The City of Fort Myers, Florida

The City of Fort Myers, Florida Fiscal Year Ended September 30, 2010 Live Work Play Invest Comprehensive Annual Financial Report and Single Audit with Management Letter and Responses

The cover captures various photographs that reflect the Mission of the City of Fort Myers, To deliver exceptional government services and provide an environment where people will be encouraged to live, work, play and invest.

Comprehensive Annual Financial Report and Single Audit with Management Letter and Responses for the City of Fort Myers, Florida Fiscal Year Ended September 30, 2010 City of Palms Prepared by the Department of Financial Services Division of Accounting Director of Finance Maria Joyner

City of Fort Myers, Florida Elected Officials as of March 16, 2011 Randall Henderson Jr., Mayor Teresa Watkins Brown, Mayor Pro Tem, Ward 1 Johnny W. Streets Jr. Ward 2 Levon Simms, Ward 3 Michael A. Flanders, Ward 4 Forrest Banks, Ward 5 Thomas Leonardo, Ward 6

TABLE OF CONTENTS Introductory Section Letter of Transmittal... i Organizational Chart... x Certificate of Achievement for Excellence in Financial Reporting... xi Financial Section Independent Auditors Report... 1 Management s Discussion and Analysis... 3 Government-wide Financial Statements: Basic Financial Statements Statement of Net Assets... 16 Statement of Activities... 17 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet... 20 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets... 22 Statement of Revenues, Expenditures, and Changes in Fund Balances... 24 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities... 26 Proprietary Fund Financial Statements: Statement of Net Assets... 28 Statement of Revenues, Expenses, and Changes in Fund Net Assets... 30 Statement of Cash Flows... 32 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets -Trust and Agency Funds... 38 Statement of Changes in Fiduciary Net Assets - Pension Trust Funds... 39 Notes to the Financial Statements... 41 Required Supplementary Information Other than Management s Discussion & Analysis Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund... 94 Employees Pension Schedules: Schedule of Funding Progress... 95 Schedule of Contributions from Employer and Others... 96 Schedule of Other Postemployment Benefits... 97

TABLE OF CONTENTS, continued Major Governmental Fund: Combining and Individual Fund Statements and Schedules Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Revenue Bonds and Notes... 101 Nonmajor Governmental Funds: Combining Balance Sheet Nonmajor Governmental Funds... 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances... 110 Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Law Enforcement Trust Fund... 116 Federal Forfeiture Fund... 117 FEMA Disaster Grant... 118 Grants... 119 Land Acquisition Fund... 120 Cemetery Maintenance Fund... 121 Off Duty Pay Fund... 122 Beautification Fund... 123 Special Assessment Geographical Area Administration... 124 Police Training Fund... 125 Street Light Maintenance Fund... 126 Street Maintenance Fund... 127 Winkler Safe Neighborhood Fund... 128 Public Art Fund... 129 Law Enforcement Equipment Fund... 130 Attainable Workforce Housing Fund... 131 Hurricane Shelter Fund... 132 Public-Private Parking Fund... 133 East Riverside Community Center Fund... 134 Para -Transit Fund... 135 Patrons of the Palms Fund... 136 State Housing Initiative Partnership Program (SHIP)... 137 Facilities Management and Construction Fund... 138 Community Redevelopment Agency... 139 Community Development Block Grant... 140 Crime Prevention Fund... 141 Submerged Land Lease Fund... 142 Nonmajor Enterprise Funds: Combining Statement of Net Assets... 144 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets... 146 Combining Statement of Cash Flows... 148 Internal Service Funds: Combining Statement of Net Assets... 152 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets... 153 Combining Statement of Cash Flows... 154 Fiduciary Funds: Combining Statement of Changes in Assets and Liabilities Agency Funds... 158

TABLE OF CONTENTS, continued Capital Assets Used in the Operation of Governmental Funds: Comparative Schedule by Source... 160 Schedule by Function and Activity... 161 Schedule of Changes by Function and Activity... 163 Statistical Section Schedule 1 - Net Assets by Component... 166 Schedule 2 - Changes in Net Assets... 168 Schedule 3 - Fund Balances, Governmental Funds... 170 Schedule 4 - Changes in Fund Balances, Governmental Funds... 172 Schedule 5 - Assessed Value and Estimated Value of Taxable Property... 174 Schedule 6 - Property Tax Rates - Direct and Overlapping Governments... 174 Schedule 7 - Principal Property Tax Payers... 175 Schedule 8 - Property Tax Levies and Collections... 176 Schedule 9 - Water Sold by Type of Customer and Wastewater Billed by Type of Customer.. 177 Schedule 10 - Ratio of Outstanding Debt by Type... 178 Schedule 11 - Direct and Overlapping Governmental Activities Debt... 181 Schedule 12 - General Revenue Bonds Pledged Revenue Coverage... 182 Schedule 13 - Water-Wastewater Utility Pledged Revenue Coverage... 184 Schedule 14 - Demographic and Economic Statistics... 186 Schedule 15 - Principal Employers... 187 Schedule 16 - Full-Time Equivalent Government - Employees by Function/Program... 187 Schedule 17 - Operations Indicators by Function/Program... 188 Schedule 18 - Capital Assets Statistics by Function... 189 Single Audit Report 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... 191 Schedule of Expenditures of Federal Awards and State Financial Assistance Projects... 193 Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance Projects... 195 Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Awards Program and State Financial Assistance Project and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and Chapter 10.550, Rules of the Florida Auditor General... 196 Schedule of Findings and Questioned Costs Federal Awards Programs and State Financial Assistance Projects, City of Fort Myers, Florida... 198 Summary Schedule of Prior Audit Findings and Corrective Action Plan Federal Awards Programs and State Financial Assistance Projects, City of Fort Myers, Florida... 201 Management Letter Independent Auditors Management Letter... 203 Management Letter Comments... 206

Introductory Section

City of Fort Myers, Florida FINANCIAL SERVICES ADMINISTRATION PO Drawer 2217 Fort Myers, Florida 33902-2217 (239) 321-7147 March 16, 2011 Mayor Randall P. Henderson, Jr. Mayor Pro-Tem Teresa Watkins Brown Council Member Johnny W. Streets, Jr. Council Member Levon Simms Council Member Michael Flanders Council Member Forrest Banks Council Member Thomas Leonardo Citizens of the City of Fort Myers To the Honorable Mayor, City Council Members and Citizens of Fort Myers: We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) of the City of Fort Myers, Florida (City) for the fiscal year ended September 30, 2010. Chapter 218.39, Florida Statutes requires that a complete set of financial statements be published within one year of fiscal year end and presented in conformance with accounting principles generally accepted in the United States of America (GAAP) and audited in accordance with auditing standards generally accepted in the United States of America and those standards applicable to audits performed in accordance with Government Auditing Standards by licensed, independent certified public accountants. Certain bond covenants require that this report be issued within 180 days of the City s fiscal year end. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. We believe the data, as presented, is accurate in all material aspects and is presented in a manner designed to fairly set forth the financial position and results of operations of the City on a government-wide and fund basis. All disclosures necessary to ensure the reader gains an understanding of the City s financial activities have been included. Management of the City is responsible for establishing and maintaining internal controls designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that sufficient, reliable, adequate accounting data is compiled for the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. Internal accounting controls have been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the evaluation of costs and benefits requires estimates and judgments by management. We believe that the City s internal controls adequately safeguard assets and provide reasonable assurance of properly recorded financial transactions. i

In addition, the City maintains budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the annual budget approved by the City Council. The City also maintains an encumbrance system that is employed as an extension of formal budgetary integration in all fund types. Encumbrances are liquidated at fiscal year-end and, if necessary, new encumbrances are issued from the new budget year. In compliance with the laws of the State of Florida, the City s financial statements have been audited by Cherry, Bekaert and Holland, L.L.P., a firm of licensed certified public accountants. The independent auditor has issued unqualified ( clean ) opinions that the City s financial statements for the fiscal year ended September 30, 2010 are fairly presented in conformity with GAAP. The independent auditors report is presented as the first component of the financial section of this report. Management s discussion and analysis (MD&A) immediately follows the independent auditors report and provides a narrative introduction, overview and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. CITY PROFILE Fort Myers, incorporated in 1886, is the oldest city in Lee County and serves as the county seat. Fort Myers is located on the lower west coast of Florida, midway between Tampa and Miami, and has a current population of approximately 68,190 residents. The City encompasses 48.82 total square miles, including waterways, and is bordered to the north and west by the Caloosahatchee River, which is part of the intercoastal-waterway connecting the Atlantic Ocean and the Gulf of Mexico. ii

During 2005, the voters of the City approved a change to the City s charter moving the City from a strong mayor-council form of government to a city manager-council form of government. Although the change in form of government has taken several years to fully implement, during fiscal year 2009 the process was completed. The policy-making body of the City is a City Council composed of a seven member Council. The Council consists of a Mayor elected at large, with one (1) vote and no veto authority, and six (6) Council Members elected by their respective wards. All terms run for a four (4) year period with the mayor and three (3) council members being elected at one election and two years later, the remaining three (3) council members being elected. The City Council is responsible for all policy-making functions of the government. The City Manager is responsible for the administration of the City. This Comprehensive Annual Financial Report includes all funds of the City of Fort Myers (the primary government) and its component units. Component units are legally separate entities for which the primary government is financially accountable. Entities outside the primary government included in this report are: the General Employees' Pension Plan, the Police Officers' Retirement System and the Municipal Firefighters' Pension Trust Fund; the Winkler Safe Neighborhood Improvement District and the Community Redevelopment Agency, which includes the Southwest Florida Enterprise Center, the Downtown Redevelopment Area, and other redevelopment areas (the Velasco Village Redevelopment Area, the Central Fort Myers Redevelopment Area, the Cleveland Avenue Redevelopment Areas, the Dr. Martin Luther King, Jr. Boulevard Redevelopment Areas, the Dunbar-Michigan Redevelopment Area, the East Fort Myers Redevelopment Area and the Eastwood Village Redevelopment Area). Municipal services provided to the citizens of Fort Myers include law enforcement, fire protection, community planning and development, traffic engineering, road and drainage construction and maintenance, parks and recreational activities/facilities, parking management, code enforcement and inspections, a cemetery, and other general governmental administrative services. The City also operates a utility system (including potable and reuse water and wastewater), solid waste services, building permits and inspections, stormwater management, golf courses, a yacht basin, an event center, parking garages, a skatium, historical homes and museum, and a hands-on children's museum. These additional operations are reported as enterprise funds that are intended to be, in most cases, self-supporting from user charges established by the City Council. The City Council is required to adopt a final budget by no later than the close of the fiscal year. The annual budget serves as the foundation for the City s financial planning and control. The budget is prepared by fund, department (e.g. Public Works), and division (e.g. Recreation). The City Manager can authorize changes within a division or departments but not between funds. Any other revisions require approval of City Council. The Region ECONOMIC CONDITION AND OUTLOOK Fort Myers is part of the Fort Myers-Cape Coral Metropolitan Statistical Area, which includes all of Lee County. The general concept of a metropolitan statistical area is one of a large population nucleus, together with adjacent communities that have a high degree of economic and social integration within that nucleus. Fort Myers is located in the heart of one of the fastest growing regions in the nation. From 2001-2010, the population of Lee County and of Southwest Florida (a five county area) grew 22% while the population of the State of Florida increased 13% and the nation rose only 8%. iii

The total taxable assessed property value in Fort Myers decreased 21.5% from $6,846,798,000 for fiscal year 2009 to $5,384,093,870 for fiscal year 2010. The City of Fort Myers, as all of Southwest Florida, has experienced a downturn in the real estate sector, as indicated by the decrease in the taxable assessed property values from fiscal year 2009. The City s 2010 assessed value reflects this downturn, which is expected to continue into fiscal year 2011. That is due to the fact that our tax year is on a calendar basis. Therefore, the taxable assessable values used for ad valorem valuations lag approximately one year behind. Although the real estate downturn has slowed growth, the City contains several factors that offset this slowdown. The primary factors are: Significant undeveloped land, both residential and commercial. Current Planned Unit Developments currently underway, but not yet completed. Continued upgrading of the City s transportation infrastructure to provide for safer and faster commuting to and from the City to outlaying areas. The City s ability to expand and diversify its tax base will be a major factor in providing additional financial resources to fund an increasing demand for services. The City re-established its Brownfields Program and is actively pursuing grant funding, expansion of brownfield areas and continued economic and environmental redevelopment throughout Fort Myers. Redevelopment of unproductive parcels of land will result in the creation of new jobs in the community in addition to improving the City s tax base. In addition, the City amended the Future Land Use Map to reduce the number of land use categories, and is streamlining land development processes in order to allow for greater flexibility, simplify and enhance development approvals, improve customer service and stimulate the economy through development. The national and state economics are key factors in assessing the City s future fiscal picture. Changes in the national, state and local economies can affect both revenues and expenditures due to the impact on tax receipts and the costs of demand of providing City services. While economic changes at the state and national level can often translate into comparable changes locally, it is important to note that the City of Fort Myers and the Southwestern Florida region often behave differently, showing economic trends and reflecting experience that may lag or precede noticed changes elsewhere. On Tuesday, January 28, 2008, the voters of the State of Florida passed a constitutional amendment that provides tax relief to the State s property owners. This amendment, known as Amendment 1, provides an additional $25,000 homestead exemption for residence, the ability (portability) of the Save Our Homes, a constitutional amendment that provides that a resident property owner s taxable assessment may not grow more than 3 percent per year or the inflation factor whichever is less and a $25,000 tangible property exemption for business property. Amendment 1, in conjunction with the property devaluation, reduced the City s taxable value by $1.0 billion, from $5.4 billion to $4.4 billion for fiscal year 2011. LONG-TERM FINANCIAL PLANNING A significant measure of the City s financial strength is the level of its fund balances (the accumulation of revenues exceeding expenditures). In accordance with the City s budget policy, the City s General Fund reserves should be maintained at a minimum of $5 million, with the ultimate goal of 10-15% of the General Fund budget. The fiscal year 2010 ending reserves for the General Fund exceed the minimum requirement and fall within the range of the goal. iv

