2024_Zephyrhills_Audit.pdf

City of Zephyrhills, Florida

General Purpose

Financial Statements For the Year Ended September 30, 2024

Officials

September 30, 2024

Elected Officials

Melonie Bahr Monson Mayor

Kenneth M. Burgess, Jr. President - City Council

Charles E. Proctor Vice President - Council Member

Lance Smith Council Member

Steven F. Spina, Ph.D Council Member

Jodi Wilkeson Council Member

Appointed Officials

William C. Poe, Jr. City Manager

Matthew Maggard City Attorney i

Table of Contents

Table of Contents ...................................................................................................................................... i-ii

Independent Auditors’ Report ............................................................................................................ A1-A3

Management’s Discussion and Analysis ......................................................................................... M1-M13

Basic Financial Statements

Statement of Net Position ................................................................................................................. 1-2

Statement of Activities

Governmental Fund Financial Statements

Balance Sheet

Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds

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

Proprietary Fund Financial Statements

Statement of Net Position – Proprietary Funds ................................................................................. 8-9

Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds

Statement of Cash Flows – Proprietary Funds ....................................................................... …….…11-12

Notes to the Financial Statements ...................................................................................................... 13-46 ii

Table of Contents (continued)

Required Supplementary Information General Fund ................................................................................................................................ 47-53

Special Revenue Fund

CRA Fund

Impact Fee Fund

Schedule of Proportionate Share of the Net Pension Liability

Schedule of Contributions

Schedule of OPEB Liability

Other Supplementary Schedules (not required) Schedule of Operating Income (Loss) – Utility Fund………………………………………………………………………………………………………. ............................................ .......60-62

Schedule of Operating Income (Loss) – Sanitation Fund……………………………………………………………….……………………………………………………………………………………………………….63

Schedule of Operating Income (Loss) – Airport Fund………………………...……………………………………………………………………………

Additional Elements of Report Prepared in Accordance with Government Auditing Standards, Issued by The Comptroller General of The United States, and the Rules of The Auditor General of The State of Florida Schedule of Federal and State Financial Assistance ................................................................................................................... ..65-66

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and other matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................... .67-68

Independent Auditors’ Report on Compliance for Each Major Federal Program and State Project and Report on Internal Control Over Compliance Required by Uniform Guidance and Rules of the Auditor General ....................................................................................................................... 69-70

Schedule of Findings and Questioned Costs ......................................................................................................................... 71-72

Independent Accountants’ Report on Compliance with Section 218.415, Florida Statutes

Management Letter ....................................................................................................................... 74-75

A1

Independent Auditors’ Report

Honorable Mayor, City Council, and City Manager City of Zephyrhills, FL 33542

Opinions

We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of the City of Zephyrhills, Florida (the City) as of and for the year ended September 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund as of September 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

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. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City of Zephyrhills and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Zephyrhills, Florida’s, ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

A2

In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit 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 of Zephyrhills, Florida’s, internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Zephyrhills, Florida’s, ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages M1 through M13 and required supplementary information on pages 47 through 59 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.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Zephyrhills, Florida’s, basic financial statements. The accompanying combining and individual nonmajor fund financial statements and schedule of expenditures of federal awards and state financial assistance, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis 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 basic 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 basic financial statements or to the basic 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 as a whole.

A3

Other Information

Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated May 1, 2025, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the City’s internal control over financial reporting and compliance.

DGPerry Zephyrhills, Florida May 1, 2025

Management’s Discussion and Analysis

(MD&A)

M1

MANAGEMENT’S DISCUSSION AND ANALYSIS

The City of Zephyrhills (the City) management discussion and analysis is designed to provide an objective and easy-to-read analysis of the City’s financial activities for the year ended September 30, 2024. As with other sections of this financial report, the information contained within this narrative should be considered only as part of a greater whole. The reader should take time to read and evaluate all sections of this report, including the government-wide financial statements on page 1-3, fund financial statements on pages 4-12, footnotes on pages 13-43, and other Required Supplemental Information beginning on pages 44-72.

Efforts were made to include relative comparative prior year figures where amounts were known.

HIGHLIGHTS

Financial Highlights

The City’s total assets exceeded its total liabilities at the close of the most recent fiscal year by $173,493,397.

The City’s total net position increased by $26,715,458 (or 18.20%). The City’s governmental net position increased by $12,995,846 (or 26%), mainly as a result of continued capital investment without taking on additional debt. The business-type net position increased by $13,719,612 (or 14.10%).

