart shows revenues by source of governmental activities by percent of total revenues.

Revenue by Source – Governmental Activities

Program RevenuesCharges for Services 5,781,784$ 8.3%Operating Grants and Contributions 1,938,613 2.8%Capital Grants and Contributions 10,132,184 14.6%

General RevenuesProperty Tax 22,247,692 32.1%Franchise Fees 4,958,135 7.2%Utility Service 7,304,617 10.5%Communication Service 3,313,753 4.8%Gas Tax 3,284,506 4.7%State Revenue Sharing 8,282,875 11.9%Interest Revenue 33,628 0.0%Miscellaneous 1,146,588 1.7%

Transfers 903,994 1.3%69,328,369$ 100.0%

Revenue by Source – Governmental Activities

Charges for Services

Operating Grants and

Contributions

Capital Grants and

Contributions Taxes

Communication Service

Gas TaxState Revenue Sharing

Interest Revenue

Miscellaneous

Transfers

10

City of Palm Bay, Florida Management’s Discussion and Analysis Business-type activities As mentioned above, business-type activities increased the City’s total net position by $1.7 million. Key elements of the increase in business-type activities are as follows:

• Conversion of sanitation services from a special revenue to an enterprise fund.

• Upward swing in charges for services revenues related to the Building Inspection Fund. The following tables show the components of program and general revenues as percentage of total for business-type activities:

Expenses and Program Revenues – Business-type Activities

Functions/Programs Expenses % of Total

Program Revenues

% of Total

Net (Expense) Revenue

Water & Sewer Utilities 22,726,306$ 71.3% 23,920,880$ 70.2% 1,194,574$ Building Inspections & Permitting 703,220 2.2% 1,143,275 3.4% 440,055 Stormwater Utility 3,408,174 10.7% 3,885,208 11.4% 477,034 Sanitation 5,050,744 15.8% 5,123,090 15.0% 72,346

31,888,444$ 100% 34,072,453$ 100% 2,184,009$

Expenses and Program Revenues – Business-type Activities

$-

$5

$10

$15

$20

$25

$30

Water & SewerUtilities

BuildingInspections &

Permitting

StormwaterUtility

Sanitation

Millions

Expenses

Program Revenues

11

City of Palm Bay, Florida Management’s Discussion and Analysis

Revenues by Source – Business-type Activities

Charges for Services 33,812,755$ 100.6% Capital Grants and Contribution 259,698 0.8% Interest Revenue 399,973 1.2% Miscellaneous 34,085 0.1%Transfers (903,994) -2.7%

33,602,517$ 100.0%

Revenues by Source – Business-type Activities

Charges for Services

Capital Grants and

ContributionsInterest

Revenue

Miscellaneous

Transfers

12

City of Palm Bay, Florida Management’s Discussion and Analysis Financial Analysis of the City’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unrestricted 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 the end of fiscal year 2013, the City’s governmental funds reported combined ending fund balances of $20.8 million, an increase of $1.1 million in comparison with the prior year. A key element of this change is attributable to increased capital grants and contributions in program revenue. Non-Spendable fund balance is $1.6 million and is comprised of prepaid items and inventory. Restricted fund balance is $10.7 million and represents 51% of the total fund balance. There is an absence of Committed fund balance in this fiscal year. Assigned fund balance is $525,456. Unassigned fund balance, which is the residual, had a balance of approximately $8.0 million. The General Fund is the chief operating fund of the City. At the end of fiscal year 2013, unassigned fund balance of the General Fund was $9.83 million, while total fund balance reached $12.01 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unrestricted fund balance and total fund balance to total fund expenditures and transfers out. The City’s General Fund, fund balance increased by $3.41 million during the current fiscal year, inclusive of a prior period correction to fund balance. Further details and General Fund budgetary highlights can be found pages 13 - 14 of this report.

General Fund Balance and Expenditures

0

10

20

30

40

50

60

70

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mill

ions

Fund Balance Expenditures

13

City of Palm Bay, Florida Management’s Discussion and Analysis The Bayfront Community Redevelopment Agency Fund (BCRA) is used to account for the ad valorem tax increment revenues accumulated for the community development in areas where taxes were assessed. Capital-oriented projects of the BCRA are accounted for in the BCRA Construction Fund. At the end of fiscal year 2013, restricted fund balance of the BCRA Fund was $1.7 million, which is an increase of $237,219. This is primarily due to grant revenues from the US-1 Beautification project. Enterprise funds The City’s enterprise funds provide the same type of information found in the government-wide financial statements, but in more detail. The City has four enterprise funds, of which the Utilities Fund is a major fund and the Building Inspections, Sanitation and Stormwater Utility Funds are non-major funds. Unrestricted net position of the enterprise funds at the end of the year were $8.8 million. The total net position of the Utilities Fund increased by $1.7 million in fiscal year 2013. The overall net position for nonmajor enterprise fund increased by $1.2 million. The Building Inspection Fund showed signs of rejuvenation in permitting and licenses experiencing an increase in net position of $451,411. The Stormwater’s increase in net position of $443,747 is a result of increased customer base charges. The Sanitation Fund’s first year operation as an enterprise fund generated $363,094 in net position. Other factors concerning the finances of these funds have been addressed in the discussion of the City’s business-type activities.

General Fund Budgetary Highlights The FY 2013 budget continued essential existing and critical City services while making necessary reduction to meet the fiscal requirements of the state mandated property tax reform and the current economic challenges. General Fund original budgeted revenue of $55,060,987 is $1.2 million or 2.2% lower than the prior year. The total actual revenues exceeded the final budget by $1.9 million. Taxes were more than budget by $1.0 million and were the chief contributors to this outcome. General Fund original budgeted expenditures total $54,847,343, representing a decrease of $753,904 or 2% from FY 2012. Actual expenditures were $2.7 million less than final budget. Public safety expenditures were less than budget by $2.0 million and are among the major contributing factors for this decrease. All expenditure functions and departments reported positive budget variances. Other significant changes in programs funded in this year’s budget include:

• Allocation of $1.0 million for road maintenance projects.

• Capital lease purchase of $506,890.

• Return of prior year allocated funds for employee benefits totaling $1.8 million

14

City of Palm Bay, Florida Management’s Discussion and Analysis The budget is based upon an estimated unreserved fund balance as of September 30, 2012 of $8,290,861. The minimum fund balance for FY13, as established by administrative code, is $4,941,647 and represents 10% of projected operating costs. The approved budget FY13 exceeds the minimum requirement by $3.3 million. A primary reason for the increase in Fund Balance was due to the prudent fiscal management by departments and employees to help stabilize the City’s financial condition. The City generated positive/(negative) variances in the General Fund. There was a cumulative positive variance of approximately $4.6 million between the final adopted budget and actual results of operations. This positive variance was primarily a result of reduced personal services and operation expenditures.

2013 General Fund Budgetary Comparison

-

10

20

30

40

50

60

70

Original Budget Amended Budget Actual Balance

Millions

Revenues

Expenditures

Fund Balance

The FY 13 adopted millage rate of 8.6326 mills is a decrease from the 9.0000 mills adopted for FY 12.

15

City of Palm Bay, Florida Management’s Discussion and Analysis Capital Asset and Debt Administration Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of September 30, 2013 amounts to $218.7 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements other than buildings, machinery and equipment, vehicles, infrastructure, and construction in progress. A summary of government-wide capital assets is presented below:

2013 2012 2013 2012 2013 2012

Land 16,242,800$ 17,108,018$ 4,923,881$ 4,923,881$ 21,166,681$ 22,031,899$

Construction in Progress 13,938,358 4,218,897 5,415,138 7,140,322 19,353,496 11,359,219

Buildings and Improvements 24,191,065 24,191,065 2,863,766 2,863,766 27,054,831 27,054,831

Water and Sewer System - - 154,287,583 151,437,022 154,287,583 151,437,022

Machinery and Equipment 21,275,869 24,307,302 6,488,487 3,886,577 27,764,356 28,193,879

Infrastructure 93,046,391 91,146,225 - - 93,046,391 91,146,225

168,694,483 160,971,507 173,978,855 170,251,568 342,673,338 331,223,075

Less: Accumulated Depreciation (69,152,146) (65,144,387) (54,866,437) (49,793,411) (124,018,583) (114,937,798)

Capital Assets, net 99,542,337$ 95,827,120$ 119,112,418$ 120,458,157$ 218,654,755$ 216,285,277$


Major capital asset purchases and projects during the current fiscal year include the following:

• Completed sidewalk construction and drainage projects of $2.9 million. • Road improvement projects still in progress at the end of the year of $11.2 million. • Water and sewer improvement projects were completed at year end totaled $2.9 million.

Additional information on the City’s capital assets can be found in Note 7 of this report.

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City of Palm Bay, Florida Management’s Discussion and Analysis Long-term debt At the end of fiscal year 2013, the City had total long-term liabilities of $165.0 million. Of this amount $129.4 million is secured solely by specified revenue sources (i.e., revenue bonds). In addition, the City’s Risk Insurance Funds had an estimated $2.6 million in claims payable. Outstanding Long-Term Debt and Claims Payable

2013 2012 2013 2012 2013 2012

Revenue Bonds 69,713,214$ 73,685,987$ 59,700,809$ 64,315,308$ 129,414,023$ 138,001,295$

Notes Payable 6,438,000 4,465,000 3,175,000 3,380,000 9,613,000 7,845,000

Capital Leases 606,146 2,436,370 1,882,678 - 2,488,824 2,436,370

OPEB Obligation 1,527,930 1,410,002 440,490 379,739 1,968,420 1,789,741

Compensated Absences 5,171,835 5,413,211 958,346 985,984 6,130,181 6,399,195

Interest Rate Swap-Fair Value 12,853,550 20,234,011 - - 12,853,550 20,234,011

Claims Payable 2,559,000 2,146,000 - - 2,559,000 2,146,000

98,869,675$ 109,790,581$ 66,157,323$ 69,061,031$ 165,026,998$ 178,851,612$


During fiscal year 2013, the City entered into lease/purchase agreements for the acquisition of Bunker Gear Equipment and Fire Breathing Apparatus in the amount of $506,890. Claims Payable increased by $413,000 in fiscal year 2013 due to a rise in prior years Workers’ Compensation losses.

The increase in notes payable was incurred to refund the 2001 Public Service Tax Refunding Revenue Bond; 2001 Series for a more favorable rate and a shorter term. Additional information on the City’s debt can be found in Note 8 of this report.

17

City of Palm Bay, Florida Management’s Discussion and Analysis Economic Factors and Next Year’s Budgets and Rates • The unemployment rate for the City at September 30, 2013 was 7.4%, a decrease of 2% from the prior

year. The national average unemployment rate for 2013 was 7.2% • Population increased less than 1% from the prior year. • The taxable value of real property for the City increased by 4.8% in the 2013 fiscal year. • Building activity resulted in $16.1 million of new construction during the year, which is an decrease of

$5.1 million, or 24.1%, from the previous year. A graphical presentation of the change in taxable value from new construction for the past ten years is presented below:

• In November 2013, the City authorized a refunding of $50,855,000 for the outstanding Taxable Special

Obligation Bond (Pension Funding Project) Series 2008 and Swap agreement resulting in a present value savings of (6,871,347). The primary purpose of the refunding was to eliminate the variable rate and swap risk associated with the Series 2008 Pension Bonds structure.

Taxable Value from New Construction

$0

$100

$200

$300

$400

$500

$600

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

(Mill

ions

)

During the current fiscal year, unrestricted fund balance in the General Fund increased to $10.36 million. The ad valorem tax rate for the General Fund was increased to 8.6326 mills for the 2013 fiscal year budget. Requests for Information This financial report is designed to present users with a general overview of the City’s finances and to demonstrate the City’s accountability. If you have questions concerning any of the information provided in this report or need additional financial information, contact the City’s Finance Department, 120 Malabar Road, S.E., Palm Bay, Florida 32907-3009. The Comprehensive Annual Financial Report for fiscal year 2012/2013 can also be found on the City’s website at www.palmbayflorida.org.

18


19

City of Palm Bay, Florida Financial Section STATEMENT OF NET POSITION September 30, 2013

Governmental Activities

Business-type Activities Total

ASSETS

Cash and Cash Equivalents 14,118,065$ 6,060,467$ 20,178,532$ Investments 5,017,002 3,214,382 8,231,384

Cash and Cash Equivalents - 7,694,978 7,694,978 Investments - 12,966,992 12,966,992

Accounts Receivable (Net) 2,837,353 11,344,847 14,182,200 Internal Balances (4,009,000) 4,009,000 - Due from Other Governments 7,386,739 - 7,386,739 Inventories 247,189 390,827 638,016 Prepaid Items 2,248,432 1,136 2,249,568 Other Assets 13,940 18,485 32,425 Noncurrent Receivables (Net) - 3,855,460 3,855,460 Deferred Charges 1,583,928 904,368 2,488,296 Net Pension Asset 35,729,499 - 35,729,499

Land 16,242,800 4,923,881 21,166,681 Construction in Progress 13,938,358 5,415,138 19,353,496

Building and Improvements 11,659,689 1,831,177 13,490,866 Water and Sewer Systems - 104,238,495 104,238,495 Machinery, Equipment and Vehicles 1,497,152 2,703,727 4,200,879 Infrastructure 56,204,338 - 56,204,338

Total Assets 164,715,484 169,573,360 334,288,844

DEFFERRED OUTFLOW OF RESOURCES

Accumulated decrease in fair value hedging derivatives 12,853,550 - 12,853,550

Total Deferred Outflows of Resources 12,853,550 - 12,853,550

Continued on the next page

Capital Assets, Net of Accumulated Depreciation:

Primary Government

Restricted Assets:

Capital Assets Not Being Depreciated:

20

City of Palm Bay, Florida Financial Section


Business-type Activities Total

LIABILITIESAccounts Payable 4,061,108$ 1,482,969$ 5,544,077$ Accrued Liabilities 984,944 230,768 1,215,712 Due to Other Governments 20,137 - 20,137 Unearned Revenue 1,450,556 3,564,653 5,015,209 Liabilities Payable from Restricted Assets:

Accrued Interest Payable 807,631 - 807,631 Customer Deposits - 2,102,273 2,102,273

Long-Term Liabilities:Due Within One Year:

Bonds Payable 1,206,378 5,138,347 6,344,725 Notes Payable 1,054,000 205,000 1,259,000 Capital Leases Payable 223,270 241,855 465,125 Claims Payable 409,440 - 409,440 Compensated Absences 827,494 153,336 980,830

Due in More Than One Year:

Bonds Payable 68,506,836 54,562,462 123,069,298 Notes Payable 5,384,000 2,970,000 8,354,000 Capital Leases Payable 382,876 1,640,823 2,023,699 Accreted Interest Payable - 10,322,557 10,322,557 Claims Payable 2,149,560 - 2,149,560 Net OPEB Obligation 1,527,930 440,490 1,968,420 Interest Rate Swap Fair Value 12,853,550 - 12,853,550 Compensated Absences 4,344,341 805,009 5,149,350

Total Liabilities 106,194,051 83,860,542 190,054,593

NET POSITIONNet Investment in Capital Assets 66,933,138$ 62,299,381$ 129,232,519$ Restricted for:

Transportation 2,794,624 - 2,794,624 Economic Development 1,674,250 - 1,674,250 Debt Service 2,870,367 - 2,870,367 Building Fund - 1,105,845 1,105,845 Water and Sewer Utilities System - 13,509,002 13,509,002 Public Safety 248,274 - 248,274

Unrestricted (Deficit) (3,145,670) 8,798,590 5,652,920

Total Net Position 71,374,983$ 85,712,818$ 157,087,801$

The notes to the financial statements are an integral part of the financial statements.

Primary Government

21


STATEMENT OF ACTIVITIES For Fiscal Year Ended September 30, 2013

Operating Capital

Charges for Grants and Grants and

Functions/Programs: Expenses Services Contributions Contributions

Governmental Activities:General Government 15,899,479$ 2,927,501$ 43,018$ -$ Public Safety 33,939,602 1,269,430 210,202 3,683,238 Physical Environment 769,669 223,441 - - Transportation 9,036,843 952,387 - 5,118,408 Economic Environment 2,337,960 72,764 1,638,973 77,525 Culture/Recreation 3,899,965 336,261 46,420 1,253,013 Interest on Long-Term Debt 3,149,007 - - -

Total Governmental Activities 69,032,525 5,781,784 1,938,613 10,132,184

Business-type Activities:Water and Sewer Utilities 22,726,306 23,661,182 - 259,698 Building Inspections & Permiting 703,220 1,143,275 - - Stormwater Utility 3,408,174 3,885,208 - - Sanitation 5,050,744 5,123,090 -

Total Business-type Activities 31,888,444 33,812,755 - 259,698

Total 100,920,969$ 39,594,539$ 1,938,613$ 10,391,882$

General Revenues:Taxes:

Property TaxFranchise FeesUtility Service TaxCommunication Service TaxGas Tax

State Revenue Sharing (unrestricted)Interest RevenueMiscellaneous

Transfers

Total General Revenues/Transfers

Change in Net PositionNet Position - Beginning as previously statedPrior period adjustment (Note 13)Net Position - Ending


Program Revenues

22


Governmental Business-type

Activities Activities Total

(12,928,960)$ -$ (12,928,960)$ (28,776,732) - (28,776,732)

(546,228) - (546,228) (2,966,048) - (2,966,048)

(548,698) - (548,698) (2,264,271) - (2,264,271) (3,149,007) - (3,149,007)

(51,179,944) - (51,179,944)

- 1,194,574 1,194,574 - 440,055 440,055 - 477,034 477,034

72,346 72,346 - 2,184,009 2,184,009

(51,179,944) 2,184,009 (48,995,935)

22,247,692 - 22,247,692 4,958,135 - 4,958,135 7,304,617 - 7,304,617 3,313,753 - 3,313,753 3,284,506 - 3,284,506 8,282,875 - 8,282,875

33,628 399,973 433,601 1,146,588 34,085 1,180,673

903,994 (903,994) -

51,475,788 (469,936) 51,005,852

295,844 1,714,073 2,009,917 70,144,964 83,998,745 154,143,709

934,175 - 934,175 71,374,983$ 85,712,818$ 157,087,801$

Primary GovernmentNet (Expense) Revenue and Changes in Net Position

23


BALANCE SHEET - GOVERNMENTAL FUNDS September 30, 2013

General

Bayfront Community Redevelopment

Agency ASSETS

Cash and Cash Equivalents 3,152,659$ 1,462,532$ Investments 2,165,154 80,405 Accounts Receivable 2,659,603 127 Due from Other Governments 2,202,198 136,422 Due from Other Funds 2,230,682 - Prepaid Items 1,640,889 132 Inventory 6,296 - Other Assets 11,940 2,000

Total Assets 14,069,421$ 1,681,618$

LIABILITIES AND FUND BALANCESLiabilities:

Accounts Payable 731,249$ 3,207$ Accrued Liabilities 870,351 4,161 Due to Other Funds - - Advances to Other Funds - - Due to Other Governments - - Unearned Revenues 462,019 -

Total Liabilities 2,063,619 7,368

Fund Balances:Nonspendable 1,647,185 - Restricted - 1,674,250 Assigned 525,456 - Unassigned (Deficit) 9,833,161 -

Total Fund Balances (Deficit) 12,005,802 1,674,250 Total Liabilities and Fund Balances 14,069,421$ 1,681,618$



24


BCRA Construction Fund

Community Investment Fund

Nonmajor Governmental Funds

Total Governmental Funds

843,075$ -$ 6,562,919$ 12,021,185$ 1,011,792 - 1,759,651 5,017,002

3,743 - 70,097 2,733,570 - 4,599,094 449,025 7,386,739 - - - 2,230,682 - - - 1,641,021 - - 594 6,890 - - - 13,940

1,858,610$ 4,599,094$ 8,842,286$ 31,051,029$

786$ 2,160,889$ 308,018 3,204,149$ - - 6,452 880,964 - 1,941,449 289,233 2,230,682 - 1,800,000 644,000 2,444,000 - - 20,137 20,137 - - 988,537 1,450,556

786 5,902,338 2,256,377 10,230,488

- - - 1,647,185 1,857,824 - 7,132,578 10,664,652

- - - 525,456 - (1,303,244) (546,669) 7,983,248

1,857,824 (1,303,244) 6,585,909 20,820,541 1,858,610$ 4,599,094$ 8,842,286$ 31,051,029$

25


26


RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION September 30, 2013

Total fund balances of governmental funds 20,820,541$

Amounts reported for governmental activities in the statement of netassets are different because:

Capital assets used in governmental activities are not financialresources and, therefore, are not reported in the funds. The costof the assets is $160,333,382 and the accumulated depreciation is $62,119,622. Internal service funds capital assets of $8,361,101 and accumulated depreciation of $7,032,524 are included in the internal service funds balances below. 98,213,760

Net pension assets are not considered to represent a financial asset and, therefore, is not reported in the governmental fund. 35,729,499

Costs of issuance of long-term debt are reported as deferred charges andamortized over the life of the debt in the government-wide statements. Inthe governmental fund financial statements, the expenditure is recordedat issuance. 1,583,928

The internal service fund is used by management to charge the costs ofemployee benefits and risk management services to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. (938,178)

Long-term liabilities are not due and payable in the current period and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. All liabilities, both current and long-term,are reported in the Statement of Net Assets. The amount for internal service funds above includes compensated absences of $113,054($18,089 current, $96,965 long-term) and $27,658 of long-term capital lease payable. Long-term liabilities at year-end consist of:

Bonds payable 69,713,214$ Notes payable 6,438,000 Accrued interest payable 807,631 Capital lease payable 551,848 Net OPEB obligation 1,489,328

Compensated absences 5,034,546 (84,034,567)

Total net position of governmental activities 71,374,983$


27


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For Fiscal Year Ended September 30, 2013

General Bayfront Community

Redevelopment Agency REVENUESTaxes 36,110,973$ 568,610$ Impact Fees - - Licenses and Permits 4,970,086 - Intergovernmental Revenues 8,619,124 528,000 Charges for Services 2,944,615 - Fines and Forfeitures 688,943 - Investment Income 13,977 1,997 Miscellaneous Revenues 683,766 22,064

Total Revenues 54,031,484 1,120,671

EXPENDITURESCurrent:

General Government 7,429,473 - Public Safety 32,979,779 - Physical Environment - - Transportation 4,798,191 - Economic Environment - 344,740 Culture/Recreation 3,469,299 -

Debt Service:Principal Retirement - 295,000 Interest and Fiscal Charges - 179,493

Capital Outlay - 64,219 Total Expenditures 48,676,742 883,452 Excess (Deficiency) of Revenues Over

Expenditures 5,354,742 237,219

OTHER FINANCING SOURCES (USES)Transfers In 3,049,163 - Transfers (Out) (6,439,778) - Capital Leases 506,890 - Proceeds of refunding debt - -

- - Total Other Financing

Sources and (Uses) (2,883,725) -

Net Change in Fund Balances 2,471,017 237,219

Fund Balances (Deficit) - Beginning (Unadjusted) 8,600,610 1,437,031 Prior Period Adjustment 934,175 - Fund Balances (Deficit)- Beginning (Restated) 9,534,785 1,437,031

Fund Balances (Deficit) - Ending 12,005,802$ 1,674,250$


Payment to Refunded Bond Escrow Agent

28


BCRA Construction Fund

Community Investment Fund

Nonmajor Governmental Funds

Total Governmental

Funds

-$ -$ -$ 36,679,583$ - - 720,155 720,155 - - - 4,970,086 - 9,604,184 1,730,473 20,481,781 - - 1,031,057 3,975,672 - - 102,928 791,871

4,867 5 11,642 32,488 - 13 508,142 1,213,985

4,867 9,604,202 4,104,397 68,865,621

- 324,028 7,753,501 - 423,083 33,402,862 - 990 - 990 - 150,784 333,412 5,282,387 - - 751,963 1,096,703 - - 41,681 3,510,980

- - 1,922,335 2,217,335 - - 3,039,666 3,219,159

1,243,961 10,594,442 2,218,306 14,120,928 1,243,961 10,746,216 9,054,474 70,604,845

(1,239,094) (1,142,014) (4,950,077) (1,739,224)

- 1,061,193 5,142,863 9,253,219 (4,950) - (1,470,747) (7,915,475)

- - - 506,890 - - 2,268,000 2,268,000 - - (2,215,000) (2,215,000)

(4,950) 1,061,193 3,725,116 1,897,634

(1,244,044) (80,821) (1,224,961) 158,410

3,101,868 (1,222,423) 7,810,870 19,727,956 - - 934,175

3,101,868 (1,222,423) 7,810,870 20,662,131

1,857,824$ (1,303,244)$ 6,585,909$ 20,820,541$

29


30


RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2013 Amounts reported for governmental activities in the statement of activities are

different because:

Net change in fund balances - total governmental funds 158,410$

Governmental funds report capital purchases as expenditures. However, in thestatement of activities, the cost of those assets are depreciated over theirestimated useful lives and reported as depreciation expense. This is the amount by which capital purchases ($14,721,277) exceeds depreciation expense ($5,864,211) in the current period. 8,857,066

Governmental funds report only the proceeds from the sale of capitalassets. However, in the Statement of Activities, the amount of theproceeds (if any) are shown net of the remaining book balance ofthe assets disposed. This is the amount of the gain or (loss) realized on the current year dispositions.

Current Year Net Loss on Disposal (18,302) Neighborhood Stabilization Program (NSP) properties (2,264,104)

The change in the net pension assets has no effect on the current financial resource and, therefore, is not reported in the governmental funds. (7,548,708)

Capital assets contributed to the City in the current year and recongnized as revenuein the statement of activities. 39,068

The repayment of principal is an expenditure in the governmental funds, but reducesliabilities in the statement of net position. In addition, the issuance of bonds and similarlong-term debt provides current financial resources to governmental funds andtherefore contribute to an increase in fund balance. In the statement of net position,however, issuing debt increases and payment of debt decreases long-term liabilitiesand does not affect the statement of activities. The amounts of the items thatmake up these differences in the treatment of long-term debt and related items are:

Principal repayments:Revenue Bonds 3,972,773 Capital Leases 195,146 Notes Payable 295,000

Debt issued or incurred:Proceeds from notes payable (2,268,000) Capital Leases (506,890)

Deferred charges (93,742) Accrued interest payable on long-term debt 95,915

Transfers of long-term debt from governmental activities to business-type activities 2,116,308 increases net assets of governmental activities, but are not reported in the governmentalfunds.

Transfers of capital assets from governmental activities to business-type activitiesdecreases net assets of governmental activities, but are not reported in the governmentfund. (2,048,000)

Under the modified accrual basis of accounting used in governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the statement of activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available.