The City Council takes the responsibility of being stewards of the public s funds very seriously. In fiscal year 2010, City Council identified a series of goals and objectives as part of the development and implementation of the City s comprehensive Strategic Plan, and the goal of fiscal accountability was considered a high level priority. The objectives for fiscal accountability comprise the exploration of options for balancing the City s budget and the development of a long term financial plan. Without strong financial planning, a local government cannot guarantee services and programs, plan for unforeseen events, or have a strong return on investment. Strategic Plan The purpose of every government is to provide public safety, public services, and an enhanced community environment for its citizens. The City continuously strives to provide the services citizens, business owners and visitors demand. To assist with this effort, City Council and staff met in February 2010 to create a Strategic Plan that will enable the organization to successfully execute the City s Mission, To deliver exceptional government services and provide an environment where people will be encouraged to live, work, play and invest." Development of the Strategic Plan incorporated the discussion of internal and external factors that may impact the City over the next few years along with an evaluation of the City s current Strengths, Weaknesses, Opportunities and Threats (SWOT). That exercise lead to the identification of strategic issues that encompass a variety of subjects important to the well-being of the City and are grouped into the six goals listed below: 1. Provide core services ~ Identify and prioritize core services. 2. Fiscal accountability ~ Develop and maintain financial strength and fiscal accountability. 3. Staff/personnel issues ~ Commit to attracting, retaining and developing a diverse and competent workforce that enables the City to achieve their business needs. 4. Physical well-being ~ Enhance Citywide infrastructure and facilities while maintaining comprehensive treatments of neighborhoods. 5. Economic development ~ Foster economic development and encourage redevelopment within the City of Fort Myers. 6. Communication ~ Promote interactive methods of communication throughout City departments and with citizens. Each Council member identified a series of objectives and then voted on the objectives that they felt were most important for implementation in fiscal year 2011. Since most of fiscal year 2010 was dedicated to goals and objectives, performance measures remain a work in progress and City Council will review the Strategic Plan in the beginning of fiscal year 2011. The objectives for physical well-being incorporate the assured provision of improved infrastructure through the City; the promotion of urban infill; and the continuation of annexations as appropriate. The following programs conform to those objectives: The City completed the design of a new, state-of-the-art wastewater facility, which will provide more environmentally pleasant waste treatment and additional reclaimed water capacity that will allow treated wastewater to be used for irrigation purposes. This will have the added effect of helping to protect the river that borders the City. The City is currently evaluating necessity compared to funding. v

The City is successfully revitalizing neighborhoods by purchasing abandoned/foreclosed homes in target areas, rehabilitating and reselling them, and by building homes on city-acquired vacant lots that meet Florida Green and Energy STAR certification standards, utilizing federal Neighborhood Stabilization Program funds. Funds for repairs and rehabilitation of housing are available from both of the Community Development Block Grant and State Housing Initiative Partnership (SHIP) programs. The City is applying for funds from the Environmental Protection Agency for the City s Brownfields Program, which encourages and facilitates redevelopment initiatives by providing various benefits and incentives to private development. The objectives for economic development incorporate the funding and implementation of the Riverfront Plan; the development of a unified marketing plan for telling our story; and the continuation to support small businesses. The following programs conform to those objectives: The City included the Fort Myers Riverfront Development Plan in its 2010 Downtown Plan, which was formally adopted by City Council in April 2010. The Riverfront Development Plan incorporates new retail, restaurant and entertainment uses, a convention quality hotel, expanded Harborside Convention Center, public plazas and open spaces, and expanded marina facilities. The City works with fledgling businesses by providing an incubator (the Southwest Florida Enterprise Center). This center provides space at very favorable rates and business classes to assist new entrepreneurs in starting up their businesses. The City partners with Florida Gulf Coast University to provide classes and assistance. The City continues to fund capital programs to meet the standards set forth in its Comprehensive Plan and to positively impact the quality of life for its residents, businesses and visitors. The City has adopted a five-year capital spending program for fiscal years 2011 through 2015 that includes: Utility $ 100,734,068 Transportation 33,061,940 Development 15,700,000 Buildings 10,310,904 Stormwater 9,524,727 Equipment 9,477,500 Parks and Beautification 1,056,500 Total $ 179,865,639 Projects in the Capital Improvement Program are designated as CP (projects needed to keep the City in compliance with the City s Comprehensive Plan), M (mandatory projects that are part of contractual requirements with third parties), and D (discretionary projects that the City would like to do). Of the $179,865,639 in the five-year capital spending program, discretionary projects total $17.68 million or 9.8%. vi

Major projects included in the capital budget for fiscal year 2011 are: Downtown Water Detention Basin $ 2,500,000 Odor Control Upgrade - SWWTP 2,298,000 Brookhill Subdivision Utility Replacement 2,210,000 SR82(MLK) Ortiz to Colonial Utilities 1,900,000 Palm Ave. Utilities 1,260,000 State Road 80 Access Modification 1,000,000 Solid Waste Vehicle Replacements 850,000 Lift Station No. 4 Rehabilitation 770,000 Records Storage Facility 680,000 Fire Engine Replacement 500,000 Total $ 13,968,000 RELEVANT FINANCIAL POLICIES The City formally adopted a debt policy during fiscal year 2008. There are no legal debt limits placed on the City through state law (no such limit exists in Florida), local ordinances or local resolutions. The City is continually pursuing ways to potentially limit debt and improve its overall financial position. These actions include such things as: Limiting future capital spending projects and minimizing the issuance of additional debt. Taking advantage of refunding opportunities, if any arise, to decrease future annual debt service requirements. Restructuring existing debt, where legally possible, to remove the City's backup pledge on debt that benefits specific districts where sufficient revenues are available from those districts to repay the debt. Committing proceeds from the sale or other disposal of any assets financed by debt to the prepayment or early payoff of the related debt. While the City does not have a comprehensive set of financial policies that have been adopted by City Council, there are guidelines in place that set forth the basic framework for the overall fiscal management of the City. With the development and implementation of the Strategic Plan, City management may be revising policies and procedures in the process to further the growth and financial security of the City. Operating independently of changing circumstances and conditions, the financial policies guide the decision-making process of the City Manager, Mayor, City Council and Administration. These policies provide guidelines for evaluating both current activities and future programs. Any downward trends in the State and/or local economy will adversely impact the City s ability to realize its budgeted revenues in the categories of franchise fees, utility taxes and state-shared revenues. Therefore, quarterly monitoring and conservatism (98% budgeting) should mitigate any unforeseen circumstances. Complementing this practice is one in which a certain amount of expenses/expenditures are frozen and are not released for use until it is clear that revenues will be at projected levels. City Council adopted a General Fund fund balance policy to protect the City from unforeseen circumstances. The policy says the City will strive to have 10% to 15% of the General Fund budget as a fund balance, but not less than $5,000,000. The City does not issue debt, long or short term, to finance operational costs. In prior fiscal years, the City utilized three credit lines for use in acquiring capital assets. These credit lines were used as vii

construction loans, which were then replaced with bonds and notes when the amounts required were sufficient to provide economies of scale in issuing long term debt. The last credit line was closed in fiscal year 2010. While the City does not have any general obligation debt, certain underlying and implied ratings have been given to the City by the ratings companies. In August 2010, Standard and Poor s Ratings Services (S&P) affirmed its A+ rating and stable outlook on the City s Series 2006 and Series 2007 improvement revenue and refunding revenue bonds. Fitch, Inc. (Fitch) provided an underlying rating of A on the City s Utility Improvement Bonds, and in March 2011, Fitch affirmed the rating of AA- on the City s general revenue improvement bonds, the rating of A+ on the City s Gas Tax Bonds and the rating of AA- on the implied general obligation debt. In the same period, S&P affirmed its A rating and stable outlook on the City s Gas Tax Bonds. MAJOR INITIATIVES It is anticipated that the current economic difficulties will persist into the next few years. The City will continue to be challenged with increases in health insurance and pension costs while faced with limited revenues as real estate value, due to foreclosures and short sales, could deteriorate further. Health insurance costs are up 12% overall and the City contributions to the three pension plans increased by $4.9 million, or 50%, over fiscal year 2009 and $1.6 million, or 10.8%, over fiscal year 2010. Economic indicators imply that the recession is over, but recovery will be slow and any favorable impact will take years to be evident to the City. It is expected that even with a turnaround in the economy, the City will never quite return to the abundant financial times experienced in 2007. Because of that, the City will have to fund operations and service delivery with constricted revenue growth into the future. The City continues to execute its plan to redevelop and reinvigorate its historic downtown and waterfront district with the approved 2010 Downtown Development Plan. The City envisions a transformation of the downtown riverfront into an exciting destination for local and regional residents, tourists and convention visitors. While total costs are yet to be determined, the first phase of the project is the construction of a water detention basin for a project cost of $4.5 million in 2011 and the expansion of the City s convention center for a project cost of $7.3 million in 2012. Also included in the first phase are a full service hotel and City blocks designed as flagship waterfront restaurant opportunities. AWARDS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Fort Myers for its comprehensive annual financial report for the fiscal year ended September 30, 2009. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for the preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. This report must satisfy both generally accepted accounting principles and applicable legal requirements. viii

A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last twenty-one consecutive years. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The City of Fort Myers has also received the GFOA s Distinguished Budget Presentation Award for the last nineteen consecutive years. The Distinguished Budget Presentation Award is the highest form of recognition in governmental budgeting, and its attainment represents a significant accomplishment by a government and its management. In order to receive this award, a government unit must publish a budget document that meets program criteria as a policy document, an operations guide, a financial plan and a communication device. The award is the budgetary counterpart of the Certificate of Achievement and is valid for one year only. ACKNOWLEDGMENTS The preparation of this Comprehensive Annual Financial Report was made possible through the cooperation and teamwork of the entire Accounting Services Division of the Financial Services Department. Their continuing effort toward improving the accounting and financial reporting systems improves the quality of information reported to the City Council, State and Federal Agencies, and the citizens and investors in the City of Fort Myers. We sincerely appreciate and commend them for their contributions. Appreciation is also extended to our external auditors, Cherry, Bekaert & Holland, L.L.P. for their assistance and to the Mayor and City Council Members for the vital role they have played in enabling the City to remain fiscally responsible to the citizens of Fort Myers. Sincerely, CITY OF FORT MYERS William P. Mitchell City Manager Maria Joyner Director of Finance ix

CITY OF FORT MYERS Organizational Chart As of September 30, 2010 Residents of Fort Myers City Council as of Board of Directors of the Winkler Safe Neighborhood Improvement District City Council as of Board of Commissioners of the Community Redevelopment Agency Elected Officials Downtown Redevelopment Area Donald Paight Executive Director Southwest Florida Enterprise Center Tom Scott Director City Attorney Grant W. Alley Other Redevelopment Areas Cleveland Avenue, Central Fort Myers, Martin Luther King, and Velasco Village Redevelopment Areas City Manager William P. Mitchell Assistant City Manager Marvin Collins Financial Services Maria Joyner Director Human Resources Christine McDade Acting Director Community Development Robert Gardner Director Police Douglas E. Baker Chief Fire Kenneth D. Dobson Chief Public Works Saeed Kazemi Director Information Technology Services Jimmy R. Barfield Director City Clerk Marie Adams x

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Financial Section

INDEPENDENT AUDITORS REPORT Honorable Mayor and City Council City of Fort Myers Fort Myers, Florida 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 Fort Myers, Florida (the City ), as of and for the year ended September 30, 2010, which collectively comprise the City s basic financial statements as listed in the table of contents. We have also audited the financial statements of the City of Fort Myers, Florida Community Redevelopment Agency (the CRA ), presented as other supplementary information in the accompanying combining financial statements as of and for the year ended September 30, 2010. These financial statements are the responsibility of the City s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. 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, each major fund, and the aggregate remaining fund information of the City as of September 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the CRA as of September 30, 2010 and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2011 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 Government Auditing Standards and should be considered in assessing the results of our audit. 1

The management s discussion and analysis and required supplementary information as listed in the table of contents are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section listed in the foregoing table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. In addition, the accompanying schedule of expenditures of federal awards and state financial assistance projects for the year ended September 30, 2010 is presented for the purpose of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and Chapter 10.550, Rules of the Auditor General, and is not a required part of the basic financial statements. The combining and individual funds financial statements and schedules, including the schedule of expenditures of federal awards and state financial assistance projects, have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections of this report have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. CHERRY, BEKAERT & HOLLAND, L.L.P. Orlando, Florida March 16, 2011 2

Management s Discussion and Analysis As management of the City of Fort Myers (the City), we offer the readers of the City s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2010. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-ix of this report, and the City s financial statements beginning on page 15. Financial Highlights: The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $279,188,504(net assets). Unrestricted net assets, which may be used to meet the government s ongoing obligations to citizens and creditors, decreased $12,678,481 (23.91%). The government s total net assets decreased by $2,434,066. As of the close of the current fiscal year, the City s governmental funds reported a combined ending fund balance of $137,155,177, a decrease of $4,642,790 (3.3%) during the year. Approximately 20.1% ($27,518,038) of this total amount is available for spending at the government s discretion (unreserved, undesignated fund balance). At the end of the current fiscal year, unreserved, undesignated fund balance for the General Fund was $12,148,678, or 18.5% of total General Fund expenditures. Business-type activities decreased their total net assets by $978,007 to $121,195,620. Of this amount, 17.3% ($21,024,664) represents unrestricted net assets, which are available for use as the City sees fit. 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. In addition to the basic financial statements, this report contains other supplementary information. 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. The Statement of Net Assets presents information on all of the City s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents revenues and expenses showing how the government s net assets changed during the most recent fiscal year. All changes in net assets are reported in a manner similar to the approach used by a private sector business. Revenues are recognized when earned or established criteria are satisfied and expenses are reported when incurred. 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. Both of these government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental activities (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, community and economic development, planning and zoning, police, fire, public works, parks and recreation, and the Community Redevelopment Agency. The business-type activities of the City include a water and wastewater utility, solid waste collection, building permits and inspections, stormwater management, golf courses, a yacht basin, an event center, downtown parking garages, a skatium, historical homes and museum, and a hands-on children s museum. The government-wide financial statements include not only the City itself (known as the primary government), but also the Community Redevelopment Agency, a legally separate entity for which the City is financially responsible. Financial information for this component unit is included in the governmental-type funds as a non-major special revenue fund. The government-wide financial statements can be found on pages 15-17 of this report. 3