At the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $38,744,464, a decrease of $1,165,924 in comparison with the prior year. Approximately 29% or $11,298,436 of this total is unrestricted and available for spending at the City’s discretion based on the parameters of the fund.

General Fund revenues increased by $117,019 (or .6%). General Fund expenditures, exclusive of capital expenditures, increased by $1,285,426 (or 9%). The Net Change in General Fund Balance was an increase of $2,946,482.

At the end of the current fiscal year, fund balance for the General Fund was $16,764,972 or 107% of total General Fund operating expenditures excluding capital outlay and debt service.

The business-type activities (the City’s Proprietary Funds) operating revenues decreased by $449,069 (or 2.4%); operating expenses increased by $666,469 (or 4.3%); operating income/loss went from an operating income of $2,414,780 in FY 2023 to $1,831,365 in FY 2024. The change in net position for the Proprietary Funds was an increase of $13,719,612 in FY 2024.

The City’s total long-term debt excluding other liabilities (namely compensated absences and Other Post-Employment Benefits OPEB) decreased by $2,566,350. The City’s total long-term debt for governmental activities decreased by $462,417, while long-term debt business-type activities decreased by $2,093,933.

City Highlights

City administration took a conservative approach to balancing the fiscal year 2024 budget. The City’s gross taxable property value increased for the ninth consecutive year. Ad valorem taxes increased by $1,569,608 to $8,684,227 using the millage rate of 6.2500, an increase of 4.95% over the Rolled-Back Rate of 5.9552.

M2

Large projects include the following:

Utility – Completed construction on Northside Lift Station and Force Main project, $2,606,436, and the sewer main extensions Kossik and Fort King, $459,759.

City Government – Hercules Park, $5,013,016, sidewalks and trails $1,517,110, And South Avenue Right of Way acquisition $400,473.

Airport – terminal, box hangars, taxiway --$ 481,580, and continuing construction of Itinerant Apron, $199,630.

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 are comprised of 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.

Government-Wide Financial Statements

The government-wide statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private sector business, in that all governmental and business-type activities are consolidated into columns which add up to a total for the primary government.

The Statement of Net Position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Below is a chart showing eleven years of net asset history.

M3

The Statement of Activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and inter-governmental 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 reflect the City’s basic services, including general government, police, fire, protective inspections, public works, community development and recreation. Property taxes, franchise fees, utility taxes, communication services taxes, gas taxes and sales taxes, along with contributions from the City’s utilities, finance the majority of these services. The business-type activities reflect private sector-type operations, including water, wastewater, sanitation and airport, where the fee for service typically covers all or most of the cost of operation, including depreciation.

The government-wide financial statements can be found on pages 1-3 of this report.

Fund Financial Statements

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 of Zephyrhills, 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 two categories: governmental funds and proprietary funds.

Governmental Funds:

Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. The basic governmental fund financial statements can be found on pages 4-7 of this report.

Because the focus of governmental fund financial statements is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains four individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, the Special Revenue Fund (Gas Taxes and Discretionary Sales Tax), the CRA Fund, and the Impact Fee Fund.

The City adopts an annual appropriated budget for all of its various funds. A budgetary comparison statement has been provided for the major governmental funds on pages 44-53.

M4

Proprietary Funds:

The City of Zephyrhills maintains three proprietary funds – each an enterprise fund. Enterprise 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 its Utility (water/wastewater) operations, for its Sanitation (i.e., solid waste collection) operation and for its Airport operation.

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 utility, sanitation and airport funds, all of which are considered to be major City funds.

The basic proprietary fund financial statements can be found on pages 8-12.

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 13-43 of this report.

GOVERNMENT-WIDE FINANCIAL STATEMENT ANALYSIS

Statement of Net Position

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 exceeded liabilities by $173,493,397 at the close of the fiscal year ending September 30, 2024.

The largest portion of the City’s net position is its investment in capital assets (e.g.: land, buildings, improvements other than buildings, machinery and equipment and infrastructure) less any related debt used to acquire those assets that is still outstanding. The City uses capital assets to provide services to citizens;

consequently, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

M5

The following table reflects the condensed Statement of Net Assets compared to the prior fiscal year.