Compensated Absences 183,759 Net OPEB Obligation (114,354)

The internal service fund is used by management to charge the costs of risk managementservices to other funds. The decrease in net position of the internal service fund isreported with governmental activities. (755,501)

Change in net position of governmental activities 295,844$


31

City of Palm Bay, Florida Financial Section STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2013

Governmental

Utilities Fund (Major Fund)

Enterprise (Nonmajor Funds)

Total Enterprise Funds

Activities - Internal Service

Funds ASSETSCurrent Assets:

Cash and Cash Equivalents 3,514,717$ 2,545,750$ 6,060,467$ 2,096,880$ Investments 3,214,382 - 3,214,382 - Restricted Cash and Cash Equivalents 1,817,222 285,051 2,102,273 - Accounts Receivable - (Net) 8,829,526 2,515,321 11,344,847 103,783 Advances to Other Funds 3,365,000 644,000 4,009,000 - Inventory 390,827 - 390,827 240,299 Prepaid Items - 1,136 1,136 607,411 Total Current Assets 21,131,674 5,991,258 27,122,932 3,048,373

Noncurrent Assets:Restricted Assets:

Cash and Cash Equivalents 5,592,705 - 5,592,705 - Investments 12,966,992 - 12,966,992 -

Total Restricted Assets 18,559,697 - 18,559,697 -

Accounts Receivable (Net) 3,855,460 - 3,855,460 - Other Assets 18,485 - 18,485 - Deferred Charges 904,368 - 904,368 -

4,778,313 - 4,778,313 - Capital Assets:

Land 4,904,079 19,802 4,923,881 - Construction in Progress 5,379,678 35,460 5,415,138 - Building and Improvements 2,863,766 - 2,863,766 - Water and Sewer Systems 154,287,583 - 154,287,583 - Machinery, Equipment and Vehicles 3,914,314 2,574,173 6,488,487 8,361,101

Less: Accumulated Depreciation (54,098,437) (768,000) (54,866,437) (7,032,524) Total Capital Assets (Net) 117,250,983 1,861,435 119,112,418 1,328,577

Total Noncurrent Assets 140,588,993 1,861,435 142,450,428 1,328,577

Total Assets 161,720,667 7,852,693 169,573,360 4,376,950


Business Type Activities - Enterprise Funds

32


STATEMENT OF NET POSITION (CONTINUED) PROPRIETARY FUNDS September 30, 2013

Governmental





Funds LIABILITIESCurrent Liabilities:

Accounts Payable 726,278$ 756,691 1,482,969$ 856,959$ Accrued Liabilities 159,373 71,395 230,768 128,215 Unearned Revenues 1,545,460 2,019,193 3,564,653 - Bonds Payable - (Net) 5,138,347 - 5,138,347 - Notes Payable 205,000 - 205,000 - Capital Leases Payable - 241,855 241,855 26,640 Compensated Absences Payable 110,054 43,282 153,336 18,089 Estimated Claims Payable - - - 409,440

Current Liabilities Payable fromRestricted Assets:

Customer Deposits 1,817,222 285,051 2,102,273 -

Total Current Liabilities 9,701,734 3,417,467 13,119,201 1,439,343

Noncurrent Liabilities:Bonds Payable - (Net) 54,562,462 - 54,562,462 - Notes Payable 2,970,000 - 2,970,000 - Capital Leases Payable - 1,640,823 1,640,823 27,658 Accreted Interest Payable 10,322,557 - 10,322,557 - Net OPEB Obligation 301,426 139,064 440,490 38,602 Compensated Absences Payable 577,781 227,228 805,009 94,965 Estimated Claims Payable - - - 2,149,560 Advances from Other Funds - - - 1,565,000 Total Noncurrent Liabilities 68,734,226 2,007,115 70,741,341 3,875,785

Total Liabilities 78,435,960 5,424,582 83,860,542 5,315,128

NET POSITIONNet investment in Capital Assets 62,078,769 220,612 62,299,381 1,274,279

Restricted:Renewal and Replacement 3,523,781 - 3,523,781 - Capital Improvements 9,985,221 - 9,985,221 - Building Fund - 1,105,845 1,105,845 -

Unrestricted 7,696,936 1,101,654 8,798,590 (2,212,457) Total Net Position (Deficit) 83,284,707$ 2,428,111$ 85,712,818$ (938,178)$



33


34


STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For Fiscal Year Ended September 30, 2013

Governmental





Funds Operating Revenues:Charges for Services:

Water 13,614,992$ -$ 13,614,992$ -$ Sewer 9,636,782 - 9,636,782 - Stormwater - 3,841,847 3,841,847 - Sanitation 5,122,688 5,122,688 User Fees - 194,992 194,992 15,608,306

Licenses and Permits - 979,866 979,866 - Miscellaneous Income 409,408 12,180 421,588 28,525 Total Operating Revenues 23,661,182 10,151,573 33,812,755 15,636,831

Operating Expenses:Personal Services 7,436,086 3,424,663 10,860,749 2,649,815 Material, Supplies, and Operating expenses 6,292,191 5,410,739 11,702,930 2,398,553 Claims/Premium Expense - - - 10,150,025 Depreciation 4,473,308 256,000 4,729,308 882,520 Amortization 22,948 1,090 24,038 -

Total Operating Expenses 18,224,533 9,092,492 27,317,025 16,080,913

5,436,649 1,059,081 6,495,730 (444,082)

Nonoperating Revenues (Expenses):Interest Income 399,973 - 399,973 1,140 Interest Expense and Fiscal Charges (4,501,773) (69,647) (4,571,420) (80,454) Intergovernmental Revenues - - - 49,260 Sale of Capital Assets 32,429 1,657 34,086 162,783 Gain (Loss) on Disposal - - - (10,398)

Total Nonoperating Revenues (4,069,371) (67,990) (4,137,361) 122,331 (Expenses)

Income Before Contributions 1,367,278 991,091 2,358,369 (321,751) and Transfers

Capital Contributions 259,698 - 259,698 - Transfers In (Out) (1,171,155) 267,161 (903,994) (433,750) Change in Net Position 455,821 1,258,252 1,714,073 (755,501)

Total Net Position (Deficit) - Beginning 82,828,886 1,169,859 83,998,745 (182,677)

Total Net Position (Deficit) - Ending 83,284,707$ 2,428,111$ 85,712,818$ (938,178)$


Operating Income (Loss)


35


STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For Fiscal Year Ended September 30, 2013

Governmental


Total Nonmajor Enterprise Funds



Funds Cash Flows from Operating ActivitiesReceipts from Customers and Users 25,501,044$ 9,940,840$ 35,441,884$ 15,608,698$ Payments to Suppliers (6,312,799) (4,730,156) (11,042,955) (12,934,264) Payments to Employees (7,423,486) (3,381,495) (10,804,981) (2,245,713)

Net Cash Provided byOperating Activities 11,764,759 1,829,189 13,593,948 428,721

Cash Flows from NoncapitalFinancing ActivitiesInterfund Advances (1,680,000) - (1,680,000) (120,000) Intergovernmental Revenues - - - 49,260 Transfers to Other Funds (6,955,658) (41,481) (6,997,139) - Transfers from Other Funds 5,784,503 308,642 6,093,145 (433,750)

Net Cash Provided (Used) by(2,851,155) 267,161 (2,583,994) (504,490)

Cash Flows from Capital and Related Financing ActivitiesAcquisition/Construction of Capital Assets (1,289,090) (2,095,569) (3,384,659) (52,385) Principal Paid on Capital Debt (5,024,933) (233,630) (5,258,563) (25,660) Interest Paid on Capital Debt (3,895,843) (69,647) (3,965,490) (80,454) Contributions 259,698 - 259,698 - Principal Paid on Notes Payable (205,000) - (205,000) - Acquisition of capital lease - 2,116,308 2,116,308 - Proceeds from Sale of Capital Assets 32,429 1,656 34,085 152,385

Net Cash (Used) by Capital and(10,122,739) (280,882) (10,403,621) (6,114)

Cash Flows from Investing ActivitiesInvestment purchases (11,076,831) - (11,076,831) - Proceeds from Sale and Maturity of Investments 11,048,656 - 11,048,656 - Interest Income on Investments 425,203 - 425,203 1,140

Net Cash Provided byInvesting Activities 397,028 - 397,028 1,140

Net Increase (Decrease) in Cash andCash Equivalents (812,107) 1,815,468 1,003,361 (80,743)

Cash and Cash Equivalents atBeginning of Year 11,736,751 1,015,333$ 12,752,084 2,177,623

Cash and Cash Equivalents atEnd of Year 10,924,644$ 2,830,801$ 13,755,445$ 2,096,880$

Cash and Cash Equivalents Classified As:Current Assets 3,514,717$ 2,545,750$ 6,060,467$ 2,096,880$ Restricted Assets 7,409,927 285,051 7,694,978 -

Total Cash and Cash Equivalents 10,924,644$ 2,830,801$ 13,755,445$ 2,096,880$


Related Financing Activities


Noncapital Financing Activities

36


STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS For Fiscal Year Ended September 30, 2013

Governmental


Enterprise (Nonmajor

Funds) Total Enterprise

Funds


Funds

Reconciliation of Operating Income (Loss) toNet Cash Provided by (Used in) OperatingActivitiesOperating Income (Loss) 5,436,649$ 1,059,082$ 6,495,731$ (444,082)$

Depreciation 4,473,308 257,090 4,730,398 882,520 Amortization 22,948 - 22,948 - Change in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable 1,869,288 (1,047,873) 821,415 (28,133) (Increase) Decrease in Inventories (64,914) - (64,914) 23,960 (Increase) Decrease in Prepaid Expenses 48,045 (1,080) 46,965 (86,908) Increase (Decrease) in Capital Assets (20,074) - (20,074) (281,552) Increase (Decrease) in Retainage Payable - 690,864 690,864 - Increase (Decrease) in Accrued Liabilities 16,335 13,454 29,789 (41,186) Increase (Decrease) in Customer Deposits (29,426) 285,051 255,625 - Increase in OPEB Obligation 30,375 - 30,375 3,573 Increase (Decrease) in Compensated Absences (17,775) (9,864) (27,639) (12,471) (Decrease) in Claims Payable - 30,376 30,376 413,000 Increase (Decrease) Unearned Revenue - 552,089 552,089 -

Total Adjustments 6,328,110 770,107 7,098,217 872,803

Net Cash Provided by OperatingActivities 11,764,759$ 1,829,189$ 13,593,948$ 428,721$

There are no noncash investing, capital, and financing activities.



37


STATEMENT OF FIDUCIARY NET POSITION PENSION TRUST FUND September 30, 2013

ASSETSCash and Cash Equivalents 5,466,365$ Investments, at fair value:

Common Stock 59,601,719$ U.S. Government securities 26,049,311 Domestic Equity Funds 6,170,531 Corpoarate Bonds 8,103,420 Bond Funds 54,663 International Equity Funds 22,451,735 Real Estate Funds 12,693,736 Convertible Securities 12,682,544 Master Limited Partnership 5,099,346 152,907,005

Receivables:Accrued Interest and Dividends 282,909 Due from Broker 1,279,342 State Contributions 137,127 Other Receivables 3,274

Other Assets 22,697

Total Assets 160,098,719

LIABILITIESAccounts Payable 203,408 Due to Broker 1,499,921 Prepaid Contibutions 1,621,801 Deferred Retirement Option Payable 9,164,822

Total Liabilities 12,489,952

Net Position - Held in Trust for Pension Benefits 147,608,767$


38

City of Palm Bay, Florida Financial Section STATEMENT OF CHANGES IN FIDUCIARY NET POSITION PENSION TRUST FUND For the Year Ended September 30, 2013

ADDITIONSContributions:

Employer:Internal 2,781,773$ State 1,195,740

Employee 1,038,855 Total Contributions 5,016,368

Investment Income:Net Appreciation in Fair Value of Investments 16,775,944 Interest and Dividends 3,373,794

Total Investment Earnings 20,149,738

Less: Investment Expenses 743,346 DROP Plan 1,053,080

Total Investment Expenses 1,796,426

Net Investment Income 18,353,312

Total Additions 23,369,680

DEDUCTIONSBenefits 7,675,094 Refunds 87,330 Administrative Expense 409,434

Total Deductions 8,171,858

Change in Net Position 15,197,822

Net Position - Beginning of Year 132,410,945

Net Position - End of Year 147,608,767$


39


40


NOTE 1 – Summary of Significant Accounting Policies The financial statements of the City of Palm Bay, Florida (the “City”) have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America as applied to government units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Significant City accounting policies are described below:

A. The Reporting Entity The City is a political subdivision incorporated on January 1, 1960 in the State of Florida and located in Brevard County. The legislative branch of the City is composed of a five (5) member elected Council, including a city-wide elected mayor. The City Council is governed by the City Charter, and by state and local laws and regulations. The City Council is responsible for the establishment and adoption of policy. The execution of such policy is the responsibility of the Council appointed city manager. Accounting principles generally accepted in the United States of America require that the reporting entity include: (1) the primary government, (2) organizations for which the primary government is financially accountable and (3) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. The criteria provided in Section 2100 of the Codification of Government Accounting and Financial Reporting Standards have been considered and the accompanying financial statements present the City and its component unit, the Bayfront Community Redevelopment Agency (“BCRA”). A blended component unit, although legally separate, is, in substance, part of the City’s operations. The City has only one blended component unit, the Bayfront Community Redevelopment Agency (the “BCRA”). For financial reporting purposes, the BCRA is reported as if it were a part of the City’s operations. The BCRA is an incremental tax district created by City ordinance pursuant to Section 163.356, Florida Statutes. The City Council appoints an advisory board to administer the activities of the BCRA. The Board approves the budget and provides funding. The City performs all accounting functions as well as facilitates operational responsibilities for the activities of the BCRA. Its services are provided exclusively to the City. The BCRA has been presented as a blended component unit classified as a special revenue fund. B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The Statement of Activities demonstrates the degree to which the direct expenses and indirect costs of a given function, or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect expenses are those costs that are allocated to functions and activities in accordance with the City’s adopted indirect cost allocation plan. The “expenses” column includes both direct and indirect expenses. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

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City of Palm Bay, Florida Financial Section NOTE 1 – Summary of Significant Accounting Policies (Continued) B. Government-wide and Fund Financial Statements (Continued)

Separate financial statements are provided for governmental funds, proprietary funds, and the fiduciary fund. The fiduciary fund is excluded from the government-wide financial statements. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. The internal service funds are included in governmental activities in the government-wide financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

Government-wide Financial Statements

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements 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 revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are user fees between the City’s enterprise funds and other governmental functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Fund Financial Statements

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, the government considers revenues to be available if they are collected within four months 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.

Taxes when levied, franchise fees, licenses, intergovernmental revenues when eligibility requirements are met, charges for services, and interest associated with the current fiscal period are all considered to be measurable and if available 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 by the City.

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City of Palm Bay, Florida Financial Section NOTE 1 – Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

The City reports the following major governmental funds:

• The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

• The Bayfront Community Redevelopment Agency Funds is used to account for ad valorem tax increment revenues accumulated for community development in the areas where the taxes were assessed.

• The BCRA Construction Fund is used to account for the proceeds provided for the capital-oriented projects of the Bayfront Community Redevelopment Agency.

• The Community Investment Fund is used to account for financial resources earmarked for the acquisition or construction of major capita facilities or other project oriented activities.

The City reports the following major enterprise fund:

• The Utilities Fund, accounts for the fiscal activities of the City’s water and wastewater treatment and distribution operations as well as the funding and payment of related debt.

Additionally, the City reports the following fund types:

• The Internal Service Funds account for certain activities of the City’s risk management, employee benefit programs and its fleet operations. Activities include premium and benefit payments, legal expenses incurred related to activities not specifically covered by City insurance policies, collections of settlements or refunds from related cases, and charges to City departments for fleet services and a vehicle replacement program.

• The Pension Trust Fund accounts for the activities of the City’s Police and Firefighters Retirement System, which accumulates resources for pension benefit payments to certain general government employees and qualified police and fire employees.

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 City’s enterprise funds and of the City’s internal service funds are charges to customers for sales and services. Operating expenses for the enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting these definitions 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 unrestricted resources first for their intended purposes, and then restricted resources, as they are needed.

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City of Palm Bay, Florida Financial Section NOTE 1 – Summary of Significant Accounting Policies (Continued) D. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand deposits, certificates of deposit, money market accounts, money market funds, savings accounts, investments in the Florida State Board of Administration Local Government Pooled Investment Fund, and investments (including restricted position) with maturities of three months or less at the time of purchase. E. Investments Investments are stated at fair value, with the exception of investments in the Florida State Board of Administration Local Government Pooled Investment Funds (“SBA”), an external 2a7-like investment pool which is presented at share price. All fair market valuations are based on quoted market prices. SBA pool shares are based on amortized cost of the SBA’s underlying portfolio. F. Receivables

Property Taxes Receivable Under Florida law, the assessment of all properties and the collection of all county, municipal and school board property taxes are consolidated in the offices of the County Property Appraiser and County Tax Collector. The laws of the State regulating tax assessments are also designed to assure a consistent property valuation method statewide. State Statutes permit municipalities to levy property taxes at a rate of up to 10 mills. The City’s millage rate, on which tax collections in fiscal year 2013 are based, is 8.6326. All real and tangible personal property taxes are due and payable on the levy date of November 1 of each year or as soon thereafter as the assessment roll is certified by the Brevard County Property Appraiser (levy date). The Brevard County Tax Collector collects and distributes all taxes. Taxes may be paid upon receipt of notice from the Tax Collector, with discounts at the rate of four percent (4%) if paid in the month of November, three percent (3%) if paid in the month of December, two percent (2%) if paid in the month of January, and one percent (1%) if paid in the month of February. Taxes paid during the month of March are without discount and all unpaid taxes on real and tangible property become delinquent on April 1 and a lien is executed on or before May 30. Property tax revenues are recognized in the fiscal year for which they are budgeted and also become due and payable. Virtually all unpaid taxes are collected via tax certificates sold on or prior to June 1; therefore, no material taxes are receivable at fiscal year end.

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NOTE 1 – Summary of Significant Accounting Policies (Continued) F. Receivables (Continued)

Accounts Receivable Utilities Fund operating revenues are generally recognized on the basis of cycle billings rendered monthly. Revenues for services delivered during the last month of the fiscal year that have not been read by September 30 are accrued based on meter readings for the applicable consumption taken at the beginning of October and billed in October. Accounts receivable balances are shown net of the allowance for uncollectible accounts. The allowances are determined based on management estimates of uncollectible amounts.

G. Inventories Inventories are valued at lower of cost or market, using the first-in /first -out (“FIFO”) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

H. Prepaids Prepaids represent payments made to vendors for services that will benefit the period beyond September 30, 2013. I. Restricted Assets The uses of certain assets of the Utilities Fund are restricted by specific provisions of bond resolutions and other agreements. Assets so designated are identified as restricted assets on the statement of net position. J. Encumbrance Encumbrance accounting is employed in the general, capital project and special revenue funds. Under this method, purchase orders contracts and other commitments outstanding at year-end do not constitute expenditures for liabilities. GASB 54, Fund Balance Reporting and Governmental Fund Type Definitions, provides additional guidance on the classification within the Net Position section of the amounts that have been encumbered. Encumbrances of balances within the General fund are classified as assigned; Special Revenue and Capital Projects funds are classified as committed and restricted. These encumbrances are not separately stated in the financial statements. K. Capital Assets Capital assets include property, plant, equipment, and infrastructure assets (e.g., roads, easements, bridges, sidewalks, and similar items), and are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and proprietary fund financial statements. Property, plant, and equipment with initial, individual costs that equal or exceed $5,000 and estimated useful lives of over one year are recorded as capital assets. Roads, bridges, and sidewalks are capitalized when their initial costs equal or exceed $250,000 and have estimated useful lives of more than one year. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

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NOTE 1 – Summary of Significant Accounting Policies (Continued) K. Capital Assets (Continued) Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. In governmental funds capital purchases (capital assets) are reported as expenditures. Capital Assets are depreciated using the straight line method over the following estimated useful lives:

Assets Years

Buildings and Improvements 25 Utilities System 25-40 Infrastructure 15-20 Equipment 5-20 Vehicles 3-10

L. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, Deferred Outflow or Resources, represents a consumption of net position that applies to future period and so will not be recognized as an expense or expenditure until then, The City has one item that meet this criterion, accumulated decrease in the fair value of hedging derivatives for the City’s interest rate swap agreement. M. Amortization of Bond Discount, Premium and Issuance Costs 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 position. Bond premiums, discounts, deferred loss on refundings, as well as issuance costs are amortized over the term of the bonds using the effective interest method. In the fund financial statements, governmental fund types recognize bond premiums and discounts as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Payment of principal is reported as expenditures. N. Compensated Absences All full-time permanent employees earn annual leave at a rate of 8 to 18 hours per month and earn sick leave at a rate of 8 to 15 hours per month, depending on length of service and position. The annual leave may be accumulated up to a maximum of 320 hours and the sick leave up to a maximum of 1,152 hours. If an employee terminates in good standing, unused annual leave will be paid up to a maximum of 320 hours. Sick leave will be paid up to a maximum of 1,152 hours. The City records compensated absences in governmental funds as expenditures for the amount accrued during the year that would normally be liquidated with expendable, available financial resources and to the extent they are due as of the end of the fiscal year. The City accrues compensated absences in the period they are earned in the government-wide and enterprise fund financial statements.

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NOTE 1 – Summary of Significant Accounting Policies (Continued) O. Unearned Revenues Unearned revenues are recorded for governmental fund receivables which are measurable but not available. In addition, in flows received but for which revenue recognition criteria have not been met are reported as unearned revenue in the government-wide, governmental, enterprise and fiduciary fund financial statements. Unearned revenues consist primarily of business service taxes collected in advance, grant funds collected in advance of incurring allowable costs and present value of potential investment earnings on future debt service deposits paid by a third party provider. P. Capital Contributions Capital Contributions consist of amounts from federal and state aid programs, developers, and water and sewer stabilization fees charged to customers for initial hookup to the Utilities System’s water and sewer lines. Contributions are recognized when earned or when legal title is transferred to the City for contributed capital assets. Q. Capitalization of Interest In accordance with generally accepted accounting principles, net interest costs on monies borrowed in order to construct capital assets are capitalized within the Business-Type Activities. There was no capitalization of interest for the fiscal year ended September 30, 2013. R. Net Position In the government-wide financial statements and in the proprietary fund statements, net position is classified in the following categories: Net Investment in Capital Assets – This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce this category. Restricted Net Position – This category represents the net position of the City, which is restricted by constraints placed on the use by external groups such as creditors, grantors, contributors, laws, regulations of other governments, through constitutional provisions or enabling legislation. Unrestricted Net Position – This category represents the net position of the City, which is not restricted for any project or other purpose. Deficit unrestricted net position if any would require future funding. S. Fund Balance The City implemented GASB Statement 54 for the fiscal year ending September 30, 2011. GASB 54 requires analysis and presentation of fund balance in five categories which are: Nonspendable – This category includes items that are not in spendable form because they are either legally or contractually required to be maintained intact such as inventory, prepaid and long-term amounts of loans and notes receivable. Restricted – Includes items that are restricted by external creditors, grantors or contributors, or restricted by legal constitutional provisions. Committed – The portion of fund balance that can be constrained for a specific purpose imposed via resolution by the Palm Bay City Council (the highest level of decision-making authority). Commitment of fund balance may be made for such purposes as a)major maintenance and repair projects, b)meeting obligations resulting from a natural disaster, c)accumulating resources pursuant to stabilization arrangements, d)establishing reserves for disasters and or, e)for specific projects. Any changes or removal of committed fund balance must be sanctioned by the Palm Bay City Council through the same process that facilitated the original commitment.

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NOTE 1 – Summary of Significant Accounting Policies (Continued) S. Fund Balance (Continued) Assigned – Includes items intended for specific uses and authorized by the City Manager and or Finance Director. The Palm Bay City Council designated the aforementioned representatives as the delegated officials that can assign portions of the fund balance as evidenced by Resolution 2011-34. Unassigned – This is the residual classification used for those balances not assigned to another category in the General Fund. Deficit fund balance in other governmental funds is also presented as unassigned. GASB 54 implementation requires the highest legal authority to approve authorized commitments of fund balance and to approve who can authorize making assignments of fund balance. On August 4, 2011, City Council by resolution 2011-34 authorized the Finance Director to assign resources and ending fund balances. GASB 54 also requires a spending policy to ending fund balances. The spending policy states in what order fund balance categories are spent. On August 4, 2011 by resolution 2011-34, the Council approved the following fund balance order of spending: (1) restricted fund balance first, and then (2) committed fund balance, then (3) assigned fund balance, and (4) unassigned fund balance. The General Fund maintains a minimum fund balance of 10% of the subsequent year’s budgeted expenditures less capital outlay and transfers. A detailed schedule of Governmental Fund Balances is presented below:

Detailed classifications of the City’s Fund Balances, as of September 30, 2013, are as follows:

Function Balance Classification General Fund

Bayfront Community

Redevelopment Agency

BCRA Construction

Fund

Community Investment

Fund

Nonmajor Governmental

Funds

Total Governmental

Funds

Non-Spendable:Items not in spendable form:

Inventory 6,296$ -$ -$ -$ -$ 6,296$ Prepaid Items 1,640,889 - - - - 1,640,889

Total Nonspendable Fund Balances 1,647,185 - - - - 1,647,185

Restricted for:Debt Service - - - - 3,677,998 3,677,998 Forfeited property - - - - 248,274 248,274 Redevelopment Activities - 1,674,250 - - - 1,674,250 Infrastructure Improvements - - - - 2,794,624 2,794,624 Other capital projects - - 1,857,824 - 411,682 2,269,506

Total Restricted Fund Balances - 1,674,250 1,857,824 - 7,132,578 10,664,652

Committed to:Road Maintence projects - - - - - -

Total Committed Fund Balances - - - - - -

Assigned to:PMU 51,52,53 - - - - - - Various contracts 525,456 - - - - 525,456

Total Assigned Fund Balances 525,456 - - - - 525,456

Unassigned:General government 9,833,161 - - 115,121 9,948,282 Other governmental fund deficit residuals - - - (1,303,244) (661,790) (1,965,034)

Total Unassigned Fund Balances 9,833,161 - - (1,303,244) (546,669) 7,983,248

Total Fund Balances 12,005,802$ 1,674,250$ 1,857,824$ (1,303,244)$ 6,585,909$ 20,820,541$

Major Funds

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NOTE 1 – Summary of Significant Accounting Policies (Continued) T. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenditures/expenses during the reporting period. Actual results could differ from management’s estimates. NOTE 2 – Stewardship, Compliance and Accountability A. Deficit Fund Equity At September 30, 2013, the following funds of the City had deficit balances:

Special Revenue Funds:Code Nuisance Fund ($34,661)Enviromental Fee Fund ($627,129)

Capital Project Funds:Community Investment Fund ($1,303,244)

Internal Service Funds:Risk Management Fund ($1,563,360)

The deficit in the Code Nuisance Fund is expected to be eliminated by future program revenue. The deficit in the Environment Fee Fund was a result of an upfront payment of mitigation costs which will be repaid with future dedicated revenue sources. The deficit fund balance in the Community Investment Program Fund is expected to be eliminated by future grant reimbursements revenues. The deficit in the Risk Fund is a result of paying higher premiums for a fully-insured program, as well as the impact of run-off on claims still open under the self-insured program. Stabilization of the fund is expected to return in the near future, as the highest level of expenditures will be known premium costs. B. Budget Overages At September 30, 2013, the following funds of the City had deficit balances:

Special Revenue Funds:Code Nuisance Fund $30,764Recreation Fund $13,000

NOTE 3 – Deposits and Investments A. Cash and Deposits At September 30, 2013, the carrying amount of the City’s cash deposit accounts was $17,282,352. The City’s cash deposits are held by a bank that qualifies as a public depository under the Florida Security for Public Deposits Act as required by Chapter 280, Florida Statutes. The City’s cash deposits are fully insured by the Public Deposits Trust Fund. Cash Equivalents consist of amounts placed with PFM Funds Prime Series Money Market Fund $8,743,760, and Federated Prime Obligation Fund Money Market Fund $2,008,505 and U.S. Bank Money Market Account $197,362. The City is also invested in the State Board of Administration’s (SBA) Local Government Surplus Funds Trust Fund investment pool, the Florida Prime Fund, created by Section 218.405, Florida Statutes. The Florida Prime Fund operates under investment guidelines established by Section 215.47, Florida Statutes. The City’s investment in the 2a7-like Florida PRIME Fund was $9,239 reported at amortized cost, and Fund B in the amount of $78. The PRIME Fund had a weighted average maturity of 44 days and the investment pool Fund B‘s average maturity was 4.04 years.

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City of Palm Bay, Florida Financial Section NOTE 3 – Deposits and Investments (Continued) B. Investment Portfolio On September 20, 2013, the City of Palm Bay adopted a revised comprehensive investment policy pursuant to Section 218.415, Florida Statutes that updated permitted investments, asset allocation limits, issuer limits, credit ratings requirements, and maturity limits to protect the City’s cash and investment assets. The City maintains a common cash and investment pool for the use of all funds. Section 218.415, Florida Statutes, limits the types of investments that a government can invest in unless specifically authorized in an investment policy. The City’s investment policy allows for the following investments: The Florida PRIME (“SBA”), United States Government Securities, United States Government Agencies, Federal Instrumentalities, Mortgage Backed Securities, Interest Bearing Time Deposit and Saving Accounts, Repurchase Agreements, Commercial Paper, Corporate Notes, Bankers’ Acceptances, State and/or Local Government Taxable and/or Tax-Exempt Debt, Registered Investment Companies Money Market Mutual Funds, and Intergovernmental Investment Pools. As of September 30, 2013, the City had the following investment types and weighted average maturity presented in terms of years:

Weighted AverageSecurity Type Fair Value Duration (Years)

U.S. Treasury Notes 9,005,375$ 2.077,142,502 1.37

Municipal Obiligations 1,070,575 0.42Corporate Notes 3,405,424 2.38PFM Fund Prime Series Money Market Fund 8,743,760 56 days

2,008,505 46 daysFlorida Prime ("SBA") Fund A 9,239 44 daysFlorida Prime ("SBA") Fund B 78 4.04US Bank Money Market Account 197,362 0.003

(17,282,352) Total 14,300,468$ 1.22

Federal Instrumentalities - Notes

Federated Prime Obligation Fund Money Market Fund

Less: Amounts reported as cash and cash equivalents

C. Interest Rate Risk The City’s investment policy sets limits for investment maturities to match known cash needs and anticipated cash flow requirements. Investment of current operating funds shall have maturities of no longer than five (5) years. Investment of bonds reserves, construction funds, and other non-operating funds, “core funds”, shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Master Repurchase Agreement. The City utilizes “weighted average duration” as a measure of interest rate risk and as of September 30, 2013, the investment portfolio had a weighted average duration of 1.22 years.

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City of Palm Bay, Florida Financial Section NOTE 3 – Deposits and Investments (Continued) C. Interest Rate Risk (Continued) The City has Federal Instrumentalities that have embedded options consisting of the option at the discretion of the issuer to call their obligation or pay a stated increase in the interest rate. The following details the embedded options:

Maturity Call Call MarketCUSIP Description Date Date Schedule Value

3134G42V9 Freddie Mac Notes (Callable) 04/29/15 10/29/13 Quarterly 479,976$ 3135GONG4 FNMA Notes (Callable) 08/07/15 11/07/13 Quarterly 415,075$ 06406HCD9 Bank of NY Mellon (Callable) 10/23/15 09/23/15 Continious 699,223 Total 1,594,274$

The City has no Federal Instrumentalities Mortgage pass-through securities. D. Credit Risk The City’s investment policy permits the following investments, which are limited to credit quality ratings From nationally recognized rating agencies as described below. Florida PRIME (“SBA”) are rated "AAAm" by Standard & Poor’s or the equivalent by another Nationally Recognized Statistical Rating Organization (“NRSRO”) and the published objectives of the fund must agree with the Securities and Exchange Commission investment requirement for 2a-7. Corporate Notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States that have a long-term debt rating, at the time of purchase, at a minimum within the single ”A” category by any two NRSROs. Bankers’ Acceptances which are issued by a domestic bank or a federally chartered domestic office of a foreign bank, which are eligible for purchase by the Federal Reserve System, at the time of purchase, the short-term paper is rated, at a minimum, “P-1” by Moody's and “A-1” by Standard & Poor's. State and/or local government taxable and/or tax-exempt debt, general obligation and/or revenue bonds, rated at a minimum within the single “A” category by any two NRSROs, for long-term debt, or rated at least “MIG-1” by Moody’s and “SP-1” by Standard & Poor’s for short-term debt. Registered Investment Companies (Money Market Mutual Funds) shares in open-end and no-load funds are registered under the Federal Investment Company Act of 1940 and operated in accordance with 17 C.F.R. § 270.2a-7. The money market funds are rated “AAAm” or better by Standard and Poor’s or the equivalent by another NRSRO. Intergovernmental Investment Pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section 163.01, Florida Statutes. Intergovernmental Investment Pools that are rated “AAAm” or better by Standard and Poor’s or the equivalent by another NRSRO.

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City of Palm Bay, Florida Financial Section NOTE 3 – Deposits and Investments (Continued) D. Credit Risk (Continued) The securities remaining in Fund B are legacy items from the four issuers whose financial circumstances gave rise to the November 2007 run (as well as overnight instruments temporarily holding fund earnings). As of September 30, 2013, their remaining amortized cost was $469.3 million or 78.7% more than remaining participant positions in Fund B. Conversely, the current estimated liquidation (market) value of these securities is pegged at $249.2 million or 94.9% of remaining participant positions. It is important to note that due to the lack of an actively traded market for Fund B securities, their “market value” is an estimate of current liquidation value that has been determined through a collaborative process among various pricing experts and sources in the marketplace Florida SBA Fund B Legal Issue As an ongoing legal matter, the SBA asserts Lehman Brothers (which is now in liquidation) sold the SBA certain unregistered secured notes that were not exempt from registration under the Securities Act of 1933. The Lehman Trustee has not yet responded to the SBA’s general creditor claim on behalf of Fund B as to whether the Lehman estate will have any assets available for recovery. The Trustee’s latest reports have stated that “returns to general estate creditors will be limited at best.” However, the secured notes sold by Lehman Brothers were secured by certain collateral. Fund B has been receiving and is expected to continue receiving monetary distributions of principal and interest from that underlying collateral. The SBA will promptly disclose any future developments as they become matters of public record. Source for all information regarding the Florida SBA Fund B is from the September 30, 2013 report provided on their website https://www.sbafla.com/prime. As of September 30, 2013, the City had the following credit exposure as a percentage of total investments:

Security Type Credit Rating % of PortfolioU.S. Treasury Notes AA+ 28.51%

AA+ 22.62%AA 3.39%

AA+ 10.78%PFM Fund Prime Series Money Market Fund AAAm 27.69%

AAAm 6.36%Florida Prime ("SBA") Fund A AAAm 0.03%Florida Prime ("SBA") Fund B N/A 0.00%US Bank Money Market Account N/A 0.62%Total 100%

Corporate Notes

Federated Prime Obligation Fund Money Market Fund

Federal Instrumentalities - NotesMunicipal Obiligations

The City’s $9,239 investment deposit in the Florida PRIME (“SBA”) Fund was rated AAAm by Standard & Poor’s as of September 30, 2013. The City’s $78 investment deposit in the Florida PRIME (“SBA”) Fund B was unrated as of September 30, 2013. The City’s $551,187 cash deposit in its Negotiable Order of Withdrawal account and cash deposit balances of $16,731,165 were deposited in qualified public depositories, as required by Chapter 280, Florida Statutes.