Fund financial statements Unlike government-wide financial statements, the focus of the fund financial statements is directed to specific activities of the City rather than the City as a whole. Except for the General Fund, a specific fund is established to satisfy managerial control over resources or to satisfy finance-related legal requirements. The City s fund financial statements are divided into three categories: 1) governmental funds, 2) proprietary funds and 3) fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both of the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to the government-wide statements in order to facilitate this comparison between governmental funds and governmental activities. The City maintains thirty-two (32) individual governmental funds. Information is presented separately in the Governmental Funds Balance Sheet and in the Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, the Revenue Bonds and Notes Fund, the Transportation Capital Projects Fund and the General Capital Projects Fund, each of which are considered to be a major fund. Data from the other twentyeight (28) governmental funds are combined into a single, aggregated presentation titled Other Governmental Funds. The City adopts annual appropriated budgets for the governmental funds with the exception of the two capital projects funds, which are budgeted on a project length basis. A budgetary comparison schedule has been provided for each of the major governmental funds, with the exception of the Transportation Capital Projects Fund and the General Capital Projects Fund, to demonstrate compliance with this budget. The governmental fund financial statements can be found on pages 19-26 of this report. Proprietary funds. The City maintains two different proprietary fund types. 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 Water and Wastewater Utility, Solid Waste Operations, Building Permits and Inspections, Stormwater Management, Fort Myers Country Club, Eastwood Golf Course, the Yacht Basin, Harborside Event Center, Downtown Parking Garages, Skatium, and the Department of Cultural and Historical Affairs, which comprises the business activities of the Imaginarium Hands-on Children s Museum, the Burrough s Home, and the Southwest Florida Museum of History. Internal Service Funds are an accounting device used to accumulate and allocate costs internally among City service functions. The City uses separate internal service funds to account for its Central Garage Operations, Information Technology Services, Public Works Warehouse and Risk Management Program. Because all of these services predominantly benefit governmental rather than business-type functions, they have been included with governmental activities in the government-wide financial statements. Proprietary fund financial statements 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 Water- Wastewater Fund and the Solid Waste Fund, both of which are considered to be major funds of the City. The remaining enterprise funds are combined into a single, aggregated presentation titled other enterprise funds. The proprietary fund financial statements can be found on pages 27-35 of this report. 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 statements because the resources of those funds are not available to support the City s own programs. The basis of accounting used for fiduciary funds is much like that used for proprietary funds. The City maintains three pension trust funds and five agency funds. The three pension trust funds are: 1) the General Employees Pension Plan, 2) Police Officers Retirement System and 3) the Municipal Firefighters Pension Trust Fund. The five agency funds are: 1) Carillon Woods Special Assessment Fund, which accounts for a special assessment that has debt outstanding with no governmental commitment; 2) the 4

EMS Impact Fee Fund, which accounts for the EMS impact fees collected which are then sent to Lee County; 3) the School Board Impact Fee Fund, which accounts for school impact fees collected and sent to Lee County; 4) Unclaimed Funds, which accounts for monies that have not been claimed and are then sent to the State of Florida according to State Statutes; and 5) Employee Special Events Fund, which is accounted for and held by the City for a committee that provides special events for employees. The fiduciary fund financial statements can be found on pages 37-39 of this report. 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, and is required by accounting principles generally accepted in the United States. The notes to the financial statements can be found on pages 41-92 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City s progress in funding its obligation to provide pension and other postemployment benefits to its employees and a schedule showing budget to actual data for the General Fund. Required supplementary information can be found on pages 93-97 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City, assets exceeded liabilities by $279,188,504 at the close of the most recent fiscal year. While governmental fund net assets total $157,992,884, the net assets that are invested in capital assets, net of related debt, are $46,344,509, or 29.3% of governmental fund-type total net assets. Business-type activities show 66.3% of their net assets being capital assets net of related debt. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in its capital assets is reported net of related debt, it should still 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. An additional portion of the City s net assets represents resources that are subject to external restrictions on how they may be used. For governmental funds, this amounts to $92,314,792 and for business-type funds, $19,842,041. Following is a summary of the City s net assets as found on page 16 of this report: City of Fort Myers, Florida Net Assets as of September 30, 2010 and 2009 Governmental Business-type Activities Activities Total 2010 2009 2010 2009 2010 2009 Current and other assets $ 171,029,698 $ 174,871,546 $ 80,758,801 $ 139,596,671 $ 251,788,499 $ 314,468,217 Capital assets 152,626,929 152,798,499 339,655,042 336,482,506 492,281,971 489,281,005 Total assets 323,656,627 327,670,045 420,413,843 476,079,177 744,070,470 803,749,222 Long-term liabilities Outstanding 153,320,290 157,139,363 283,719,448 335,022,014 437,039,738 492,161,377 Other liabilities 12,343,453 11,081,739 15,498,775 18,883,536 27,842,228 29,965,275 Total liabilities 165,663,743 168,221,102 299,218,223 353,905,550 464,881,966 522,126,652 Net assets: Invested in capital assets, net of related debt 46,344,509 40,276,557 80,328,915 73,491,549 126,673,424 113,768,106 Restricted 92,314,792 90,062,098 19,842,041 24,755,638 112,156,833 114,817,736 Unrestricted 19,333,583 29,110,288 21,024,664 23,926,440 40,358,247 53,036,728 Total net assets $ 157,992,884 $ 159,448,943 $ 121,195,620 $ 122,173,627 (1) $ 279,188,504 $ 281,622,570 (1) (1) Includes restatement in Note 6, for implementation of GASB 53, Accounting and Financial Reporting for Derivative Instruments. 5

Following is a summary of the information presented in the Statement of Activities found on page 17 of this report: City of Fort Myers, Florida Changes in Net Assets For the Year Ended September 30, 2010 and 2009 Governmental Business-type Activities Activities Total 2010 2009 2010 2009 2010 2009 Revenues: Program Revenues Charges for services $ 6,531,081 $ 6,874,322 $ 75,143,129 $ 70,832,842 $ 81,674,210 $ 77,707,164 Operating grants and contributions 4,881,791 3,233,726 17,725 21,339 4,899,516 3,255,065 Capital grants and contributions 7,261,760 7,754,113 1,021,427 10,022,669 8,283,187 17,776,782 General Revenues Property taxes 40,719,474 50,344,893 - - 40,719,474 50,344,893 Other taxes 18,614,259 20,674,454 - - 18,614,259 20,674,454 Other 9,649,870 13,341,021 2,798,003 1,525,247 12,447,873 14,866,268 Total revenues 87,658,235 102,222,529 78,980,284 82,402,097 166,638,519 184,624,626 Expenses: General government 16,675,130 17,629,323 - - 16,675,130 17,629,323 Police 31,887,208 29,213,985 - - 31,887,208 29,213,985 Fire 16,722,815 17,983,913 - - 16,722,815 17,983,913 Protective inspections 1,555,000 2,402,582 - - 1,555,000 2,402,582 Physical environment 2,357,311 3,248,941 - - 2,357,311 3,248,941 Transportation 11,558,730 13,144,626 - - 11,558,730 13,144,626 Economic environment 7,830,674 7,131,285 - - 7,830,674 7,131,285 Culture and recreation 3,781,245 4,158,147 - - 3,781,245 4,158,147 Interest 3,658,929 5,314,097 - - 3,658,929 5,314,097 Utilities - - 45,914,665 36,707,074 45,914,665 36,707,074 Solid Waste - - 10,541,992 11,069,317 10,541,992 11,069,317 Permitting and Inspections - - 2,688,251 3,913,932 2,688,251 3,913,932 Stormwater - - 2,053,906 1,640,896 2,053,906 1,640,896 Historical Homes - - 1,757,457 1,703,697 1,757,457 1,703,697 Downtown Parking - - 1,026,229 1,028,549 1,026,229 1,028,549 Golf Courses - - 3,273,457 3,321,542 3,273,457 3,321,542 Skatium - - 1,174,152 1,252,056 1,174,152 1,252,056 Yacht Basin - - 2,399,954 2,100,472 2,399,954 2,100,472 Harborside Event Center - - 2,215,480 2,156,990 2,215,480 2,156,990 Total expenses 96,027,042 100,226,899 73,045,543 64,894,525 169,072,585 165,121,424 Increase in net assets before transfers and special items (8,368,807) 1,995,630 5,934,741 17,507,572 (2,434,066) 19,503,202 Gain (loss) on capital assets - (2,329,858) - - - (2,329,858) Transfers 6,912,748 3,836,399 (6,912,748) (3,836,399) - - Increase / (decrease) in net assets (1,456,059) 3,502,171 (978,007) 13,671,173 (2,434,066) 17,173,344 Restatement in Note 6, GASB 53 implementation - - - (2,009,932) - (2,009,932) Net assets beginning 159,448,943 155,946,772 122,173,627 110,512,386 281,622,570 266,459,158 Net assets ending $ 157,992,884 $ 159,448,943 $ 121,195,620 $ 122,173,627 $ 279,188,504 $ 281,622,570 Governmental Activities Governmental activities decreased the City s net assets by $1,456,060. This decrease is mainly due to a reduction in tax revenues ($10.1 million) as a result of a reduction in tax base, offset by an overall reduction ($5.6 million) in expenses due to spending reductions made during the budget process as a result of reduced revenues, and an increase in transfers from business-type funds ($2.0 million). 6

The following chart compares expenses with program revenues for the City s governmental activities: Expenses and Program Revenues - Governmental Activities $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- General Government Police Fire Protective Inspections Physical Environment Transportation Economic Environment Culture & Recreation Interest on Long-Term Debt Revenues Expenses The following graph shows the composition of revenues for the City s governmental activities: Revenues by Source - Governmental Activities Property Taxes 46% Public Service Taxes 11% Franchise Fees 6% Capital Grants and Contributions 8% Operating Grants and Contributions 6% Charges for Services 7% Fuel Taxes 5% Intergovernment 8% Interest 2% Miscellaneous 1% 7

Business-type Activities Business-type activities decreased the City s net assets by $978,007, accounting for 40.18% of the total reduction in the City s net assets. Key elements for the difference between the current and prior fiscal year are: The Water-Wastewater Fund increased its net assets by $649,833. This represents an increase of.8% over the prior year s net assets. This increase is a result of operating revenues of $48.3 million exceeding operating expenses of $32.8 million for an operating income gain of $15.5 million, offset by a reduction of private source contributions of $6.0 million, a reduction of nonoperating revenues of $.8 million, and an increase of $7.7 million in interest expense and bond issue costs. Revenues increased by 6% due to a 9% rate increase and operating expenses decreased due to cost reduction measures and vacancy savings. Interest income diminished due to lower interest rates and the economy continues to negatively impact developers, which affected donations of infrastructure improvements. Net assets in the Solid Waste Fund decreased by $738,473, a reduction of 11.5% from prior year s net assets. While operating revenues of $14.1 million exceeded operating expenses of $10.5 for an operating gain of $3.6, the decrease in net assets primarily relates to the increase of $1.0 million in the transfer to the General Fund. The net assets in the nonmajor enterprise funds decreased by $889,367. This decrease is a result of operating expenses of $16.4 million exceeding operating revenues of $12.7 million for an operating loss of $3.7 million, offset by an increase in net transfers of $2.6 million. Operating revenues in the Stormwater Fund increased due to a full year of collecting stormwater fees compared to six months of collections in fiscal year 2009, but the weak economy continues to impact revenues in other enterprise funds, such as the golf courses, parking garages and event center. The following chart compares expenses with program revenues for the City s business-type activities: Expenses and Program Revenues - Business-Type Activities 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 - Water/Wastewater Utility Solid Waste Permitting and Inspections Stormwater Dept of Cultural & Historical Downtown Parking Golf Courses Skatium Yacht Basin Harborside Event Center Revenues Expenses 8

The following graph shows the composition of revenues for the City s business-type activities: Revenues by Source - Business-Type Activities Utilities Charges for Services 61% Solid Waste Charges for Services 18% Miscellaneous & Intergovernment 4% Capital Grants & Contributions 1% Operating Grants & Contributions 0.022% Other Charges for Services 16% 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 fund financial statements for the governmental funds are provided on pages 19-26. The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City s governmental funds reported combined ending fund balances of $137,155,177, a decrease of $4,642,790 during the year. Approximately 29.49% of this amount, $40,445,915, constitutes unreserved fund balance. Of this amount, $12,927,877 has been designated for specific use, but may still be used should City Council decide to change the designated use. The remaining unreserved fund balance is considered unreserved-undesignated and available for spending at the City s discretion, subject to budgetary controls. The remainder of the fund balance is reserved to indicate it is not available for new spending because it has already been committed: 1) to pay debt service - $7,135,436, 2) transportation projects - $63,074,304, 3) general capital projects - $24,170,771, 4) other governmental funds - $1,056,793, and 5) miscellaneous items including prepaid expenditures, advances and long term notes receivable - $1,271,958. The General Fund is the primary operating fund of the City. At the end of the current fiscal year, unreservedundesignated fund balance of the General Fund was $12,148,678 while total fund balance was $21,270,309. As a measure of the General Fund s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 30.49% of total General Fund expenditures, while total fund balance represents 32.42% of that same amount. It should be noted that the budget for fiscal year 2010-2011 provides for using $4,627,642 of the unreserved fund balance to support General Fund expenditures in that fiscal year. 9

The fund balance of the City s General Fund increased $.3 million during the current fiscal year. The primary reasons for the increase in fund balance were the following: Operating expenditures decreased by $5.6 million to $65.6 million as compared to $71.2 million in fiscal year 2009. Interfund transfers into the General Fund increased by $2.0 million, due to contributions from Internal Service Funds and the Facilities Management Special Revenue Fund. In addition, these other factors should be noted: Tax revenues decreased $10.1 million, which was primarily a result of a 21.5% reduction in tax base offset slightly by an increase to the millage rate from prior year of 3.3%. Interfund transfers out of the General Fund decreased by $1.8 million due to the reduced transfers of ad valorem taxes to the TIF districts as a result of decreased tax values in those districts. The Transportation Capital Projects Fund decreased its fund balance by $1.9 million, primarily due to an increase in intergovernmental revenue of $.8 million offset by an increase of $2.9 capital projects expenses. The General Capital Projects Fund decreased its fund balance by $1.8 million, mainly due to a reduction of intergovernmental and miscellaneous revenues of $2.0 million compared to prior year. Proprietary Funds The fund financial statements for the City s proprietary funds provide essentially the same type of information found in the government-wide financial statements, but in more detail. The following are noteworthy changes from the prior year: The Water-Wastewater Fund had an increase in net assets of $649,833. This increase represents an increase of.8% over the prior year. The Water-Wastewater Fund had an increase in charges for services of $2,640,962, mainly due to a 9% rate increase that was effective October 1, 2009. Cost reduction savings of $3,221,208 in operating expenses were offset by an increase of $2,662,033 in depreciation expense. Interest expense and bond issue costs increased by $7,569,228 compared to prior year, primarily due to capitalized interest costs for fiscal years 2007 and 2008 that were included in fiscal year 2009. Contributions from developers, which represent infrastructure improvements, decreased by $6,043,957 due to the downturn in the economy and real estate. A reduced contribution of $1.0 million to the General Fund provided a savings in outgoing transfers. The Solid Waste Fund decreased its net assets by $738,473, a reduction of 11.5%. Charges for services increased by $147,621, primarily due to a newly implemented commercial recycling fee. The overall reduction of $541,570 in operating expenses is mostly attributable to lower tonnage collection, which results in reduced tipping fee expense. The increase in revenue and reduction of expenses was offset by an increase of $1.0 million in the Solid Waste Fund s contribution to the General Fund. Other Enterprise Funds net assets decreased $889,367 in the current fiscal year. This represents a decrease of 2.8% from prior year s net assets. Charges for services increased by $1,597,517, primarily due to the increase of $1,149,924 in Stormwater collections fees. Cost reductions of $522,876 in operating expenses were attributable to a reduction of $1,002,329 in personal services, offset by an increase of $524,293 in materials and supplies. The reduction in personal services expenses comprises the elimination of full time employees (186 employees city-wide) and frozen wages as of October 1, 2009. The increase in materials and supplies is primarily due to repairs at the Yacht Basin and an increase in its resale items, including fuel and marina store items. Non-operating revenues declined by $600,386, which primarily relates to a reduction in grants received by the Stormwater Fund. Net transfers decreased by $1,832,683 as compared to prior year, primarily due to the transfer of assets from Governmental Activities for the creation of the Stormwater Fund in fiscal year 2009. 10