Statement of Net Position at SEPTEMBER 30, 2024

Governmental Activities Business-type Activities Total

2024 2023 2024 2023 2024 2023

Current Assets 40,809,110 41,693,250 29,952,410 29,293,183 70,761,520 70,986,433

Non-current Assets and Deferred Outflows 55,955,745 47,031,749 101,383,726 90,762,920 157,339,471 137,794,669

Total Assets and Deferred Outflows 96,764,855 88,724,999 131,336,136 120,056,103 228,100,991 208,781,102

Current Liabilities 2,773,440 2,816,162 5,110,859 5,509,752 7,884,299 8,325,914

Non-current Liabilities and Deferred Inflows 34,296,344 36,436,172 15,200,391 17,241,077 49,496,735 53,677,249

Total Liabilities 37,069,784 39,252,334 20,311,250 22,750,829 57,381,034 62,003,163

Net Position:

Invested in capital assets, net of 48,314,864 39,483,563 87,981,541 75,073,792 136,296,405 114,557,355 related debt

Restricted-Debt Svc, R/R, Extension 22,038,723 26,153,469 11,620,425 10,179,518 33,659,148 36,332,987

Unrestricted (7,885,076) (16,164,367) 11,422,920 12,051,964 3,537,844 (4,112,403)

Total Net Position 62,468,511 49,472,665 111,024,886 97,305,274 173,493,397 146,777,939

At the end of the current fiscal year, the City of Zephyrhills is able to report positive balances for both city-wide and business-type all categories of net position. The governmental unrestricted net position was a negative $7,885,076, an improvement from a negative 16,164,367 in Fiscal Year 2023. The improvement was partially due to the decrease in OPEB liability. For more detailed information, see the Statement of Net Position (pages 1 and 2).

M6

Changes in Net Position

The table on the following page compares the revenues and expenses for the current and previous fiscal year.

As the increased estimate of retiree health is allocated across the governmental departments, the City’s Governmental activity net position increased $12,995,846 and business-type activity net position increased $13,719,612 as discussed below.

M7

Governmental activities

Table 2 above compares the revenues and expenses for the two activity types for the current and prior fiscal years. Net position for governmental activities increased by $12,995,846, because governmental revenues remain consistently strong while governmental expenditures fall short of budgeted projections.

As illustrated in the following chart, 76% of governmental activity revenue comes from property taxes, utility taxes, sales and other taxes.

Business-type activities

Table 2 on the previous page compares the revenues and expenses for the two activity types for the current and prior fiscal years. Combined net position for all business-type activities increased $13,719,612 – an increase in the Utility Fund of $12,862,105, an increase in the Sanitation Fund of $441,306 and an increase in the Airport Fund of $452,201. Key elements of these changes were:

Water and sewer capacity fees for now connections continues to be strong. Moreover, water and sewer revenue continued to be strong despite a year that had historically high rainfall. There were some cost reductions transitioning from Munibilling, a third-party billing company to City staff.

Airport continues to receive multi-million grant awards.

M8

Normal Impacts

There are nine basic impacts on revenues and expenses as reflected below.

Revenues

Economic Condition – The economic conditions can reflect a declining, stable or growing economic environment and have a substantial impact on property, sales, gas and other tax revenue as well as public spending habits for building permits, elective user fees and volumes of consumption.

Increase/Decrease in Council approved rates – While certain tax rates are set by statute, the City Council has significant authority to impose and periodically increase/decrease rates (water, sewer, sanitation, permitting, and impact fees).

Changing Patterns in Intergovernmental and Grant Revenue (both recurring and non-recurring) – Certain recurring revenues (state revenue sharing, block grants, etc.) may experience significant changes periodically while non-recurring (or one-time) grants are less predictable and often distorting in their impact on a year-to-year basis.

Contribution from Utility, Sanitation and Airport Funds – The City owns and operates the Water and Wastewater services, Sanitation services and municipal Airport and provides administrative and support services for these Proprietary Funds. In return, the City receives payment from them. Therefore, the ongoing competitiveness and vitality of these funds are important to the City.

Market Impacts on Investment Income – Due to varying maturities on the City’s investments and the varying nature of the market in general, the City investment income may fluctuate from year to year.

Expenses

Introduction of New Programs – Within the functional expense categories (General Government, Police, Fire, Public Works, Parks, etc.) individual programs may be added or deleted to meet changing community needs.

Increase in Authorized Personnel – Changes in service demand may cause the Council to increase/decrease authorized staffing.

Salary Increases (cost of living and market adjustment) – The ability to attract and retain human and intellectual resources requires the City to strive to approach a competitive salary range position in the marketplace.

Inflation – While overall inflation appears to be reasonably modest, the City is a major consumer of certain commodities such as chemicals and supplies, fuel and parts. Some functions may experience unusual commodity specific increases.