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NOTE 3 – Deposits and Investments (Continued) E. Custodial Risk The City’s investment policy, pursuant to Section 218.415(18), Florida Statutes, requires securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchased by, and all collateral obtained by the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida as defined in Section 658.12, Florida Statutes, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits maintained by book-entry at the issuing bank shall clearly identify the City as the owner. As of September 30, 2013, the City’s investment portfolio was held with a third-party custodian as required by the City’s investment policy. F. Concentration of Credit Risk The City’s investment policy has established asset allocation and issuer limits on the following investments, which are designed to reduce concentration of credit risk of the City’s investment portfolio. A maximum of 25% of available funds may be invested in the Florida PRIME Fund ("SBA"), 100% of available funds may be invested in United States Government Securities, 50% of available funds may be invested in United States Government Agencies with a 25% limit on individual agency, 80% of available funds may be invested in Federal Instrumentalities with a 50% limit on individual instrumentalities, 20% of available funds may be invested in mortgage backed securities with a 15% limit on individual issuers, 40% of available funds may be invested in interest bearing time deposit or savings accounts with a 15% limit on individual issuers, a maximum of 50% of available funds may be invested in repurchase agreements excluding one (1) business day agreements and overnight sweep agreements with a 25% limit on any one institution, 25% of available funds may be directly invested in prime commercial paper with a 10% limit on individual issuers, 15% of available funds may be invested in corporate notes with a limit of 5% with any one corporate issuer, 25% of available funds may be directly invested in Bankers’ Acceptances with a 10% limit on individual issuers, a maximum of 20% of available funds may be invested in State and/or Local Government Taxable and/or Tax-Exempt Debt with a 5% limit on individual issuers, a maximum of 50% of available funds may be invested in Registered Investment Companies (Money Market Mutual Funds) with a limit of 30% with any one money market fund, a maximum of 25% may be invested in intergovernmental investment pools. As of September 30, 2013, the City had the following issuer concentration based on fair value:

Security Type Fair Value % of PortfolioU.S. Treasury Notes 9,005,375$ 28.51%Federal Home Loan Mortgage Corporation Notes (FHLMC) 5,029,998 15.93%Federal Home Loan Bank Notes (FHLB) 689,903 2.18%Federal National Mortgage Association Notes (FNMA) 1,422,600 4.50%Apple Inc. Globa Corporate Notes 268,110 0.85%General Electric Capital Corporate Notes 451,607 1.43%Toyota Motor Credit Corp Corporate Notes 249,780 0.79%Bank of New York Mellon (Callable) Corporate Notes 699,223 2.21%Wello Fargo & Company (Floating) Corporate Notes 476,720 1.51%Anheuser-Busch Global Notes Corporate Notes 351,582 1.11%Caterpillar Financial SR Notes Corporate Notes 159,266 0.50%JP Morgan Chase & Co Global Notes Corporate Notes 749,137 2.37%New York City, New York Taxable GO Bonds Municipal Oblig 690,028 2.18%Regional Transportation Aughority, IL Taxable Revenue Bond 380,547 1.20%PFM Funds Prime Series Money Market Fund 8,743,760 27.69%Federated Prime Obligation Fund Money Market Fund 2,008,505 6.36%Florida Prime 9,239 0.03%SBA Fund B 78 0.00%US Bank Money Market Account 197,362 0.62%

31,582,820$ 100.00% 53

City of Palm Bay, Florida Financial Section NOTE 3 – Deposits and Investments (Continued) G. Investments – Palm Bay Retirement System

1. Investment Authorization

The Palm Bay Retirement System’s (the “Plan”) investment policy is determined by the Board of Trustees (the “Board”). The policy has been identified by the Board as having the greatest expected investment return, and the resulting positive impact on asset values, funded status, and benefits, without exceeding a prudent level of risk. The Board determined this policy after evaluating the implications of increased investment return versus increased variability of return for a number of potential investment policies with varying commitments to stocks and bonds. The primary investment objective of the plan is the preservation of invested capital. The secondary objective is to achieve moderate long-term real growth of the assets while minimizing the volatility of returns.

The Trustees are authorized to acquire and retain every kind of property, real, personal or mixed, and every kind of investment specifically including, but not by way of limitation, bonds, debentures, and other corporate obligations, and stocks, preferred or common, which persons of prudence, discretion and intelligence acquire or retain for their own account. Investment in all equity securities shall be limited to those listed on a major U.S. stock exchange and limited to no more than 75% (at market) of the Plan’s total asset value with no more than 5% at cost value of an investment manager’s equity portfolio invested in the shares of a single corporate issuer. Investments in stocks of foreign companies shall be limited to 25% (at market) of the investment portfolio. Investment in equity securities whose market capitalization is less than $3 billion dollars shall be limited to 25% of the total equity portfolio. Investments in those corporations whose stock has been publicly traded for less than one year are limited to 15% of the equity portfolio. The fixed income portfolio shall be comprised of securities rated “BBB” or higher by Standard & Poor’s or Baa or higher by Moody’s rating services with no more than 10% at cost of an investment manager’s total fixed income portfolio invested in the securities of any single corporate issuer. However, investments in securities rated below “A” shall be limited to 20% of the total fixed income portfolio. Investments in Collateralized Mortgage Obligations (CMOs) and real estate shall not exceed 25% and 15% of the portfolio or market, respectively. The Plan has contracts with investment counselors who supervise and direct the investment of equity and fixed income securities. In this regard, the Plan does utilize mutual funds as the investment vehicles for all its fixed income investments. In addition, the Plan utilizes an investment consultant who monitors the investing activity. The investments owned are held by custodians in the name of the Plan; however, equity securities are held in a nominee name to facilitate trading. 2. Types of Investments Florida Statutes and Plan investment policy authorize the Trustees to invest funds in various investments. The current target and actual allocation of these investments at market are as follows:

Target % of Actual % ofAuthorized Investments Portfolio Portfolio

Domestic equities 35% 42%Fixed income 25% 22%International equities 15% 14%Real estate 10% 8%Convertible securities 10% 8%Master limited partnership 5% 3%Cash equivalents 0% 3%

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City of Palm Bay, Florida Financial Section NOTE 3 – Deposits and Investments (Continued) G. Investments – Palm Bay Retirement System (Continued)

3. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in the market interest rates. As a means of limiting its exposure to interest rate risk, the Plan diversifies its investments by security type and institution, and limits holdings in any one type of investment with any one issuer with various durations of maturities. Information about the sensitivity of the fair values of the Plan’s investments to market interest rate fluctuations are provided by the following tables that show the distribution of the Plan’s investment by maturity at September 30, 2013:

Investment Type Fair Value Less Than 1 1 to 5 6 to 10 More Than 10U.S. Treasuries 14,078,630$ 2,625,443$ 7,424,151$ 2,989,317$ 1,039,719$ U.S. Agencies 11,970,681 - - 1,304,005 10,666,676 Debt Securities 8,103,420 882,484 2,440,552 2,149,903 2,630,481 Bond Funds 54,663 - - 54,663 -

Total Fixed Income 34,207,394$ 3,507,927$ 9,864,703$ 6,497,888$ 14,336,876$

Investment Maturities (in Years)

4. Credit Risk Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. This risk is generally measured by the assignment of a rating by a nationally recognized statistical rating organization. The Plan’s investment policy utilizes portfolio diversification in order to control this risk. The following tables disclose credit ratings by investment type, at September 30, 2013 as applicable:

Fair ValuePercentage of

Portfolio26,049,311$ 76.15%

103,789 0.30%519,969 1.52%409,257 1.20%

1,046,325 3.06%876,426 2.56%651,678 1.91%116,108 0.34%992,164 2.90%

1,250,732 3.66%944,207 2.76%

1,247,428 3.65%34,207,394$ 100%

Quality Rating of Credit Risk Debt SecuritiesGovernment

BBB+

Other

AAA

BBBBBB-

Total Fixed Income Securities

AAAA-A+AA-BB

5. Concentration of Credit Risk The investment policy of the Plan contains limitations on the amount that can be invested in any one issuer as well as maximum portfolio allocation percentages. There were no individual investments that represent 5% or more of plan net position at September 30, 2013.

55


NOTE 3 – Deposits and Investments (Continued) G. Investments – Palm Bay Retirement System (Continued)

6. Custodial Credit Risk Deposits are exposed to custodial risk if they are uninsured and uncollateralized. Custodial risk is the risk that, in the event of the failure of the counterparty, the Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Investment securities are exposed to custodial risk if the securities are uninsured, are not registered in the name of the Plan and are held either by the counterparty or the counterparty’s trust department or agent but not in the Plan’s name.

Consistent with the Plan’s investment policy, substantially all the investments are held by Plan’s custodial bank and registered in the Plan’s name, except for equity securities which are held in nominee name to facilitate trading. All of the Plan’s deposits are insured and or collateralized by a financial institution separate from the Plan’s depository financial institution.

NOTE 4 – Receivables The City's receivables as of September 30, 2013 are summarized as follows:

Governmental Business-type Total Accounts Receivable:

Accounts receivable 2,837,353$ 11,477,946$ 14,315,299$ Due from other Governments 7,386,739 - 7,386,739 Assessments Receivables - 3,953,290 3,953,290

10,224,092 15,431,236 25,655,328 Less: Allowances for Uncollectibles - (230,929) (230,929) Accounts receivable, net 10,224,092$ 15,200,307$ 25,424,399$

Other InternalGeneral Fund Governmental Service Total

Accounts Receivable: Accounts receivables 2,659,603$ 73,967$ 103,783$ 2,837,353$ Due from State of Florida 2,202,198 5,145,776 - 7,347,974 Due from Brevard County - 38,765 - 38,765

4,861,801 5,258,508 103,783 10,224,092 Less: Allowances for uncollectibles - - - - Governmental receivable, net 4,861,801$ 5,258,508$ 103,783$ 10,224,092$

Primary Government


56


NOTE 4 – Receivables (Continued) The City’s Utilities Fund provides water, sewer and stormwater services to residents in the City. Customers routinely receive services in advance during the ordinary course of business; however, customers’ deposits are available to be applied against amounts owed. Accounts receivable in the Utilities Fund at September 30, 2013 as summarized as follows:


Enterprise (Nonmajor Fund) Total

Accounts Receivable: Accounts receivables 6,993,297$ 2,525,320$ 9,518,617$ Unbilled receivables 1,959,329 - 1,959,329 Assessments receivables 3,953,290 - 3,953,290

12,905,916 2,525,320 15,431,236 Less: Allowances for uncollectibles (220,930) (9,999) (230,929)$ Business-type receivable, net 12,684,986$ 2,515,321$ 15,200,307$

Business-type Activies

NOTE 5 – Restricted Assets The use of certain Utilities Fund assets is restricted by specific provisions of the bond resolution authorizing the issuance of the utilities revenue and refunding bonds. In addition, the City restricts funds available for repayment of customer deposits as well as funds required to be placed in special construction accounts, as required by state statutes. Restricted assets at September 30, 2013 are as follows:

Cash andAccount Description: Cash EquivalentsCurrent:

Customer Deposits 2,102,273$

Total Current Restricted Assets 2,102,273

Noncurrent:Renewal, Replacement and Improvement 3,523,781 Connection Fees 5,721,017 Debt Service Reserve 9,314,899

Total Noncurrent Restricted Assets 18,559,697

Total Restricted Assets- Business-type Activities 20,661,970$

57


Note 6 - Interfund Transfers, Receivables and Payables Individual Interfund transfers at September 30, 2013 are presented on the table that follows:

Transfers Out General Nonmajor

Governmental Community

Investment FundNonmajor Enterprise Utilities Internal Service

Total Transfers Out

General -$ 4,183,535$ 1,056,243$ -$ -$ 1,200,000$ 6,439,778$ Nonmajor Governmental 36,527 959,328 - 308,642 - 166,250 1,470,747 BCRA - - 4,950 - - - 4,950 Utilities 1,212,636 - - - - - 1,212,636 Nonmajor Enterprise - - - - 41,481 - 41,481 Internal Service 1,800,000 - - - - - 1,800,000

Total Transfers In 3,049,163$ 5,142,863$ 1,061,193$ 308,642$ 41,481$ 1,366,250$ 10,969,592$

Tranfers In

The transfer of approximately $1.2 million to the General Fund represents annual return on investments (ROI). This amount is based on a percentage of the Utility System’s total gross capital assets and is equivalent to payment in lieu of taxes (PILOT). The transfer of $1.0 million was made to the Community Investment Fund for road projects. The transfers to the Nonmajor Governmental Funds were primarily to make debt service principal and interest payments of approximately $4.2 million. The transfers to the Internal Service Fund relate primarily to a transfer of $1.2 million the Employee Benefit Fund. An additional $166,250 was for the acquisition of a new fire truck. Intra-nonmajor governmental transfers of approximately $942,000 were for debt service payments. The Employee Benefits Fund transfer to the General Fund of $1.8 million was a return of previously allocated funds. The majority of the transfer from the nonmajor governmental to the nonmajor enterprise was a residual $298,942 resulting from converting a special revenue fund to an enterprise fund. Advances to/from other funds at September 30, 2013 were as follows:

• $1,525,000 – Balance of a loan from the Utilities Fund to the Fleet Services Fund in 2004 to fund capital acquisitions.

• $644,000 – Funds advanced by the Building Inspection Fund to the Environmental Fee fund to cover the cost of a Federal Fish and Wildlife permit granted by the U.S. Department of Interior.

• $1,800,000 – Funds advance by the Utilities Fund to the Community Investment Fund as a stop-gap to cover capital improvement projects pending grant reimbursement.

Due to/from other funds balances consist of amounts due to the General Fund ($2,230,682) from the Code Nuisance Fund, Community Development Block Grant Fund, HOME, and Community Investment Program that were unsettled at yearend

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NOTE 7 – Capital Assets A. Changes in Capital Assets The following tables show the changes in capital assets by governmental activities and business-type activities. Governmental activities include the capital assets for the Internal Service Funds.

Beginning EndingBalance Balance

Governmental Activities 9/30/2012 Increases Decreases 9/30/2013

Capital Assets, Not Being Depreciated:Land 17,108,018$ 1,390,595$ (2,255,813)$ 16,242,800$ Construction In Progress - Infrastructure 4,218,897 12,644,285 (2,924,824) 13,938,358

21,326,915 14,034,880 (5,180,637) 30,181,158

Capital Assets, Being Depreciated:Buildings and Improvements 24,191,065 - - 24,191,065$ Machinery, Equipment and Vehicles 24,307,302 749,183 (3,780,616) 21,275,869 Infrastructure 91,146,225 2,924,824 (1,024,658) 93,046,391

139,644,592 3,674,007 (4,805,274) 138,513,325

Less Accumulated Depreciation For:Buildings and Improvements (11,619,898) (911,478) - (12,531,376) Machinery and Equipment (20,026,266) (1,466,765) 1,714,314 (19,778,717)

Infrastructure (33,498,223) (4,368,488) 1,024,658 (36,842,053)

Total Accumulated Depreciation (65,144,387) (6,746,731) 2,738,972 (69,152,146)

Total Capital Assets, Being Depreciated, Net 74,500,205 (3,072,724) (2,066,302) 69,361,179

Governmental Activities Capital Assets, Net 95,827,120$ 10,962,156$ (7,246,939)$ 99,542,337$

Total Capital Assets, Not Being Depreciated

Total Capital Assets Being Depreciated

The Sanitation Fund was converted into an Enterprise Fund in the current year. Decreases in governmental activities include capital assets transferred to the newly created Enterprise Fund .

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NOTE 7 – Capital Assets (Continued) A. Changes in Capital Assets (Continued)

Ending EndingBalance Balance

Business-type Activities 9/30/2012 Increases Decreases 9/30/2013 Utility SystemCapital Assets, Not Being Depreciated:

Land 4,904,079$ -$ -$ 4,904,079$ Construction In Progress 7,140,322 1,172,980 (2,933,624) 5,379,678

Total Capital Assets, Not Being Depreciated 12,044,401 1,172,980 (2,933,624) 10,283,757

Capital Assets, Being Depreciated:Buildings and Improvements 2,863,766 - - 2,863,766 Water and Sewer System 151,300,555 2,987,028 - 154,287,583 Machinery and Equipment 3,886,577 62,706 (34,969) 3,914,314

Total Capital Assets Being Depreciated 158,050,898 3,049,734 (34,969) 161,065,663

Less Accumulated Depreciation For:Buildings and Improvements (955,349) (77,240) - (1,032,589) Water and Sewer System (45,922,430) (4,126,658) - (50,049,088) Machinery and Equipment (2,782,319) (269,410) 34,969 (3,016,760)

Total Accumulated Depreciation (49,660,098) (4,473,308) 34,969 (54,098,437)

Total Capital Assets, Being Depreciated, Net 108,390,800 (1,423,574) - 106,967,226

Utility System Capital Assets, Net 120,435,201$ (250,594)$ (2,933,624)$ 117,250,983$

Building InspectionCapital Assets, Being Depreciated:

Machinery and Equipment 136,467$ -$ (136,467)$ -$

Less Accumulated Depreciation For:Machinery and Equipment (133,313) (3,154) 136,467 -

Building Inspection Capital Assets, Net 3,154$ (3,154)$ -$ -$

Stormwater UtilityCapital Assets, Not Being Depreciated:

Land 19,802$ -$ -$ 19,802$ Construction in Progress - 35,460 - 35,460

Total Capital Assets, Not Being Depreciated: 19,802$ 35,460$ -$ 55,262$

Capital Assets, Being Depreciated:Machinery and Equipment - 14,173 - 14,173

Less Accumulated Depreciation For:Machinery and Equipment - - - -

Stormwater Utility Capital Assets, Net - 14,173 - 14,173

Sanitation Capital Assets, Being Depreciated:

Machinery and Equipment -$ 2,560,000$ -$ 2,560,000$

Less Accumulated Depreciation For:Machinery and Equipment - (768,000) - (768,000)

Sanitation Capital Assets, Net -$ 1,792,000 - 1,792,000

The Sanitation Fund was established as an Enterprise Fund at the beginning of the current fiscal year. In previous years, this fund was characterized as a special revenue fund. The increase in capital asset listed above is a result of the conversion.

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City of Palm Bay, Florida Financial Section NOTE 7 – Capital Assets (Continued) A. Changes in Capital Assets (Continued) Shown below is a summary of depreciation expense by function. Depreciation expense for the internal service funds are included in the governmental activities amounts. Depreciation Expense By Function

Governmental Activities:General Government 704,202$ Public Safety 1,011,415 Physical Environment 768,679 Transportation 3,823,517 Culture/Recreation 438,917

Total Governmental Activities 6,746,730$

Business-type Activities:Utility System 4,473,308$ Building Inspection 3,154 Sanitation Fund 768,000

5,244,462$

B. Construction Commitments

RemainingProjects Spent-to-Date Commitment

Public Works Malabar North Parkway 6,666,154$ 6,164,002$ Realignment of Troutman/Clearmont Rd 3,647,754 1,746,200 Palm Bay Road Landscaping 1,001,147 161,851 Road Maintenance Program 371,030 1,282,808 US-1 Beautification 1,242,399 -

Utility ImprovementsUnit 46 Infrastructure expansion - 1,269,832

Total 12,928,484$ 10,624,693$

61


NOTE 8 - Long Term Debt A. Schedule of Changes in Long-Term Debt The following is a schedule of changes in the City’s long-term debt for the fiscal year ended September 30, 2013:

Balance Balance Due Within Long-TermGovernmental Activities: 9/30/12 Additions Reductions 9/30/13 One Year PortionBonds Payable

Revenue Bonds 73,166,447$ -$ 3,942,189$ 69,224,258$ 1,206,378$ 68,017,880$

Add Premium 535,812 - 31,441 504,371 - 504,371

Less Deferred Amounts:

For Issuance Discounts (16,272) - (857) (15,415) - (15,415)

Total Bonds Payable 73,685,987 - 3,972,773 69,713,214 1,206,378 68,506,836

Notes Payable 4,465,000 2,268,000 295,000 6,438,000 1,054,000 5,384,000

Capital Leases 2,436,370 506,890 2,337,114 606,146 223,270 382,876

OPEB Obligation 1,410,002 117,928 - 1,527,930 - 1,527,930

Compensated Absences 5,413,211 3,533,138 3,774,514 5,171,835 827,494 4,344,341

Interest Rate Swap-Fair Value 20,234,011 - 7,380,461 12,853,550 - 12,853,550 Claims Payable 2,146,000 413,000 - 2,559,000 409,440 2,149,560

Total Governmental Activities 109,790,581$ 6,838,956$ 17,759,862$ 98,869,675$ 3,720,582$ 95,149,093$

Business-type Activities:Utility System

Bonds Payable:

Revenue Bonds 68,586,012$ -$ 5,024,933$ 63,561,079$ 5,138,347$ 58,422,732$ Add Premium 479,353 - 79,576 399,777 - 399,777 Less Deferred Amounts:

For Loss on Refunding (4,603,012) - (470,916) (4,132,096) - (4,132,096) For Issuance Discounts (147,045) - (19,094) (127,951) - (127,951)

Total Bonds Payable 64,315,308 - 4,614,499 59,700,809 5,138,347 54,562,462 Notes Payable 3,380,000 - 205,000 3,175,000 205,000 2,970,000 OPEB Obligation 271,051 30,375 - 301,426 - 301,426 Compensated Absences 705,610 341,364 359,139 687,835 110,054 577,781

Total Utility System 68,671,969$ 371,739$ 5,178,638$ 63,865,070$ 5,453,401$ 58,411,669$

Building InspectionOPEB Obligation 77,716$ 1,787$ -$ 79,503 -$ 79,503$ Compensated Absences 81,635 70,358 96,042 55,951 8,952 46,999

Total Building Inspection 159,351$ 72,145$ 96,042$ 135,454$ 8,952$ 126,502$

Stormwater UtilityOPEB Obligation 30,972$ 26,802$ -$ 57,774 -$ 57,774$ Compensated Absences 198,739 206,736 200,089 205,386 32,862 172,524

Total Stormwater Utility 229,711$ 233,538$ 200,089$ 263,160$ 32,862$ 230,298$

Sanitation Capital Leasees -$ 2,116,308$ 233,630$ 1,882,678$ 241,855$ 1,640,823$ OPEB Obligation 1,787$ -$ 1,787 -$ 1,787 Compensated Absences - 18,765 9,591 9,174 1,468 7,706

Total Sanitation -$ 2,136,860$ 243,221$ 1,893,639$ 243,323$ 1,650,316$

Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. For governmental activities, claims and compensated absences are generally liquidated with resources from the General Fund. It is anticipated that future discharge of net pension and postemployment benefit obligations will also be liquidated with General Fund resources.

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City of Palm Bay, Florida Financial Section NOTE 8 - Long Term Debt (Continued) B. Bonds Payable 1. Governmental Activities The City has pledged local option gas tax revenues to repay $7,695,000 in revenue bonds issued in May 2004. Proceeds from the bonds were used to finance roadway improvements to Emerson Drive. The bonds are payable solely from local option gas tax revenues and are payable through 2021. Total principal and interest remaining to be paid on the bonds is $5,438,406. For the current year, principal and interest of $680,888 was paid. Local option gas tax revenues were $3,284,506. In September 2004, the City has issued $5,376,447 in special obligations bonds secured by pledged state revenue sharing monies, as defined in Chapter 218, Part ll, Florida Statutes, in an amount of up to 50% of the state revenue monies received in the preceding fiscal year. Proceeds from the bonds were used to discharge the unfunded actuarial accrued pension liability of the Palm Bay Police and Firefighters Pension Plan. The bonds are payable solely from the state revenue sharing funds and are payable through 2032. Total principal and interest remaining to be paid on the bonds is $9,000,076. For the current year, principal and interest of $342,649 was paid. State revenue sharing monies received in 2013 were $3,270,431. The City has pledged local government half-cent sales tax revenues to repay $18,365,000 in revenue bonds issued in September 2006. Proceeds from the bonds were used to finance the acquisition and improvement of capital facilities. The bonds are payable solely from sales tax revenues and are payable through 2037. Total principal and interest remaining to be paid on the bonds is $27,448,810. For the current year, principal and interest of $1,151,544 was paid. Sales tax revenues were $5,012,444. In January 2008, the City issued $38,345,000 in special obligations bonds which are secured by a covenant to budget and appropriate from non-ad valorem revenues. Proceeds from the bonds were used to discharge the unfunded actuarial accrued pension liability of the Palm Bay Police and Firefighters Pension Plan. The bonds are payable through 2038. Total principal and interest remaining to be paid on the bonds is $81,403,736. For the current year, principal and interest of $1,369,553 was paid. The City has pledged public services tax revenues to repay $5,485,000 in revenue bonds issued in October 2010. Proceeds from the bonds were used to finance the cost of expansion and improvement of the City Hall. The bonds are payable solely from public service tax revenues and are payable through 2041. Total principal and interest remaining to be paid on the bonds is $11,258,679. For the current year, interest of $318,877 was paid. Public services tax revenues were $10,618,370.

63

City of Palm Bay, Florida Financial Section NOTE 8 - Long Term Debt (Continued) B. Bonds Payable (Continued) 1. Governmental Activities (Continued) A summary of outstanding governmental bonds payable at September 30, 2013 is as follows:

Remaining Annual Amount Amount Interest Rates Maturity

Governmental Activities: Purpose of Issue Issued Outstanding (Percent) ToRevenue Bonds:

Local Option Gas Tax Revenue Bonds Financing of Emerson Drive road 7,695,000 4,455,000 4.000-5.250 2021 Series 2004 improvements

Taxable Special Obligation Bonds Discharging of unfunded actuarial 5,376,447 5,024,258 4.800-6.040 2032 Series 2004 accrued pension fund liability

Sales Tax Revenue Bonds Acquisition and construction 18,365,000 16,285,000 4.000-5.000 2037 Series 2006 of capital improvements

Taxable Special Obligation Bonds Discharging of unfunded actuarial 38,345,000 37,975,000 3.250-6.344 2038 Series 2008 accrued pension fund liability

Public Service Tax Revenue Bonds Finance the cost of expansion and 5,485,000 5,485,000 3.063-6.395 2041 Series 2010 improvement of City Hall

Total Governmental Activities 69,224,258$

64

City of Palm Bay, Florida Financial Section NOTE 8 - Long Term Debt (Continued) B. Bonds Payable (Continued) 2. Business-type Activities All of the outstanding bonds of the Utilities Fund are secured by the water and sewer net operating revenues. In addition, mainline extension charges and water connection fees are pledged for debt coverage. The City has pledged future special assessment revenues to repay $3,535,000 in utility special assessment bonds issued in June 2003. Proceeds from the bonds were used to finance water and sewer system improvements. The bonds are payable from proceeds derived from special assessments and are payable through 2025. Total principal and interest remaining to be paid on the bonds is $2,976,684. Principal and interest paid for the current year was $260,140. During fiscal year ended September 30, 2013, the City collected $114,593 in special assessments leaving $1,699,040 in assessments receivable, net of allowance for uncollectible accounts, to be collected by the City in future years. The following is a summary of business-type activities bonds payable reflected in the City’s Utilities Fund as of September 30, 2013:

Remaining Annual Amount Amount Interest Rates Maturity

Business-type Activities: Purpose of Issue Issued Outstanding (Percent) ToRevenue Bonds:Utility Capital Improvement Revenue Bonds Capital improvements to 21,311,958 10,911,079 5.000-5.250 2031

Series 2001 water system

Utility Special Assessment Bonds Financing special assessments 3,535,000 2,315,000 3.300-4.125 2025 Series 2003 for water and sewer improvements

Utility Capital Improvement Bonds Utility Installation on Emerson Drive 2,110,000 1,095,000 4.000-5.250 2020Seriies 2004

Refunding Bonds: Utility System Refunding Revenue Bonds Refunding of '92 Utility Bonds 5,990,000 2,275,000 5.250 2018

Series 2002

Utility System Refunding Revenue Bonds Refunding of '94 Utility Bonds 47,875,000 28,815,000 4.000-5.000 2022 Series 2003

Utility System Refunding Bonds Refunding of '98 Utility Bonds 24,160,000 18,150,000 3.400-5.000 2024Series 2005 B

Total Business-type Activities 63,561,079$

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City of Palm Bay, Florida Financial Section NOTE 8 - Long Term Debt (Continued) C. Debt Service Requirements The following are the debt service requirements to maturity on the City’s long term debt, excluding compensated absences and claims payable for governmental activities and business-type activities:

Fiscal YearPrincipal Interest Principal Interest Principal Interest Total

2014 1,206,378$ 2,775,091$ 223,270$ 12,145$ 1,054,000$ 184,478$ 5,455,362$ 2015 1,019,792 3,395,829 127,616 6,130 1,078,000 164,557 5,791,924 2016 1,072,547 3,359,246 101,443 3,588 1,096,000 144,324 5,777,148 2017 1,287,506 3,315,304 102,950 2,081 345,000 126,326 5,179,167 2018 1,418,913 3,263,694 40,607 551 360,000 111,676 5,195,441 2019-2023 7,863,975 16,402,361 10,260 29 2,045,000 315,956 26,637,581 2024-2028 10,485,147 15,923,611 - - 460,000 9,640 26,878,398 2029-2033 17,410,000 11,532,511 - - - - 28,942,511 2034-2038 26,540,000 5,266,953 - - - - 31,806,953 2039-2043 920,000 89,849 - - - - 1,009,849 Total 69,224,258$ 65,324,449$ 606,146$ 24,524$ 6,438,000$ 1,056,957$ 142,674,334$

Revenue/Refunding Bonds Capital Leases Notes Payable

The liquidity facility that supports the Series 2008 taxable special obligation bonds expires January 2015. If renewal efforts are unsuccessful, and the City is unable to replace it with a liquidity facility from another provider or is unable to refinance the bonds, the Series 2008 bonds outstanding at that time will be mandatorily redeemed under the terms of the liquidity facility and the City will be required to reimburse the liquidity provider. As of September 30, 2013, the Series 2008 outstanding balance was $38,110,000, of which $37,740,000 is reported in the table above as maturing in October 2017 through October 2037. If the bonds are mandatorily redeemed, the 2015 debt service requirements for revenue bonds principal will be $39,499,792 rather than the $1,759,792 included in the table above and the 2018 - 2042 principal maturity will be reduced by $37,740,000. Fiscal Year