General Fund Budgetary Highlights The difference between the original budget and the final amended budget was $4,856,682 and is summarized as follows: General Fund appropriations increased by $3,228,576 with funding coming from reserves. The increase is the result of $2,705,266 being appropriated for capital projects not completed during the prior fiscal year, $24,550 to complete the construction of the Lee Memorial bus shelter, $3,470 for moving expenditures for the Assistant City Manager, $2,051 for grant funds not expended in the prior year, and $493,239 for encumbrances carried over to the next fiscal year. General Fund appropriations also increased by $1,370,496 for additional fire and police pension benefits with funding coming from Florida Insurance Premium taxes. General Fund appropriations were also increased by $150,519 for various studies and reviews by outside consultants. The difference between the final amended budget and actual revenues was $(7,190,687) and is summarized as follows: Licenses and permits were less than budget by $249,770, primarily due to a decrease in Franchise Fees as a result of a one-time fuel refund of approximately $200,000 provided by Florida Power and Light to its customers during the fiscal year. Intergovernmental revenues, mainly State Shared Revenues and the ½ Cent Sales Tax was less than budget by $319,448 as a result of low consumer confidence driven by the economy. Charges for Services are favorable to the budget by $175,947 due to increased collections for lot mowing services as well as a new abandoned property registration fee. Fines and forfeitures are favorable to the budget by $180,392 due to increased collections for code enforcement liens as well as police enforcement. Miscellaneous revenues was $6,937,006 less than budget, as the budget amount includes appropriated reserves of $7,713,821, plus revenue reserves in the amount of ($1,000,000), accounts used strictly for budgeting purposes. The City utilized reserves to balance the fiscal year budget and to complete capital improvement projects and studies that were unable to be completed in the prior year. In addition, interest Income was less than budget by $223,416 due to lower than expected interest rates and a decrease in available funds to invest. The difference between the final amended budget and actual expenditures was $(7,481,965) and is summarized as follows: City Manager was $114,990 under budget due to lower than anticipated expenses in professional services, public relations, newsletter postage / printing, and due and subscriptions. Legal was $107,833 under budget because litigation professional service expenditures were lower than anticipated. City Clerk was $194,638 under budget due to lower than anticipated expenses in personnel services, legal advertisements and local election expenses. Financial Services was $152,129 under budget due to vacancy savings and reductions in professional services expenses and auditing fees. Human Resources were $518,736 under budget because unemployment compensation expense was lower than anticipated. 11

Police was $303,728 under budget due to reduced health insurance expense as well as lower than anticipated expenses in professional services, communications, rentals, and small tools and equipment. Fire was $372,903 under budget because costs related to the South Trail Fire District interlocal agreement were less than anticipated due to reduced property values in that district. Public Works Administration was $157,155 under budget because consulting services that related to special projects and federal lobbyist expenses were less than anticipated. The Parks department in Public Works was under budget in the amount of $273,860 as a result of personnel savings experienced from vacant positions. The Engineering department in Public Works was under budget due to vacant positions and lower professional services as various studies and reviews by consultants were not completed by year end. Capital funding transfers were $3,065,708 less than budget as many projects were not completed by year end. Capital Assets and Debt Administration Capital Assets The City s investment in capital assets for its governmental and business-type activities as of September 30, 2010 amounts to $492,281,971 (net of accumulated depreciation). This investment in capital assets includes land, antiques and museum pieces, construction in progress, building, improvements (including utility systems), intangible assets and infrastructure. The total increase in the City s investment in capital assets for the current fiscal year was.61% (a.11% decrease in government funds and.94% increase for business-type activities). Major capital asset activity during the current fiscal year included the following: Various system additions and improvements were completed in the Water and Wastewater Fund at a cost of $27,526,855, the majority of which was due to the completion of the multi-year capital projects for the Downtown Utility and Streetscape Improvements and improvements at the East Water Reclamation Facility. Construction began, or continued, on other projects, adding an estimated $6,088,900 to construction in process. Governmental Activities assets decreased $171,570, which related to the disposal of a pump aerial truck and confiscated vehicles sold at auction. A reduction of $3,136,147 in construction in progress, related to the completion of Downtown streetscape and sidewalk improvements, was offset by the addition of $8,655,564, which is primarily due to the improvements for State Road 82. City of Fort Myers, Florida Capital Assets Governmental Business-type Activities Activities Total 2010 2009 2010 2009 2010 2009 Land $ 24,945,106 $ 27,565,734 $ 3,788,143 $ 3,788,143 $ 28,733,249 $ 31,353,877 Antiques & exhibits 900,427 900,427 - - 900,427 900,427 Intangibles-easements 3,400,521 - - - 3,400,521 - Buildings 11,168,942 11,813,155 44,729,862 37,960,197 55,898,804 49,773,352 Improvements & Infrastructure 95,050,271 99,076,981 278,426,476 257,776,516 373,476,747 356,853,497 Equipment 5,839,761 7,728,578 4,396,423 5,616,011 10,236,184 13,344,589 Intangibles-software 88,860 - - - 88,860 - Construction in progress 11,233,041 5,713,624 8,314,138 31,341,639 19,547,179 37,055,263 Total capital assets $ 152,626,929 $ 152,798,499 $ 339,655,042 $ 336,482,506 $ 492,281,971 $ 489,281,005 Additional information on the City s capital assets can be found in Note 5 on pages 62-65 of this report. 12

Long-term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $249,430,000, of which $128,395,000 was related to the Water-Wastewater Utility. The remaining bonded debt is backed by specified revenue sources. In addition, the City had $153,888,794 of notes, loans and capital lease obligations outstanding. Of this amount, $143,127,134 relates to the City s Water-Wastewater Utility. Governmental Activities City of Fort Myers, Florida Bonded Debt and Loans Payable Business-type Activities 2010 2009 2010 2009 2010 2009 Revenue Bonds $ 120,142,110 $ 126,104,835 $ 892,890 $ 915,165 $ 121,035,000 $ 127,020,000 Utility Revenue Bonds - - 128,395,000 132,265,000 128,395,000 132,265,000 Notes and Loans 6,078,846 7,841,236 147,809,948 202,791,851 153,888,794 210,633,087 Total long-term debt $ 126,220,956 $ 133,946,071 $ 277,097,838 $ 335,972,016 $ 403,318,794 $ 469,918,087 Total The City s total debt decreased $66,599,293 or 14.17%. The key factors in this decrease were: The governmental funds revenue bonds decreased $5,962,725 (4.45%) due to normal amortization of debt service. Business-type debt decreased $58,874,178 (17.52%) due to the pay-off of the 2009 Taxable Short Term Government Obligation Note, which was an interim financing arrangement for the Series 2009 Utility System Variable Rate Refunding Revenue Bonds. Other reductions comprised normal amortization of debt service. Additional information on the City s long-term debt can be found in Note 6 on pages 66-73 of this report and in the City s Annual Report to Bondholders, published separately. Economic Factors and New Year s Budget and Rates The City s unemployment rate for September 30, 2010 (13.5%) was higher than the State of Florida or the United States (9.6% and 11.9% respectively). This increased rate underscores the effects of the real estate slow-down in the area. The City s population decreased.9% from 68,819 in 2009 to 68,190 in 2010. The taxable value of commercial and residential property decreased 21.5% to $5.38 billion from last year s value of $6.85 billion. The City s property tax millage rate increased from 7.1634 mills in 2009 to 7.4000 mills in 2010. Water and Sewer rates increased 9.0% effective October 1, 2009. The increase was necessary to provide the funds needed for operational increases. Requests for information The financial report is designed to provide users with a general overview of the City of Fort Myers finances. Questions concerning any of the information provided in this report, or requests for additional financial information, should be addressed to the Director of Finance, PO Drawer 2217, Fort Myers, Florida 33902-2217 or telephone (239) 321-7147. You can also access our website at www.cityftmyers.com. 13

14

Basic Financial Statements

Government-wide Financial Statements 15

Statement of Net Assets September 30, 2010 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 36,123,948 $ 14,229,649 $ 50,353,597 Investments 16,005,561 4,826,094 20,831,655 Accounts receivable, net 2,743,389 6,478,397 9,221,786 Special assessments receivable 36,789-36,789 Interest receivable 238,993 24,993 263,986 Due from other governments 8,490,350 5,561,220 14,051,570 Internal balances 18,327 (18,327) - Inventories 663,583 268,304 931,887 Prepaid items 296,686 128,924 425,610 Deferred special assessments receivable 49,087-49,087 Notes receivable 3,017,719-3,017,719 Allowance for notes receivable (2,617,719) - (2,617,719) Assets held for resale 909,564-909,564 Restricted assets: Cash and cash equivalents 79,935,164 30,669,687 110,604,851 Investments 23,178,392 7,896,264 31,074,656 Interest receivable 1,982 34,355 36,337 Unamortized bond issuance costs 1,937,883 3,307,896 5,245,779 Deferred outflow on derivative instrument - 7,351,345 7,351,345 Capital assets, net: Non-depreciable 40,479,095 12,102,281 52,581,376 Depreciable 112,147,834 327,552,761 439,700,595 Total assets 323,656,627 420,413,843 744,070,470 LIABILITIES Accounts and contracts payable 3,995,767 4,172,719 8,168,486 Accrued and other liabilities 5,102,771 171,240 5,274,011 Accrued interest payable 1,997,965 3,986,276 5,984,241 Due to other governments 426,574 1,672,352 2,098,926 Unearned revenues 578,870 1,648 580,518 Customer deposits 241,506 5,494,540 5,736,046 Due within one year: Compensated absences 1,334,506 224,789 1,559,295 Termination benefits 42,682 34,737 77,419 Loans and notes payable 521,154 5,289,270 5,810,424 Bonds payable 6,241,375 5,623,625 11,865,000 Claims and judgments 2,347,700-2,347,700 Accrued retirement payable 11,162,720-11,162,720 Due in more than one year: Compensated absences 2,181,581 582,236 2,763,817 Other postemployment benefits payable 4,422,830 1,460,554 5,883,384 Due to private sources - 2,832,963 2,832,963 Derivative instrument - 10,862,265 10,862,265 Loans and notes payable 5,557,692 142,520,678 148,078,370 Bonds payable 117,065,471 114,288,331 231,353,802 Accrued contingencies: Claims and judgments 2,442,579-2,442,579 Total liabilities 165,663,743 299,218,223 464,881,966 NET ASSETS Invested in capital assets, net of related debt 46,344,509 80,328,915 126,673,424 Restricted for: Capital projects 51,823,762 1,198,244 53,022,006 Culture & recreation 255,071 28 255,099 Debt service 7,135,436 11,400,208 18,535,644 Economic environment 8,305,107-8,305,107 General government 1,271,958-1,271,958 Impact fee projects 19,039,083 972,235 20,011,318 Physical environment - 142,889 142,889 Public safety: Expendable 1,862,166-1,862,166 Nonexpendable 2,000-2,000 Renewal & replacement 619,991 6,121,090 6,741,081 Transportation 2,000,218 7,347 2,007,565 Unrestricted 19,333,583 21,024,664 40,358,247 Total Net Assets $ 157,992,884 $ 121,195,620 $ 279,188,504 The notes to the financial statements are an integral part of this statement. 16

Statement of Activities For the Year Ended September 30, 2010 Net (Expense) Revenue and Changes in Net Assets Program Revenues Primary Government Operating Capital Charges for Grants and Grants and Governmental Business-type Functions / Programs Primary government: Governmental activities: Expenses Services Contributions Contributions Activities Activities Total General government $ 16,675,130 $ 520,803 $ 67 $ - $ (16,154,260) $ - $ (16,154,260) Police 31,887,208 1,875,559 1,528,830 840 (28,481,979) - (28,481,979) Fire 16,722,815 556,050 157,920 140,113 (15,868,732) - (15,868,732) Protective inspections 1,555,000 2,610,984 - - 1,055,984-1,055,984 Physical environment 2,357,311 405,602-93,842 (1,857,867) - (1,857,867) Transportation 11,558,730-642,236 6,890,278 (4,026,216) - (4,026,216) Economic environment 7,830,674 115,648 2,552,312 150 (5,162,564) - (5,162,564) Culture and recreation 3,781,245 446,435 426 136,537 (3,197,847) - (3,197,847) Interest on long-term debt 3,658,929 - - - (3,658,929) - (3,658,929) Total governmental activities 96,027,042 6,531,081 4,881,791 7,261,760 (77,352,410) - (77,352,410) Business-type Activities: Utilities 45,914,665 48,300,544-702,818-3,088,697 3,088,697 Solid Waste 10,541,992 14,123,999-71,243-3,653,250 3,653,250 Permitting and Inspection 2,688,251 1,707,358 - - - (980,893) (980,893) Stormwater 2,053,906 2,848,845-247,366-1,042,305 1,042,305 Dept of Cultural & Historical Affairs 1,757,457 698,065 17,725 - - (1,041,667) (1,041,667) Downtown Parking 1,026,229 743,828 - - - (282,401) (282,401) Golf Courses 3,273,457 3,006,715 - - - (266,742) (266,742) Skatium 1,174,152 967,376 - - - (206,776) (206,776) Yacht Basin 2,399,954 1,949,748 - - - (450,206) (450,206) Harborside Event Center 2,215,480 796,651 - - - (1,418,829) (1,418,829) Total business-type activities 73,045,543 75,143,129 17,725 1,021,427-3,136,738 3,136,738 Total primary government $ 169,072,585 $ 81,674,210 $ 4,899,516 $ 8,283,187 General revenues: Taxes: Property taxes 40,719,474-40,719,474 Public service taxes 9,241,071-9,241,071 Franchise fees 5,276,818-5,276,818 Fuel taxes 4,096,370-4,096,370 Intergovernmental, unrestricted 6,957,210-6,957,210 Interest and investment income 1,828,164 820,299 2,648,463 Miscellaneous 864,496 1,977,704 2,842,200 Net transfers 6,912,748 (6,912,748) - Total general revenues and transfers 75,896,351 (4,114,745) 71,781,606 Change in net assets (1,456,059) (978,007) (2,434,066) Net assets - beginning, as restated (Note 6) 159,448,943 122,173,627 281,622,570 Net assets - ending $ 157,992,884 $ 121,195,620 $ 279,188,504 The notes to the financial statements are an integral part of this statement. 17