M9

Current Year Impacts

Revenues

Economic Condition

The City’s ad valorem revenue has increased for the seventh straight year. Ad valorem taxes increased $1,569,608, 22% more than collected in fiscal year 2023. Franchise fees, utility taxes, local option sales tax revenue increased significantly and remained the single best source of governmental capital improvements;

and state shared revenues slightly increased.

As in previous years, the City received grant revenue (from the federal and state governments) in fiscal year 2024.

Expenses

Operating costs increased by 6.49% in the Governmental Funds, the Utility Fund expenditures increased by 2.78%. Operating costs increased by 11.95% in the Airport Fund and 4.28% in the Sanitation Fund. Detailed reports on operating revenues and expenditures in the governmental funds and enterprise funds are reported elsewhere in this report.

M10

Governmental Funds

As of the year end, the governmental funds (as presented on the balance sheet on page 4) reported a combined fund balance of $38,744,464 which is 2.9% less than the prior year combined fund balance of $39,910,388.

$11,298,436 constitutes an undesignated/ unreserved fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is restricted, committed, or assigned to indicate that it is not available for new spending. Major reservations and designations include local option sales tax revenue, impact fees, community redevelopment, gas tax revenue, and cemetery perpetual care reserves.

Business-Type Funds

In total, the Proprietary Funds, (which include the City’s Utility, Sanitation and Airport Fund), show net gain before capital contributions and transfers. The year-end net position is $111,024,886 which is $13,719,612 higher than the beginning of year net position. Each of these Proprietary Funds is to be viewed and analyzed as a separate and distinct business, thus the following commentary focuses first on the Utility Fund, then on the Sanitation Fund and finally on the Airport Fund.

The Utility Fund has an operating income of $2,151,162 and, after non-operating revenues and expenses and capital contributions, an increase in net position of $3,885,377. Operating revenues decreased by 6.16% because of the unusually wet year. Operating expenses increased slightly by 2.78%

The Sanitation Fund has an operating income of $477,089 and, after non-operating revenues and expenses and capital contributions, an increase in net position of $565,202. Operating revenues increased 7.20% from the previous year and operating expenses increased 4.28%.

Although the Airport Fund has an operating loss of $796,886 after non-operating revenues and expenses. Most of this loss was the result of depreciation increases due to prior and current year capital asset additions, funded mostly by Federal and State grants. Operating revenues increased by 11.95% and operating expenses increased by 10%.

M11

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

As of year-end, the City had $152.27 million invested in a variety of capital assets, as reflected in the following table, which represents an increase (additions less retirements and depreciation) of $19.17 million (or 14.40%) from the previous year balances.

The following table presents a summary of the change in Capital Assets, which is presented in detail on pages 24 and 25 of the notes.

M12

Debt Outstanding

As of year-end, the City had $15,985,094 million in debt (notes, capital leases payable, etc. excluding compensated absences and Other Post-Employment Benefits - OPEB obligations) outstanding compared to $18,551,444 last year, a 13.83% decrease.

Detailed information regarding the City’s long term debt obligation can be found in Note 5, pages 26 through 29 of this report.

ECONOMIC FACTORS

The State of Florida, by constitution, does not have a state personal income tax and, therefore, the State operates primarily using sales, gasoline and corporate income taxes. Local governments (cities, counties and school boards) primarily rely on property and a limited array of allowable other taxes (sales, gasoline, utility services, etc.) and fees (franchise, occupational license, etc.) for their governmental activities. There are a limited number of state-shared revenues and recurring and nonrecurring (one-time) grants from both the state and federal governments.

For the business-type and certain governmental activities (permitting, etc.) the user pays a related fee or charge associated with the service.

The level of taxes, fees and charges for services (including development related impact fees) will have a bearing on the City’s specific competitive ability to (a) annex additional land into its corporate limits and (b) encourage development (office, retail, residential, industrial) to choose to be located in their jurisdiction.

The City places significant emphasis on encouraging economic development (particularly in the downtown redevelopment area) and maintaining property values through rigorous code enforcement.

M13

FINANCIAL CONTACT

The City’s financial statements are designed to present users (citizens, taxpayers, customers, investors and creditors) with a general overview of the City’s finances and to demonstrate the City’s accountability. If you have any questions about this report or need additional financial information, contact the City’s Finance Department at City Hall, 5335 8th Street, Zephyrhills, FL 33542, telephone (813) 780-0000.