Principal Interest Principal Interest Principal Interest Total2014 5,138,347$ 3,315,771$ 241,855$ 61,422$ 215,000$ 179,706$ 9,152,101$ 2015 5,270,152 3,183,092 250,371 52,906 230,000 167,536 9,154,057 2016 5,392,372 3,059,205 259,186 44,091 240,000 154,518 9,149,372 2017 5,522,565 2,929,716 268,311 34,966 255,000 140,934 9,151,492 2018 5,700,747 2,749,934 277,758 25,519 270,000 126,502 9,150,460 2019-2023 31,682,979 10,575,977 585,197 21,357 1,590,000 386,010 44,841,520 2024-2028 3,742,189 7,324,227 - - 375,000 21,226 11,462,642 2029-2033 1,111,728 4,643,688 - - - - 5,755,416 Total 63,561,079$ 37,781,610$ 1,882,678 240,261 3,175,000$ 1,176,432$ 107,817,060$

Revenue/Refunding Bonds Notes PayableCapital Leases

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City of Palm Bay, Florida Financial Section NOTE 8 - Long Term Debt (Continued) D. Interest Rate Swap Agreement Interest Rate Swap – The City is a party to an interest rate swap agreement that is recorded in the financial statements in accordance with the recently issued GASB Statement No. 53 (“GASB 53”), “Accounting and Financial Reporting for Derivative Instruments”, which became effective for periods beginning with fiscal year ended September 30, 2010. The derivative is to be reported in the Statement of Net Position at fair value, and the hedges must be tested for effectiveness to qualify for hedge accounting. Depending on the test results, the change in fair value is either reported in the Statement of Net Position, or in the Statement of Activities. The City performed the required test on this swap, and deemed the swap effective and it qualified for hedge accounting. Therefore, the change in fair value of the interest rate swap for this period is reported as an interest rate swap liability (fair value) of $12,853,550, offset by a corresponding deferred swap outflow in the Statement of Net Position. Objective – As a means to lower its borrowing costs, when compared against fixed rate bonds at the time of issuance, the City of Palm Bay entered into a fixed rate bond swap agreement. The intention of the swap was to convert the interest rate on the City’s $38,345,000 variable Rate Taxable Special Obligations Bonds, Series 2008 (the “series 2008 Bonds”) into a synthetic fixed rate debt. Terms – Effective January 16, 2008, the city entered into a 29.7 year qualified fixed payer swap with Royal Bank of Canada (RBC). The notional amount of the swap as of September 30, 2013 was $38,150,000 and has a termination date of October 1, 2037. Based on the swap agreement, the City pays their counterparty a fixed rate of 3.25% through October 1, 2013, 5% through October 1, 2020 and 6.344% until the termination date. The City receives a floating rate from the counterparty of one month London InterBank Offered Rate (LIBOR). Interest payments are made monthly and principal payments annually. The swap is related to the $38,345,000 Taxable Special Obligation Bonds, Series 2008. The bonds are traditional variable rate taxable municipal bonds hedged by the swap contract to mitigate interest rate risk. The swap transaction terminates no later than the final maturity of the 2008 Bonds. Under the terms of the swap agreement, scheduled payments that are owed by the City to RBC are insured by Assured Guaranty Municipal Corporation (AGM) and are supported through a collateralization agreement between the City and RBC. If the City was required to post collateral under the swap agreement, it could have a material adverse effect on the City’s liquidity position. The aggregate fair market value of the above referenced contingency feature has not been determined. The City has the right to optional termination of the swap. As of September 30, 2013, rates were as follows:

Terms RateInterest Rate Swap:Fixed payment to counterparties Fixed 3.25%Less: Variable payment from counterparties 100% of monthly LIBOR 0.18%Net interest swap payments 3.07%

Variable rate bond coupon payments 7 day market rate 0.65%Synthetic interest rate on bonds 3.72%

Interest Rate Swap Rate Table

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NOTE 8 - Long Term Debt (Continued) D. Interest Rate Swap Agreement (Continued) Fair Value – Because interest rates have declined since execution of the swap, as of September 30, 2013, the swap had a negative fair value of $12,853,550. The City’s financial advisor uses pricing models that integrate the contractual terms of the swap, including: the effective date; the termination date; the amortization schedule; the index or indices and fixed rates: and any day count modifications to the accrual and/or payment dates. Market-based parameters used by the financial advisor’s derivative pricing models include: the term structure of interest rates as implied by the U.S. Treasury curve and by various swap curves; spreads for taxable and tax-exempt swap rates (risk premiums); spreads for credit risk(s); and discount factors derived from the LIBOR swap curve. In order to calculate the fair market value of interest rate swaps, the swap valuation models calculate the present values of the anticipated future cash flows for both the floating and fixed legs of the swap using discount factors. The resulting fair market value represents the present value of the floating leg cash flows minus the present value of the fixed cash flows. Basis Risk – If the fixed interest rate on the City’s bonds is higher than the LIBOR rate, the City is responsible for the difference. Conversely, if the fixed interest rate is lower than LIBOR, the City benefits. Credit Risk – As of September 30, 2013 the City was not exposed to credit risk (the risk of economic loss due to a counterparty default on the swap agreement) because the swap had a negative fair value. However, should interest rates change and the fair value of the swap become positive, the City would be exposed to credit risk in the amount of the positive fair value. Termination Risk – The City or counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If at the time of the termination, the swap has a negative value, the City would be liable to the counterparty for a payment equal to the swap’s fair value. Swap payments and Associated Debt – The interest rate swap agreement does not affect the City’s obligation (under the bond indenture) to repay the principal and variable interest on the Series 2008 bonds. As interest rates vary the variable rate interest payments due on the Series 2008 Bonds and net swap payments will vary. Using the 3.25% initial fixed swap rate as of September 30, 2013, debt service requirements of the Series 2008 Bond’s principal and the fixed swap payments, assuming that current interest rates remain the same for their term, were as follows.

InterestYear Liquidity Remarketing Rate Swap TotalEnded Principal Interest (1) Fees (2) Fees (3) Total Net (4)

2014 235,000$ 246,838$ 239,243$ 26,583$ 747,664$ 1,403,928$ 2,151,592$ 2015 - 245,310 237,762 26,418 509,490 1,403,928 1,913,418 2016 - 245,310 237,762 26,418 509,490 1,403,928 1,913,418 2017 - 245,310 237,762 26,418 509,490 1,403,928 1,913,418 2018 70,000 245,310 237,762 26,418 579,490 1,401,324 1,980,814

2019-2023 1,430,000 1,205,685 1,168,587 129,843 3,934,115 6,847,032 10,781,147 2024-2028 4,260,000 1,135,973 1,101,020 122,336 6,619,329 6,342,786 12,962,115 2029-2033 10,885,000 919,133 890,852 98,984 12,793,969 4,855,344 17,649,313 2034-2038 21,095,000 441,063 430,038 47,782 22,013,883 1,754,538 23,768,421

37,975,000$ 4,929,932$ 4,780,788$ 531,200$ 48,216,920$ 26,816,736$ 75,033,656$

(1) Assumes a variable interest rate of .65% as of September 30, 2013 (2) Liquidity fees are 63 basis points or .63% of outstanding bond principal(3) Remarketing fees are 7 basis points or .07% of outstanding bond principal(4) Computed: (3.25% - .18%) multiplied by the notional amount outstanding (See interest rate swap table)

Variable-Rate Bond

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NOTE 8 - Long Term Debt (Continued) E. Debt Defeasance and Advance Refunding The City advance refunds and/or defeases long-term debt primarily to reduce debt service requirements. As of September 30, 2013, the City has the following outstanding bonds, which were funded by the placement of assets in an irrevocable trust to be used for satisfying debt service requirements therefore the debt is not reported in the financial statements.

FiscalYear Original Amount

Description of Obligation Defeased Issue Outstanding

Capital Improvement RevenueRefunding Bonds, Series 1992 2001 10,340,000$ 2,215,000$

Public Service Tax RevenueRefunding Bonds, Series 2001 2013 8,285,000$ 2,215,000$

Water and Sewer Revenue Bonds:Series 1992B 1994 52,350,000 29,460,000 Series 1992A 2002 7,345,000 2,745,000 Series 1994 2003 58,365,000 30,760,000 Series 1998 2006 23,215,000 17,455,000 , , , ,

177,160,000$ 102,110,000$

F. Notes Payable The Bayfront Community Redevelopment Agency (“BCRA”) entered into a financial arrangement to enter into a special, limited obligation note with a financial institution for $6,000,000 to fund redevelopment activities of the BCRA. Principal is due annually on August 1st and interest payments are due semi-annually on August 1st and February 1st of each year. The note is collateralized by a lien upon and pledge of ad valorem taxes designated for the BCRA. The principal balance outstanding as of September 30, 2013 is $4,170,000. In October 2012, the City issued a $2,268,000 Public Service Tax Refunding Revenue Note. Proceeds from the note were used to refund outstanding Public Service Tax Refunding Revenue Bond, Series 2001. The refunding reduces the total debt service payments over three year by $115,352 with an economic benefit to the City of $112,205. Principal and interest payments are due annually on October 1 through 2015. The note is secured by a pledge of Municipal Service Tax Revenues. The total outstanding balance as of September 30, 2013 is $2,308,393. Public services tax revenues were $10,618,370 In February 2009, the City issued a $3,935,000 Special Assessment Note to finance improvements to the City’s water and sewer system. The note is secured by a pledge of future special assessment revenues and has a final maturity date of 2024. Principal and interest remaining on the Note is $4,351,432. Total principal and interest paid during the current year was $399,212. During the fiscal year, the City collected assessments revenues in the amount of 375,900 leaving a balance of $2,116,328 in assessments receivable, net of allowance for uncollectible accounts.

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NOTE 8 - Long Term Debt (Continued) G. Capital Lease Obligations The City has entered into lease agreements as lessee for financing the acquisition of, heavy transportation equipment, bunker gear and breathing apparatus for the Fire Department, and containers for the Sanitation Cart Program. These lease agreements qualify as capital leases for accounting purposes and have been recorded at the present value of their future minimum lease payments. . Assets acquired through capital leases are as follows:

Governmental Activities Enterprise ActivitiesAsset: Machinery and equipment 1,387,567$ 2,560,000$

Less: Accumulated depreciation (772,062) (768,000) 615,505$ 1,792,000$

Future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2013 were as follows: Governmental Activities Enterprise Activities

Fiscal Year Fiscal Year

2014 235,415 2014 241,855 2015 133,746 2015 250,371 2016 105,031 2016 259,186 2017 105,031 2017 268,311 2018 41,158 2018 277,758 2019-2021 10,289 2019-2020 585,197

Total minimum lease payment 630,670 Total minimum lease payment 1,882,678 Less: amount representing interest (24,524) Less: amount representing interest (240,262) Present value of minimum lease Present value of minimum leasepayments 606,146$ payments 1,642,416$

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NOTE 9 – Employee Retirement Systems All City of Palm Bay full-time employees participate in one of two retirement plans offered by the City. Full-time employees participate in either the Palm Bay Defined Contribution Retirement Plan or the Palm Bay Defined Benefit Police and Firefighters Retirement System. In addition, the City offers its elected officials membership in the Florida Retirement System. A. Defined Contribution Retirement Plan The City of Palm Bay's general employees' retirement plan is a defined contribution plan administered and maintained by ICMA Retirement Corporation. The City has no fiduciary responsibility for this plan and the assets of the plan are not reported as a pension trust fund. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All full-time general employees are eligible to participate upon employment. Effective May 1, 2001, an executive plan was established. It includes the City Manager, Deputy City Managers, City Clerk, City Attorney, Deputy City Attorney and all department heads except for the police and fire department chiefs who are covered under the defined benefit plan. Employer contributions are vested according to the following schedule: 20% after one year of service and 20% per year thereafter until fully vested. Contributions under the plan were established by the Plan & Trust adoption agreement with ICMA Retirement Corporation and may be amended at the City's discretion. As of December 2010, the City’s contribution for members covered under the executive plan (executive) and general employees (general) were modified. The employer contributes a base of 3.75% for executive and 3% for general, to each individual’s retirement account. The employee may elect to contribute an additional percentage of their salary, between 0%-9.75% and 0%-6%, for executive and general respectively. The City will match the employee contribution. As of August 2010, the City’s contribution for NAGE Blue and White employees was modified. The employer contributes a base of 3% to each individual’s retirement account. The employee may elect zero to six percent (0‐6%) to contribute to their account and the City will match the employee contribution. The employer and employee contributions for fiscal year 2013 were $1,532,190 and $955,026 respectively. B. Defined Benefit Plan Palm Bay Police and Firefighter Plan

1. Plan Description The City of Palm Bay maintains a single-employer defined benefit pension plan, which covers general employees, police officers and firefighters. The Plan for general employees is closed to new employees and consists of retirees only. Coverage for firefighters and police officers is administered by the Board of Trustees of the City of Palm Bay Police and Firefighters Retirement System (the "Plan"). The Plan provides retirement, disability, and death benefits to plan members and beneficiaries. Benefits under the plan are established in accordance with City Ordinance and certain provisions of Florida Statutes Chapters 185 (Police Officers) and 175 (Firefighters). Benefit provisions of the Plan may be amended by the City Council, but may not be reduced below the minimum specified by Florida Statutes, unless the plan stops receiving 175 and 185 funds. The Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing the Board of Trustees:

Board of Trustees of the City of Palm Bay Police and Firefighters Retirement System 1501 Robert J. Conlan Boulevard NE, Suite 240 Palm Bay, Florida 32905-3567

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NOTE 9 – Employee Retirement Systems (Continued) B. Defined Benefit Palm Bay Police and Firefighter Plan (Continued)

2. Pension Benefits All participants: All regular full-time certified police officers and firefighters are eligible to participate in the Plan. Benefits vest 50% after five years of service plus 10% per year thereafter to 100% after 10 years. Early retirement, delayed retirement, supplemental, death and disability benefits are also provided. Police officer members: Normal retirement shall be the earlier of attainment of (1) age 55, (2) completion of 30 years credited service regardless of age, (3) age 52 with 25 years of credited service (4) for police officers who are employed on or after October 1, 2006 and retire after that date, 28 years of credited service, regardless of age, or (5) for police officers who are employed on or after April 5, 2012, completion of 25 years of credited service, regardless of age. Average Final Compensation (AFC) is one and a half times the average of the highest five years of the last ten years of credited service. Payments for used leave are not included in AFC. Each police officer member with less than 20 years of credited service will have a monthly normal retirement benefit in an amount equal to 2% of the member’s AFC multiplied by the member’s credited service preformed prior to June 1, 1992 and 2½% of the member’s AFC multiplied by the member’s credited service performed on and after June 1, 1992. For members who have completed 20 years of credited service as sworn police officers, instead of the amount described in the previous sentence, the member’s monthly normal retirement benefit shall be an amount equal to 3% of the member’s AFC multiplied by the member’s credited service plus 5% of AFC for service after 20 years to a maximum of 100% of the AFC upon completion of 28 years of service. Benefit provisions of the Plan may be amended by the City Council, but may not be reduced below the minimum specified by Florida Statutes, unless the plan stops receiving 175 and 185 funds. The Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing the Board of Trustees:

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City of Palm Bay, Florida Financial Section NOTE 9 – Employee Retirement Systems (Continued) B. Defined Benefit Palm Bay Police and Firefighter Plan (Continued)

2. Pension Benefits (Continued) Firefighter members: Tier One members Normal retirement shall be the earlier of attainment of (1) age 55, (2) completion of 25 years of credited service at 85% of AFC or 28 years regardless of age, or (3) age 52 with 25 years of credited service effective September 30, 2002. Average Final Compensation (AFC) is one and a half times the average of the highest five years of the last ten years of credited service. Payments for used leave are not included in AFC. Each firefighter member with less than 20 years of credited service will have a monthly normal retirement benefit in an amount equal to 2% of the member’s AFC multiplied by the member’s credited service performed prior to October 1, 1991, and 2½% of the member’s AFC multiplied by the member’s credited service performed on and after October 1, 1991. For members who have completed 20 years of credited service as firefighter, instead of the amount described in the previous sentence, the member’s monthly normal retirement benefit shall be an amount equal to 3% of the member’s AFC multiplied by the member’s credited service plus 5% of AFC for service after 20 years to a maximum of 100% of the AFC upon completion of 28 years of service. Tier Two members Normal retirement shall be the first day of the month coincident with or next following the completion of 25 years of credited regardless of age. Provided, however that a vested member who terminates prior to attaining 25 years of credited service shall be eligible for normal retirement benefits upon reaching age 55. Average Final Compensation (AFC) is one and a half times the average of the highest five years of the last ten years of credited service. Payments for unused leave are not included in AFC. Each firefighter with less than 20 years of credited service will have a monthly normal retirement benefit in an amount equal to 2 ½ of the member’s AFC multiplied by the member’s credited service. For members who have completed 20 years of credited service as a firefighter, instead of the amount described in the previous sentence, the member’s monthly normal retirement benefit shall be an amount equal to 3.2% of AFC for service after 20 years to a maximum of 90% of the AFC, excluding supplemental benefits. Deferred Retirement Option Plan (DROP): Effective September 30, 2000 for police officers and September 30, 2001 for firefighters, members who continue in employment past normal retirement date may either accrue larger pensions or freeze their accrued benefit and enter the DROP. Each participant in the DROP has an account credited monthly with benefits not received and quarterly with investment earnings net of expenses based on the Plan’s earnings. The DROP is administered by the Board of Trustees. Participation in the DROP is limited to 60 months. Supplemental Benefits Police officer members: Police officers who retire after October 1, 2006 receive a Supplemental Benefit equal to $25 per month times complete years of Credited Service. The benefit shall cease upon retiree reaching age 65. Members approved for disability retirement are ineligible for the supplemental retirement benefit.

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2. Pension Benefits – Supplementary Benefits (Continued) Firefighter members: Tier One members Firefighters receive a Supplemental Benefit of $189 per month payable over the life of the retiree only. Firefighters who retire on or after October 1, 2006, receive $458 per month, instead of $189. Firefighters who terminate after October 1, 2007, receive a Supplemental Benefit equal to $25 per month times years of credited service earned prior to March 15, 2012. Effective March 15, 2012, firefighters who have not attained age 55 with 10 or more years of credited service or 25 years of credited service regardless of age on that date who either terminate while vested or terminate upon reaching normal or early retirement shall receive a supplemental benefit of $12 per month for each year of credited service. The benefit shall cease upon retiree reaching the age of Medicare eligibility and members approved for disability retirement are ineligible for the supplemental retirement benefit.

Tier Two members Firefighters are eligible to receive a Supplemental Benefit of $12 per month for each year of credited service. The benefit shall commence upon entry into the DROP or upon receipt of a retirement benefit and separation from the City. This benefit shall only be payable over the life of the member, will cease upon member reaching the age of Medicare eligibility and members approved for disability retirement are ineligible for the supplemental retirement benefit. Cost of Living Adjustment: Police officer members: The Plan provides for cost-of-living adjustment to police officers who retire or enter the DROP on or after September 30, 2000. The retirement benefits will increase by 3% each year commencing with the September 30th following three years of retirement. Firefighter members: Tier One members The Plan provides for cost-of-living adjustment to firefighters who retire or enter the DROP on or after September 30, 2001. The retirement benefits will increase by 3% each year commencing with the September 30th following six years of retirement. Tier Two members The cost-of-living adjustment will increase by 2% commencing with September 30th following six years of retirement.

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3. Summary of Significant Accounting Policies Basis of Accounting: The financial statements of the Plan are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. The City’s contributions are recognized when due and a formal commitment to provide the contributions has been made. Contributions from the state of Florida consist of an excise tax imposed by the City upon certain casualty insurance companies or the gross amount of receipts of premiums from policyholders on all premiums collected on casualty insurance policies covering property within the City. These contributions are recognized when measurable and included as part of the City’s contribution. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. Method Used to Value Investments: Plan investments are reported at fair value using quoted market prices to value investments. Purchases and sales of investments are recorded on a trade-date basis. The Plan provides for investment in various including domestic equities, fixed income, international equities and real estate. Funded Status and Funding Progress: The funded status of the Plan as of September 30, 2012, the most recent actuarial valuation date is as follows:

UAAL as aActuarial Actuarial Actuarial % of Valuation Value of Accrued Liability Unfunded Funded Covered Covered

Date Assets (AAL) AAL (UAAL) Ratio Payroll Payroll10/01/12 135,844,085$ 166,536,696$ 30,692,611$ 81.57% 13,053,146$ 235.14%

The schedule of funding progress, presented as required supplementary information (“RSI”) following the notes to the financial statements, presents multilayer trend information about whether the actuarial value of the Plan assets is increasing or decreasing over time relative to the AAL for benefits. Actuarial Valuation: The most recent actuarial report was prepared as of October 1, 2012. Additional information as of the latest actuarial valuation includes: Actuarial cost method Entry Age Normal Amortization method Level percentage of Pay, Closed Remaining amortization period 30 years Asset valuation method 4 year smoothed Actuarial assumptions:

• Investment rate of return 8.0% • Projected salary increases 6.5% • Cost-of-living adjustments 3.0% • Inflation rate 4.0%

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NOTE 9 – Employee Retirement Systems (Continued) B. Defined Benefit Palm Bay Police and Firefighter Plan (Continued)

4. Funding Policy Florida Statutes, Chapters 175 and 185 require members to contribute not less than 0.5% of their annual salary. The Plan, as approved by the City Council, requires member police officers and firefighters to contribute 8.76% of their base annual salary. The City is required to contribute at an actuarially determined rate. The current required rate for police is 19.66% and for fire is 31.29% of annual covered payroll. The City contributed $2,781,773 in fiscal year 2013, which does not include funds received from the state from excise taxes as described below. Municipalities that have established pension plans complying with the provisions of Chapters 175 and 185, Florida Statutes, and that have enacted appropriate taxing legislation are eligible to receive revenues generated from excise taxes on gross receipts of certain insurance premiums from policyholders covering property within the City limits. These are the Firefighters’ Pension Fund Excise Tax imposed on the gross receipts of property insurance policy premiums and the Police Officers’ Pension Fund Excise Tax imposed on the gross receipts of casualty insurance policy premiums. The maximum allowable credit for fiscal year 2013 was $1,135,217. These revenues amounted to $1,195,740 for the year ended September 30, 2013, or 10.1% of annual covered payroll. Any excess premium taxes received from the state for which a credit is not taken goes into the Plan asset for the Plan. 5. Annual Pension Cost and Net Pension Asset Annual pension cost is a measure of the periodic cost of an employer’s participation in a defined benefit pension plan. The City’s annual pension cost for the past three years and related information for the plan is shown below:

State Net PensionYear Ended Internal Sources Sources Total % Contributed Obligation (Asset)

09/30/11 1,041,819$ 958,064$ 754,808$ 321.4% (41,507,935)$ 09/30/12 411,709 958,064 1,999,883 150.4% (43,278,207) 09/30/13 2,061,296 1,135,217 3,196,513 124.4% (35,729,499)

Employer Annual pension cost

The City’s annual pension cost and net pension asset (NPA) related to the Plan for the fiscal year ended September 30, 2013 is as follows:

Annual required contribution (ARC) 3,925,294$ Interest on net pension (asset) (2,795,880) Adjustment to ARC 10,396,807 Annual pension cost 11,526,221 Actual contributions 3,977,513 Decrease in net pension (asset) 7,548,708 Net pension (position) beginning of year (43,278,207) Net pension (position) at end of year (35,729,499)$

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City of Palm Bay, Florida Financial Section NOTE 9 – Employee Retirement Systems (Continued) C. Florida Retirement System On June 5, 2008, with the passing of Resolution 2008-55, the City authorized participation of its elected officials in the Florida Retirement System (“FRS”) administered by the State of Florida. Also approved was Resolution 2008-56 providing for membership in the FRS and authorizing execution of all necessary agreement with the administrator of the FRS for the purpose of extending benefits to elected officials of the City.

1. Plan Description The Florida Retirement System is a multiple employer cost sharing public employee retirement system, administered by the Florida Legislature and available to governmental units within Florida. The FRS provides vesting after six years of creditable service. Members are eligible for normal retirement after vesting (6 years or more creditable service for regular members). Early retirement may be taken anytime, but there is a five percent benefit reduction for each year prior to normal retirement age (less than 30 year’s service or 62 years of age for regular members). 2. Funding Policy Contributions to the FRS are made by the City as a percentage of covered payrolls. The required contribution rate in effect at year end was 33.03% for the elected officers’ class membership. Article X, Section 14 of the State Constitution and Part VII, Chapter 112 of the Florida Statutes provide the authority to amend the contribution rates and obligations. The City’s contributions for the Florida Retirement System during the year which were equal to the required contribution amounted to $3,790.

The FRS issues an annual report including a statement of financial condition, historical and statistical information and an actuarial report. A copy can be obtained from the State of Florida, Division of Retirement, Research, Education Section, 1317 Winewood Blvd., Tallahassee, Florida 32399-1560. D. Post-Employment Benefits Other Than Pensions (“OPEB”)

1. Plan Description The City of Palm Bay administers an employee group medical insurance plan (the “Plan”) that provides medical insurance benefits to its employees and their eligible dependents. In accordance with Section 112.0801 of the Florida Statutes, because the City provides a medical plan to active employees and their eligible dependents, the City is also required to provide retirees with the opportunity to participate in this Plan. Benefit provisions for the Plan are established and may be amended by the City Council. The retirees pay the full group premium amount for health insurance with no explicit subsidy from the City. The Plan does not issue a publicly available financial report.

2. Funding Policy Contribution rates for the Plan are established on an annual basis. Eligible retirees and their covered dependents receiving benefits contribute 100% of their premium costs for medical insurance. While the City does not directly contribute towards the costs of retiree premiums via an explicit subsidy, the ability of retirees to obtain health insurance coverage at a group rate which includes active employees constitutes a significant economic benefit to retirees, or an “implicit” subsidy. This implicit subsidy is considered to be an Other Post Employment Benefit (OPEB) obligation of the City. The City is currently funding this OPEB obligation on a pay-as-you-go basis, contributing only those amounts necessary to provide for its portion of current year benefit costs and expenses. For the year ended September 30, 2013, the City estimated it subsidized $187,452 of medical costs for its retirees and their covered dependents.

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NOTE 9 – Employee Retirement Systems (Continued) D. Post-Employment Benefits Other Than Pensions (“OPEB”) (Continued)

3. Annual OPEB Cost and Net OPEB Obligation The City’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (“ARC”), an amount actuarially determined in accordance with parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize an unfunded liability of the plan over a period not to exceed thirty years.

The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation to the City’s Plan, including the implicit rate subsidy for medical insurance:

.

Annual Required Contribution (ARC) 395,467$ Interest on net OPEB Obligation 80,538 Adjustment to annual required contribution 109,875 Annual OPEB cost (expense) 366,131 Contributions made 187,452 Increase in net OPEB obligation 178,679 Net OPEB obligation - beginning of year 1,789,741 Net OPEB obligation - end of year 1,968,420$

As of September 30, 2013, no trust has been established for the Plan. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the past three fiscal years, are presented below.

Fiscal YearEnded

9/30/20119/30/20129/30/2013

Percentage ofAnnual Annual OPEB Net OPEB

366,131 55% 1,968,420

OBEB Cost Costs Contributed Obligation

441,395 33% 1,789,741 426,571$ 25% 1,494,915$

The schedule of funding progress, presented as required supplementary information (“RSI”) following the notes to the financial statements, presents multilayer trend information about whether the actuarial value of the Plan assets is increasing or decreasing over time relative to the AAL for benefits. The actuarial valuation for the calculation of OPEB involves estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared to past experiences and new estimates are made about the future. As of September 30, 2013, the most recent actuarial valuation date, the accrued liability for benefits was $4,557,289 all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $37.0 million and the ratio of the unfunded actuarial liability (“UAL”) to covered payroll was 12.32%. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the date of valuation and the pattern of sharing of benefit costs between the employer and plan members to that point. Actuarial calculations reflect long-term perspective and employ methods and assumptions designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets,. In the September 30, 2013 actuarial valuation, the projected unit credit cost method was used. The annual required contribution (“ARC”) reflects a 30-year (closed), level amortization of the unfunded actuarial accrued liability (“AAL”). The actuarial assumptions included a 4.5% investment rate of return and 0% projected salary increases. Annual medical costs are assumed to decline gradually over the next several years from 6% at October 1, 2012, to an ultimate rate of 5% on and after 2013. The economic rates are based on assumed long-term medical inflation rate of 5% per annum.