18

Governmental Fund Financial Statements 19

Balance Sheet Governmental Funds September 30, 2010 General Fund Revenue Bonds and Notes Transportation Capital Projects ASSETS Cash and cash equivalents $ 16,310,966 $ 6,866,161 $ 48,691,119 Investments 5,604,096 282,918 16,113,708 Accounts receivable, net 2,653,530 - - Special assessments receivable 36,789 - - Interest receivable 25,273 1,982 112,305 Due from other funds 800,869 - - Due from other governmental agencies 1,672,860-5,445,630 Prepaid items 54,958 - - Deferred special assessments receivable 49,087 - - Notes receivable 400,000 - - Allowance for notes receivable - - - Advances to other funds 817,000 - - Assets held for resale - - - Total assets $ 28,425,428 $ 7,151,061 $ 70,362,762 LIABILITIES AND FUND BALANCES Liabilities: Accounts and contracts payable $ 433,740 $ 625 $ 2,559,510 Accrued and other liabilities 4,740,945 15,000 3,045 Due to other funds - - - Due to other governmental agencies 27,857 - - Funds held in escrow 206,130 - - Customer deposits 219,130 - - Deferred revenue 1,527,317-1,635,899 Advances from other funds - - - Total liabilities 7,155,119 15,625 4,198,454 Fund Balances: Reserved 1,271,958 7,135,436 63,074,304 Unreserved: Designated - General fund 4,627,642 - - Designated - special revenue funds - - - Designated - capital project funds 3,222,031-32,000 Undesignated - General fund 12,148,678 - - Undesignated - special revenue funds - - - Undesignated - capital project funds - - 3,058,004 Total fund balances 21,270,309 7,135,436 66,164,308 Total liabilities and fund balances $ 28,425,428 $ 7,151,061 $ 70,362,762 The notes to the financial statements are an integral part of this statement. 20

General Capital Projects Other Governmental Funds Total Governmental Funds $ 19,110,093 $ 13,394,116 $ 104,372,455 6,246,165 4,431,586 32,678,473-88,980 2,742,510 - - 36,789 43,788 30,903 214,251 - - 800,869 128,671 1,242,902 8,490,063-22,080 77,038 - - 49,087-2,617,719 3,017,719 - (2,617,719) (2,617,719) - 200,000 1,017,000-909,564 909,564 $ 25,528,717 $ 20,320,131 $ 151,788,099 $ 297,400 $ 472,031 $ 3,763,306 11,186 36,861 4,807,037-635,789 635,789-398,717 426,574-367 206,497-22,376 241,506 128,671 443,326 3,735,213-817,000 817,000 437,257 2,826,467 14,632,922 24,170,771 1,056,793 96,709,262 - - 4,627,642-5,046,204 5,046,204 - - 3,254,031 - - 12,148,678-11,390,667 11,390,667 920,689-3,978,693 25,091,460 17,493,664 137,155,177 $ 25,528,717 $ 20,320,131 $ 151,788,099 21

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2010 Fund Balance - total governmental funds $ 137,155,177 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. Capital assets (net of accumulated depreciation) 150,145,763 Some revenues have been unearned on the balance sheet because they were not measurable and available at year end. 3,156,343 Long-term liabilities are not due and payable in the current period, and, therefore, are not reported in the governmental funds. Revenue bonds $ (123,306,846) Notes and capital lease obligations (6,078,846) Accrued retirement (11,162,720) Compensated absences (3,387,223) Termination benefits (40,716) Other postemployment benefits payable (4,192,791) Accrued interest (1,997,965) Bond issue costs 1,937,883 (148,229,224) Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. 15,764,825 Net assets of governmental activities $ 157,992,884 The notes to the financial statements are an integral part of this statement. 22

23

Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2010 General Fund Revenue Bonds and Notes Transportation Capital Projects REVENUES Taxes $ 49,322,481 $ - $ 1,705,071 Licenses and permits 7,769,030 - - Intergovernmental revenue 5,696,052-5,583,081 Charges for services 1,290,607 - - Fines and forfeitures 1,306,392 - - Miscellaneous 5,539,988 9,597 1,569,177 Contributions - private source 10,043-29,630 Total revenues 70,934,593 9,597 8,886,959 EXPENDITURES Current: General government 9,207,733 - - Police 29,508,983 - - Fire 16,048,929 - - Protective inspections 1,805,083 - - Physical environment 5,384,552 - - Transportation 430,834 - - Economic environment - - - Culture and recreation 3,212,703 - - Debt service: Principal retirement - 7,146,708 - Interest and fiscal charges - 5,788,042 - Capital outlay: General government - - - Police - - - Fire - - - Physical environment - - - Transportation - - 10,512,210 Economic environment - - - Culture and recreation - - - Total expenditures 65,598,817 12,934,750 10,512,210 Excess (deficiency) of revenues over expenditures 5,335,776 (12,925,153) (1,625,251) OTHER FINANCING SOURCES (USES) Transfers in 14,447,248 13,129,000 1,498,661 Transfers out (19,491,746) (59,628) (1,799,407) Total other financing sources and uses (5,044,498) 13,069,372 (300,746) Net change in fund balances 291,278 144,219 (1,925,997) Fund balances - beginning 20,979,031 6,991,217 68,090,305 Fund balances - ending $ 21,270,309 $ 7,135,436 $ 66,164,308 The notes to the financial statements are an integral part of this statement. 24

General Capital Projects Other Governmental Funds Total Governmental Funds $ - $ 4,995,715 $ 56,023,267 - - 7,769,030 82,574 3,838,609 15,200,316-614,265 1,904,872-321,395 1,627,787 797,719 1,051,465 8,967,946-69,573 109,246 880,293 10,891,022 91,602,464-1,920,171 11,127,904-2,418,100 31,927,083-126,945 16,175,874 - - 1,805,083 - - 5,384,552-3,126,116 3,556,950-7,402,593 7,402,593-433,926 3,646,629-578,407 7,725,115-517,481 6,305,523 452,408-452,408 185,130-185,130 306,085-306,085 96,953-96,953 301,472-10,813,682 223,345-223,345 173,484-173,484 1,738,877 16,523,739 107,308,393 (858,584) (5,632,717) (15,705,929) 719,796 5,802,056 35,596,761 (1,619,325) (1,563,516) (24,533,622) (899,529) 4,238,540 11,063,139 (1,758,113) (1,394,177) (4,642,790) 26,849,573 18,887,841 141,797,967 $ 25,091,460 $ 17,493,664 $ 137,155,177 25

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended September 30, 2010 Net change in fund balance - total governmental funds $ (4,642,790) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This, and the net effect of various other transactions involving capital assets, increased net assets. General government expenditures for capital outlay $ 12,251,087 Non-capitalizable expenditures on capital outlay (986,902) Current year depreciation (10,341,544) Transfer of assets to Internal Services (57,478) Donated assets 131,366 Gain (loss) on disposal of assets (24,065) Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayments of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Amortization of bond-related accounts 230,132 Issue costs 168,934 Principal payments 7,725,115 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 the governmental funds. Change in retirement payable (3,236,452) Change in termination benefits 194,227 Change in other postemployment benefits payable (1,250,317) Change in accrued interest expense (1,978) Change in compensated absences (137,369) Change in claims and judgments 660,195 972,464 8,124,181 (3,771,694) Revenues in the fund statements, which were subject to accrual in the prior year, are additions to beginning net assets and, therefore, are not reported as revenues in the Statement of Activities. 354,428 Internal service funds are used by management to charge the costs of information technology, fleet management, risk, and warehousing to individual funds and customers. Losses arising from the internal customers are added as expenditures on the Statement of Activities as chargebacks. Revenues and expenditures with outside customers are included also, as are nonoperating revenues and expenses. This amount is the effect of reporting internal service funds with governmental activities. (2,492,648) Change in net assets of governmental activities $ (1,456,059) The notes to the financial statements are an integral part of this statement. 26

Proprietary Fund Financial Statements 27

Statement of Net Assets Proprietary Funds September 30, 2010 Water- Wastewater ASSETS Current assets: Cash and cash equivalents $ 7,019,050 $ 1,784,198 $ 5,426,401 Investments 2,341,515 590,950 1,893,629 Restricted cash and cash equivalents 29,284,970 157,515 1,227,202 Restricted investments 7,457,699 45,889 392,676 Accounts receivable, net 4,658,495 1,169,282 650,620 Interest receivable 7,164 4,145 13,684 Restricted interest receivable 31,829 293 2,233 Due from other governments 5,092,338 13,362 455,520 Inventories 164,941-103,363 Prepaid items 1,488-127,436 Total current assets 56,059,489 3,765,634 10,292,764 Noncurrent assets: Advances to other funds - - 23,000 Unamortized bond issue costs 3,282,418 524 24,954 Deferred outflow on derivative instrument 7,351,345 - - Capital assets: Intangible assets - - - Land and improvements 954,695-2,833,448 Construction in progress 7,389,795 18,794 905,549 Buildings, net 33,266,124-11,463,738 Improvements other than building, net 266,715,481-11,710,995 Equipment, net 862,466 3,027,383 506,574 Total noncurrent assets 319,822,324 3,046,701 27,468,258 Total assets 375,881,813 6,812,335 37,761,022 LIABILITIES Current liabilities: Accounts and contracts payable 3,475,079 292,256 405,384 Accrued and other liabilities 114,792 9,248 47,200 Due to other funds - - 18,327 Due to other governments 1,650,779-21,573 Unearned revenue - - 1,648 Customer deposits 5,268,974-225,566 Compensated absences 103,167 11,409 110,213 Termination benefits 11,798 3,933 19,006 Claims and judgments - - - Accrued interest payable 3,953,999 7,606 24,671 Notes payable 5,119,224-170,046 Revenue bonds 5,600,000 12,075 11,550 Total current liabilities 25,297,812 336,527 1,055,184 Noncurrent liabilities: Compensated absences 280,798 107,192 194,246 Other postemployment benefits payable 690,368 235,922 534,264 Advances from other funds - - 23,000 Claims and judgments - - - Due to private sources 2,832,963 - - Derivative instrument 10,862,265 - - Notes payable 138,007,910-4,512,768 Revenue bonds 113,404,873 451,276 432,182 Total noncurrent liabilities 266,079,177 794,390 5,696,460 Total liabilities 291,376,989 1,130,917 6,751,644 NET ASSETS Invested in capital assets, net of related debt 55,452,331 2,582,826 22,293,758 Restricted: Capital projects - 7,565 1,190,679 Culture & recreation - - 28 Debt service 11,378,372 11,201 10,635 Impact fee projects 972,235 - - Physical environment 142,889 - - Renewal & replacement 5,682,919 169,427 268,744 Transportation - - 7,347 Unrestricted 10,876,078 2,910,399 7,238,187 Total net assets $ 84,504,824 $ 5,681,418 $ 31,009,378 The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds 28 Solid Waste Other Enterprise Funds

Total Enterprise Funds Governmental Activities - Internal Service Funds $ 14,229,649 $ 8,349,088 4,826,094 6,505,480 30,669,687 3,337,569 7,896,264-6,478,397 879 24,993 26,724 34,355-5,561,220 267 268,304 663,583 128,924 219,648 70,117,887 19,103,238 23,000-3,307,896-7,351,345 - - 88,860 3,788,143-8,314,138-44,729,862 6,513 278,426,476-4,396,423 2,385,793 350,337,283 2,481,166 420,455,170 21,584,404 4,172,719 232,461 171,240 89,237 18,327 146,733 1,672,352-1,648-5,494,540-224,789 22,103 34,737 1,966-2,347,700 3,986,276-5,289,270-5,623,625-26,689,523 2,840,200 582,236 106,761 1,460,554 230,039 23,000 200,000-2,442,579 2,832,963-10,862,265-142,520,678-114,288,331-272,570,027 2,979,379 299,259,550 5,819,579 80,328,915 2,481,166 1,198,244-28 - 11,400,208-972,235-142,889-6,121,090-7,347-21,024,664 13,283,659 $ 121,195,620 $ 15,764,825 29

Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended September 30, 2010 Business-type Activities - Enterprise Funds Other Water- Solid Enterprise Wastewater Waste Funds OPERATING REVENUES Charges for services $ 47,089,143 $ 14,071,115 $ 11,724,668 Rent - - 913,093 Miscellaneous 1,211,400 52,884 94,706 Total operating revenues 48,300,543 14,123,999 12,732,467 OPERATING EXPENSES Personal services 9,317,136 3,135,147 6,566,266 Contractual services 1,116,273 3,338,540 2,162,466 Materials and supplies 3,003,062 472,067 1,838,680 General and administrative 2,413,788 942,992 1,253,885 Utilities 2,333,787 7,934 853,653 Depreciation 11,818,620 840,561 1,645,042 Insurance 674,600 430,300 582,100 Self insurance claims - - - Repairs and maintenance 1,133,913 33,405 337,381 Travel 6,696 295 8,475 Rentals 1,004,161 1,318,365 1,183,189 Total operating expenses 32,822,036 10,519,606 16,431,137 Operating income (loss) 15,478,507 3,604,393 (3,698,670) NONOPERATING REVENUES (EXPENSES) Operating grants and contributions - - 17,725 Interest income 696,487 30,312 93,502 Gain (loss) on disposal of capital assets - (47,035) 925 Interest expense and bond issue costs (11,082,696) (22,386) (157,750) Total nonoperating revenues (expenses) (10,386,209) (39,109) (45,598) Income (loss) before contributions and transfers 5,092,298 3,565,284 (3,744,268) Contributions from other funds - - - Capital grants and contributions 702,818 71,243 247,366 Transfers in 72,717-5,059,923 Transfers out (5,218,000) (4,375,000) (2,452,388) Total contributions and transfers in (out) (4,442,465) (4,303,757) 2,854,901 Change in net assets 649,833 (738,473) (889,367) Total net assets - beginning 83,854,991 6,419,891 31,898,745 Total net assets - ending $ 84,504,824 $ 5,681,418 $ 31,009,378 The notes to the financial statements are an integral part of this statement. 30