Statement of Net Position For the Year Ended September 30, 2024

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

Go vernmenta l Ac tiv ities

Bus ine ss-T ype Activ ities T o ta l

Asse ts

Curre nt Asse ts

Cash and Pooled Cash, Cash Equivalents, and Investments $ 39,512,573 $ 13,631,750 $ 53,144,323

Restricted Assets:

Cash and Pooled Cash, Cash

Equivalents, and Investments Utility Connection Impact Fees - 11,620,423 11,620,423 Utility Deposits - 1,518,465 1,518,465

Receivables (Net of Allowance):

Accounts - billed and unbilled 446,293 1,641,226 2,087,519

Due from Other Governments 826,314 743,393 1,569,707 Inventories 22,930 599,291 622,221 Lease Receivable - Short Term - 186,418 186,418 Prepaid Items 1,000 11,444 12,444

Total Current Assets 40,809,110 29,952,410 70,761,520

No n-Curre nt Asse ts

Lease Receivable - Long Term - 1,608,168 1,608,168 Land and Improvements 4,296,979 2,864,000 7,160,979 Building and Improvements 22,471,439 46,029,769 68,501,208 Improvements - Other than Building 9,077,087 - 9,077,087 Equipment 11,133,472 9,260,970 20,394,442 Infrastructure 28,866,507 102,094,792 130,961,299 Subscription Assets 2,247,363 - 2,247,363 Construction in Process 6,423,758 5,937,839 12,361,597 Accumulated Depreciation (31,419,224) (67,003,250) (98,422,474)

Total Non-Current Assets 53,097,381 100,792,288 153,889,669

Deferred Outflows of Resources 2,858,364 591,438 3,449,802

T o ta l Asse ts a nd De fe rre d Outflo ws o f Re so urce s $ 96,764,855 $ 131,336,136 $ 228,100,991

For the Year Ended September 30, 2024

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

Go ve rnme nta l Activ itie s

Bus ine ss- T yp e

Activ itie s T o ta l Lia b il itie s

Curre nt Lia b il itie s

Accounts Payable 1,660,959$ 1,655,565$ 3,316,524$ Customer Deposits - 1,882,148 1,882,148 Accrued Interest Payable - 34,746 34,746 Current Portion of:

Revenue Bonds and Notes Payable 483,490 1,436,120 1,919,610 Subscription Asset Payable-Short Term 225,304 - 225,304 Compensated Absences 403,687 102,280 505,967

Total Current Liabilities 2,773,440 5,110,859 7,884,299

No n-Curre nt Lia b il itie s

Net Pension Liability 11,447,445 2,619,176 14,066,621 Revenue Bonds and Notes Payable 4,299,027 9,766,457 14,065,484 Subscription Asset Payable-Long Term 1,432,725 - 1,432,725 Compensated Absences 1,169,945 620,369 1,790,314 Net OPEB Liability (See note 10) 11,215,677 - 11,215,677

Total Non-Current Liabilities 29,564,819 13,006,002 42,570,821

Total Liabilities 32,338,259 18,116,861 50,455,120

Deferred Inflows of Resources 1,958,085 2,194,389 4,152,474

Total Liabilities and Deferred Inflows of Resources 34,296,344 20,311,250 54,607,594

Ne t Po s itio n Investment in Capital Assets, Net of Related Debt 48,314,864 87,981,541 136,296,405

Restricted

Infrastructure 11,962,825 - 11,962,825

Impact Fees 8,256,639 - 8,256,639

Other 1,819,259 - 1,819,259

Extensions - Utility Fund - 11,620,425 11,620,425 Unrestricted (7,885,076) 11,422,920 3,537,844

Total Net Position 62,468,511 111,024,886 173,493,397

T o ta l Lia b il itie s a nd Ne t Po s itio n 96,764,855$ 131,336,136$ 228,100,991$

Statement of Activities For the Year Ended September 30, 2024

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

Functions/Programs Expenses

Charges For

Services

Operating Grants and

Contributions

Capital Grants and

Contributions

Governmental

Activities

Business-Type

Activities Total Governmental Activities

General Government (3,891,762)$ 1,650,893$ -$ 781,999$ (1,458,870)$ -$ (1,458,870)$ Police (4,286,476) 53,810 - - (4,232,666) - (4,232,666) Fire (603,810) - - - (603,810) - (603,810) Protective Inspections (578,445) 729,625 - - 151,180 - 151,180 Economic Environment (1,112,349) - - - (1,112,349) - (1,112,349) Public Works (3,790,179) 1,087,329 - - (2,702,850) - (2,702,850) Library (377,765) 6,820 - - (370,945) - (370,945) Interest and Fiscal