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City of Palm Bay, Florida Financial Section NOTE 10 – Restricted Net Position The City maintains several special revenue funds to account for external and internal restrictions placed on revenue sources. In addition, the City has two debt service funds that account for proceeds that are restricted as to the repayment of bonds. A summary of restrictions that meet the criteria for restricted net position are as follows:

Governmental ActivitiesSpecial Revenue Funds: Law Enforcement Trust Fund Forfeited property accounted for and used according to Federal

and Florida laws 248,274$ Impact Fee Funds Levied pursuant to Florida Statutes, must be used for allowable

improvements2,794,624

Levied pursuant to County and City Ordinance, must be used for activities of the redevelopment agency 1,674,250

4,717,148

Debt Service Funds: Debt Service Funds Restricted pursuant to bond covenants for payment of principal and

interest 2,870,367

Total Restricted Net Position - Governmental Activities 7,587,515$

Business-type ActivitiesRenewal and Replacement Funds required to be placed in special construction accounts

pursuant to Bond Covenants 3,523,781$ Building Fund Funds required to be spent on building code activities pursuant to

Section 166.222, Florida Statues 1,105,845 Capital Improvements

Water and sewer connection fees and mainline extension charges pledged for repayment of bond debt incurred for capital expansion and system improvements 9,985,221

14,614,847$

Bayfront Community Redevelopment Agency

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City of Palm Bay, Florida Financial Section NOTE 11 – Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; information security and privacy; Law Enforcement Practices and natural disasters. The risk management program began on October 1, 1989. Historically under this program, the Risk Management Fund operated primarily as a self-insurance program. Coverage was provided by the Fund for up to a maximum of $350,000 for each worker's compensation claim; $250,000 for each general or auto liability claim; and $25,000 for each theft, disappearance and dishonesty claim. Historically, the Fund had also provided coverage up to a maximum of $25,000 for property damage claims (building and auto). Workers’ Compensation and General Liability claims open at the time of transition are administered by a third party. The prior coverage levels continue to apply to those claims Beginning March 1, 2009, the City purchased new coverage levels under which the Fund will only provide coverage up to a maximum of $1,000 for building claims and up to $500 for auto claims ($1000 for fire truck claims); damages in excess of these amounts are covered by commercial insurance carriers. Additionally, during the first quarter of fiscal year 2010, a decision was made to transition the remaining general liability, vehicle liability, and workers’ compensation lines of coverage from a self-insured program with the previously mentioned self-insured retentions, to an essentially fully-insured program with no-deductible coverage levels (vehicle liability and workers’ compensation). This change was effective for all claims dated January 1, 2010. General liability covers the first $100,000 as self-insured claims. Claims exceeding this threshold are under the umbrella of commercial coverage. Open claims for Worker’s Compensation and General Liability at the time of transition are currently administered by a third party and the prior coverage level remains in effect for those claims. All departments of the City participate in the program. Payments are made by various funds to the Risk Management Fund based on past experience and actuarial estimates of the amounts needed to pay prior and current year claims. The claims liability of $2,559,000 reported in the Risk Management Fund at September 30, 2013 is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City’s claims liability at year end is actuarially determined and includes incurred but not reported losses. Prior years' liabilities are undiscounted. Changes in the fund's claim liability are as follows:

Beginning of Fiscal Year

Liability

Claims and Changes in Estimates

Less Claims Payments

Balance at Fiscal Year

End

2010-2011 3,055,000$ 1,400,486$ (1,879,486)$ 2,576,000$ 2011-2012 2,576,000 676,330 (1,106,330) 2,146,000 2011-2013 2,146,000 1,394,700 (941,700) 2,599,000

The City maintains the Employee Benefit Internal Service Fund to account for the City's employee health care coverage program, which was self-insured by the City, beginning December 1996. In December 2010, the City moved the health care plan into a fully-insured program. Revenues are recognized from payroll deductions for employee paid coverage and from City contributions. At September 30, 2013, there was no liability recorded because there are no estimated claims due and unpaid. Changes in the claims liability are as follows:

Beginning of Fiscal Year

Liability

Claims and Changes in Estimates

Less Claims Payments

Balance at Fiscal Year

End

2010-2011 440,000$ 587,801$ (1,027,801)$ -$ 2011-2012 - (10,797) 10,797 - 2012-2013 - - - -

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NOTE 12 – Commitments and Contingencies Intergovernmental Grants - Amounts received or receivable from grantors are subject to audit and adjustment by grantor agencies, principally federal and state government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts to be immaterial. Litigation - Various suits and claims arising in the ordinary course of operations are pending against the City. While the ultimate effect of such litigation cannot be ascertained at this time, in the opinion of management, upon consultation with legal counsel, the City has sufficient insurance coverage to cover any claims and/or the liabilities that may arise from such action. The effect of such losses would not materially affect the financial position of the City or the results of its operations. Encumbrance – The City uses an encumbrance system as an extension of normal budgetary accounting for governmental funds. Under this system, purchase orders, contracts and other commitments are recorded in order to reserve the portion of applicable appropriations. Outstanding encumbrances at yearend are recorded as restricted, committed, or assigned fund balances, depending on the classification of the resources to be used to liquidate the encumbrance. Encumbrances outstanding as of September 30, 2013 are as follows:

Major Governmental FundsGeneral Fund 525,456$ Bayfront Community Redevelopment Agency 22,880

BCRA Construction 3,093

Community Investment Fund 348,324

Non-major Governmental Funds 8,045,548

8,596,977$

NOTE 13 – Prior Period Adjustment It was necessary to restate the financial results for the fiscal year ended September 30, 2012. Adherence to actuarially determined required contributions; despite a one-time stop/start State credit resulted in an overpayment of fire and police pension contributions totaling $934,175. This amount will be applied against the City’s actuarially determined contributions for fiscal year 2014. As such, the expenditures reduced the City’s fund balance in fiscal year 2012 and thus were restated to reflect a prepayment of contributions. NOTE 14 – Subsequent Events On November 26, 2013, the City issued Taxable Special Obligation Bond, Series 2013 in the amount $50,855,000. The purpose of the bond is to refund the City’s Taxable Special Obligation Bond (Pension Funding Project) Series 2008, outstanding balance of $38,098,832, and pay certain costs in connection with terminating the City’s adjoined interest rate SWAP agreement in the amount of $12,515,000. The City has pledged designated revenues in the form of Communications Services Tax and Public Service Tax in connection with this issuance.

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NOTE 15 – Other Required Disclosures New Pronouncements

GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, was issued November 2010. The objective of this Statement is to improve financial reporting by addressing issues related to service concession arrangements (SCAs), which are a type of public-private or public-public partnership. This Statement applies only to those arrangements in which specific criteria determining whether a transferor has control over the facility are met. This Statement also provides guidance for governments that are operators in an SCA. The requirements of this statement are effective for the fiscal year ending September 30, 2013. Management has determined that the impacts of this Statement are not applicable to the City. GASB Statement No. 61, The Financial Reporting Entity: Omnibus – an amendment of GASB Statements No. 14 and 34, was issued November 2010. This Statement modifies certain requirements for inclusion of component units in the financial reporting entity. This Statement amends the criteria for reporting component units as if they were part of the primary government (that is, blending) in certain circumstances. This Statement also clarifies the reporting of equity interests in legally separate organizations. It requires a primary government to report its equity interest in a component unit as an asset. The requirements of this statement are effective for the fiscal year ending September 30, 2013. Management has determined that the impacts of this Statement are not applicable to the City. GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, was issued December 2010. The objective of this Statement is to incorporate into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the American Institute of Certified Public Accountants’ (AICPA) Committee on Accounting Procedure. This Statement also supersedes Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, thereby eliminating the election provided in paragraph 7 of that Statement for enterprise funds and business-type activities to apply post-November 30, 1989 FASB Statements and Interpretations that do not conflict with or contradict GASB pronouncements. Management has determined that the provisions of this Statement did not have a material affect. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, was issued in June 2011. The Statement establishes a framework for reporting deferred outflows of resource, deferred inflows of resources. The statement standardizes the presentation of the deferred balances and their effects on government’s net position. The requirements of this statement are effective for the fiscal year ending September 30, 2013. The City implemented the provisions of this Statement effective for fiscal year ending September 30, 2013 GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This Statement provides guidance and establishes the accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflow of resources, certain items that were previously reported as assets and liabilities. The provisions of this Statement are effective for fiscal year ending September 30, 2014. GASB Statement No. 66, Technical Corrections – 2012 – An amendment of GASB Statements No. 10 and No. 62. This Statement is effective for the fiscal year ending September 30, 2014 GASB Statement No. 67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25, This Statement is effective for the fiscal year ending September 30, 2015. GASB Statement No. 68 Accounting and Financial Reporting for Pensions – an amendment to GASB Statement No. 27. This Statement is effective for the fiscal year ending September 30, 2016. Management has not determined the impact implementation of GASB 65 to GASB 68 will have on the City’s financial statements.

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REQUIRED SUPPLEMENTARY INFORMATION

Budgetary Comparison Schedules:

• General Fund • Bayfront Community Redevelopment Agency

Schedule of Funding Progress

• City of Palm Bay Retirement System • Other Post Employment Benefits

Notes to Required Supplementary Information

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City of Palm Bay, Florida Financial Section SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – GENERAL FUND For Fiscal Year Ended September 30, 2013

VarianceActual Positive

Original Final Amounts (Negative)REVENUES/TRANSFERS INTaxes: Ad Valorem 21,605,092$ 21,605,092$ 21,679,082$ 73,990$ Local Option Fuel 2,632,164 2,632,164 3,284,506 652,342 Utility Service 6,699,700 6,699,700 7,304,617 604,917 Communication Service 3,597,668 3,597,668 3,313,753 (283,915) Business Tax Receipts 531,500 531,500 529,015 (2,485)

35,066,124 35,066,124 36,110,973 1,044,849 Licenses and Permits: Franchise Fees 4,856,013 4,856,013 4,958,135 102,122 Other Licenses and Permits 11,800 11,800 11,951 151

4,867,813 4,867,813 4,970,086 102,273 Intergovernmental Revenues: Federal Grants 196,068 235,093 199,787 (35,306) Local Grants - 6,000 50,093 44,093 State Revenue Sharing 8,136,774 8,136,774 8,339,013 202,239 Shared Taxes and Licenses 22,000 22,000 30,231 8,231

8,354,842 8,399,867 8,619,124 219,257 Charges for Services: General Government Charges 303,202 303,202 406,596 103,394 Public Safety Charges 318,438 318,438 292,358 (26,080) Physical Environment Charges 189,100 189,100 195,192 6,092 Transportation Charges 316,418 316,418 422,674 106,256 Culture/Recreation Charges 134,800 134,800 198,282 63,482 Charges to Other Funds 1,429,514 1,429,514 1,429,513 (1)

2,691,472 2,691,472 2,944,615 253,143 Fines and Forfeitures: Court Fines and Costs 576,800 608,043 688,943 80,900

Miscellaneous Revenue: Investment income 20,000 20,000 13,977 (6,023) Rents 238,500 238,500 235,156 (3,344) Sales of Surplus 10,000 10,000 10,931 931 Contributions 25,000 25,000 28,654 3,654 Other Revenue 177,800 177,800 409,025 231,225

471,300 471,300 697,743 226,443 Other Sources: Capital Leases - 506,891 506,890 (1)

Transfers In: Code Enforcement Fund 20,000 20,000 20,000 - Debt Service Fund - 1,669 1,669 - AARA Grant Fund - 311 311 - Emergency Fund - 3,421 3,421 - Road Maintenance Fund - 11,126 11,126 - Utilities Operating Fund 1,212,636 1,212,636 1,212,636 - Employee Benefit Fund 1,800,000 1,800,000 1,800,000 -

3,032,636 3,049,163 3,049,163 -

Total Revenues and Transfers In 55,060,987 55,660,673 57,587,537 1,926,864

Budgeted Amounts


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City of Palm Bay, Florida Financial Section SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – GENERAL FUND (CONTINUED) For Fiscal Year Ended September 30, 2013


Original Final Amounts (Negative)EXPENDITURES/TRANSFERS OUTGeneral Government: Legislative: Personal Services 388,943 402,477 397,043 5,434 Operating 87,443 108,503 98,257 10,246 Contributions - - 75 (75)

476,386 510,980 495,375 15,605 City Manager: Personal Services 631,468 603,265 600,419 2,846 Operating 243,072 243,072 242,275 797

Contributions 50,000 50,000 23,509 26,491 924,540 896,337 866,203 30,134

City Attorney: Personal Services 471,929 483,757 496,893 (13,136) Operating 366,183 375,639 362,152 13,487

838,112 859,396 859,045 351 Finance: Personal Services 1,242,161 1,271,506 1,251,339 20,167 Operating 539,846 552,987 478,072 74,915

1,782,007 1,824,493 1,729,411 95,082 Information and Innovation: Personal Services 870,253 932,006 914,198 17,808 Operating 417,695 509,817 402,750 107,067

1,287,948 1,441,823 1,316,948 124,875 Human Resources: Personal Services 319,362 307,587 296,007 11,580 Operating 104,235 124,235 135,301 (11,066)

423,597 431,822 431,308 514 Growth Management: Personal Services 515,750 528,003 528,858 (855) Operating 17,365 32,495 18,290 14,205

533,115 560,498 547,148 13,350 Non-Departmental: Personal Services - - (44,351) 44,351 Operating 1,207,802 1,228,386 1,228,386 -

1,207,802 1,228,386 1,184,035 44,351

Total General Government 7,473,507 7,753,735 7,429,473 324,262

Budgeted Amounts


85

City of Palm Bay, Florida Financial Section SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – BUDGET AND ACTUAL – GENERAL FUND (CONTINUED) For Fiscal Year Ended September 30, 2013


Original Final Amounts (Negative)

Public Safety:Police: Personal Services 17,628,006 17,975,369 16,716,520 1,258,849 Operating 2,286,360 2,487,918 2,317,267 170,651

19,914,366 20,463,287 19,033,787 1,429,500 Fire: Personal Services 12,037,269 12,283,099 12,014,396 268,703 Operating 1,025,313 1,626,969 1,374,986 251,983

13,062,582 13,910,068 13,389,382 520,686 Code Compliance: Personal Services 528,922 541,380 509,946 31,434 Operating 53,292 53,292 46,664 6,628

582,214 594,672 556,610 38,062 Total Public Safety 33,559,162 34,968,027 32,979,779 1,988,248

Transportation: Public Works - Transportation Personal Services 3,030,874 3,056,578 2,867,658 188,920 Operating 1,906,498 1,971,132 1,902,396 68,736 Capital Outlay 26,000 66,000 28,137 37,863

Total Transportation 4,963,372 5,093,710 4,798,191 295,519

Culture/Recreation:Parks & Recreation: Personal Services 2,532,066 2,589,147 2,524,930 64,217 Operating 914,359 933,223 913,870 19,353 Capital Outlay 30,800 30,800 30,499 301

Total Culture / Recreation 3,477,225 3,553,170 3,469,299 83,871

Transfers Out:Capital Improvements Program - 425,000 425,000 - Debt Service Fund 2,432,277 2,403,094 2,383,533 19,561 Employeee Benefit Fund 1,200,000 1,200,000 1,200,000 - 08 Pension Obilgation Bond 1,741,800 1,788,422 1,788,422 - Community Investment Grant 631,243 631,243 - City Hall Annex CIP 11,580 11,580 - Total Transfers Out 5,374,077 6,459,339 6,439,778 19,561

Total Expenditures and Transfers Out 54,847,343 57,827,981 55,116,520 2,711,461

Excess (Deficiency) of Revenues and Transfers In Over (Under) Expendituresand Transfers Out 213,644$ (2,167,308)$ 2,471,017$ 4,638,325$

Fund Balance - Beginning of Year 9,534,785

Fund Balance - End of Year 12,005,802$

Budgeted Amounts

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BUDGETARY COMPARISON SCHEDULE BAYFRONT COMMUNITY REDEVELOPMENT AGENCY For the Year Ended September 30, 2013

Budget Actual AmountsREVENUES

Taxes 555,251$ 568,610$ 13,359$ Intergovernmental Revenues 1,917,937 528,000 (1,389,937) Investment Income 4,000 1,997 (2,003) Miscellaneous Revenue 22,366 22,064 (302)

Total Revenues 2,499,554 1,120,671 (1,378,883)


Economic Environment 360,105 344,740 15,365 Capital Outlay 1,611,076 64,219 1,546,857 Debt Service:

Principal Retirement 295,000 295,000 - Interest and Fiscal Charges 179,526 179,493 33

Total Expenditures 2,445,707 883,452 1,562,255

Excess (Deficiency) of Revenues Over (Under) Expenditures 53,847 237,219 183,372

Net Change in Fund Balance 53,847$ 237,219$ 183,372$

Fund Balance - Beginning 1,437,031

Fund Balance - Ending 1,674,250$

Variance with Budget - Positive

(Negative)

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CITY OF PALM BAY POLICE AND FIRE RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS September 30, 2013

UAAL as aActuarial Actuarial Actuarial % of Valuation Value of Accrued Liability Unfunded Funded Covered Covered

Date Assets (AAL) - Entry Age AAL (UAAL) Ratio Payroll Payroll

10/01/02 35,581,320$ 40,363,335$ 4,782,015$ 88.2% 9,388,878$ 50.9%10/01/03 37,883,803 46,908,663 9,024,860 80.8% 10,431,696 86.5%10/01/04 46,612,670 48,500,013 1,887,343 96.1% 10,830,507 17.4%10/01/05 50,800,889 63,507,631 12,706,742 80.0% 11,759,525 108.1%10/01/06 58,457,003 88,621,298 30,164,295 66.0% 14,180,452 212.7%10/01/07 102,992,988 106,889,425 3,896,437 96.4% 14,501,608 26.9%10/01/08 107,687,206 118,235,506 10,548,300 91.1% 14,990,500 70.4%10/01/09 110,134,959 129,957,312 19,822,353 84.8% 14,110,472 140.5%10/01/10 117,655,929 135,684,606 18,028,677 86.7% 12,664,561 142.4%10/01/11 123,717,617 154,627,903 30,910,286 86.7% 13,846,317 223.2%10/01/12 135,844,085 166,536,696 30,692,611 81.6% 13,053,146 235.1%

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City of Palm Bay, Florida Financial Section CITY OF PALM BAY OTHER POST EMPLOYMENT BENEFITS SCHEDULE OF FUNDING PROGRESS September 30, 2013

Actuarial UAAL as aActuarial Actuarial Accrued Liability Annual % of Valuation Value of (AAL) Projected Unfunded Percentage Covered Covered

Date Assets Unit Cost AAL (UAAL) Funded Payroll Payroll

2009 -$ 5,466,603$ 5,466,603$ 0.0% 43,336,833$ 12.61%2010 - 5,903,799 5,903,799 0.0% 45,070,307 13.10%2011 - 4,088,745 4,088,745 0.0% 34,213,764 11.95%2012 - 4,318,571 4,318,571 0.0% 35,582,315 12.14%2013 - 4,557,289 4,557,289 0.0% 37,005,607 12.32%

The above schedule reflects data for five years only due to this being the fifth year of implementation of GASB Statement No. 45.

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City of Palm Bay, Florida Financial Section NOTES TO REQUIRED SUPPLEMENTARY INFORMATION NOTE 1 – BUDGETARY REQUIREMENTS A. Budgetary Information The following procedures are used to establish the budgetary data reflected in the financial statements: 1) No later than August 10th of each year, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. 2) Public hearings are held to obtain taxpayer comments. 3) Prior to October 1, the budget is legally enacted through the passage of an ordinance. 4) Budgets are legally adopted and formal budgetary integration is employed as a management control device during the year for the general fund, all special revenue funds (except for the miscellaneous donations fund), all capital projects fund, and all debt service funds. The budgets adopted for the enterprise fund and internal service funds are for managerial control purposes. 5) Budgets for the governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). 6) The City Manager is authorized to transfer part or all of an unencumbered appropriation balance between activities of a department within a fund; however, any revisions that alter the total appropriations of any department or fund must be approved by the City Council. The classification detail at which expenditures may not legally exceed appropriations is at the fund level. During the fiscal year ended, various appropriations were approved in accordance with this policy. Budgeted amounts shown in the financial statements are as originally adopted and as further amended. 7) Appropriations lapse at the close of the fiscal year.

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91

OTHER SUPPLEMENTAL INFORMATION Budgetary Comparison Schedule:

• BCRA Construction Fund • Community Investment Fund

Nonmajor Governmental Funds:

Combining Financial Statements for All Nonmajor Governmental Funds and Individual Budgetary Comparison Schedules for All Budgeted Nonmajor Governmental Funds

92


93

City of Palm Bay, Florida Financial Section BUDGETARY COMPARISON SCHEDULE BCRA CONSTRUCTION FUND For the Year Ended September 30, 2013


Investment Income 20,000$ 4,867$ (15,133)$ Total Revenues 20,000 4,867 (15,133)


Capital Outlay 2,874,101 1,243,961 1,630,140 Total Expenditures 2,874,101 1,243,961 1,630,140

(Deficiency) of Revenues(Under) Expenditures (2,854,101) (1,239,094) 1,615,007

OTHER FINANCING SOURCES (USES)Transfers (Out) (4,950) (4,950) -

Total Other Financing Sources (4,950) (4,950) -

Net Change in Fund Balance (2,859,051)$ (1,244,044)$ 1,615,007$




(Negative)

94


BUDGETARY COMPARISON SCHEDULE COMMUNITY INVESTMENT FUND For the Year Ended September 30, 2013


Intergovernmental Revenues 18,189,496$ 9,604,184$ (8,585,312) Investment Income - 5 5 Miscellaneous Revenues - 13 13

Total Revenues 18,189,496 9,604,202 (8,585,294)


Physical Environment 88,698 990 87,708 Transportation 22,886 150,784 (127,898) Capital Outlay 22,341,092 10,594,442 11,746,650

Total Expenditures 22,452,676 10,746,216 11,706,460 (Deficiency) of Revenues

(Under) Expenditures (4,263,180) (1,142,014) 3,121,166

OTHER FINANCING SOURCES (USES)Transfers In 1,061,193 1,061,193 -

Total Other Financing Sources 1,061,193 1,061,193 -

Net Change in Fund Balance (3,201,987)$ (80,821)$ 3,121,166$

Fund Balance (Deficit) - Beginning (1,222,423)

Fund Balance (Deficit) - Ending (1,303,244)$


(Negative)

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96


NONMAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS

Special Revenue Funds account for revenues from specific taxes or other earmarked revenue sources which, by law are designated to finance particular functions or activities of government. The City has the following nonmajor special revenue funds: Law Enforcement Trust – This fund is used to account for proceeds obtained through the sale of confiscated and unclaimed property turned over to the City through court judgments. The proceeds are to be used solely for crime fighting purposes. Code Nuisance Fund – This fund is used to account for transactions related to properties with code violations where the owners are unwilling to abate the problems. SHIP Program – This fund is used to account for proceeds received from the State for the City’s State Housing Initiative Partnership (SHIP) program. Community Development Block Grant – This fund is used to account for proceeds received from a Housing and Community Development Grant program for common residential improvements. HOME Grant – This fund is used to account for the proceeds received from the State for the City’s HOME Grant. Miscellaneous Donations – This fund is used to account for proceeds received as donations to the Police, Fire and Parks Departments. ARRA Grant – The City used this fund to account for proceeds from the federal stimulus plan. The residual balance was transferred to General Fund in FY 2013. Emergency Fund – This fund was used to account for transactions related to the damages caused by three hurricanes during the 2004 fiscal year. The residual balance of $3,421 was transferred to the General Fund in FY 2013. Recreation Program Fund – This fund is used to account for the proceeds received for special recreation events; administered by the Parks and Recreation department. Impact Fee Trust – This fund is used to account for proceeds provided for the acquisition and/or improvement of urban district park facilities, police capital facilities, fire capital facilities, and the expansion of the City’s major road network system. Environmental Fee Fund – This fund is used to account for transactions related to the City’s Incidental Take Permit issued by the United States Fish and Wildlife Service. Sanitation Fund – This fund was used to account for transactions related to the billing and collection of Waste Management sanitation services. In FY 2013, the Sanitation Fund was converted to an Enterprise. Road Maintenance Fund – This fund was used to account for transactions related to the maintenance of existing roads. It was eliminated in FY13 since the required restricted/committed revenue source was no longer applicable. The residual balance of $11,126 was transferred to the General Fund.

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98


DEBT SERVICE FUNDS

The City has one debt service fund. They are used to account for the payment of principal and interest on outstanding general governmental revenue bonds. Debt Service Funds – This fund is used to account for the principal and interest payments of the Local Option Gas Tax Revenue Bonds, Series 2004; the Taxable Special Obligation Revenue Bonds, Series 2004; Sales Tax Revenue Bonds, Series 2006; Taxable Special Obligation Bonds, Series 2008; Public Service Tax Revenue Bonds, Series 2010; 2012 Public Service Tax Refunding Note, and debt service on capital leases. .

CAPITAL PROJECTS FUNDS

Community Investment 06 Bond CIP Fund – This fund is used to account for the proceeds of the 2006

Sales Tax Bond earmarked for community related capital improvement projects. City Hall Annex 10 Bond CIP Fund – This fund was used to account for the proceeds of the 2010 Sales Tax Bond earmarked for design, engineering and construction of the City Hall Annex Building. Construction was completed in FY 2011 and the residual balance of $11,580 was transferred to General Fund in FY 2013.

99

City of Palm Bay, Florida Financial Section COMBINING BALANCE SHEET ALL NONMAJOR GOVERNMENTAL FUNDS September 30, 2013

Law Enforcement

Trust Code Nuisance

Fund SHIP Program

Community Development Block Grant HOME Grant

ASSETSCash and Cash Equivalents 328,700$ -$ 734,061$ -$ -$ Investments - - - - - Restricted Cash and Equivalents - - - - - Accounts Receivable - - - 65,430 - Due from Other Governments - - - 410,260 38,765 Prepaid Items - - - 594 -

Total Assets 328,700$ -$ 734,061$ 476,284$ 38,765$


Accounts Payable 21,869$ 18,719$ 16$ 36,044$ 3,327$ Accrued Liabilities 3,474 - - 2,859 119 Due to Other Funds - 15,942 - 261,591 11,700 Advances to Other Funds - - - - - Due to Other Governments - - - - - Unearned Revenue 55,083 - 734,045 175,790 23,619

Total Liabilities 80,426 34,661 734,061 476,284 38,765

Fund Balances:Restricted 248,274 - - - - Committed - - - - - Assigned - - - - - Unassigned (Deficit) - (34,661) - - -

Total Fund Balances (Deficit) 248,274 (34,661) - - -

Total Liabilities andFund Balances 328,700$ -$ 734,061$ 476,284$ 38,765$

Special Revenue Funds

100


Misc. Donations ARRA Grant

Fund Emergency

Fund Recreation

Program Fund Impact Fee Trust

59,937$ -$ -$ 55,204$ 1,701,477$ - - - - 1,296,505 - - - - - - - - - 3,928 - - - - - - - - - -

59,937$ -$ -$ 55,204$ 3,001,910$

20$ -$ -$ -$ 207,286$ - - - - - - - - - - - - - - - - - - - - - - - - -

20 - - - 207,286

- - - - 2,794,624 - - - - - - - - - -

59,917 - - 55,204 - 59,917 - - 55,204 2,794,624

59,937$ -$ -$ 55,204$ 3,001,910$


101

City of Palm Bay, Florida Financial Section COMBINING BALANCE SHEET ALL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) For September 30, 2013

Debt Service Funds

Environmental Fee Fund Sanitation Fund

Road Maintenance

Fund Debt Service Funds ASSETS

Cash and Cash Equivalents 37,008$ -$ -$ 3,229,941$ Investments - - - 463,146 Restricted Cash and Equivalents - - - - Accounts Receivable - - - 739 Due from Other Governments - - - - Prepaid Items - - - -

Total Assets 37,008$ -$ -$ 3,693,826$


Accounts Payable -$ -$ -$ 15,828$ Accrued Liabilities - - - - Due to Other Funds - - - - Advances to Other Funds 644,000 - - - Due to Other Governments 20,137 - - - Unearned Revenue - - - -

Total Liabilities 664,137 - - 15,828

Fund Balances:Restricted - - - 3,677,998 Unassigned (Deficit) (627,129) - - -

Total Fund Balances (Deficit) (627,129) - - 3,677,998

Total Liabilities andFund Balances 37,008$ -$ -$ 3,693,826$


102


Community Investment 06

Bond CIP Fund

City Hall Annex 10 Bond CIP

Fund Total Nonmajor Governmental

Funds

416,591$ -$ 6,562,919$ - - 1,759,651 - - - - - 70,097 - - 449,025 - - 594

416,591$ -$ 8,842,286$

4,909$ -$ 308,018$ - - 6,452 - - 289,233 - - 644,000 - - 20,137 - - 988,537

4,909 - 2,256,377

411,682 - 7,132,578 - - (546,669)

411,682 - 6,585,909

416,591$ -$ 8,842,286$

Capital Project Funds

103


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2013

Law Enforcement

Trust Code Nuisance

Fund SHIP Program

Community Development Block Grant HOME Grant

REVENUESImpact Fees -$ -$ -$ -$ -$ Intergovernmental Revenues 91,500 - - 1,273,839 365,134 Charges for Services - 233,673 17,237 735,225 7,550 Fines and Forfeitures 102,928 - - - - Investment Income 421 - 409 - - Miscellaneous Revenues 25,770 - - 162 2 Total Revenues 220,619 233,673 17,646 2,009,226 372,686


General Government - - - - - Public Safety 242,319 180,764 - - - Transportation - - - - - Economic Environment - - 17,646 361,631 372,686 Culture/Recreation - - - - -

Debt Service:Principal Retirement - - - - - Interest and Fiscal Charges - - - - -

Capital Outlay 125,834 - - 1,647,595 - Total Expenditures 368,153 180,764 17,646 2,009,226 372,686

Excess (Deficiency) of Revenues Over (Under) Expenditures (147,534) 52,909 - - -

OTHER FINANCING SOURCES (USES)Transfers In - - - - - Transfers (Out) - (20,000) - - - Proceeds of Refunding Debt - - - - - Payment to Refunded Bond Escrow Agent - - - - - Total Other Financing Sources (Uses) - (20,000) - - -

(147,534) 32,909 - - -

Fund Balances (Deficit) - Beginning 395,808 (67,570) - - -

Fund Balances (Deficit) - Ending 248,274$ (34,661)$ -$ -$ -$


Net Change in Fund Balances

104


Misc. Donations ARRA Grant

Fund Emergency

Fund Recreation

Program Fund Impact Fee Trust

-$ -$ -$ -$ 720,155$ - - - - -

1,270 - - 9,602 - - - - - - - - - - 5,419

13,830 - - 43,005 288,120 15,100 - - 52,607 1,013,694

- - - - - - - - - - - - - - 333,412 - - - - -

16,337 - - 25,344 -

- - - - - - - - - - - - - - 73,847

16,337 - - 25,344 407,259

(1,237) - - 27,263 606,435

- - - - 12,466 - (311) (3,421) - (1,108,282) - - - - - - - - - - - (311) (3,421) - (1,095,816)

(1,237) (311) (3,421) 27,263 (489,381)

61,154 311 3,421 27,941 3,284,005

59,917$ -$ -$ 55,204$ 2,794,624$


105


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) For the Year Ended September 30, 2013

Debt Service Funds

Environmental Fee Fund Sanitation Fund

Road Maintenance

Fund Debt Service Funds REVENUESImpact Fees -$ -$ -$ -$ Intergovernmental Revenues - - - - Charges for Services 26,500 - - - Fines and Forfeitures - - - - Investment Income - - - 4,296 Miscellaneous Revenues - - - 137,253 Total Revenues 26,500 - - 141,549


General Government - - - 324,028 Public Safety - - - - Transportation - - - - Economic Environment - - - - Culture/Recreation - - - -

Debt Service:Principal Retirement - - - 1,922,335 Interest and Fiscal Charges - - - 3,039,666

Capital Outlay - - - - Total Expenditures - - - 5,286,029

Excess (Deficiency) of Revenues Over (Under) Expenditures 26,500 - - (5,144,480)

OTHER FINANCING SOURCES (USES)Transfers In - - - 5,118,817 Transfers (Out) (9,700) (298,942) (11,126) (18,965) Proceeds of Refunding Debt - - - 2,268,000 Payment to Refunded Bond Escrow Agent - - - (2,215,000) Total Other Financing Sources (Uses) (9,700) (298,942) (11,126) 5,152,852