Total Enterprise Funds Governmental Activities - Internal Service Funds $ 72,884,926 $ 14,372,024 913,093-1,358,990 209,695 75,157,009 14,581,719 19,018,549 2,867,083 6,617,279 115,920 5,313,809 2,967,820 4,610,665 655,566 3,195,374 574,843 14,304,223 1,351,578 1,687,000 1,335,046-2,001,202 1,504,699 731,921 15,466 13,156 3,505,715 496,542 59,772,779 13,110,677 15,384,230 1,471,042 17,725-820,301 119,068 (46,110) 10,155 (11,262,832) - (10,470,916) 129,223 4,913,314 1,600,265-57,478 1,021,427-5,132,640 - (12,045,388) (4,150,391) (5,891,321) (4,092,913) (978,007) (2,492,648) 122,173,627 18,257,473 $ 121,195,620 $ 15,764,825 31

Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Water- Wastewater Business-type Activities - Enterprise Funds Solid Waste Other Enterprise Funds Cash received from customers $ 45,361,326 $ 14,043,233 $ 13,022,921 Cash payments to suppliers for goods and services (11,926,695) (6,283,378) (8,546,780) Cash payments to employees for services (9,123,426) (3,110,112) (6,430,784) Other operating revenue 1,211,400 52,884 94,957 Other operating payments (60,667) (296,357) (154,784) Net cash provided by (used in) operating activities 25,461,938 4,406,270 (2,014,470) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Grants and private contributions - - 17,725 Decrease in due to other funds (113,800) (42,400) (82,700) Increase in due to other funds - - 12,627 Repayment of advance to other funds - - 11,500 Repayment of advance from other funds - - (11,500) Transfers in 107,069,547 522,556 6,693,815 Transfers out (112,214,830) (4,897,556) (4,061,054) Net cash provided by (used in) noncapital financing activities (5,259,083) (4,417,400) 2,580,413 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (14,504,193) (316,912) (720,900) Bond issuance 51,550,843 - - Fiscal charges - (2,194) (588) Grants and private contributions 935,745 71,243 247,366 Interest paid on notes, bonds and advances (17,310,020) (20,909) (246,094) Principal paid on notes and bonds (108,159,609) (11,385) (173,183) Proceeds from sale of capital assets - - 925 Net cash used in capital and related financing activities (87,487,234) (280,157) (892,474) CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 1,019,926 32,637 87,247 Purchase of investment securities - (61,386) (626,485) Proceeds from the sale of investments 6,217,380-74,152 Net cash provided by (used in) investing activities 7,237,306 (28,749) (465,086) Net decrease in cash and cash equivalents (60,047,073) (320,036) (791,617) Cash and cash equivalents at beginning of year 96,351,093 2,261,749 7,445,220 Cash and cash equivalents at end of year $ 36,304,020 $ 1,941,713 $ 6,653,603 The notes to the financial statements are an integral part of this statement. 32

Total Enterprise Funds Governmental Activities - Internal Service Funds $ 72,427,480 $ 14,376,128 (26,756,853) (6,122,127) (18,664,322) (4,248,009) 1,359,241 209,695 (511,808) - 27,853,738 4,215,687 17,725 - (238,900) (35,800) 12,627 95,450 11,500 - (11,500) - 114,285,918 477 (121,173,440) (4,150,868) (7,096,070) (4,090,741) (15,542,005) (207,544) 51,550,843 - (2,782) - 1,254,354 57,478 (17,577,023) - (108,344,177) - 925 10,155 (88,659,865) (139,911) 1,139,810 123,682 (687,871) (997,571) 6,291,532 288,027 6,743,471 (585,862) (61,158,726) (600,827) 106,058,062 12,287,484 $ 44,899,336 $ 11,686,657 (continued) 33

Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2010 (continued) Water- Wastewater Business-type Activities - Enterprise Funds Solid Waste Other Enterprise Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 15,478,507 $ 3,604,393 $ (3,698,670) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 11,818,620 840,561 1,645,042 Other postemployment benefits 221,339 68,636 156,293 Changes in assets and liabilities: Decrease in accounts payable - other 160,227-12,898 Increase (decrease) in accounts payable - supplier (479,336) (35,838) (417,586) (Increase) decrease in bad debt (300,926) 195,337 121,567 Increase (decrease) in compensated absences 13,981 (29,729) 39,647 (Increase) decrease in customer receivables (1,426,891) (223,219) 263,847 (Increase) decrease in inventory 18,029 - (77,046) Decrease in benefits payable (41,612) (13,871) (60,462) Net cash provided by (used in) operating activities $ 25,461,938 $ 4,406,270 $ (2,014,470) Noncash investing, capital, and financing activities: Interest receivable / unrealized gain $ (323,439) $ (2,325) $ 6,255 Contributions from private sources - 71,243 17,725 Donation of utility improvements 702,818 - - The notes to the financial statements are an integral part of this statement. 34

Total Enterprise Funds Governmental Activities - Internal Service Funds $ 15,384,230 $ 1,471,042 14,304,223 1,351,578 446,268 71,476 173,125 - (932,760) 229,798 15,978-23,899 10,484 (1,386,263) 4,105 (59,017) 1,084,139 (115,945) (6,935) $ 27,853,738 $ 4,215,687 $ (319,509) $ (4,614) 88,968-702,818-35

36

Fiduciary Fund Financial Statements 37

Statement of Fiduciary Net Assets Trust and Agency Funds September 30, 2010 Employee Retirement Agency Funds Funds ASSETS Cash and cash equivalents $ 6,290,720 $ 102,438 Receivables Employer 12,769,163 - Interest and dividends 523,194 321 Special assessments - 107,521 Total receivables 13,292,357 107,842 Investments, at fair value U.S. government and agencies securities 6,968,926 - Municipal bonds 1,850,111 - Corporate stock 58,802,388 - Corporate bonds 21,136,019 - Mortgage backed securities 14,213,321 - Asset backed securities 2,745,742 - Mutual funds: Fixed income 2,338,765 - Equity 17,399,558 - Real estate 1,390,451 - International equity 14,203,051 - Private placement 609,604 - Real estate investment trusts 75,000 - International securities: Bonds and notes 545,910 - Stocks 1,790,351 - Certificate of deposit - 223,493 Total investments 144,069,197 223,493 Total assets 163,652,274 433,773 LIABILITIES Accounts and contracts payable - 2,420 Accrued and other liabilities 37,801 36,142 Due to other governmental agencies - 53,211 Due to other funds - 20 Due to noteholders - 341,980 Total liabilities 37,801 433,773 NET ASSETS Held in trust for pension benefits $ 163,614,473 (A schedule of funding progress for each pension plan is presented on page 95.) The notes to the financial statements are an integral part of this statement. 38

Statement of Changes in Fiduciary Net Assets Pension Trust Funds For the Year Ended September 30, 2010 Employee Retirement Funds ADDITIONS Contributions Employer $ 17,311,368 State of Florida 1,370,494 Plan members 3,085,250 Total contributions 21,767,112 Investment income Net appreciation (depreciation) in fair value of investments 9,458,278 Interest and dividends 3,628,480 Total investment gains (losses) 13,086,758 Less: Investment expenses 748,815 Net investment gains (losses) 12,337,943 Miscellaneous revenue 128,586 Total increases 34,233,641 DEDUCTIONS Benefits paid 17,100,744 Administrative expenses 206,178 Total deductions 17,306,922 Change in net assets 16,926,719 NET ASSETS Held in trust for pension benefits Beginning of year 146,687,754 End of year $ 163,614,473 The notes to the financial statements are an integral part of this statement. 39

40

Notes to the Financial Statements September 30, 2010 Note 1. Summary of Significant Accounting Policies... 42 Note 2. Deposits and Investments... 50 Note 3. Receivables, Accrued Liabilities and Deferred Revenue... 59 Note 4. Restricted Assets... 61 Note 5. Capital Assets... 62 Note 6. Long Term Debt... 66 Note 7. Prior Year Defeased Debt and Long-Term Refundings... 73 Note 8. Redevelopment Trust Fund... 74 Note 9. Interfund Receivables, Payables and Advances... 75 Note 10. Interfund Transfers... 76 Note 11. Stewardship, Compliance and Accountability... 77 Note 12. Reserved and Designated Fund Balances... 79 Note 13. Self-Insurance Program... 80 Note 14. Commitments and Contingencies... 81 Note 15. Related Organization Transactions... 82 Note 16. Employee Retirement Plans... 82 Note 17. Deferred Compensation Plan... 88 Note 18. Special Assessment Debt with No Governmental Commitment... 89 Note 19. Subsequent Events... 89 Note 20. Construction Project Interest Costs... 89 Note 21. Other Postemployment Benefits... 89 Note 22. Termination Benefits... 91 Note 23. Assets Held for Resale... 91 Note 24. Fund Deficit... 92 41

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Fort Myers, (City) was incorporated in 1886 pursuant to the laws of Florida 3959, and Chapter 165, Florida Statutes. The City operates under a City Council-Manager form of government and consists of six wards, each represented by a council member, and a seventh voting seat that is the Mayor elected-atlarge. The City provides the following municipal services: public safety, parks and recreation, solid waste, streets and roads, planning and zoning, water and wastewater, stormwater management and general administrative services. The City also provides a cemetery, golf courses, a yacht basin, event center, parking garages, a skatium, historical homes and historical museum, and a hands-on children s museum. The accounting policies and the presentation of the financial report of the City have been designed to conform to accounting principles generally accepted in the United States of America as applicable to governmental units, in accordance with the Governmental Accounting Standards Board (GASB). GASB embodies the official pronouncements previously issued by the National Council on Governmental Accounting (NCGA). Private-sector standards of accounting and financial reporting issued prior to December 1, 1989 generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments have the option of following subsequent private-sector guidance for their proprietary funds and governmental activities. The City has elected not to follow subsequent private-sector guidance. The following is a summary of the City s significant accounting policies. 1. Reporting Entity As required by accounting principles generally accepted in the United States of America, the accompanying financial statements present the City and its component units (entities for which the City is considered to be financially accountable). Blended component units, although legally separate entities, are, in substance, part of the government s operations. Therefore, data from these units are presented with the data of the City (the primary government). The City currently has only blended component units. Each of the blended units has a September 30 year end. Component Units: A component unit is a separate entity that, when combined with the primary government, constitutes a financial reporting entity. There are two types of component units, blended and discretely presented. Blended component units consist of organizations for which the primary government is financially accountable. This type includes entities where the primary government appoints a voting majority of the organization s governing board, and (a) the primary government is able to impose its will on that organization or (b) the organization provides a specific financial benefit to, or imposes a specific financial burden on, the primary government. Discretely presented component units consist of organizations for which the primary government is not financially accountable. However, the nature and significance of their relationship with the primary government is such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. Blended Component Units: The Community Redevelopment Agency of Fort Myers (CRA) was established November 5, 1984 by the City of Fort Myers under ordinance 2259 pursuant to Chapter 163, Part III of the Florida Statutes. The six City Council Members and the Mayor are the governing board of the CRA sitting as the Board of Governors and elect a chairperson and vice-chairperson. The CRA includes the Southwest Florida Enterprise Center, the Downtown Redevelopment Area, the Cleveland Avenue Redevelopment Areas, the Central Fort Myers Redevelopment Area, the Martin Luther King Redevelopment Areas, the Velasco Village Redevelopment Area, the East Fort Myers Development Area, the Eastwood Village Redevelopment Area and the Dunbar-Michigan Redevelopment Area. The CRA is presented as a nonmajor special revenue fund. 42

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 1. Reporting Entity (continued) In prior fiscal years, the City also included the Winkler Safe Neighborhood Improvement District (WSNID) as a blended component unit. The WSNID was established February 18, 1998 by the City of Fort Myers under ordinance 2838 pursuant to Chapter 163, Part III of the Florida Statutes. Due to the constraints the 2 mills assessed in WSNID placed on the maximum millage rate of 10 mills, the City decided to terminate the Interlocal Agreement that was effective on November 10, 1998 with Lee County. The WSNID was dissolved May 17, 2010 by the City under Ordinance No. 3556. The remaining reserves in the Winkler Safe Neighborhood Fund will be used toward debt payments that relate to $5.1 million in bonds issued by the City during fiscal year 2000 and an additional $3.3 million in bonds issued during fiscal year 2005. Other Related Organizations: The City of Fort Myers Housing Authority is a separate legal entity. Authority commissioners are appointed by the Mayor and approved by the City Council and may be removed for cause. There is no financial benefit or burden to the City and the City has no authority over day-to-day operations. As such, this organization is not included in the accompanying financial statements. 2. Government-wide and fund financial statements The basic financial statements of the City consist of the government-wide financial statements and fund financial statements. The government-wide financial statements (the Statement of Net Assets and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government and component units. 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 of a given function, or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operation 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. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds. Fiduciary funds and component units that are fiduciary in nature (i.e. Pension Trust Funds) are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide statements governmental activities column, a reconciliation is presented on the page following each statement that briefly explains the adjustments necessary to reconcile the fund based financial statements to the governmental activities column of the government-wide presentation. The City s fiduciary funds are presented in the fund financial statements by type (pension and agency). Since, by definition, these assets are being held for the benefit of a third party (i.e. pension participants) and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. Internal Service Funds of a government, which traditionally provide services primarily to other funds of the government, are presented in the summary form as part of the proprietary fund financial statements. Since the principal users of the internal services are the City s governmental activities, financial statements of Internal Service Funds are consolidated into the governmental activities column when presented at the government-wide level. To the extent possible, the costs of these services are reflected in the appropriate governmental activities. 43