Charges on Long-Term Debt (117,639) - - - (117,639) - (117,639)

Total Governmental Activities (14,758,425) 3,528,477 - 781,999 (10,447,949) - (10,447,949)

Business-Type Activities Water and Sewer (11,209,529) 14,634,297 - 8,940,728 - 12,365,496 12,365,496 Sanitation (2,159,722) 2,511,730 - - - 352,008 352,008 Airport (3,119,145) 2,322,254 - 1,125,923 - 329,032 329,032

Total Business-Type Activities (16,488,396) 19,468,281 - 10,066,651 - 13,046,536 13,046,536

Total (31,246,821)$ 22,996,758$ -$ 10,848,650$ (10,447,949)$ 13,046,536$ 2,598,587$

General Revenues:

Taxes

Ad Valorem 8,684,227 - 8,684,227 Franchise Fees 1,891,749 - 1,891,749 Communications Services 965,964 - 965,964 Utility Taxes 2,401,570 - 2,401,570 Business Taxes 118,852 - 118,852 State Revenue Sharing 711,455 - 711,455 Half-Cent Sales Tax 1,548,994 - 1,548,994 Local Option Gas Tax 756,674 - 756,674 Local Option Sales Tax 3,649,934 - 3,649,934 Other Taxes 154,474 - 154,474 Investment Income 2,342,681 658,479 3,001,160 Miscellaneous 217,221 - 217,221 Gain (Loss) on Asset Disposal - 14,597 14,597

Total General Revenues and Special Items 23,443,795 673,076 24,116,871 Change in Net Position 12,995,846 13,719,612 26,715,458

Net Position Beginning of Year 49,472,665 97,305,274 146,777,939 Net Position End of Year 62,468,511$ 111,024,886$ 173,493,397$

Program Revenues Changes in Net Position

Balance Sheet Governmental Funds

General Special

Revenue CRA Fund Impact Fee

Fund Total Asse ts

Cash and Pooled Cash, Cash Equivalents, and Investments 17,147,006$ 12,288,038$ 1,804,703$ 8,272,826$ 39,512,573$

Receivables (Net of Allowance) Accounts Billed 446,293 - - - 446,293 Due from Other Governments 375,744 450,570 - - 826,314

Inventories - at Cost 22,930 - - - 22,930 Prepaid Items 1,000 - - - 1,000

Total Assets 17,992,973$ 12,738,608$ 1,804,703$ 8,272,826$ 40,809,110$

Lia b ilities a nd Fund Ba la nce s

Liabilities

Accounts Payable 829,027 775,783 39,962 16,187 1,660,959 Accrued Liabilities 398,974 - 4,713 - 403,687

Total Liabilities 1,228,001 775,783 44,675 16,187 2,064,646

Fund Ba la nce s

Nonspendable:

Inventories 22,930 - - - 22,930 Prepaid items 1,000 - - - 1,000

Restricted For:

Community Reinvestment 165,611 - 1,760,028 - 1,925,639 Impact Fee Programs - - - 8,256,639 8,256,639 Infrastructure Sales Tax Programs - 11,485,596 - - 11,485,596 Transportation - Fuel Tax - 477,229 - - 477,229 Other (Confiscated Property) 59,231 - - - 59,231

Assigned:

Cemetery Perpetual Care 548,425 - - - 548,425 CAD Reserve 51,194 - - - 51,194 Recreation-ZNHH Reserve 3,846,624 - - - 3,846,624 Building Department Reserve 572,522 - - - 572,522 Other 198,999 - - - 198,999

Undesignated/Unreserved 11,298,436 - - - 11,298,436

Total Fund Balances 16,764,972 11,962,825 1,760,028 8,256,639 38,744,464

T o ta l Lia b il ity a nd Fund Ba la nces 17,992,973$ 12,738,608$ 1,804,703$ 8,272,826$ 40,809,110$

Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds

Fund Balances - Total Governmental Funds 38,744,464$

Amounts reported for Governmental Activities in the Statement of Net Position are different because:

Capital Assets used in Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds.