16,800 (298,942) (11,126) 8,372

Fund Balances (Deficit) - Beginning (643,929) 298,942 11,126 3,669,626

Fund Balances (Deficit) - Ending (627,129)$ -$ -$ 3,677,998$


Net Change in Fund Balances

106


Community Investment 06

Bond CIP Fund

City Hall Annex 10 Bond CIP

Fund Total Nonmajor Governmental

Funds

-$ -$ 720,155$ - - 1,730,473 - - 1,031,057 - - 102,928

1,097 - 11,642 - - 508,142

1,097 - 4,104,397

- - 324,028 - - 423,083 - - 333,412 - - 751,963 - - 41,681

- - 1,922,335 - - 3,039,666

371,030 - 2,218,306 371,030 - 9,054,474

(369,933) - (4,950,077)

- 11,580 5,142,863 - - (1,470,747) - - 2,268,000 - - (2,215,000) - 11,580 3,725,116

(369,933) 11,580 (1,224,961)

781,615 (11,580) 7,810,870

411,682$ -$ 6,585,909$

Capital Project Funds

107

City of Palm Bay, Florida Financial Section BUDGETARY COMPARISON SCHEDULE LAW ENFORCEMENT TRUST For the Year Ended September 30, 2013

BudgetActual

AmountsREVENUES

Intergovernmental Revenues 88,000$ 91,500$ (3,500)$ Fines and Forfeitures - 102,928 102,928 Investment Income - 421 421 Miscellaneous Revenues - 25,770 25,770

Total Revenues 88,000 220,619 125,619


Public Safety 321,736 242,319 79,417 Capital Outlay 125,835 125,834 1

Total Expenditures 447,571 368,153 79,418

Excess (Deficiency) of Revenues Over (Under) Expenditures (359,571) (147,534) 212,037

Net Change in Fund Balance (359,571)$ (147,534) 212,037$

Fund Balance - Beginning 395,808

Fund Balance - Ending 248,274$


(Negative)

108


BUDGETARY COMPARISON SCHEDULE CODE NUISANCE FUND For the Year Ended September 30, 2013

BudgetActual

AmountsREVENUES

Charges for Services 235,000$ 233,673$ (1,327)$ Total Revenues 235,000 233,673 (1,327)


Public Safety 150,000 180,764 (30,764) Total Expenditures 150,000 180,764 (30,764)

Excess (Deficiency) of Revenues Over (Under) Expenditures 85,000 52,909 (32,091)

OTHER FINANCING USESTransfers (Out) (20,000) (20,000) -

Total Other Financing Uses (20,000) (20,000) -

Net Change in Fund Balance 65,000$ 32,909 (32,091)$

Fund Balance (Deficit) - Beginning (67,570)

Fund Balance (Deficit) - Ending (34,661)$


(Negative)

109


BUDGETARY COMPARISON SCHEDULE SHIP PROGRAM For the Year Ended September 30, 2013

BudgetActual

AmountsREVENUES

Intergovernmental Revenues 162,140$ -$ (162,140)$ Charges for Services 19,000 17,237 (1,763) Investment Income 300 409 109

Total Revenues 181,440 17,646 (163,794)


Economic Environment 198,924 17,646 181,278 Total Expenditures 198,924 17,646 181,278

(Deficiency) of Revenues(Under) Expenditures (17,484) - 17,484

Net Change in Fund Balance (17,484)$ - 17,484$

Fund Balance - Beginning -

Fund Balance - Ending -$


(Negative)

110

City of Palm Bay, Florida Financial Section BUDGETARY COMPARISON SCHEDULE COMMUNITY BLOCK DEVELOPMENT GRANT For the Year Ended September 30, 2013


Intergovernmental Revenues 551,264$ 1,273,839$ 722,575$ Charges for Services 684,000 735,225 51,225 Miscellaneous Revenue - 162 162

Total Revenues 1,235,264 2,009,226 773,962


Economic Environment 455,632 361,631 94,001 Capital Outlay 2,730,830 1,647,595 1,083,235

Total Expenditures 3,186,462 2,009,226 1,177,236

(Deficiency) of Revenues(Under) Expenditures (1,951,198) - 1,951,198

Net Change in Fund Balance (1,951,198)$ - 1,951,198$




(Negative)

111


BUDGETARY COMPARISON SCHEDULE HOME GRANT For the Year Ended September 30, 2013


Intergovernmental Revenues 485,881$ 365,134$ (120,747)$ Charges for Services - 7,550 7,550 Miscellaneous Revenues - 2 (2)

Total Revenues 485,881 372,686 (113,199)


Economic Environment 520,528 372,686 147,842 Total Expenditures 520,528 372,686 147,842

(Deficiency) of Revenues(Under) Expenditures (34,647) - 34,643

Net Change in Fund Balance (34,647)$ - 34,643$




(Negative)

112

City of Palm Bay, Florida Financial Section BUDGETARY COMPARISON SCHEDULE MISCELLANEOUS DONATIONS For the Year Ended September 30, 2013


Charges for Services -$ 1,270$ 1,270$ Miscellaneous Revenues - 13,830 13,830

Total Revenues - 15,100 15,100

EXPENDITURESPublic Safety - 16,337 (16,337)

Total Expenditures - 16,337 (16,337)

Excess of Revenues Over Expenditures - (1,237) (1,237)

Net Change in Fund Balance -$ (1,237) (1,237)$




(Negative)

113


BUDGETARY COMPARISON SCHEDULE ARRA FUND For the Year Ended September 30, 2013


Intergovernmental Revenues -$ -$ -$ Total Revenues - - -


Physical Environment - - - Capital Outlay - - -

Total Expenditures - - -

Excess of Revenues Over Expenditures - - -

OTHER FINANCING SOURCES (USES)Transfers (Out) (311) (311) -

Total Other Financing Sources and (Uses) (311) (311) -

Net Change in Fund Balance (311)$ (311) -$

Fund Balance - Beginning 311



(Negative)

114


BUDGETARY COMPARISON SCHEDULE EMERGENCY FUND For the Year Ended September 30, 2013


Intergovernmental Revenues -$ -$ -$ Total Revenues - - -


General Government 12,344 - 12,344 Total Expenditures 12,344 - 12,344

Excess of Revenues Over Expenditures (12,344) - 12,344

OTHER FINANCING SOURCES (USES)Transfers (Out) (3,421) (3,421) -

Total Other Financing (Uses) (3,421) (3,421) -





(Negative)

115


BUDGETARY COMPARISON SCHEDULE RECREATION PROGRAM FUND For the Year Ended September 30, 2013

BudgetActual

AmountsREVENUES

Charges for Services 22,000$ 9,602$ (12,398)$ Miscellaneous Revenues - 43,005 43,005

Total Revenues 22,000 52,607 30,607


Culture/Recreation 12,344 25,344 (13,000) Total Expenditures 12,344 25,344 (13,000)

Excess of Revenues Over Expenditures 9,656 27,263 17,607

Net Change in Fund Balance 9,656$ 27,263 17,607$




(Negative)

116


BUDGETARY COMPARISON SCHEDULE IMPACT FEE TRUST For the Year Ended September 30, 2013


Impact Fees 1,010,000$ 720,155$ (289,845)$ Investment Income 20,000 5,419 (14,581) Miscellaneous Revenues - 288,120 288,120

Total Revenues 1,030,000 1,013,694 (16,306)


Transportation 889,741 333,412 556,329 Capital Outlay 1,974,437 73,847 1,900,590

Total Expenditures 2,864,178 407,259 2,456,919 (Deficiency) of Revenues

(Under) Expenditures (1,834,178) 606,435 2,440,613

OTHER FINANCING SOURCES (USES)Transfers In 10,866 12,466 1,600 Transfers (Out) (759,982) (1,108,282) (348,300)

Total Other Financing Uses (749,116) (1,095,816) (346,700)

Net Change in Fund Balance (2,583,294)$ (489,381) 2,093,913$




(Negative)

117


BUDGETARY COMPARISON SCHEDULE ENVIRONMENTAL FEE For the Year Ended September 30, 2013


Charges for Services 9,500$ 26,500$ 17,000$ Total Revenues 9,500 26,500 17,000


Physical Environment - - - Total Expenditures - - -

Excess of RevenuesOver Expenditures 9,500 26,500 17,000

OTHER FINANCING (USES)Transfers (Out) (9,500) (9,700) (200)

Total Other Financing (Uses) (9,500) (9,700) (200)

Net Change in Fund Balance -$ 16,800 16,800$


Fund Balance (Deficit) - Ending (627,129)$


(Negative)

118


BUDGETARY COMPARISON SCHEDULE SANITATION FUND For the Year Ended September 30, 2013


Charges for Services -$ -$ -$ Interest Income - - -

Total Revenues - - -


Transportation - - - Capital Outlay - - - Debt Service:

Principal Retirement - - - Interest and Fiscal Charges - - -

Total Expenditures - - -

Excess (Deficiency) of Revenues Over (Under) Expenditures - - -

OTHER FINANCING SOURCESTransfers (Out) (300,000) (298,942) 1,058

Total Other Financing Sources (300,000) (298,942) 1,058





(Negative)

119

City of Palm Bay, Florida Financial Section BUDGETARY COMPARISON SCHEDULE ROAD MAINTENANCE FUND For the Year Ended September 30, 2013


Taxes -$ -$ -$ Total Revenues - - -


Transportation - - - Total Expenditures - - -

Excess (Deficiency) of Revenues Over (Under) Expenditures - - -

OTHER FINANCING SOURCESTransfers (Out) (11,126) (11,126) -

Total Other Financing Sources (11,126) (11,126) -

Net Change in Fund Balance (11,126)$ (11,126) -$




120


BUDGETARY COMPARISON SCHEDULE DEBT SERVICE FUNDS For the Year Ended September 30, 2013


Investment Income -$ 4,296$ 4,296$ Miscellaneous Revenue 130,739 137,253 6,514

Total Revenues 130,739 141,549 10,810


General Government 323,845 324,028 (183) Debt Service:

Principal Retirement 1,972,651 1,922,335 50,316 Interest and Fiscal Charges 2,996,395 3,039,666 (43,271)

Total Expenditures 5,292,891 5,286,029 6,862

(Deficiency) of Revenues (Under) Expenditures (5,162,152) (5,144,480) 17,672

OTHER FINANCING SOURCES (USES) Transfers In 5,127,579 5,118,817 (8,762)

Transfers (Out) (17,365) (18,965) (1,600) Proceeds of Refunding Debt 37,395 2,268,000 2,230,605 Payment to Refunded Bond Escrow Agent - (2,215,000) (2,215,000)

Total Other Financing Sources (Uses) 5,147,609 5,152,852 5,243

Net Change in Fund Balance (14,543)$ 8,372 22,915$




(Negative)

121


BUDGETARY COMPARISON SCHEDULE COMMUNITY INVESTMENT 06 BOND CIP FUND For the Year Ended September 30, 2013

BudgetActual

AmountsREVENUES

Investment Income -$ 1,097$ 1,097$ Total Revenues - 1,097 1,097

EXPENDITURESCurrent:General Government - - Capital Outlay 782,319 371,030 411,289

Total Expenditures 782,319 371,030 411,289 (Deficiency) of Revenues

(Under) Expenditures (782,319) (369,933) 412,386




Variance with Budget -

Positive (Negative)

122


BUDGETARY COMPARISON SCHEDULE CITY HALL ANNEX 10 BOND CIP FUND For the Year Ended September 30, 2013


Investment Income -$ -$ -$ Total Revenues - - -

EXPENDITURESCapital Outlay - - -

Total Expenditures - - - (Deficiency) of Revenues

(Under) Expenditures - - -

OTHER FINANCING SOURCES (USES)Transfer In 11,580 11,580 -

Total Other Financing Sources 11,580 11,580 -

Net Change in Fund Balance 11,580$ 11,580 -$




123


NONMAJOR ENTERPRISE FUNDS

Enterprise Funds are used to account for the acquisition, operation and maintenance of government facilities and services, which are entirely or predominantly self-supported, by user fee and charges. The operations of Enterprise Funds are accounted for in such a manner as to show a profit or loss similar to comparable private enterprises. The City maintains the following Nonmajor Enterprise Funds:

Building Inspection Fund – This fund is used to account for building-related activities within the City. Revenues are primarily generated by user licenses and permits. Sanitation Fund – This fund is used to account for residential solid waste collection services administered by the City in partnership with Waste Management. Stormwater Utility Fund – This fund is used to account stormwater services in the City. .

124


COMBINING STATEMENT OF NET POSITION NONMAJOR ENTERPRISE FUNDS September 30, 2013

Building Inspection Fund

Stormwater Utility Fund

Sanitation Fund


ASSETSCurrent Assets:

Cash and Cash Equivalents 640,232$ 1,237,029$ 668,489$ 2,545,750$ Restricted Cash and Cash Equivalents - - 285,051 285,051 Accounts Receivable - (Net) 263 2,019,193 495,865 2,515,321 Advances to Other Funds 644,000 - - 644,000 Prepaid Items 116 838 182 1,136 Total Current Assets 1,284,611 3,257,060 1,449,587 5,991,258

Noncurrent Assets:Capital Assets:

Land - 19,802 - 19,802 Construction in Progress - 35,460 - 35,460 Machinery, Equipment and Vehicles - 14,173 2,560,000 2,574,173

Less: Accumulated Depreciation - - (768,000) (768,000) Total Capital Assets (Net) - 69,435 1,792,000 1,861,435

Total Noncurrent Assets - 69,435 1,792,000 1,861,435

Total Assets 1,284,611 3,326,495 3,241,587 7,852,693

LIABILITIESCurrent Liabilities:

Accounts Payable 29,345 32,855 694,491 756,691 Accrued Liabilities 13,968 52,115 5,312 71,395 Unearned Revenues - 2,019,193 - 2,019,193 Capital Leases Payable - - 241,855 241,855 Compensated Absences Payable 8,953 32,862 1,468 43,283

Current Liabilities Payable fromRestricted Assets:

Customer Deposits - - 285,051 285,051

Total Current Liabilities 52,266 2,137,025 1,228,177 3,417,468

Noncurrent Liabilities:Capital Leases Payable - - 1,640,823 1,640,823 Net OPEB Obligation 79,503 57,774 1,787 139,064 Compensated Absences Payable 46,997 172,524 7,706 227,227 Total Noncurrent Liabilities 126,500 230,298 1,650,316 2,007,114

Total Liabilities 178,766 2,367,323 2,878,493 5,424,582

NET POSITION

Net Investment in Capital Assets - 69,435 151,177 220,612 Restricted:

Building Inspection Fund 1,105,845 - - 1,105,845 Unrestricted - 889,737 211,917 1,101,654

Total Net Position 1,105,845$ 959,172$ 363,094$ 2,428,111$

125


COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION NONMAJOR ENTERPRISE FUNDS September 30, 2013

Building Inspection Fund

Stormwater Utility Fund

Sanitation Fund


Operating Revenues:Charges for Services:

Stormwater -$ 3,841,847$ -$ 3,841,847$ Sanitation 5,122,688 5,122,688 User Fees 194,992 - - 194,992

Licenses and Permits 941,793 38,073 - 979,866 Miscellaneous Income 6,490 5,288 402 12,180 Total Operating Revenues 1,143,275 3,885,208 5,123,090 10,151,573

Operating Expenses:Personal Services 567,922 2,570,439 286,302 3,424,663 Material, Supplies, and Operating expenses 134,209 837,735 4,438,795 5,410,739 Depreciation 1,090 - 256,000 257,090

Total Operating Expenses 703,221 3,408,174 4,981,097 9,092,492

440,054 477,034 141,993 1,059,081

Nonoperating Revenues (Expenses):

Interest Expense and Fiscal Charges - - (69,647) (69,647) Sale of Capital Assets 1,657 - - 1,657

Total Nonoperating Revenues 1,657 - (69,647) (67,990) (Expenses)

Income Before Contributions 441,711 477,034 72,346 991,091 and Transfers

Transfers In (Out) 9,700 (33,287) 290,748 267,161 Change in Net Position 451,411 443,747 363,094 1,258,252

Total Net Position - Beginning 654,434 515,425 - 1,169,859

Total Net Position - Ending 1,105,845$ 959,172$ 363,094$ 2,428,111$


126


STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS For Fiscal Year Ended September 30, 2013

Building Inspection

Fund Stormwater

Fund Sanitation

Fund Total Cash Flows from Operating ActivitiesReceipts from Customers and Users 1,143,356$ 3,885,208$ 4,912,276$ 9,940,840$ Payments to Suppliers (159,894) (831,088) (3,739,174) (4,730,156) Payments to Employees (562,697) (2,543,457) (275,341) (3,381,495)

Net Cash Provided byOperating Activities 420,765 510,663 897,761 1,829,189

Cash Flows from NoncapitalFinancing ActivitiesTransfers to Other Funds - (33,287) (8,194) (41,481) Transfers from Other Funds 9,700 - 298,942 308,642

Net Cash Provided (Used) by9,700 (33,287) 290,748 267,161

Cash Flows from Capital and Related Financing ActivitiesAcquisition/Construction of Capital Assets 2,064 (49,633) (2,048,000) (2,095,569) Principal Paid on Capital Debt - - (233,630) (233,630) Interest Paid on Capital Debt - - (69,647) (69,647) Acquisition of capital lease 2,116,308 2,116,308 Proceeds from Sale of Capital Assets 1,656 - - 1,656

Net Cash (Used) by Capital and3,720 (49,633) (234,969) (280,882)

Net Increase (Decrease) in Cash andCash Equivalents 434,185 427,743 953,540 1,815,468

Cash and Cash Equivalents atBeginning of Year 206,047$ 809,286$ -$ 1,015,333

Cash and Cash Equivalents atEnd of Year 640,232$ 1,237,029$ 953,540$ 2,830,801$

Cash and Cash Equivalents Classified As:Current Assets 640,232$ 1,237,029$ 668,489$ 2,545,750$ Restricted Assets - - 285,051 285,051

Total Cash and Cash Equivalents 640,232$ 1,237,029$ 953,540$ 2,830,801$




NonMajor Enterprise Funds

127 127


STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS (CONTINUED) For Fiscal Year Ended September 30, 2013

Building Inspection

Fund Stormwater

Fund Sanitation

Fund Total

Reconciliation of Operating Income (Loss) toNet Cash Provided by (Used in) OperatingActivitiesOperating Income (Loss) 440,055$ 477,034$ 141,993$ 1,059,082$

Depreciation 1,090 - 256,000 257,090 Change in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable 81 (552,089) (495,865) (1,047,873) (Increase) Decrease in Prepaid Expenses (60) (838) (182) (1,080) Increase (Decrease) in Accounts Payable 376 (4,003) 694,491 690,864 Increase (Decrease) in Accrued Liabilities 3,121 5,021 5,312 13,454 Increase in Customer Deposits - - 285,051 285,051 Increase in OPEB Obligation 1,787 26,802 1,787 30,376 Increase (Decrease) in Compensated Absences (25,685) 6,647 9,174 (9,864) (Decrease) Unearned Revenue - 552,089 - 552,089

Total Adjustments (19,290) 33,629 755,768 770,107

Net Cash Provided by OperatingActivities 420,765$ 510,663$ 897,761$ 1,829,189$


128


INTERNAL SERVICE FUNDS

Internal Service Funds account for the financing of goods and services provided by one department or agency to other departments or agencies of the government and to other government units on a cost reimbursement basis.

Risk Management – This fund is used to account for the expenses incurred for workers’ compensation claims, general and auto liability claims and property damage claims and the related administrative expenses to operate the City’s risk management program. Revenues are generated by charges to the various departments and funds based on past experience and actuarial estimates.

Employee Benefit – This fund is used to account for expenses incurred for insured and self-insured benefits under the City’s Section 125 “cafeteria” benefits plan maintained for City employees. Fleet Services – This fund is used to account for the fiscal activity related to meeting the automotive and other vehicular needs of the City. This fund purchase vehicles, maintains them and charges user departments for the vehicular usage.

129

City of Palm Bay, Florida Financial Section COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS September 30, 2013

Risk Management

Employee Benefit Fleet Services Total

ASSETSCurrent Assets:

Cash and Cash Equivalents 448,836$ 736,344$ 911,700$ 2,096,880$ Accounts Receivable (Net) - 91,571 12,212 103,783 Inventory - - 240,299 240,299 Prepaid Items 607,166 - 245 607,411

Total Current Assets 1,056,002 827,915 1,164,456 3,048,373 Capital Assets:

Machinery, Equipment and Vehicles - - 8,361,101 8,361,101 Less Accumulated Depreciation - - (7,032,524) (7,032,524)

Total Capital Assets (Net) - - 1,328,577 1,328,577 Total Assets 1,056,002 827,915 2,493,033 4,376,950

LIABILITIESCurrent Liabilities:

Accounts Payable 50,375 656,330 150,254 856,959 Accrued Liabilities 9,987 98,153 20,075 128,215 Capital Leases Payable - - 26,640 26,640 Compensated Absences Payable - - 18,089 18,089 Estimated Claims Payable 409,440 - - 409,440

Total Current Liabilities 469,802 754,483 215,058 1,439,343

Noncurrent Liabilities:Capital Leases Payable - - 27,658 27,658 Net OPEB Obligation - - 38,602 38,602 Compensated Absences Payable - - 94,965 94,965 Estimated Claims Payable 2,149,560 - - 2,149,560 Advances from Other Funds - - 1,565,000 1,565,000

Total Noncurrent Liabilities 2,149,560 - 1,726,225 3,875,785 Total Liabilities 2,619,362 754,483 1,941,283 5,315,128

NET POSITIONNet Investment in Capital Assets - - 1,274,279 1,274,279 Unrestricted (Deficit) (1,563,360) 73,432 (722,529) (2,212,457)

Total Net Position (Deficit) (1,563,360)$ 73,432$ 551,750$ (938,178)$

130

City of Palm Bay, Florida Financial Section COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS For the Year Ended September 30, 2013

Risk Management

Employee Benefit

FleetServices Total

Operating Revenues:Charges for Services 2,973,917$ 9,666,322$ 2,968,067$ 15,608,306$ Miscellaneous Revenues 721 837 26,967 28,525

Total Operating Revenues 2,974,638 9,667,159 2,995,034 15,636,831

Operating Expenses:Personal Services 439,828 1,311,029 898,958 2,649,815 Contracted Services 22,050 81,230 5,375 108,655 Supplies and Materials 4,358 - 2,009,043 2,013,401 Repairs and Maintenance - - 247,840 247,840 Other Services and Charges 2,158 4,224 22,275 28,657 Claims/Premium Expense 2,167,777 7,982,248 - 10,150,025 Depreciation - - 882,520 882,520

Total Operating Expenses 2,636,171 9,378,731 4,066,011 16,080,913

338,467 288,428 (1,070,977) (444,082)

Nonoperating Revenues (Expenses)Interest Income - - 1,140 1,140 Interest Expense - - (80,454) (80,454) Intergovernmental Revenues - - 49,260 49,260 Sale of Capital Assets - - 162,783 162,783 Gain (Loss) on Disposal of Capital Assets - - (10,398) (10,398)

Total Nonoperating Revenues(Expenses) - - 122,331 122,331

Income (Loss) Before Transfers 338,467 288,428 (948,646) (321,751)

Transfers In - 1,200,000 166,250 1,366,250 Transfers (Out) - (1,800,000) - (1,800,000)

Change in Net Position 338,467 (311,572) (782,396) (755,501)

Total Net Position (Deficit) - Beginning (1,901,827) 385,004 1,334,146 (182,677)

Total Net Position (Deficit) - Ending (1,563,360)$ 73,432$ 551,750$ (938,178)$


131


COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended September 30, 2013

Risk Management


Cash Flows from Operating ActivitiesReceipts from Customers and Users 2,981,633$ 9,644,243$ 2,982,822$ 15,608,698$ Payments to Suppliers (2,505,969) (8,065,108) (2,363,187) (12,934,264) Payments to Employees (26,828) (1,311,029) (907,856) (2,245,713)

Net Cash Provided byOperating Activities 448,836 268,106 (288,221) 428,721

Cash Flows from NoncapitalFinancing ActivitiesInterfund Advances - - (120,000) (120,000) Intergovernmental Revenues - - 49,260 49,260 Transfers (to) from Other Funds - (600,000) 166,250 (433,750)

Net Cash Provided (Used) by- (600,000) 95,510 (504,490)

Cash Flows from Capital and Related Financing ActivitiesAcquisition/Construction of Capital Assets - - (52,385) (52,385) Principal Paid on Capital Debt - - (25,660) (25,660) Interest Paid on Capital Debt - - (80,454) (80,454)

Net Cash (Used) by Capital and- - (6,114) (6,114)

Cash Flows from Investing ActivitiesInterest Income on Investments - - 1,140 1,140

Net Cash Provided (Used) ByInvesting Activities - - 1,140 1,140

Net (Decrease) in Cash andCash Equivalents 448,836 (331,894) (197,685) (80,743)

Cash and Cash Equivalents atBeginning of Year - 1,068,238 1,109,385 2,177,623

Cash and Cash Equivalents atEnd of Year 448,836$ 736,344$ 911,700$ 2,096,880$

Cash and Cash Equivalents Classified As:Current Assets 448,836$ 736,344$ 911,700$ 2,096,880$

Total Cash and Cash Equivalents 448,836$ 736,344$ 911,700$ 2,096,880$




132


COMBINING STATEMENT OF CASH FLOWS (CONTINUED) INTERNAL SERVICE FUNDS For the Year Ended September 30, 2013

Risk Management


Reconciliation of Operating Income (Loss) toNet Cash Provided by (Used in) OperatingActivitiesOperating Income (Loss) 338,467$ 288,428$ (1,070,977)$ (444,082)$

Depreciation - - 882,520 882,520 Change in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable 6,995 (22,916) (12,212) (28,133) (Increase) Decrease in Inventories - - 23,960 23,960 (Increase) Decrease in Prepaid Expenses (86,663) - (245) (86,908) Increase (Decrease) in Accounts Payable (227,223) 50,616 (104,945) (281,552) Increase (Decrease) in Accrued Liabilities 4,260 (48,022) 2,576 (41,186) Increase (Decrease) in OPEB Obligation - - 3,573 3,573 Increase (Decrease) in Compensated Absences - - (12,471) (12,471) Increase (Decrease) in Claims Payable 413,000 - - 413,000

Total Adjustments 110,369 (20,322) 782,756 872,803

Net Cash Provided (Used) by OperatingActivities 448,836$ 268,106$ (288,221)$ 428,721$

There are no noncash investing, capital, and financing activities.


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STATISTICAL SECTION FINANCIAL TRENDS These schedules contain tend information to help the reader understand how the City’s financial performance and condition have changed over time.

1. Net Position by Component 2. Changes in Net Position 3. Fund Balances of Governmental Funds 4. Changes in Fund Balances, Governmental Funds

REVENUE CAPACITY These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax.

5. Assessed and Estimated Actual Value of Taxable Property 6. Direct and Overlapping Property Tax Rates 7. Principal Taxpayers 8. Property Tax Levies Valuations and Collections

DEBT CAPACITY These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the ability to issue additional debt in the future.

9. Ratios of Outstanding Debt 10. Direct and Overlapping Debt 11. Pledged Revenue Coverage

DEMOGRAPHIC, ECONOMIC AND OPERATING INFORMATION These schedules offer demographic and economic indicators in addition to service and infrastructure data to help the reader understand the environment within which the City’s financial activities take place and how the information in the report relates to services provided and activities performed.

12. Demographic and Economic Statistics 13. Principal Employers 14. FTEs of Government Employees 15. Capital Asset Statistics 16. Operating Indicators by Function/Program

OTHER These schedules offer additional financial information and the data required to be disclosed for the City’s outstanding debt.

17. Impact Fee Revenues 18. Utilities Debt Service Applicable to Transportation 19. Historical Public Service Tax Collections 20. Gallons of Fuel Sold 21. LOGT Revenues 22. Debt Service Coverage 23. Rate Comparison with Other Cities 24. Largest Water and Wastewater System Customers

ADDITIONAL NOTES The following schedules were omitted because they do not apply to the City:

Ratios of General Bonded Debt Outstanding Legal Debt Margin Information

The City has not issued General Bonded Debt for the last (10) years. Neither the City Charter or Code, nor the Florida Statutes limit the amount of debt the City can issue, therefore tables showing the legal debt limit and debt margins are not applicable.