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus, basis of accounting and financial statement presentation Government-wide financial statements, proprietary fund financial statements and fiduciary fund financial statements: The government-wide financial statements, the proprietary fund financial statements and the fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds are balance sheet funds only, and therefore have no measurement focus. 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 have been met. Governmental 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 City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, public service taxes, franchise taxes, fuel taxes, charges for services and interest income associated with the current fiscal period are all considered to be susceptible to accrual. These have been recognized as revenues of the period when they also meet the availability criteria. In addition, revenue from Federal and State reimbursement type grants for which eligibility requirements have been met and which meet the availability criteria have been accrued and recognized as revenues of the period. Only the portion of special assessments receivable due within the current period is considered to be susceptible to accruals as revenue of the current period. All other revenue items are considered to be measurable and available only when the government receives cash. Major Funds and Basis of Presentation: The financial transactions of the City are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenses/expenditures. These funds are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. Accounting principles generally accepted in the United States of America set forth minimum criteria (percentage of the assets, liabilities, revenues or expenses/expenditures of either fund category or the governmental and enterprise funds combined) for the determination of major funds. The nonmajor funds are presented in one column in the fund financial statements. The City reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those that are required to be accounted for in another fund. Revenue is derived primarily from property taxes, state and federal distributions, grants and other intergovernmental revenue. The general operating expenditures, fixed charges and capital outlay costs that are not paid through other funds are paid from the General Fund. The Revenue Bonds and Notes Fund accounts for the accumulation of resources to pay outstanding long term debt. It is made up of several sub-funds, one for each bond or other borrowing that is outstanding and for which resources are accumulated to pay the debt service. The Transportation Capital Projects Fund accounts for resources accumulated to provide transportation related capital projects. It includes road impact fees, cash from debt borrowing, the accounting for capital projects and the 5 th cent local option gas tax money. 44

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus, basis of accounting and financial statement presentation (continued) The General Capital Projects Fund is used to account for the financial resources to be used for the acquisition and construction of the City s general capital facilities, improvements and equipment. The City reports the following major proprietary funds: The Water-Wastewater Utility Fund accounts for the activities related to providing water, wastewater and reclaimed water services to the public. The Solid Waste Fund accounts for the revenues and costs associated with providing solid waste services to the residents of the City. In addition, the City reports the following other fund types: Internal Service Funds account for services provided to other departments of the City on a cost reimbursement basis. These services include: Information Technology Services, Risk Management Services (workers compensation, general liability insurance and property insurance), Central Garage and a Public Works Warehouse that acts as a central store for items needed for all phases of Public Works. Pension Trust Funds account for the City s General Employee s Pension Plan, Police Officers Retirement System and the Municipal Firefighters Pension Trust Fund (collectively, the Pension Trust Funds) and are each separate legal entities established to account for the financial activity of the separate pension plans. A board of trustees governs each plan, with each board consisting of seven trustees. The General Employees Pension Plan Board of Trustees is comprised of the president of the employees association; a trustee appointed by the employees association; a nonunion city employee who is a member of the system, elected by the members of the system who are non-union City employees; two trustees appointed by the City Council; a trustee who is a physician appointed by the City Council (City Council may waive the requirement to be a physician if a physician cannot be found); and a seventh trustee appointed by the other six trustees. The Police Officers Retirement System Board of Trustees is made up of the Mayor of the City; the Chief of Police of the City; three members of the system who are elected by a majority of police officers who are members of the system and two trustees who shall be legal residents of the City, appointed by the City Council upon nomination by the other five trustees. The members of the board of trustees for the Municipal Firefighters Pension Trust Fund consist of Mayor of the City; the Fire Chief of the City; three members of the system who are elected by a majority of fire fighters who are members of the system; and two trustees who shall be legal residents of the City, appointed by the City Council upon nomination by the other five trustees. Although an outside firm administers each plan, the plans are sponsored by and fiscally dependent on the City. The City is obligated to fund liabilities of each pension system based upon actuarial valuations. The Pension Trust Funds account for the activities of the General Employees Pension Plan, the Police Officers Retirement System and the Municipal Firefighters Pension Trust Fund, which accumulate resources for the pension benefit payments to virtually all full-time, regular employees, all non-civilian police department employees, and all firefighters and fire department officers respectively. The Agency Funds are used to account for resources collected by the City for third parties. These agency funds include the Carillon Woods Special Assessment Geographical Area Fund, the EMS Impact Fee Fund, School Impact Fee Fund, Unclaimed Funds and the Employees Special Events Fund. The Carillon Woods Special Assessment Geographical Area Fund is an agency fund used to collect payments from property owners of the special assessment district and then use those payments to pay the debt service incurred in providing the capital improvements to the district. 45

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3. Measurement focus, basis of accounting and financial statement presentation (continued) The City has no obligation for the debt other than to collect the payments and assist in foreclosure action if necessary. The EMS and School Impact Fee Fund are impact fees levied by the County. The City collects these impact fees at the time permits are issued and then turns the fees over to the County. The Unclaimed Funds fund accounts for funds that the City has been holding, and if not claimed, will eventually go to the State of Florida. The Employee Special Events Fund is money being held for the group that does special events for the City s employees. This group raises their own funds and the City provides the tracking and accounting of these funds for the Committee. Generally, interfund activity has been eliminated from the government-wide financial statements. Notable exceptions are other charges of the City s water and wastewater function. 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, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating 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 proprietary funds and the internal service funds are charges to customers for sales and services. The Water-Wastewater Utility Enterprise Fund also recognizes as operating revenues the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, and then unrestricted resources as they are needed. The City does not currently employ an indirect cost allocation system. An administrative service fee is charged by the General Fund to the other operating funds, and the fee is eliminated like a reimbursement (reducing the revenue and expense in the General Fund) to address services provided that are accounted for in the General Fund, such as finance, human resources, legal and other such services. 4. Assets, liabilities and net assets or equity a. Cash and Cash Equivalents The City maintains a cash and investment pool that is available for use by all funds. The City considers all highly liquid investments with original maturities of three months or less when purchased, as well as investments in the City s cash and investment pool, to be cash equivalents for purposes of the statement of cash flows. The City s cash and investments pool allows individual funds, at any time, to deposit additional cash or make withdrawals without prior notice or penalty, and thus, the City is internally managing a mutual fund, which is considered by GASB to be a cash equivalent. The City s cash and investment pool consists of U.S. Government securities, the Local Government Surplus Funds Trust Fund investment account administered by the Florida State Board of Administration (the Florida PRIME Pool) and cash. Cash balances and requirements of all funds are considered in determining the amount to be invested. Interest earned on pooled cash and investments is allocated monthly to funds based on their average weekly cash balances. 46

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. Assets, liabilities and net assets or equity (continued) b. Investments For all funds, except the pension trust funds and certain other funds, which are required to be invested separately, investments consist of U.S. Government and Federal Agency securities, corporate bonds, corporate stocks, the Local Government Surplus Trust Fund Investment Pool administered by the SBA, a guaranteed investment contract (GIC) and time deposits. Investments of the pension funds consist of U.S. Government securities, municipal and corporate bonds, corporate stocks, convertibles, mortgage backed securities, asset backed securities, mutual funds, private placements, real estate investment trusts, international equities, and money market funds. All investments, except as noted below, are reported at fair value using quoted market prices. Fair value of investments in the SBA Pool is equal to the City s cost. Money market investments with a remaining maturity at the time of purchase of one year or less are reported at amortized cost. The difference between cost and fair value of investments held is recorded as net unrealized gains or losses and is included in net investment earnings. Purchases and sales of investments are recorded on the trade dates. Net realized gains and losses on sale of investments are reflected in current operating results as investment earnings along with interest and dividends. c. Interfund Receivables and Payables During the course of its operations, the City has numerous transactions between funds to provide services, construct assets and service debt. To the extent that certain transactions between funds were not paid for or received as of September 30, 2010, balances of interfund receivables and payables expected to be liquidated within one year have been recorded as due from and due to other funds. Balances of interfund receivables and payables not expected to be liquidated within one year are recorded as advances to and advances from other funds. Balances of advances to other funds are reserved in the fund balances of the respective funds since these balances are not available for appropriation. d. Other Receivables and Payables All trade, property tax and other receivables on the Statement of Net Assets are shown net of allowance for uncollectibles. All receivables are reviewed periodically and, when determined to be uncollectible, are turned over to a collection agency. Once turned over to the collection agency, the amount is included in the uncollectible balance. e. Inventories Inventories for all funds, except for the enterprise funds, consist primarily of expendable supplies held for consumption and are stated at cost (first-in, first-out method). For the enterprise funds, the City uses the consumption method of accounting, which provides that expenditures are recognized when inventory is used. Inventory in the Yacht Basin Enterprise Fund, Skatium Enterprise Fund and the Department of Cultural and Historical Affairs Enterprise Fund, which includes the Historical Museum and the Imaginarium Hands-on Museum, is held primarily for resale and stated at cost. The Department of Cultural and Historical Affairs and the Skatium value inventory at replacement cost. The Yacht Basin values oil and gift shop inventory by the retail method and fuel inventory by the cost inventory method. Both the retail and cost inventory methods use the last-in, first-out method. All inventories, regardless of fund, are counted on a periodic basis. f. Prepaid Items Prepaid items are items that have been paid in the current accounting period but are proper expenses/expenditures extending over more than one accounting period and are allocated between those accounting periods that receive the benefit of the expense/expenditure. 47

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. Assets, liabilities and net assets or equity (continued) g. Restricted Assets Proceeds of the City s enterprise fund revenue bonds, as well as other resources set aside in accordance with bond covenants and local ordinance, are classified as restricted on the fund level Statement of Net Assets of the enterprise funds. These include the following: operating accounts for the Water-Wastewater enterprise fund that are used for the accumulation of resources equal to operating costs for specified periods; renewal and replacement accounts used for the accumulation of resources to provide for replacement of existing system assets; debt service accounts used for the accumulation of resources needed to meet debt service requirements as they become due; capital project accounts used for acquisition and construction of assets funded by revenue bond proceeds; the impact fee construction account used for the accumulation and expenditure of amounts restricted by local ordinance for future plant expansion; and customers deposits account restricted from use by local ordinance. In addition, certain assets are restricted in the other enterprise funds due to the proper use of the assets. The most notable of these are customer deposit accounts and resources accumulated to repay outstanding debt. Restricted assets are not presented on the balance sheets of the governmental funds under the modified accrual basis of accounting; however, certain assets of these funds are restricted as to use. Such assets, consisting primarily of cash and receivables, include debt proceeds, permit fees, state and federal forfeiture awards, state and federal grants and amounts held for debt service. All applicable assets in the enterprise funds and in the governmental funds have been restricted in amounts sufficient to meet restrictive purposes. h. Capital Assets These assets are stated at historical, or estimated historical cost or, if donated, at fair market value at the date of donation and are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Infrastructure assets of the proprietary funds, such as water and sewer lines, are reported in the government-wide and fund level financial statements. Expenditures that materially extend the useful life of existing properties are capitalized. The cost of property sold or retired, together with the accumulated depreciation, is removed from the appropriate accounts, and any resulting gain or loss is included in net income. The City has adopted a minimum capitalization threshold for capital expenditures of $5,000. Assets purchased with a cost of less than $5,000 are included as an expenditure/expense in the appropriate fund. Depreciation on property, plant and equipment is computed using the straight-line method over the estimated useful lives of the related assets, which are: Equipment Buildings Other improvements Infrastructure of enterprise funds Other infrastructure 5-15 years 20-40 years 15-40 years 20-50 years 20-40 years i. Deferred Revenues Deferred revenues are recorded for governmental fund receivables that are not both measurable and available. In addition, inflows that do not meet the criteria for revenue recognition, such as occupational licenses collected in advance, are reported as deferred revenues for both the government-wide and the fund financial statements. 48

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 4. Assets, liabilities and net assets or equity (continued) j. Long-Term Obligations Long-term obligations, such as bonds and notes, are recorded at the fund level in the proprietary funds and at the government-wide level for the governmental and business-type activities. Amounts payable within one year are classified as current liabilities on the proprietary funds balance sheets and as noncurrent liabilities due within one year on the government-wide statement of net assets. k. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally segregated by outside parties for use for a specific purpose. Designations of fund balance represent tentative managerial plans that are subject to change. l. Net Assets Net assets of the government-wide and proprietary funds are categorized as invested in capital assets, net of related debt, restricted or unrestricted. The first category represents net assets related to property, plant, equipment and infrastructure. The restricted category represents the balance of assets restricted by requirements of revenue bonds and other externally imposed constraints or by legislation in excess of the related liabilities payable from restricted assets. 5. Other policies Property Tax Calendar The City levies property taxes each November 1, which become a lien on real and personal property located in the City. Property taxes are based on the assessed values determined by the Lee County Property Appraiser as of the prior January 1. The current year s levy is based on taxable assessed property values totaling $5,384,093,870. The State of Florida permits the City to levy taxes up to 10 mills of assessed property valuations for the General Fund. For the 2009-2010 fiscal year, the City levied taxes of 7.4000 mills for the General Fund. All taxes are due from property owners on March 31. Taxes become delinquent on April 1 and are subject to the issuance of tax sale certificates if unpaid by June 1. At September 30, 2010, delinquent property taxes are not material to the basic financial statements of the City and therefore have not been accrued as taxes receivable. Compensated Absences Employees earn vacation and sick leave in varying amounts based on length of service. Employees may also earn up to 120 hours of compensatory time. Upon termination, employees are paid 100% of the accumulated vacation and compensatory time at current base hourly rates. Vacation accumulation is capped at a maximum number of hours depending on employee category and bargaining unit. Upon termination of employment, if the employee is eligible to receive retirement benefits, either regular or early benefits, whether or not the benefits begin at termination or are deferred, the employee receives 33% of accumulated sick leave paid at the employee s current base hourly rate. The current portion of compensated absences payable is the amount estimated to be used or paid in the following fiscal year. Liability for accrued compensated absences of the governmental activities is not reported in the balance sheet of the governmental funds and, accordingly, represents a reconciling item between the fund and government-wide presentations. All compensated absences are accrued when incurred in the governmentwide, proprietary and fiduciary fund financial statements. 49