Governmental Capital Assets 84,516,605$

Less: Accumulated Depreciation (31,419,224) 53,097,381

Long-Term Liabilities are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. (4,782,517)

SBITA Financing payable (1,658,029)

Compensated Absences - Long-Term (1,169,945)

Unfunded Accrued Liability - OPEB (11,215,677)

Net Pension Liability (11,447,445)

Other Deferred Inflows/Outflows 900,279 (24,590,817)

Net Assets of Governmental Activities 62,468,511$

Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds

General

Special

Revenue CRA Fund

Impact Fee

Fund Total

Revenues

Taxes 11,171,476$ -$ 999,142$ -$ 12,170,618$

Licenses and Permits 2,460,151 - - - 2,460,151

Intergovernmental Revenue 2,489,884 5,070,598 - - 7,560,482

Charges for Services 1,731,807 - - - 1,731,807

Fines and Forfeitures 85,918 - - - 85,918

Miscellaneous Revenue 1,296,755 844,981 197,649 420,828 2,760,213

Special Assessments - - - 984,866 984,866

Total Revenues 19,235,991 5,915,579 1,196,791 1,405,694 27,754,055

Expendi tures

Current

General Government 4,444,489 - 465,597 703,552 5,613,638

Public Safety 8,034,160 - - - 8,034,160

Economic Environment - - - - -

Physical Environment - - - - -

Public Works 2,672,881 - - - 2,672,881

Library 425,023 - - - 425,023

Capital Outlay 606,251 10,656,263 114,155 123,847 11,500,516

Debt Service

Principal Retirement - 472,417 - - 472,417

Interest and Fiscal Charges - 117,639 - - 117,639

Total Expenditures 16,182,804 11,246,319 579,752 827,399 28,836,274

Excess of Revenues Over (Under) Expended 3,053,187 (5,330,740) 617,039 578,295 (1,082,219)

Other Financing Sources (Uses)

Transfers In - - - - -

Transfers Out (83,705) - - - (83,705)

Total Other Financing Sources (Uses) (83,705) - - - (83,705)

Net Change in Fund Balances 2,969,482 (5,330,740) 617,039 578,295 (1,165,924)

Fund Balances - Beginn ing o f Year 13,795,490 17,293,565 1,142,989 7,678,344 39,910,388

Fund Balances - End of Year 16,764,972$ 11,962,825$ 1,760,028$ 8,256,639$ 38,744,464$

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

Net Change in Fund Balance - Total Government Funds (1,165,924)$

Amounts reported for Governmental Activities in the Statement of Activities are different because:

Governmental Funds report Capital Outlays as Expenditures.

However, in the Statement of Activities, the cost of those assets are depreciated over their estimated useful lives.

Expenditures for Capital Assets 11,500,516$

Expenditures for Subscription Assets (60,026)

Less Current Year Depreciation/Amortization (3,085,250) 8,355,240

Proceeds from debt issue are financing source in the governmental funds. They are not revenue in the statement of activities; issuing debt increases long-term liabilities in the statement of net assets. -

Estimated (increase)/decrease in Net OPEB obligations 4,662,014

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as Expenditures in Governmental Funds.

Other 476,061

Change in Subscription Assets Payable 546,174

Change in Compensated Absences - Long-Term (210,364)

Other - Deferred Inflows/Outflows 444,913

Increase Net Pension Liability (112,268) 1,144,516

Change in Net Assets of Governmental Activities 12,995,846$

Proprietary Funds

Utility Fund Sanitation Fund Airport Fund Total

Asse ts

Current Asse ts

Cash and Investments 9,203,897$ 1,942,044$ 2,485,809$ 13,631,750$ Accounts Receivable 1,337,110 326,076 54,040 1,717,226

Less: Allowance for Credit Losses (64,000) (12,000) - (76,000) Lease Receivable - short-term - - 186,418 186,418 Other Prepaid Expense 11,444 - - 11,444 Inventories of Supplies, at cost 551,545 - 47,746 599,291 Due From Other Governments 620,530 - 122,863 743,393 Due From the Federal Government - - - - Due From Other Funds - - -

Total Current Assets 11,660,526 2,256,120 2,896,876 16,813,522

Non-Curre nt Asse ts

Lease receivable - long-term - - 1,608,168 1,608,168

Total Non-Current Assets - - 1,608,168 1,608,168

Restric te d Asse ts

Cash and Pooled Cash, Cash Equivalents and Investments

Utility Connection Impact Fees 11,620,425 - - 11,620,425

Construction Fund - - - -

Sinking Fund - - - -

Renewal and Replacement - - - -

Water Reuse Reserve Fund - - - - Utility Deposits 1,518,465 - - 1,518,465

Total Restricted Assets 13,138,890 - - 13,138,890

Cap ita l Asse ts

Property, Plant, Equipment and Infrastructure 116,971,856 4,794,843 44,420,672 166,187,371