135


136

Schedule 1

City of Palm Bay, Florida Statistical Section NET POSITION BY COMPONENT Last Ten Fiscal Years (Accrual Basis of Accounting)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Governmental ActivitiesNet Investment in Capital Assets 38,676,828$ 41,430,421$ 49,080,259$ 55,772,824$ 36,132,923$ 39,382,891$ 45,103,439$ 64,944,616$ 62,197,018$ 66,933,138$ Restricted 9,331,439 13,917,720 6,221,866 9,967,111 16,765,888 13,186,748 11,054,682 8,965,925 7,900,735 7,587,515 Unrestricted 10,139,534 9,780,952 10,521,037 (1,981,340) 12,438,266 9,530,166 9,184,015 (4,638,406) 47,211 (3,145,670)

Total Governmental Activities Net Position 58,147,801$ 65,129,093$ 65,823,162$ 63,758,595$ 65,337,077$ 62,099,805$ 65,342,136$ 69,272,135$ 70,144,964$ 71,374,983$

Business-Type ActivitiesNet Investment in Capital Assets 13,559,512$ 19,409,943$ 19,495,173$ 27,892,942$ 27,930,259$ 37,816,839$ 43,159,143$ 48,685,483$ 60,343,032$ 62,299,381$ Restricted 21,767,331 24,196,148 27,048,699 28,448,684 24,283,483 23,554,282 18,902,136 14,989,123 14,318,054 14,614,847 Unrestricted 17,259,069 20,955,870 17,259,069 24,254,476 27,415,051 20,824,288 21,647,095 20,437,168 9,337,659 8,798,590

Total Business-Type Activities Net Position 52,585,912$ 64,561,961$ 63,802,941$ 80,596,102$ 79,628,793$ 82,195,409$ 83,708,374$ 84,111,774$ 83,998,745$ 85,712,818$

Primary GovernmentNet Investment in Capital Assets 52,236,340$ 60,840,364$ 68,575,432$ 83,665,766$ 64,063,182$ 77,199,730$ 88,262,582$ 113,630,099$ 122,540,050$ 129,232,519$ Restricted 31,098,770 35,755,470 33,270,565 38,415,795 41,049,371 36,741,030 29,956,818 23,955,048 22,218,789 22,202,362 Unrestricted 27,398,603 33,095,220 42,265,510 22,273,136 39,853,317 30,354,454 30,831,110 15,798,762 9,384,870 5,652,920

Total Primary Government Net Position 110,733,713$ 129,691,054$ 144,111,507$ 144,354,697$ 144,965,870$ 144,295,214$ 149,050,510$ 153,383,909$ 154,143,709$ 157,087,801$

Fiscal Year

Source: City of Palm Bay Finance Department

137

Schedule 2

City of Palm Bay, Florida Statistical Section CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013ExpensesGovernmental Activities:

General Government 5,628,952$ 7,712,242$ 10,595,965$ 12,351,486$ 12,379,684$ 10,488,716$ 8,294,658$ 9,660,449$ 7,838,165$ 15,899,479$ Public Safety 31,849,404 29,465,950 34,127,984 38,161,047 34,673,552 36,258,434 34,825,258 37,294,661 33,687,869 33,939,602 Physical Environment 5,412,527 4,986,585 2,203,826 1,171,817 1,258,063 1,208,284 555,383 490,105 872,935 769,669

Transportation 10,062,724 12,524,590 11,501,663 12,721,189 12,887,696 11,440,490 13,021,454 13,676,102 12,984,446 9,036,843 Economic Environment 1,376,496 1,895,703 3,708,233 3,707,562 3,478,848 3,080,806 1,228,397 2,360,314 1,576,831 2,337,960 Culture/Recreation 3,756,448 3,655,638 7,298,226 11,575,119 11,181,805 10,279,722 9,601,349 8,992,328 3,890,650 3,899,965 Interest on Long-Term Debt 271,149 847,383 2,003,301 3,737,766 4,825,864 5,835,068 4,888,851 4,449,497 3,441,661 3,149,007

Total Governmental Activities Expenses 58,357,700 61,088,091 71,439,198 83,425,986 80,685,512 78,591,520 72,415,350 76,923,456 64,292,557 69,032,525

Business-Type Activities:Water and Wastewater 16,151,556 15,905,946 18,626,397 20,767,536 22,436,363 22,821,351 24,197,960 24,178,305 23,238,071 22,726,306 Building Inspections 1,786,847 1,940,512 2,457,202 2,861,371 2,597,130 2,223,127 1,233,060 892,279 712,026 703,220 Stormwater - - - - - - - 3,564,481 3,164,194 3,408,174 Sanitation - - - - - - - - - 5,050,744

Total Business-Type Activities Expenses 17,938,403 17,846,458 21,083,599 23,628,907 25,033,493 25,044,478 25,431,020 28,635,065 27,114,291 31,888,444

Total Primary Government Expenses 76,296,103$ 78,934,549$ 92,522,797$ 107,054,893$ 105,719,005$ 103,635,998$ 97,846,370$ 105,558,521$ 91,406,848$ 100,920,969$

Program RevenuesGovernmental Activities:

Charges for Services:General Government 3,612,836$ 2,812,495$ 2,743,816$ 2,755,122$ 2,814,961$ 2,847,118$ 2,799,160$ 2,739,313$ 2,902,743$ 2,927,501$ Public Safety 1,007,021 569,674 2,703,711 1,782,292 1,790,158 2,026,650 2,167,865 1,453,430 1,383,344 1,269,430 Physical Environment 113,513 124,775 162,775 115,428 127,513 111,135 135,167 4,979,119 5,136,773 223,441

Transportation 3,962,223 5,061,525 2,528,538 3,220,267 3,095,516 715,740 782,820 1,884,626 1,055,081 952,387 Economic Environment 312,984 395,154 732,432 636,839 597,228 1,348,931 687,998 45,299 27,433 72,764 Culture/Recreation 549,108 555,486 873,664 1,125,600 1,309,147 5,790,251 5,322,674 5,674,661 259,619 336,261

Operating Grants and Contributions 5,600,308 7,820,760 5,634,609 9,812,445 10,484,540 5,586,975 7,310,174 6,585,450 3,139,324 1,938,613 Capital Grants and Contributions 816,983 1,035,040 1,084,291 1,295,525 1,211,333 1,733,106 574,722 469,643 610,535 10,132,184

Total Governmental Activities Program Revenues 15,974,976 18,374,909 16,463,836 20,743,518 21,430,396 20,159,906 19,780,580 23,831,541 14,514,852 17,852,581

Business-Type Activities:Charges for Services 20,693,638 23,985,796 23,918,034 23,296,325 22,952,062 22,200,034 23,477,022 27,765,064 26,861,196 33,812,755 Operating Grant and Contributions - - - - 183,392 24,862 - 54,425 - Capital Grants and Contributions 4,827,251 7,021,363 8,330,153 3,649,686 2,502,916 6,374,906 4,505,547 3,078,516 921,157 259,698

Total Business-Type Activities Program Revenues 25,520,889 31,007,159 32,248,187 26,946,011 25,454,978 28,758,332 28,007,431 30,843,580 27,836,778 34,072,453

Total Primary Government Program Revenues 41,495,865$ 49,382,068$ 48,712,023$ 47,689,529$ 46,885,374$ 48,918,238$ 47,788,011$ 54,675,121$ 51,925,034$

Net (Expense)/RevenueGovernmental Activities (42,382,724)$ (42,713,182)$ (54,975,362)$ (62,682,468)$ (59,255,116)$ (58,431,614)$ (52,634,770)$ (53,091,915)$ (49,777,705)$ (51,179,944)$ Business-Type Activities 7,582,486 13,160,701 11,164,588 3,317,104 421,485 3,713,854 2,576,411 2,208,515 722,487 2,184,009

Total Primary Government Net Expense (34,800,238)$ (29,552,481)$ (43,810,774)$ (59,365,364)$ (58,833,631)$ (54,717,760)$ (50,058,359)$ (50,883,400)$ (49,055,218)$ (48,995,935)$

Fiscal Year

138

Schedule 2

City of Palm Bay, Florida Statistical Section

Schedule 2

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013General Revenues and Other Changes in Net PositionGovernmental Activities:

Property Taxes 17,680,912$ 19,967,983$ 23,286,570$ 25,941,327$ 27,335,274$ 25,912,020$ 27,399,051$ 24,606,678$ 22,759,737$ 22,247,692$ Franchise Fees 4,214,318 4,979,300 6,147,254 6,261,214 6,212,976 6,361,164 5,731,594 5,281,867 4,935,960 4,958,135 Utility Service Taxes 5,213,947 5,675,238 6,045,059 6,223,557 6,138,775 6,317,399 6,847,450 6,732,890 6,865,192 7,304,617 Communication Service Taxes 2,942,378 3,093,611 3,384,027 3,579,131 4,452,802 3,766,126 3,739,028 3,521,956 3,446,340 3,313,753 State Revenue Sharing 7,134,745 9,033,573 2,614,660 2,643,050 7,414,286 6,932,441 6,966,869 7,221,568 7,633,919 8,282,875 Municipal Fuel Tax 2,660,589 2,791,627 8,327,998 7,858,684 2,389,461 2,421,074 2,369,610 2,390,212 3,105,994 3,284,506 Investment Earnings 435,438 805,534 2,136,330 3,670,356 1,885,623 518,729 305,744 122,491 90,002 33,628 Miscellaneous 850,428 759,457 182,370 333,071 1,270,735 415,116 322,372 637,595 486,691 1,146,588 Transfers 1,127,300 2,588,151 3,545,370 4,107,511 3,379,970 2,550,273 2,195,383 2,480,899 1,326,699 903,994

Total Governmental Activities 42,260,055 49,694,474 55,669,638 60,617,901 60,479,902 55,194,342 55,877,101 52,996,156 50,650,534 51,475,788

Business-Type Activities: Investment Earnings 982,409 1,361,781 2,871,579 3,082,050 1,951,287 1,386,789 1,163,855 649,777 473,724 399,973

Miscelleneous - 41,718 36,382 16,114 39,889 16,246 (31,918) 26,007 17,459 34,085 Transfers (1,127,300) (2,588,151) (3,545,370) (4,107,511) (3,379,970) (2,550,273) (2,195,383) (2,480,899) (1,326,699) (903,994)

Total Business-Type Activities (144,891) (1,184,652) (637,409) (1,009,347) (1,388,794) (1,147,238) (1,063,446) (1,805,115) (835,516) (469,936)

Total Primary Government 42,115,164$ 48,509,822$ 55,032,229$ 59,608,554$ 59,091,108$ 54,047,104$ 54,813,655$ 51,191,041$ 49,815,018$ 51,005,852$

Special Item -$ -$ -$ -$ -$ -$ -$ 4,025,658$ -$

Change in Net PositionGovernmental Activities (122,669)$ 6,981,292$ 694,276$ (2,064,567)$ 1,224,786$ (3,237,272)$ 3,242,331$ 3,929,999$ 872,829$ 295,844$ Business-Type Activities 7,437,595 11,976,049 10,527,179 2,307,757 (967,309) 2,566,616 1,512,965 403,400 (113,029) 1,714,073

Total Primary Government 7,314,926$ 18,957,341$ 11,221,455$ 243,190$ 257,477$ (670,656)$ 4,755,296$ 4,333,399$ 759,800$ 2,009,917$

Fiscal Year


139

Schedule 3

City of Palm Bay, Florida Statistical Section FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013General Fund

Reserved 38,993$ 32,736$ 42,765$ 102,494$ 75,216$ 34,259$ 20,932$ -$ -$ -$ Unreserved 8,200,825 10,240,950 12,856,324 8,468,675 5,839,920 6,653,481 5,769,980 - - -

Nonspendable - - - - - - - 7,836 5,743 1,647,185 Assigned - - - - - - - 1,539,853 1,525,044 525,456 Unassigned - - - - - - - 4,530,160 7,069,823 9,833,161

Total General Fund 8,239,818$ 10,273,686$ 12,899,089$ 8,571,169$ 5,915,136$ 6,687,740$ 5,790,912$ 6,077,849$ 8,600,610$ 12,005,802$

All Other Governmental FundsReserved -$ -$ 3,887,224$ 17,710,408$ 18,045,827$ 16,479,904$ 14,891,522$ -$ -$ -$ Unreserved, reported in: 9,265,107 7,658,296 7,898,355 6,541,669 1,224,581 2,169,036 535,780 - - -

Special Revenue Funds 4,562,022 8,637,907 5,597,785 6,207,813 11,063,763 8,770,729 9,221,859 - - - Debt Service Funds 1,850,358 2,544,667 1,420,241 2,499,421 4,505,645 3,528,314 3,246,773 - - - Capital Projects Funds 1,474,688 2,735,146 13,041,321 21,908,906 14,067,769 9,167,355 7,903,411 - - - Nonspendable - - - - - - - - - - Restricted - - - - - - - 16,747,649 12,669,953 10,664,652 Committed - - - - - - - 11,126 11,126 - Assigned - - - - - - - 201,780 391,769 - Unassigned - - - - - - - (917,839) (1,945,502) (1,849,913)

Total All Other Governmental Funds 17,152,175$ 21,576,016$ 31,844,926$ 54,868,217$ 48,907,585$ 40,115,338$ 35,799,345$ 16,042,716$ 11,127,346$ 8,814,739$

Fiscal Year

The City implemented the provisions of GASB 54 in fiscal year 2011. Fiscal years prior to 2011 have not been retroactively restated. Source: City of Palm Bay Finance Department

140

Schedule 4

City of Palm Bay, Florida Statistical Section CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Revenues

Taxes 32,712,144$ 36,507,759$ 41,477,570$ 44,648,280$ 40,572,979$ 39,099,824$ 41,039,594$ 37,925,252$ 36,710,391$ 36,679,583$ Impact Fees 2,730,981 3,669,210 3,019,348 3,866,131 3,582,210 965,755 960,804 1,027,028 372,457 720,155 Licenses and Permits 999,969 1,229,168 664,489 672,806 6,224,611 6,395,039 5,760,068 5,304,766 4,955,478 4,970,086 Intergovernmental Revenues 11,589,848 19,154,607 16,074,081 18,770,124 18,231,502 18,131,733 18,122,233 18,295,184 11,413,620 20,481,781 Charges for Services 4,436,335 3,810,723 3,587,459 3,582,326 3,884,461 4,159,430 3,292,144 8,684,082 9,237,360 3,975,672 Fines and Forfeitures 663,115 718,253 1,939,240 963,720 1,007,287 1,294,766 1,577,268 1,020,034 1,011,608 791,871 Investment Income 435,438 805,534 1,782,997 3,287,437 1,716,830 484,511 291,246 121,702 88,203 32,488 Contributions - - - - - 1,412,220 1,704,617 1,281,897 - - Miscellaneous Revenues 850,428 759,457 970,821 994,983 2,701,459 793,161 659,167 994,753 745,030 1,213,985

Total Revenues 54,418,258 66,654,711 69,516,005 76,785,807 77,921,339 72,736,439 73,407,141 74,654,698 64,534,147 68,865,621

ExpendituresGeneral Government 6,302,920 8,129,853 9,339,363 10,789,021 46,800,984 9,949,203 9,127,668 9,337,427 7,526,638 7,753,501 Public Safety 31,235,905 28,856,962 31,547,473 34,387,867 35,076,923 34,201,555 34,312,623 34,586,291 32,154,990 33,402,862 Physical Environment 5,370,706 5,237,873 2,088,324 946,157 1,072,281 991,306 301,606 211,012 92,382 990 Transportation 7,066,740 8,505,845 8,479,315 9,333,319 9,176,293 8,041,241 9,413,087 9,642,321 9,429,373 5,282,387 Economic Environment 1,376,496 1,892,049 3,704,580 3,703,908 3,475,194 3,079,893 1,228,397 1,733,091 1,574,094 1,096,703 Culture/Recreation 3,647,398 3,983,335 6,741,094 10,752,234 10,320,295 9,377,080 8,585,222 7,714,253 3,392,219 3,510,980

Debt Service:Bond Principal Retirement 1,885,000 2,194,032 2,627,567 1,427,666 1,838,015 2,368,676 3,682,804 16,351,987 2,221,789 2,217,335 Interest and Fiscal Charges 271,149 847,383 1,315,073 3,275,808 4,679,932 5,668,839 4,768,607 4,518,073 3,339,325 3,219,159 Bond Issue Costs - - - 427,809 1,116,931 2,000 - 133,096 - -

Capital Improvements 3,224,443 3,593,297 21,963,354 20,536,615 13,003,559 9,067,321 11,389,623 14,314,045 6,696,831 14,120,928 Total Expenditures 60,380,757 63,240,629 87,806,143 95,580,404 126,560,407 82,747,114 82,809,637 98,541,596 66,427,641 70,604,845

Excess of Revenues Over (Under)Expenditures (5,962,499) 3,414,082 (18,290,138) (18,794,597) (48,639,068) (10,010,675) (9,402,496) (23,886,898) (1,893,494) (1,739,224)

Other Financing Sources (Uses)Transfers In 6,627,516 8,778,292 15,252,113 11,146,679 13,660,907 10,333,769 10,967,555 9,474,108 7,048,290 9,253,219 Transfers (Out) (6,739,716) (6,716,821) (11,876,343) (7,542,101) (12,223,856) (8,645,122) (9,802,172) (8,117,209) (7,547,405) (7,915,475) Issuance of Debt 13,071,447 - 21,100,000 34,396,033 38,345,000 - - 5,485,000 - - Proceeds of Refunding Debt - - - - - - - - - 2,268,000 Proceeds From Capital Leases 114,543 982,156 6,000,000 145,832 240,352 302,655 3,024,022 - - 506,890 Payment to Refunded Bond Escrow Agent - - - - - - - - - (2,215,000)

Total Other Financing Sources 13,073,790 3,043,627 30,475,770 38,146,443 40,022,403 1,991,302 4,189,405 6,841,899 (499,115) 1,897,634

Special Item - - - - - - - (2,424,693) - -

Net Change in Fund Balances 7,111,291$ 6,457,709$ 12,185,632$ 19,351,846$ (8,616,665)$ (8,019,373)$ (5,213,091)$ (19,469,692)$ (2,392,609)$ 158,410$

Debt Service as a Percentage of Noncapital Expenditures 3.89% 5.01% 5.91% 6.62% 6.72% 10.90% 12.46% 24.33% 9.36% 9.73%

Fiscal Year

General Government expenditures in fiscal year 2008 include $36.2 million in pension obligation debt that was used to discharge the unfunded actuarial accrued liability of the Police and Firefighter’s retirement plan. Bond principal retirement in fiscal year 2011 includes the prepayment of the Palm Bay Road Loan fund. Source: City of Palm Bay Finance Department

141

Schedule 5


ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years

Fiscal Year Total Less: Total Taxable Total

Ended Centrally Real Personal Estimated Tax Exempt Assessed Direct TaxSeptember 30 Assessed Property Property Actual Value Property Value Rate

2013 2,339,055$ 3,974,742,930$ 302,825,423$ 4,279,907,408$ 1,640,796,077$ 2,639,111,331$ 8.6326

2012 2,845,608 3,742,718,710 299,963,912 4,045,528,230 1,531,329,937 2,514,198,293 9.0000

2011 3,045,632 3,881,723,920 267,824,965 4,152,594,517 1,565,788,444 2,586,806,073 7.5000

2010 2,922,219 4,807,504,670 312,268,802 5,122,695,691 1,787,027,471 3,335,668,220 6.8165

2009 3,242,757 5,803,424,830 350,996,460 6,157,664,047 2,099,481,373 4,058,182,674 5.3000

2008 3,349,136 7,363,902,660 337,146,083 7,704,397,879 2,657,033,779 5,047,364,100 4.7429

2007 3,372,809 8,062,779,760 343,715,447 8,409,868,016 2,564,030,503 5,845,837,513 4.6000

2006 2,884,076 8,167,219,240 326,850,925 8,496,954,241 2,772,105,494 5,724,848,747 5.9804

2005 2,519,971 5,877,004,770 463,017,733 6,342,542,474 2,341,142,304 4,001,400,170 6.9900

2004 2,416,325 3,959,754,460 327,704,191 4,289,874,976 1,359,490,452 2,930,384,524 7.5301

Source: Brevard County Property Appraiser

142

Schedule 6


PROPERTY TAX RATES – DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years

Total Debt Total Direct and

Fiscal Operating Service Direct Operating School Special Overlapping Year Millage Millage Rates Millage District Districts Rates

2013 8.6326 - 8.6326 6.3979 7.6060 0.4752 23.1117

2012 9.0000 9.0000 6.5199 8.1120 0.4782 24.1101

2011 7.5000 - 7.5000 5.8249 7.6530 0.5627 21.5406

2010 6.8165 - 6.8165 5.1077 7.6870 0.5627 20.1739

2009 5.3000 - 5.3000 5.2628 7.6610 0.5627 18.7865

2008 4.7429 - 4.7429 5.2210 7.5310 0.5627 18.0576

2007 4.6000 - 4.6000 5.5370 7.6670 0.6600 18.4640

2006 5.5740 0.4064 5.9804 5.3781 7.9630 0.7197 20.0412

2005 6.4308 0.5592 6.9900 6.0030 8.1940 0.8181 22.0051

2004 6.8356 0.6945 7.5301 6.4340 8.4050 0.8500 23.2191

City of Palm Bay Direct Rates Brevard County

Source: Brevard County Tax Collector

143

Schedule 7


PRINCIPAL PROPERTY TAXPAYERS September 30, 2013

Percentage PercentageTaxes of Total Taxes of Total

Taxpayers Assessed Rank Taxes Levied Assessed Rank Taxes Levied

Harris Corporation 275,346$ 1 1.2% 239,074$ 1 1.3%

WSL Glenbrooke Investors V LLC 117,065 2 0.5% - -

Intersil Corporation 116,540 3 0.5% 186,493 2 1.0%

Federal National Mortgage 101,822 4 0.4% - -

Palm Bay Shopping Plaza LLC 94,959 5 0.4% - -

Vinings Palm Bay Investment 86,697 6 0.4% - -

Wal-Mart Stores East LP 70,787 7 0.3% - -

Bayside Lakes LLP 65,392 8 0.3% - -

Sutton Properties of Palm Bay 64,695 9 0.3% - -

CSFB 2004-C3 Lighthouse Point 63,752 10 0.3% - -

Creative Choice Homes XXV LTD 62,673 11 0.3% - -

Rivera Terrace Properties LLC 61,421 12 0.3% - -

Palm Bay Improvements LLC 59,820 13 0.3% - -

Malabar Associated, Ltd 59,399 14 0.3% - -

H F Partnership LLP 59,133 15 0.3% 56,591 8 0.3%

Palm Bay Vista Preserve LLC 57,415 16 0.3% - -

Palm Bay Partners LLC 52,745 17 0.2% - -

Southern Malabar Cove LLC 47,005 18 0.2%

HR Acquisition I Corporation 48,904 19 0.2% - -

Portfolio Real Estate Palm Bay 48,641 20 0.2% - -

Edens & Avant - - - 145,979 3 0.8%

SAGE Living Center of Palm Bay - - - 78,977 4 0.4%

LBK 3 LP - - - 67,523 5 0.4%

Lighthouse Pointe Project - - - 59,163 6 0.3%

Vestcor Fund Xll Ltd - - - 57,234 7 0.3%

Moallem, David - - - 54,183 9 0.3%

Capstone Capital Corporation - - - 54,147 10 0.3%

Total 1,614,210$ 7.1% 999,364$ 5.6%

2013 2004

Source: Brevard County Tax Collector

144

Schedule 8


PROPERTY TAX VALUATIONS, LEVIES AND COLLECTIONS Last Ten Fiscal Years

FiscalYear Total Tax

Ended Levy for Collections inSeptember 30 Fiscal Year Amount % of Levy Subsequent Years Amount % of Levy

2013 23,752,002$ 21,817,153$ 91.9% $430,539 22,247,692$ 93.7%

2012 23,274,819 22,608,173 97.1% 151,563 22,759,737 97.8%

2011 25,012,443 24,376,725 97.5% 299,953 24,676,678 98.7%

2010 27,672,368 26,742,020 96.6% 657,032 27,399,052 99.0%

2009 26,663,652 25,099,966 94.1% 812,054 25,912,020 97.2%

2008 27,706,586 25,821,447 93.2% 1,513,827 27,335,274 98.7%

2007 26,301,541 24,662,850 93.8% 1,278,477 25,941,327 98.6%

2006 23,952,792 22,924,832 95.7% 361,837 23,286,670 97.2%

2005 20,505,724 19,840,712 96.8% 127,271 19,967,983 97.4%

2004 17,985,158 17,333,055 96.4% 347,856 17,680,911 98.3%

Collected within theFiscal Year of the Levy Total Collections to Date


145

Schedule 9

City of Palm Bay, Florida Statistical Section RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years

Business-Type Activities

Municipal Local Option Taxable Special Sales Tax BCRA PST FMLC % ofFiscal Service Tax Gas Tax Obligation Revenue Capital Notes Loan Comm Paper Utility Total Primary Personal Per Year Bonds Bonds Bonds Bonds Leases Payable Payable Notes Revenue Bonds Government Income Capita

2013 5,485,000$ 4,455,000$ 42,999,258$ 16,285,000$ 606,146$ 4,170,000$ 2,268,000$ -$ 63,561,079$ 139,829,483$ 6.56% 1,336

2012 8,370,000 4,905,000 43,226,447 16,665,000 2,436,369 4,465,000 - - 68,586,012 148,653,828 7.37% 1,434

2011 9,015,000 5,340,000 43,351,447 17,030,000 2,827,874 4,750,000 - - 73,234,911 155,549,232 7.59% 1,503

2010 4,150,000 5,755,000 43,421,447 17,380,000 23,861,281 5,020,000 - 13,981,000 95,658,103 209,226,831 9.71% 2,023

2009 4,745,000 6,160,000 43,506,447 17,720,000 21,405,525 5,280,000 - 15,498,000 100,344,685 214,659,657 10.14% 2,096

2008 5,310,000 6,560,000 43,701,447 18,045,000 21,694,100 5,530,000 - 15,498,000 104,567,561 220,906,108 10.83% 2,155

2007 5,855,000 6,945,000 5,371,447 18,365,000 21,808,038 5,770,000 - 15,498,000 108,601,249 188,213,734 9.32% 1,849

2006 6,380,000 7,320,000 5,376,447 - 21,975,363 6,000,000 - - 112,258,833 159,310,643 8.93% 1,648

2005 6,885,000 7,695,000 5,376,447 - 1,102,667 - - - 97,293,733 118,352,847 6.87% 1,288

2004 7,370,000 - - - 114,543 - - - 100,606,388 108,090,931 6.66% 1,220


General Obligation Debt: The City has had no general obligation debt in the past eight years Debt Limitation: The City does not have a legal debt limit The City implemented GASB 44 in fiscal year 2005. This statement did not require retroactive reporting for additional years prior to statement implementation. Source: City of Palm Bay Finance Department

146

Schedule 10


COMPUTATIONOF DIRECT AND OVERLAPPING BONDED DEBT – GENERAL OBLIGATION BONDS September 30, 2013

Assessed Net Debt City's ShareTaxing District Valuation Outstanding Overlapping of Debt

Brevard County 24,626,876,502$ 115,970,192$ 10.50% 12,181,504$

City of Palm Bay Governmental Activities Direct DebtBonds Payable 68,506,836Notes Payable 5,384,000

Capital Leases 382,876 74,273,712

Total Direct and Overlapping Governmental Activities Debt 86,455,216$

Notes: Based on 2013 estimated taxable assessed valuation. The percentage of overlapping debt is estimated using taxable property values. The calculation was derived by Dividing the City’s total taxable value by the total outstanding debt for Brevard County Sources: City of Palm Bay Finance Department Brevard County Finance Department

147

Schedule 11


PLEDGED REVENUE COVERAGE Last Ten Fiscal Years

NetFiscal Operating Operating AvailableYear Revenue (1) Expenses (2) Revenue Principal Interest Coverage

2013 23,869,662$ 12,972,795$ 10,896,867$ 4,874,933$ 3,679,346$ 1.27

2012 23,351,079 12,772,311 10,578,768 4,503,899 3,396,741 1.34

2011 23,092,830 11,926,644 11,166,186 4,728,192 3,894,598 1.29

2010 23,521,722 12,148,574 11,373,148 4,546,582 4,373,963 1.27

2009 22,093,387 11,751,890 10,341,497 4,152,876 4,250,357 1.23

2008 22,582,007 12,252,791 10,329,216 4,033,688 4,268,957 1.24

2007 23,027,583 11,248,146 11,779,437 3,657,584 4,281,261 1.48

2006 21,351,081 10,031,914 11,319,167 3,374,900 4,233,965 1.49

2005 18,790,548 8,776,803 10,013,745 3,187,655 3,618,966 1.47

2004 17,698,180 9,987,789 7,710,391 2,169,736 3,563,105 1.34

Water and Sewer System Revenue Bonds

Debt Service

Notes: (1) Operating Revenue includes interest income. (2) Direct Operating Expenses are operating expenses excluding depreciation and amortization. This table does not include the full provisions of the bond covenants. Source: City of Palm Bay Finance Department

148

Schedule 12


DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Years

Personal EducationIncome Per Capita Median Level in Years School Unemployment

Year Population (thousands) Income Age of Schooling Enrollment Rate

2013 104,693 2,130,607$ 20,351$ 39.9 14.0 14,386 7.4%

2012 103,681 2,017,529 19,459$ 38.7 14.1 14,422 9.4%

2011 103,504 2,048,448 19,791 38.9 14.1 13,386 10.3%

2010 103,422 2,155,004 20,837 38.0 14.1 14,677 12.1%

2009 102,397 2,117,774 20,682 38.1 13.9 14,612 11.9%

2008 102,519 2,040,231 19,901 38.1 13.9 15,014 7.3%

2007 101,793 2,019,878 19,843 38.0 13.9 14,130 5.0%

2006 96,683 1,858,924 19,227 37.8 13.9 13,348 3.7%

2005 91,888 1,723,543 18,757 37.6 13.9 12,920 3.4%

2004 88,572 1,622,196 18,315 37.5 13.9 12,916 5.0%

Sources: Florida Department of Education Bureau of Economics and Business Research, University of Florida US Department of Labor City of Palm Bay Growth Management Department

149

Schedule 13


PRINCIPAL EMPLOYERS IN THE CITY OF PALM BAY Current Year and Nine Years Ago

September 30, 2013

Number of % of Total Number of % TotalEmployer Employees Rank Employment Employees Rank Employment Harris Corporation 3,596 1 7.26% 3,100 1 7.53%Brevard County School Board 1,611 2 3.25% 1,050 3 2.55%City of Palm Bay 785 3 1.59% 710 4 1.72%MC Assembly 598 4 1.21% 300 8Palm Bay Hospital 575 5 1.16% 318 7 0.77%Intersil 412 6 0.83% 1,400 2 3.40%Wal*Mart 377 7 0.76%Publix (3 of 3 locations reported) 410 8 0.83% 400 6 0.97%Brevard Community College 256 9 0.52% 220 10 0.53%Winn Dixie (2 locations) 234 10 0.47% 410 5 1.00%AAR Corp 165 11 0.33% 0.00%Home Depot 130 12 0.26% 140 13 0.34%DRS Optronics 250 9 0.61%Palm Bay Chevrolet 150 11 0.36%Q-Bit Corporation 141 12 0.34%

Totals 9,149 18.48% 8,589 20.14%

2013 2004

Note: Number of employees listed is employed within the City of Palm Bay Data for 2004 (number of employees) is a duplicate of 2003 since that information was unattainable. Sources: US Department of Labor, Bureau of Labor Statistics, Local Area Unemployment Statistics City of Palm Bay Growth Management Department City of Palm Bay Budget Division

150

Schedule 14

City of Palm Bay, Florida Statistical Section FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM Last Ten Fiscal Years Function/Program 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

General GovernmentLegislative 4 4 4 4 4 4 4 4 4 3Management 6.7 7 10 11 12 14 12 10 10 9Finance 18 36 35 32 32 32 32 29 32 32Community Planning 2 2 2 2 15 15 14 14 12 8Other 32.19 29 31 31 36 33 35 25 20 20

Public SafetyPolice 250.55 250 261 265 271 274 262 245 236 228Fire 133 138 130 131 139 141 143 144 139 139Code Enforcement 11 10 11 11Building 13 14 17 24 29 41 42 34 24 22

Physical EnvironmentUtilities 132.86 118 120 118 118 119 108 98 88 84

Economic EnvironmentEconomic /Neighborhood 5 6 9 9 9 11 14 13 11 6 Development

TransportationPublic Works 121.02 117 127 120 131 140 139 127 114 121

Culture/RecreationParks 49.68 54 58 58 71 80 85 77 62 59

Total 768 775 804 805 867 904 901 830 763 742

Fiscal Year

Note: The methodology for calculating the full-time equivalents was changed in fiscal year 2007 to include part-time employees. Source: City of Palm Bay Budget Division

151

Schedule 15

City of Palm Bay, Florida Statistical Section CAPITAL ASSETS STATISTICS Last Ten Fiscal Years

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

PoliceStations 2 2 2 2 2 2 2 2 2 2Patrol Units 127 127 127 127 127 127 127 121 112 102Policemen and Officers 152 160 166 166 166 165 163 154 140 135

FireStations 5 5 5 5 5 5 5 5 5 5Firefighters and Officers 122 122 127 118 118 122 125 122 113 113

Public WorksStreets (miles) 862 862 862 862 862 862 862 862 862 862Street lights 3960 3960 3960 3960 3960 3960 3960 3779 3674 3650

Parks and RecreationCommunity Centers 1 1 1 1 1 1 1 1 1 1Developed Parks 25 32 25 25 25 22 19 19 18 18Acreage of developed parks 314.06 314.06 241.33 241.33 241.33 233.54 232.78 232.78 212.73 212.73Acreage of all park land 2024.99 2024.99 1674.33 1674.33 1674.33 1500 1500 1500 1500 1500

Water SystemWater mains (miles) 604 603 596 580 551 545 539 529 547 546Fire hydrants 2886 2886 2833 2739 2746 2570 2347 2293 2152 2120Treatment plants 3 3 3 3 3 3 3 2 2 2Service connections 32232 31811 31630 31145 30339 29840 29389 28404 27995 25643Capacity (mgd) 15.5 15.5 15.5 15.5 15.5 15.5 15.5 10 10 10

Wastewater SystemSanitary sewer lines (miles) 295 290 290 290 290 296 296 278 263 254Treatment plants 2 2 2 2 2 2 2 2 2 2Service connections - sewer 15323 15031 14909 14807 14455 14316 14077 13361 13105 11768Service connections - reclaimed water 424 421 420 416 105 96 82 0 0 0Treatment capacity (mgd) 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2

Fiscal Year

Source: Various City Department

152

Schedule 16

City of Palm Bay, Florida Statistical Section OPERATING INDICATORS BY FUNCTION/PROGRAM Last Ten Fiscal Years

2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

PolicePhysical Arrests 3,295 3,504 4,655 3,715 3,805 3,648 3,805 3,277 2,724 2,770Parking Violations (1) 5 10 257 317 24 68 54 N/A N/A N/ATraffic Tickets (1) 6,361 6,626 9,998 16,785 17,394 19,392 20,243 N/A N/A N/ATotal Traffic Stops (1) 12,009 22,117 22,424 39,851 31,685 30,482 27,183 N/A N/A N/ACalls for Service (1) 148,938 229,903 243,417 195,756 202,348 196,688 187,854 N/A N/A N/A

FireNumber of calls for service 11,683 11,317 11,115 10,520 10,263 9,780 9,441 9,408 9,561 9,531Number of fires extinguished 275 251 450 455 320 335 419 409 311 444

Public WorksRefuse Collection (pounds) (5) - - 61,540 115,690 138,913 N/A 218,149 222,834 207,054 145,988New Street Miles - - - - - - - 864 864 864Canal Clearing (6) 34,071 67,238 N/A N/A N/A N/A N/A N/A N/A N/ANew Street (2) - - - - - - 864 864 864 864Potholes repaired 1,108 888 620 946 1,190 1,106 1,051 1,287 825 701

Parks and RecreationCommunity Center Attendance (3) 18,827 15,614 20,545 26,501 23,701 29,182 27,704 N/A N/A N/ACamp Programs (3) 457 405 87 275 303 881 1,066 N/A N/A N/AProgram Membership (3) 2,031 928 1,341 1,396 1,328 1,594 1,361 N/A N/A N/A

Water SystemNew Connections (2) 421 181 485 806 499 451 1,054 389 2,483 880Water main breaks (2) 1 1 8 16 8 15 20 N/A N/A N/AAverage daily consumption (millions of gallons) 6 6 6 6 6 6 6 6 6 6Active accounts 32,232 31,811 31,630 31,145 30,339 29,840 29,389 28,335 27,946 25,463

Wastewater SystemAverage daily sewage treatment (millions of gallons) 3 3 3 3 3 4 4 3 3 3Active Accounts (2) 15,323 15,031 14,949 14,807 14,455 14,316 14,077 13,361 13,105 11,768

Building Total Inspections (4) 6,235 7,990 8,497 8,851 9,216 15,493 21,084 36,211 38,497 20,276Permits Issued 4,131 3,980 4,332 4,473 4,328 5,442 6,836 10,081 20,186 11,290

Source: Various City Departments(1) Information prior to 2007 could not be retrieved(2) Information could not be retrieved(3) Information prior to 2007 unavailable due to change in software system(4) Information prior to 2004 unavailalbe due to change in software system(5) No longer being tracked(6) Started tracking in 2012

Fiscal Year

Source: Various City Departments

153

Schedule 17


IMPACT FEE COLLECTIONS AND BALANCES Last Ten Fiscal Years

Fiscal Police Fire Parks Transportation TotalYear Impact Fees Impact Fees Impact Fees Impact Fees Collections

2013 7,621$ 54,444$ 128,377$ 835,718$ 1,026,160$ 2012 2,396 15,885 42,650 311,526 372,457 2011 6,417 40,492 105,915 1,105,388 1,258,212 2010 7,114 49,204 121,662 906,921 1,084,901 2009 13,370 82,651 153,867 859,033 1,108,920 2008 27,498 173,904 296,432 7,491,291 7,989,125 2007 39,090 261,595 390,840 4,190,909 4,882,434 2006 53,017 179,789 353,631 2,628,548 3,214,985 2005 69,546 221,106 496,577 3,005,000 3,792,229 2004 56,310 176,215 351,981 2,182,736 2,767,242

Balance at Balance atbeginning of Collections Uses end of

Type Fiscal Year Fiscal Year

Police Impact Fees 18,093$ 7,621$ 17,990$ 7,724$

Fire Impact Fees 132,782 54,444 166,250 20,976

Parks Impact Fees 105,392 128,377 44,237 189,532

Transportation Impact Fees 3,027,738 835,718 1,287,064 2,576,392

Totals 3,284,005$ 1,026,160$ 1,515,541$ 2,794,624$

Parkway- Malabar North 331,735 Transfers to Debt Service for Emerson Drive 942,031

Collections

Balances

Significant Usage

154

Schedule 18


UTILITIES DEBT SERVICE APPLICABLE TO TRANSPORTATION PROJECTS Last Ten Fiscal Years

Special Refunding Bonds Assessment Bonds Portion Related To

Fiscal Year Series 2005B Series 2003 Road Improvements

2013 1,818,251$ 248,053$ 886,030$

2012 1,465,189 247,403 733,941

2011 1,774,308 246,393 866,437

2010 1,648,158 250,043 813,726

2009 1,656,558 183,274 789,295

2008 1,654,208 111,747 758,243

2007 1,388,458 115,176 645,411

2006 1,022,741 571,104 679,642

2005 1,364,432 247,730 690,752

2004 1,270,785 128,185 600,275

Debt Service

Note: Portion of project costs related to roadway restoration and drainage improvements: 43% for 1998 Utility Revenue Bonds 42% for 2003 Utility Assessment Bonds Portion of principal for Special Assessment Bonds was prepaid in fiscal year 2006. Source: City of Palm Bay Utilities

155

Schedule 19


Historical Sales Tax Revenue and Debt Service Coverage

Last Ten Fiscal Years Last Eight Fiscal YearsFiscal Communication Fiscal Sales Tax Max Annual Debt Debt ServiceYear Electricity Services Gas Water Total Year Revenue Service 2006 Bonds Coverage2013 5,994,198$ 3,313,753$ 91,033$ 1,219,386$ 10,618,370$ 2013 5,012,444$ 1,162,250$ 4.31

2012 5,538,018 3,446,340 120,661 1,206,514 10,311,533 2012 4,790,989 1,162,250 4.12

2011 5,523,218 3,637,601 80,387 1,129,285 10,370,491 2011 4,555,098 1,162,250 3.92

2010 5,691,766 3,854,672 96,210 1,059,474 10,702,122 2010 4,456,874 1,162,250 3.83

2009 5,182,844 3,833,585 94,338 1,040,217 10,150,984 2009 4,484,366 1,162,250 3.86

2008 5,000,445 4,105,868 101,806 1,036,524 10,244,643 2008 4,698,617 1,162,250 4.04

2007 5,077,133 3,579,131 93,367 1,053,058 9,802,689 2007 4,916,124 1,162,250 4.23

2006 4,974,545 3,384,028 86,816 983,698 9,429,087 2006 5,241,784 1,162,250 4.51

2005 4,710,289 3,093,611 90,526 874,422 8,768,848

2004 4,260,422 2,942,378 87,618 865,907 8,156,325

Historical Pledged State Revenue Sharing Funds

Last Ten Fiscal YearsFiscal State Revenue Year Sharing2013 3,270,431$

2012 2,842,930

2011 2,666,470

2010 2,509,995

2009 2,448,073

2008 2,715,669

2007 2,942,559

2006 3,086,214

2005 3,007,186

2004 2,492,148

Historical Public Service Tax Receipts By Category


156

Schedule 20


CERTIFIED GALLONS OF TAXABLE FUEL SOLD IN BREVARD COUNTY, FLORIDA AND LOCAL OPTION GAS TAX REVENUE Last Ten Fiscal Years

Annual LocalOption Gas Tax

Fiscal Year Motor Fuel Diesel Fuel Total Revenue

2013 234,444,633 115,596,498 350,041,132 3,284,506

2012 236,330,147 106,207,434 342,537,581 3,105,994

2011 239,919,288 37,011,535 276,930,822 2,390,212

2010 247,235,293 32,236,346 279,471,639 2,369,610

2009 240,360,931 33,874,396 274,235,327 2,421,074

2008 247,296,412 37,893,942 285,190,354 2,389,461

2007 259,371,190 40,972,456 300,343,646 2,643,050

2006 251,312,392 41,030,735 292,343,127 2,614,660

2005 255,979,324 38,825,600 294,804,924 2,791,626

2004 245,180,579 35,720,563 280,901,142 2,660,589 Sources: Florida Department of Revenue City of Palm Bay Finance Department

157

Schedule 21


DISTRIBUTION OF BREVARD COUNTY LOCAL OPTION GAS TAX REVENUES Fiscal Year Ended September 30, 2013

Percent Share Percent Share 2013Jurisdiction Total Municipalities Revenue Share

Brevard County 47.14 0.000% 8,999,413$

Cape Canaveral 1.50 2.837% 286,335

Cocoa 2.01 3.812% 384,672

Cocoa Beach 2.07 3.922% 395,787

Grant-Valkaria 0.43 0.811% 81,833

Indialantic 0.48 0.908% 91,588

Indian Harbor Beach 1.66 3.139% 316,723

Malabar 0.47 0.891% 89,957

Melbourne 13.07 24.728% 2,495,439

Melbourne Beach 0.38 0.725% 73,205

Melbourne Village 0.08 0.153% 15,487

Palm Bay 17.26 32.645% 3,294,292

Palm Shores 0.10 0.183% 18,429

Rockledge 3.73 7.058% 712,272

Satellite Beach 2.17 4.106% 414,353

Titusville 4.84 9.165% 924,847

West Melbourne 2.60 4.917% 496,169

Total 100.00 100.000% 19,090,801$

Source: Brevard County Board of County Commissioners

158

Schedule 22

City of Palm Bay, Florida Statistical Section UTILITY DEBT SERVICE COVERAGE Last Ten Fiscal Years

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Operating Revenues 16,748,437$ 17,681,896$ 19,263,064$ 20,470,562$ 20,823,230$ 21,238,898$ 22,626,385$ 22,511,829$ 22,931,067$ 23,488,824$ Interest Income 949,743 1,108,652 2,088,017 2,557,021 1,758,777 854,489 895,337 581,001 420,012 380,838 Operating Expenses (excl. depreciation/amortization) (9,987,789) (8,776,803) (10,032,114) (11,248,146) (12,252,791) (11,751,890) (12,148,574) (11,926,644) (12,772,311) (12,972,795) Net Revenues 7,710,391$ 10,013,745$ 11,318,967$ 11,779,437$ 10,329,216$ 10,341,497$ 11,373,148$ 11,166,186$ 10,578,768$ 10,896,867$

Restricted MLE Account Balance 3,363,050 3,363,050 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 MLE Portion Attributable to MLE Expansion % 1,270,780 1,364,433 1,178,835 1,388,458 1,654,207 1,656,558 1,648,158 1,089,046 1,465,189 1,773,251 Connection Fees Available for Debt Service 3,408,469 2,916,695 2,995,956 3,075,233 3,995,072 4,076,150 4,505,572 4,080,322 3,666,511 3,665,453

Parity Debt Service 5,732,841$ 6,806,620$ 7,608,865$ 7,938,844$ 8,302,645$ 8,403,233$ 8,920,545$ 7,937,528$ 7,900,640$ 8,205,614$ 1994 Revenue Bonds - - - - - - - - - 1998 Revenue Bonds 1,270,785 1,364,432 - - - - - - - 2001 Revenue Bonds 800,000 935,000 1,100,000 1,200,000 1,300,000 1,400,000 1,920,000 1,920,000 1,920,000 1,920,000 2002 Refunding Bonds 536,737 530,263 533,562 534,125 533,900 532,888 536,088 528,238 534,863 535,175 2003 Refunding Bonds 3,087,600 3,786,400 3,788,888 3,785,388 3,786,288 3,783,688 3,784,500 3,787,900 3,787,900 3,784,500 2004 Revenue Bonds 37,719 190,525 193,525 191,162 188,538 190,387 192,087 192,488 192,688 192,688 2005 A Revenue Bonds - - 814,055 839,712 839,712 839,712 839,712 419,856 - - 2005 B Refunding Bunds - - 1,178,835 1,388,457 1,654,207 1,656,558 1,648,158 1,089,046 1,465,189 1,773,251 Total Debt Service 5,732,841$ 6,806,620$ 7,608,865$ 7,938,844$ 8,302,645 8,403,233 8,920,545 7,937,528 7,900,640 8,205,614

DEBT SERVICE COVERAGE

PART A: Parity Debt ServiceTest 1 Net Revenues 7,710,391$ 10,013,745$ 11,318,967$ 11,779,437$ 10,329,216 10,341,497 11,373,148 11,166,186 10,578,768 10,896,867 Parity Debt Service Less Portion Attributable to MLE Expansion % 4,462,061 5,442,188 6,430,030 6,550,386 6,648,438 6,746,675 7,272,387 6,848,482 6,435,451 6,432,363

Actual 1.73 1.84 1.76 1.80 1.55 1.53 1.56 1.63 1.64 1.69 Required 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10

andTest 2 Net Revenues 7,710,391 10,013,745 11,318,967 11,779,437$ 10,329,216$ 10,341,497$ 11,373,148$ 11,166,186$ 10,578,768$ 10,896,867$ Restricted MLE Account Balance 3,363,050 3,363,050 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 Total 11,073,441$ 13,376,795$ 13,002,667$ 13,463,137$ 12,012,916$ 12,025,197$ 13,056,848$ 12,849,886$ 12,262,468$ 12,580,567$

Parity Debt Service 5,732,841 6,806,620 7,608,865 7,938,844 8,302,645 8,403,233 8,920,545 7,937,528 7,900,640 8,205,614

Actual 1.93 1.97 1.71 1.70 1.45 1.43 1.46 1.62 1.55 1.53 Required 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10

orPART B: Parity Debt ServiceTest 1 Net Revenues 7,710,391 10,013,745 11,318,967 11,779,437$ 10,329,216$ 10,341,497$ 11,373,148$ 11,166,186$ 10,578,768$ 10,896,867$ Connection Fees Available for Debt Service 2,384,533 2,916,695 2,995,956 3,075,233 3,995,072 4,076,150 4,505,572 4,080,322 3,666,511 3,665,453 Total 10,094,924$ 12,930,440$ 14,314,923$ 14,854,670$ 14,324,288$ 14,417,647$ 15,878,720$ 15,246,508$ 14,245,279$ 14,562,320$

Parity Debt Service Less Portion Attributable to MLE Expansion % 4,462,061 5,442,188 6,430,030 6,550,386 6,648,438 6,746,675 7,272,387 6,848,482 6,435,451 6,432,363

Actual 2.26 2.38 2.23 2.27 2.15 2.14 2.18 2.23 2.21 2.26 Required 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20

andTest 2 Net Revenues 7,710,391 10,013,745 11,318,967 11,779,437$ 10,329,216$ 10,341,497$ 11,373,148$ 11,166,186$ 10,578,768$ 10,896,867$ Connection Fees Available for Debt Service 2,384,533 2,916,695 2,995,956 3,075,233 3,995,072 4,076,150 4,505,572 4,080,322 3,666,511 3,665,453 Restricted MLE Account Balance 3,363,050 3,363,050 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 1,683,700 Total 13,457,974$ 16,293,490$ 15,998,623$ 16,538,370$ 16,007,988$ 16,101,347$ 17,562,420$ 16,930,208$ 15,928,979$ 16,246,020$

Parity Debt Service 5,732,841 6,806,620 7,608,865 7,938,844 8,302,645 8,403,233 8,920,545 7,937,528 7,900,640 8,205,614

Actual 2.35 2.39 2.10 2.08 1.93 1.92 1.97 2.13 2.02 1.98 Required 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20

andProviso Net Revenues 7,710,391 10,013,745 11,318,967 11,779,437 10,329,216 10,341,497 11,373,148 11,166,186 10,578,768 10,896,867 Parity Debt Service 5,732,841$ 6,806,620$ 7,608,865$ 7,938,844$ 8,302,645$ 8,403,233$ 8,920,545$ 7,937,528$ 7,900,640$ 8,205,614$

Actual 1.34 1.47 1.49 1.48 1.24 1.23 1.27 1.41 1.34 1.33 Required 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Source: City of Palm Bay

159

Schedule 23

City of Palm Bay, Florida Statistical Section UTILITY RATE COMPARISON WITH NEIGHBORING UTILITIES September 30, 2013

Water Wastewater Total

Neighboring Utilities

City of Daytona Beach 31.31$ 46.12$ 77.43$ City of West Melbourne 40.08 35.75 75.83 City of Port St. Lucie 24.83 49.89 74.72 City of Palm Bay 30.11 40.70 70.81 City of Melbourne 28.09 41.67 69.76 City of Cocoa 25.78 41.58 67.36 City of Holly Hill 31.50 35.59 67.09 City of Edgewater 27.07 37.93 65.00 Indian River County 22.75 41.63 64.38 Brevard County 28.34 32.66 61.00 City of Vero Beach 20.65 37.84 58.49 City of New Smyrna Beach 16.92 38.96 55.88 City of Port Orange 23.05 31.78 54.83 City of Ormond Beach 21.09 28.36 49.45

Average of Neighboring Utilities 26.27$ 38.44$ 64.71$

Note: Amounts shown are for 5,000 gallons monthly service and reflect standard residential single family rates effective October 1, 2012 and are exclusive of taxes. Source: City of Palm Bay Billing & Collections Division

160

Schedule 24

City of Palm Bay, Florida Statistical Section TEN LARGEST CUSTOMERS OF THE WATER AND WASTEWATER SYSTEM September 30, 2013

12-Month Percent Revenue PercentWater Customers Usage (1) of Total Generated of Total

Harris Corporation 28,999 1.54% 132,993$ 1.04%Woodlake Village Apartments 24,028 1.27% 140,663 1.10%Bridlewood Real Estate LLC 18,186 0.96% 105,977 0.83%School Board of Brevard County 16,736 0.89% 97,204 0.76%Vinings Palm Bay Investments LLC 15,902 0.84% 85,149 0.67%Palm Bay Community Hosp 14,802 0.78% 91,812 0.72%The Park at Palm Bay 12,636 0.67% 65,903 0.52%Madalyn Landing 11,819 0.63% 60,606 0.48%CG I & II Condo Association Inc 11,548 0.61% 66,901 0.53%Vista Oaks West Assoc Inc 10,018 0.53% 53,737 0.42%Total 164,675 8.73% 900,947$ 7.07%

12-Month Percent Revenue PercentWastewater Customers Usage (1) of Total Generated of Total

Harris Corporation 28,999 2.94% 219,121$ 2.54%Woodlake Village Apartments 24,028 2.44% 132,493 1.54%Bridlewood Real Estate LLC 18,186 1.84% 102,566 1.19%School Board of Brevard County 15,741 1.60% 118,710 1.38%Vinings Palm Bay Investments LLC 15,262 1.55% 106,280 1.23%Palm Bay Community Hosp 14,802 1.50% 77,736 0.90%The Park at Palm Bay 12,636 1.28% 77,930 0.90%Madalyn Landing 11,819 1.20% 74,168 0.86%CG I & II Condo Association Inc 11,548 1.17% 91,905 1.07%Vista Oaks West Assoc Inc 10,018 1.02% 58,842 0.68%Total 163,040 16.53% 1,059,751$ 12.29%

(1) In thousands of gallons Source: City of Palm Bay

161


162

City of Palm Bay, Florida Compliance Section SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE For the year ended September 30, 2013 FEDERAL AWARDS Pass Through

CFDA Grantor Number / Pass Through Federal toFederal Grantor/Pass-Through Grantor Program Title Number Grantor's Number Expenditures Subrecipients

U.S. Department of CommerceEDA Grant:Troutman/Clearmont Realignment (Note 2) 11.300 04-01-06580 1,471,767$ -$

Total Department of Commerce 1,471,767 -

U.S. Department of Housing & Urban DevelopmentCommunity Development Block Grant 14.218 B-12-MC-12-0032 517,061 82,689

Neighborhood Stabilization Program 14.218 B-11-MN-12-0021 814,624 - 1,331,685 82,689

Passed through Brevard County:HOME Grant 14.239 M-12-DC-12-0200 372,686 -

372,686 -

Total Department of Housing & Urban Development 1,704,371 82,689

U.S. Department of JusticePassed through the Florida Office of the Attorney General:

Victim Crime Act Grant 16.575 V 12113 46,691 - Bulletproof Vest Partnership Program 16.607 03/04 21,781 -

68,472 -

2011 Edward Byrne Memorial Justice 16.738 2011-DJ-BX-2628 8,298 - 2012 Edward Byrne Memorial Justice 16.738 2012-DJ-BX-0194 34,977 -

43,275 -

Total U.S. Department of Justice 111,747 -

U.S. Department of Transportation

Passed through Florida Department of Transportation:Safe Routes to School 20.205 AQ114 97,231 - Palm Bay Landscaping and Irrigation Installation 20.205 AQA 45 1,001,145 - Malabar Parkway 20.205 AQF 85 4,334,572 - SR 5/US 1 Beautification Construction (Note 3) 20.205 AQ786 215,512 -

Total U.S. Department of Transportation 5,648,460 -

U.S. Department of Treasury Equitable Sharing Program 21.000 FL0051200 29,914 -

Total U.S. Department of Treasury 29,914 -

U.S. Department of Homeland Security - Federal Emergency Management Agency

Passed through Florida Division of Emergency ManagementAssistance to Firefighters Grant 97.044 EMW-2010-FH-00832 89,041 -

Total U.S. Department of Homeland Security 89,041 -

9,055,300$ 82,689$


TOTAL EXPENDITURES OF FEDERAL AWARDS

163

City of Palm Bay, Florida Compliance Section SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE (CONTINUED) For the year ended September 30, 2013 STATE AWARDS Pass Through

CSFA Grantor State toAgency/Program Number Number Expenditure Subrecipients

Florida Department of TransportationEDTF Assignment Grant:

Clearmont/Troutman Realignment (Note 2) 55-032 AR431 2,175,987$ -$ Malabar Parkway ( Note 2) 55-032 AR464 1,574,746 -

Total Florida Department of Transportation 3,750,733 -

Florida Housing Finance AgencyState Housing Initatives Partnership Program 52.901 N/A 2,374 -

Total Florida Housing Finance Agency 2,374 -

TOTAL STATE EXPENDITURES 3,753,107$ -$

TOTAL EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE 12,808,407$ 82,689$

164

City of Palm Bay, Florida Compliance Section NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FINANCIAL STATE ASSISTANCE For Fiscal Year Ended September 30, 2013 NOTE 1 – Basis of Presentation The accompanying schedule of expenditures of federal awards and state assistance is presented using the modified basis of accounting for grants accounted for in governmental funds and on the accrual basis of accounting for grants accounted for in proprietary funds NOTE 2 – Grant Assignments On January 26, 2011, The City received a grant in the amount of $4,000,000 from the State of Florida Office of Tourism, Trade and Economic Development (OTTED) for the construction of Malabar Parkway under (Program # 11-MP019 / CSFA # 31.002). On February 15, 2012, the Florida Department of Economic Opportunity- Division of Strategic Business (DSDB) replaced OTTED as a party on the award agreement (program # 11-MP019 CSFA #40.002). Subsequent to that change, on August 2, 2013 DSDB assigned all obligations of the latter agreement to the Florida Department of Transportation (FDOT) under new contract #AR464. On December 28, 2011 the City was awarded $1,605,708 from the Florida Economic Development Transportation Fund (EDTF), for the Clearmont/Troutman realignment project (contract # 12-00099). That amount was subsequently increased on May 12, 2012 to $3,000, 000. On July 10, 2013 this agreement was assigned to the Florida Department of Transportation (FDOT) under contract #AR431 NOTE 3 – Contract #AQ786 On March 11, 2011, the City was awarded a grant in the amount of $650,000 by the Florida Department of Transportation for the US 1 Beautification Construction Project – Contract #AQ786. Prior year reported expenditures were $434,488, leaving a balance of $215,512. Current year expenditures totaled $1,238,769; however, only $215,512 is being reported to equal the grant award.

165


166

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

The Honorable Mayor and

Members of the City Council City of Palm Bay, Florida We have audited, 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, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Palm Bay, Florida (the “City”), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated March 19, 2014. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances 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. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. 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 combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 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 that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

167

The Honorable Mayor and Members of the City Council City of Palm Bay, Florida 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. We noted certain matters that we have reported to management of the City in a separate letter dated March 19, 2014. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

MOORE STEPHENS LOVELACE, P.A. Certified Public Accountants Orlando, Florida March 19, 2014

168

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND STATE PROJECT AND ON INTERNAL

CONTROL OVER COMPLIANCE AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE REQUIRED BY OMB

CIRCULAR A-133 AND CHAPTER 10.550, RULES OF THE AUDITOR GENERAL The Honorable Mayor and

Members of the City Council City of Palm Bay, Florida Report on Compliance for Each Major Federal Program and State Project We have audited the compliance of City of Palm Bay, Florida (the “City”), with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement and the requirements described in the Department of Financial Services’ State Projects Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs and state projects for the year ended September 30, 2013. 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. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs and state projects. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City’s major federal programs and state projects based on our audit of the types of compliance requirements referred to above. 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; and Chapter 10.550, Rules of the Auditor General. Those standards, OMB Circular A-133, and Chapter 10.550, Rules of the Auditor General require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about the City’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 on compliance for each major federal program and state project. However, our audit does not provide a legal determination of the City’s compliance.

169


Members of the City Council City of Palm Bay, Florida Opinion on Each Major Federal Program and State Project In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs and state projects for the year ended September 30, 2013. Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program and state project to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major federal program and state project and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General, 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 or state project 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 or state project will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program or state project that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 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 material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General. Accordingly, this report is not suitable for any other purpose.

170


Members of the City Council City of Palm Bay, Florida Report on Schedule of Expenditures of Federal Awards and State Financial Assistance Required by OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General We have audited the financial statements of the governmental activities, the business-type activity, each major fund, and the aggregate remaining fund information of the City as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated March 19, 2014, which contained unmodified opinions on those financial statements. Our report on the basic financial statements also contained references to the reports of other auditors. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis, as required by OMB Circular A-133 and Chapter 10.550, Rules of the Auditor General, and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates 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 basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 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 schedule of expenditures of federal awards and state financial assistance is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.


171


SCHEDULE OF FINDINGS AND QUESTIONED COSTS

For The Year Ended September 30, 2013

Section I - Summary of Independent Auditor’s Results Financial Statements

Type of Auditor’s Report Issued: Unmodified Opinion Internal control over financial reporting: • Material weakness(es) identified? Yes X No • Significant deficiency(ies) identified? Yes X None reported

Noncompliance material to financial statements noted? Yes X No

Federal Awards and State Financial Assistance Internal control over major programs: • Material weakness(es) identified? Yes X No • Significant deficiency(ies)? Yes X None reported

Type of report issued on compliance for major federal programs and major state projects:

Unmodified Opinion

Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 or Chapter 10.557, Rules of the Auditor General?

Yes

X No

Identification of Major Federal Programs and Major State Projects: CFDA Numbers Name of Federal Programs 11.300 Economic Development Cluster 14.218 CDBG Entitlement Cluster (CDBG and NSP) CSFA Number Name of State Project 55.032 Economic Development Transportation Projects Dollar threshold used to distinguish between Type A and Type B programs/projects: Federal $300,000 State $300,000 Auditee qualified as low-risk auditee pursuant to OMB Circular A-133? X Yes No

172


SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)

For The Year Ended September 30, 2013

Section II - Findings Related to the Financial Statement Audit, as required to be reported in accordance with Government Auditing Standards. No matters are reported. Section III - Federal Award Findings and Questioned Costs Section reported in accordance with

OMB Circular A-133. No matters are reported. Section IV - Status of Prior Year Findings No matters were reported in the prior year affecting federal financial assistance programs.

173

INDEPENDENT AUDITOR’S MANAGEMENT LETTER The Honorable Mayor and Members of the City Council City of Palm Bay, Florida We have audited the basic financial statements of the City of Palm Bay, Florida (the “City”), as of and for the fiscal year ended September 30, 2013, and have issued our report thereon dated March 19, 2014. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; and Chapter 10.550, Rules of the Auditor General. We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards, Independent Auditor’s Report on Compliance with Requirements for Each Major Federal Program and Major State Project and Report on Internal Control over Compliance and Report on Schedule of Expenditures of Federal Awards and State Financial Assistance in Accordance with OMB Circular A-133, and Chapter 10.550, Rules of the Auditor General; and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated March 19, 2014, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules of the Auditor General, which govern the conduct of local governmental entity audits performed in the State of Florida. 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 findings and recommendations made in the preceding annual financial audit report. There were no such 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 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, accounting procedures, and internal controls. In connection with our audit, we did not have such recommendations.

Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address noncompliance with

provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings.

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The Honorable Mayor and Members of the City Council City of Palm Bay, Florida

Section 10.554(1)(i)5., 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. The legal authority is disclosed in the notes to the financial statements.

Section 10.554(1)(i)6.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, the results of our tests did not indicate that the City met any of the conditions described in Section 218.503(1), Florida Statutes.

Section 10.554(1)(i)6.b., Rules of the Auditor General, requires that we determine whether the annual

financial report for the City for the fiscal year ended September 30, 2013 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, 2013. In connection with our audit, we determined that these two reports were in agreement.

Pursuant to Sections 10.554(1)(i)6.c. and 10.556(7), Rules of the Auditor General, we applied

financial condition assessment procedures as of September 30, 2013. It is management’s responsibility to monitor the City’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, the Mayor, City Council, and applicable management and is not intended to be, and should not be, used by anyone other than these specified parties.


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