Less: Accumulated Depreciation (47,955,216) (2,478,306) (16,569,731) (67,003,253)

Total Capital Assets 69,016,640 2,316,537 27,850,941 99,184,118

Total Assets 93,816,056 4,572,657 32,355,985 130,744,698

De fe rre d Outflo ws o f Re source s

Deferred Pension Outflows 418,582 123,442 49,414 591,438

T o ta l Asse ts a nd De fe rred Outflo ws o f Reso urces 94,234,638$ 4,696,099$ 32,405,399$ 131,336,136$

Proprietary Funds (continued)

Utility Fund Sanitation Fund Airport Fund Total

Lia b il itie s a nd Fund Eq uity

Curre nt Lia b ili tie s Pa ya b le fro m Curre nt Asse ts

Accounts Payable and Accrued Expenses 976,844$ 58,721$ 133,980$ 1,169,545$

Water Capacity Reservation 588,300 - - 588,300

Current Portion of Notes Payable 1,396,455 39,665 - 1,436,120

Total 2,961,599 98,386 133,980 3,193,965

Curre nt Lia b ili tie s Pa ya b le fro m Re stric te d Asse ts

Customer Deposits 1,833,447 - 48,701 1,882,148

Accrued Interest 34,746 - - 34,746

Total 1,868,193 - 48,701 1,916,894

Total Current Liabilities 4,829,792 98,386 182,681 5,110,859

Lo ng -T e rm Lia b ili tie s

Net Pension Liabilty 1,856,197 543,413 219,566 2,619,176 Compensated Absences Payable, Long- Term Portion 265,265 156,377 198,727 620,369

Bonds and Notes Payable, Long-Term Portion 9,766,457 - - 9,766,457

Total Long-Term Liabilities 11,887,919 699,790 418,293 13,006,002

Total Liabilities 16,717,711 798,176 600,974 18,116,861

De fe rre d Inflo w o f Re so urce s

Deferred Inflow of Resources - Leases - - 1,742,916 1,742,916

Deferred Pension Inflows 319,987 93,630 37,856 451,473

Total Liabilities and Deferred Inflow of Resources 17,037,698 891,806 2,381,746 20,311,250

Ne t Asse ts

Invested in Capital Assets, Net of Related Debt 57,853,728 2,276,872 27,850,941 87,981,541

Restricted

Extension - Utility fund 11,620,425 - - 11,620,425 Unrestricted 7,722,787 1,527,421 2,172,712 11,422,920

Total Net Assets 77,196,940 3,804,293 30,023,653 111,024,886

T o ta l Lia b il itie s a nd Ne t Asse ts 94,234,638$ 4,696,099$ 32,405,399$ 131,336,136$

Statement of Revenues, Expenses, and Changes in Net Position

Utility Fund Sanitation

Fund Airport Fund Total Op era ting Reve nue

Charges for Services 13,193,390$ 2,511,730$ 2,322,254$ 18,027,374$ Total Operating Revenue 13,193,390 2,511,730 2,322,254 18,027,374

Op era ting Exp e nse s

Personnel Services 2,179,681 638,153 516,332 3,334,166 Professional Services 1,329,559 21,761 10,632 1,361,952 Operating Supplies 71,769 73,170 7,070 152,009 Property and Casualty Insurance 379,168 93,692 108,401 581,261 Repairs and Maintenance 269,088 298,115 50,588 617,791 Utilities 670,098 2,860 44,422 717,380 Depreciation 3,943,740 334,357 1,300,377 5,578,474 Administrative Fees 1,438,331 361,440 20,000 1,819,771 Other Operating Expenses 760,794 211,093 85,055 1,056,942 Costs of Goods Resold - - 976,263 976,263

Total Operating Expenses 11,042,228 2,034,641 3,119,140 16,196,009

Operating Income (Loss) 2,151,162 477,089 (796,886) 1,831,365

No n-Op e ra ting Re venue (Exp e nse s)

Investment Income 446,012 89,303 123,164 658,479 Interest Expense/Bond Refinance (167,301) (1,190) - (168,491) Connection Fees 1,440,907 - - 1,440,907 Insurance Proceeds 904 - - 904 Gain (Loss) on Sale of Asset 13,693 - - 13,693

Total Non-Operating Revenues (Expenses) 1,734,215 88,113 123,164…