Notes to the Financial Statements, continued September 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 5. Other policies (continued) All compensated absences are liquidated as part of salary expense in the division and fund that pays the salaries of the employees. These funds include the General Fund, Grants Special Revenue Fund, Street Maintenance Special Revenue Fund, State Housing Partnership Special Revenue Fund, Facilities Management and Construction Special Revenue Fund, Fort Myers Redevelopment Agency Special Revenue Fund, Southwest Florida Enterprise Center Special Revenue Fund, Water Wastewater Enterprise Fund, Solid Waste Enterprise Fund, the Building, Permits and Inspection Enterprise Fund, Stormwater Enterprise Fund, Fort Myers Country Club Enterprise Fund, Eastwood Golf Course Enterprise Fund, Yacht Basin Enterprise Fund, Harborside Event Center Enterprise Fund, Skatium Enterprise Fund, Department of Cultural and Historical Affairs Enterprise Fund, Central Garage Internal Service Fund, Information Technology Services Internal Service Fund, Public Works Warehouse Internal Service Fund and the Risk Management Internal Service Fund. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenditures/expenses during the reporting period. Actual results could differ from these estimates. Significant estimates used in these financial statements include the amount of insurance claims payable (Note 13). Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded as a reservation of budget, is employed as an extension of the statutorily required budgetary process. All encumbrances lapse at year end. Contracts that require completion after the fiscal year end must be re-appropriated in the subsequent year. NOTE 2 DEPOSITS AND INVESTMENTS Deposits The City maintains a cash and investment pool for all funds except those whose cash and investments must be segregated due to bond covenants or other legal restrictions. Cash on Hand: At September 30, 2010, petty cash for all funds was $16,005. Deposits: At September 30, 2010, the carrying amount of the City s deposits was $123,659,034 and the banks balances were $126,307,648. The difference was due to checks that had been written but not yet paid by the banks and deposits in transit. These deposits are insured by the Federal Deposit Insurance Corporation or by collateral pursuant to the Florida Security for Public Deposits Act (Florida Statutes Chapter 280). Under this Act, financial institutions that qualify as public depositories pledge securities that have a market value equal to 50% - 125% of the average daily balance for each month of all public deposits in excess of applicable deposit insurance. The Public Deposit Security Trust Fund has a procedure to allocate and recover losses in the event of default or insolvency. When public deposits are made in accordance with Chapter 280, no public depositor shall be liable for any loss thereof. 50

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) Investments Florida Statutes, the City s Investment Policy and various bond covenants authorize investments that include money market accounts, savings accounts, repurchase agreements, the Local Government Surplus Funds Trust Fund administered by the Florida State Board of Administration (SBA), obligations of the U.S. Government, government agencies guaranteed by the U.S. Government and certain bond mutual funds. 1) City s Investments At September 30, 2010, the City had the following cash and investments: Fair Value as of Cash and Investments September 30, 2010 Cash $ 4,255,329 Money Market 7,060,389 Fixed Income Treasury and Agency Securities 21,348,359 Corporate Bonds 17,046,504 Asset Backed Securities 4,727,952 Money Market Funds 11,346,641 Corporate Stocks 78,727 SBA Investment Pool (Florida PRIME) 10,172,251 Guaranteed Investment Contract (GIC) 13,479.499 Total Cash and Investments $ 89,515,651 The City s investment policy applies to the investment of short-term operating funds of the City of Fort Myers and all of its dependent special districts. Longer-term funds, including its employee retirement system funds, funds related to the issuance of debt, and other funds held pursuant to trust agreements administered, are covered by separate policies, contracts or agreements in effect for such funds. Except for longer-term and restricted funds, all cash balances of all funds, including the General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Utility Fund and other proprietary funds that exist or may be created from time to time, shall be consolidated and administered in accordance with the provisions of this policy. The basic goals of Fort Myers investment program are, in order of priority: Safety of investments; Maintenance of sufficient liquidity to meet cash flow needs, and; Attainment of a market average rate of return (yield), taking into account the City s investment risk constraints and the cash flow characteristics of the portfolio. The City invested surplus funds in an external investment pool, a Local Government Surplus Funds Trust Fund, a leading money market investment fund available to public sector organizations in Florida, which is known as Florida PRIME. The Board of Trustees of the SBA ( Trustees ) consists of the Governor, as Chairman, the Chief Financial Officer, as Treasurer, and the Attorney General, as Secretary. The Trustees will annually certify that Florida PRIME complies with the requirements of Chapter 218, Florida Statutes, and that the management of Florida PRIME is in accord with best investment practices. The Trustees delegate the administrative and investment authority to manage Florida PRIME to the Executive Director of the SBA, subject to Applicable Florida Law. The Trustees appoint an Investment Advisory Council and a Participant Local Government Advisory Council. Both Councils will, at least annually, review this Policy and any proposed changes prior to its presentation to the Trustees and will undertake other duties set forth in Applicable Florida Law. Pursuant to Florida law, the Auditor General will conduct an annual financial audit of Florida PRIME, which will include testing for compliance with this Policy. 51

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) City s Investments (continued) A participant, such as the City, invests in pools of investments whereby the city owns a share of the pool, not the underlying securities. The Florida PRIME is considered a SEC 2a-7 like fund, which is not registered with the Securities and Exchange Commission ( SEC ) as an investment company, but has a policy that it will, and does, operate in a manner consistent with Rule 2a-7 under the Investment Company Act of 1940, which comprises the rules governing money market funds. Florida PRIME s investment policy guidelines have been created to be 2a-7 like as well as adhere to Standard and Poor s (S&P) AAAm guidelines. The weighted average maturity (WAM) for Florida PRIME will be managed to 60 days or less. The Pool s guidelines allow for the purchase of only top-tier money market assets of the highest quality (at least 50% A- 1+ and no more than 50% A-1) such as US Treasury and Agency obligations; corporate obligations (including CP and ABCP); municipal securities; bank obligations (CDs, BAs, TDs, etc.); repurchase agreements; and money market mutual funds. Florida PRIME is rated by S&P and has a rating of AAAm as of September 30, 2010. The pertinent investment constraints contained in 2a-7 include the following: Weighted average maturity portfolio (WAM), limited to 90 days (reset dates used to calculate WAM) Maximum maturity for government and agency securities limited to 762 days Money market instruments limited to maximum maturity of 397 days Credit ratings must be first tier at time of purchase Diversification provided by limiting single issuer to 5% of total assets Market value must remain within plus or minus ½ of 1% of amortized cost Interest Rate Risk: In accordance with its investment policy, the City mitigates its interest rate risk by structuring the City s portfolio so that the securities mature to meet the City s cash requirements, thereby avoiding the need to sell securities on the open market prior to their maturation; and investing primarily in shorter-term securities, unless it can be anticipated that long-term securities can be held to maturity without jeopardizing liquidity requirements. Credit Risk: Fair Value as of Investment Type September 30, 2010 Weighted Average Maturity (in years) Money market funds $ 11,346,641 - Treasury/Agency securities 21,348,359.85 Corporate bonds 17,046,504 1.83 Asset Backed Securities 4,727,952 7.24 SBA Investment Pool (Florida PRIME) 10,172,251.14 Total investments $ 64,641,707 Portfolio weighted average maturity 1.76 Safety of principal is the foremost objective of the City s investment policy. The City s policy limits the credit risk by limiting investments to the safest types of securities; pre-qualifying the financial institutions with which it will conduct business; diversifying the investment portfolio so that the failure of any one issuer or backer will not place an undue financial burden upon the City; and monitoring all the City s investments on a daily basis to anticipate and respond appropriately to a significant reduction of credit worthiness of any of the depositories. As of September 30, 2010, the City s investments in money market funds were rated AAAm by S&P. Treasury and agency securities were rated AAA by S&P and Aaa by Moody s Investors Service (Moody s). Except for Rowan Companies, Inc., which was backed by the U.S. government and therefore not rated, the City s investments in corporate bonds were rated AAA or AA+ by S&P and Aaa by Moody s and they are FDIC guaranteed. Rowan Companies is an oil exploration company that is governed by the 52

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) Credit Risk (continued) Merchant Marine Act of 1936, Title XI. Investments in asset backed securities were mostly associated with government agencies, and therefore not rated. Those asset backed securities not associated with government agencies total $499,653, which were rated AAA by S&P and Aaa by Moody s. Credit risk associated with the Guaranteed Investment Contracts is as follows: Description Maturity Fair Value as of September 30, 2010 Florida Rural Utility Financing Commission Revenue Notes, 2008B Construction October 1, 2011 $ 11,906,696 Florida Rural Utility Financing Commission Revenue Notes, 2008B Reserve October 1, 2011 1,572,803 As of September 30, 2010, Pallas Capital Corp (Pallas) was rated A3/P-1 by Moody's and AA-/F1+ by Fitch, Inc (Fitch). Under the Guaranteed Investment Contract (GIC), if Pallas ratings fall below Moody's A-1, or the rating on their short-term debt obligations has been suspended, withdrawn or has fallen below P-1, then Pallas must assign the GIC to another provider rated at least A-1/P-1 by Moody's, collateralize the GIC, or obtain a guaranty of insurance. Insurance must be from a guarantor or entity with a Moody s credit rating of at least A-1/P-1. If Pallas collateralizes the GIC, the collateral must consist of direct and general obligations of or obligations guaranteed by the United States of America or its agencies. The market value of the collateral must be maintained at 103% or more of the principal balance of the funds in the GIC. Any such collateral must be held by a custodian chosen by Pallas and acceptable to the City. 2) City s Pension Plan Investments At September 30, 2010, the City s three pension plans had the following cash and investments: Credit Rating: Standard & Poor s Credit Rating: Moody s Description Fair Value General Employees Pension Plan: Money Market $ 3,288,003 U.S. Government and agencies securities 6,742,656 Not rated Not rated Municipal bonds 1,850,111 AAA to A+ Aaa to A1 Corporate stock 24,227,641 Not rated Not rated Corporate bonds 4,990,719 AAA to BB Aaa to Ba3 Mortgage backed securities 7,702,141 AAA to B- Aaa to B2 Asset backed securities 1,054,793 AAA to AAA Aaa to Aaa Mutual funds - Fixed Income 2,338,765 Not rated Not rated Mutual funds - Equity - Mutual funds - International Equity 7,625,299 Not rated Not rated Private placements 609,604 AAA to BBB+ Aaa to Baa2 Real Estate Investment Trusts 75,000 Not rated Not rated International Securities: Foreign bonds and notes 545,910 AA to A- Aa1 to Baa1 Foreign stocks 1,790,351 Not rated Not rated Total for General Employees Pension Plan 62,840,993 (continued) 53

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) 2) City s Pension Plan Investments (continued) Description Fair Value Credit Rating: Standard & Poor s Credit Rating: Moody s Firefighters Pension Plan: Cash 1,158 Money Market 980,990 Not rated Not rated U.S. Government and agencies securities 95,907 AAA Aaa Corporate stock 13,299,282 Not rated Not rated Corporate bonds 6,854,283 AA+ to BBB- Aa2 to Baa3 Mortgage backed securities 138,875 AAA Aaa Asset backed securities 1,690,949 AAA to AAA Aaa to Aaa Mutual funds - Equity 9,158,835 Not rated Not rated Mutual funds - Real Estate 1,390,451 Not rated Not rated Mutual funds - International Equity 3,565,341 Not rated Not rated Total for Firefighters Pension Plan 37,176,071 Police Officers Pension Plan: Cash 2,020,569 U.S. Government and agencies securities 130,363 AAA Aaa Corporate stock 21,275,465 Not rated Not rated Corporate bonds 9,291,017 AA+ to BBB+ Aa2 to Baa1 Mortgage backed securities 6,372,305 AAA to AAA Aaa to Aaa Mutual funds - Equity 8,240,723 Not rated Not rated Mutual funds - International equity 3,012,411 Not rated Not rated Total for Police Officers Pension Plan 50,342,853 Total Cash and Investments $ 150,359,917 a) General Employees Pension Plan The City of Fort Myers General Employees Pension Plan adopted an Investment Policy Statement, which authorizes investments in domestic securities, domestic fixed income investment grade bonds, and international equities. Investment managers may invest in commercial paper, banker s acceptances, repurchase agreements, Treasury Bills, certificates of deposit and money market funds. Commercial paper must be rated by Standard and Poor s (S&P) and Moody s Investors Services (Moody s) at A-1 or P-1, respectively. Bankers acceptances and certificates of deposit should only be purchased from larger, well capitalized domestic and foreign banks with a minimum of an A rating from one of the major rating agencies. Corporate or tax-exempt debt issues must have credit ratings of BBBor better from S&P or Baa3 or better from Moody s. There shall be no investment in the following: (a) margin purchases, (b) commodities, (c) calls or straddles (not including covered call options) and warrants or other options (except as part of purchase of another security) unless incidental to an investment in a mutual fund, commingled or pooled fund or other similar investment vehicle, (d) venture capital, and (e) investments prohibited by state or Federal law. No issues may be purchased with a longer maturity than the maximum maturity in the applicable benchmark index. Duration should be managed to remain within ±25% of the applicable benchmark index. 54

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) a) General Employees Pension Plan (continued) Concentration of Credit Risk: The cost of an individual security may not exceed 5% of the total market value of the portfolio and the market value of investments of a single issuer (with the exception of the U.S. Government, its agencies and instrumentalities) must not exceed 5% of the market value of the portfolio. International equities may not exceed more than 20% of the portfolio and holdings in any one company in a portfolio may not exceed 5% of that portfolio. Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of the counterparty, the General Employees Pension Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Pursuant to Section 112.661 (10), Florida Statutes, the Plan s investment policy states that securities should be held with a third-party custodian, and all securities purchased by, and all collateral obtained by the pension fund should be designated as an asset of the Plan. As of September 30, 2010, the Plan s investment portfolio was held with a third-party custodian as required by the statute. Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Plan s foreign investment policy states that no more than 20% at market value of the assets may be invested in foreign equity securities. The Plan s actual investment in international securities at September 30, 2010 was $2,336,261 or 3.71% of the Plan s total assets at market value. The Plan also held foreign investments comprised of mutual funds in international equity, which amounted to $7,625,299 or 12.80% of the Plan s total assets at fair market value as of September 30, 2010. At September 30, 2010, the remaining General Employees Pension Plan investments, other than stocks and stock related funds, were as follows: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 1-5 6-10 More Than 10 Money Market $ 3,288,024 $ 3,288,024 $ - $ - $ - U.S. Government and agencies securities 6,742,656-2,150,354 4,173,975 418,327 Municipal bonds 1,850,111-979,651 393,287 477,173 Corporate bonds 4,990,719-3,129,411 1,647,737 213,571 Mortgage backed Securities 7,702,141-795,609 615,535 6,290,997 Asset backed securities 1,054,793-292,507 646,222 116,064 Private placements 609,604-463,746 72,835 73,023 International securities: Foreign bonds and notes 545,910-249,151 53,436 243,323 Total investments $ 26,783,958 $ 3,288,024 $ 8,060,429 $ 7,603,027 $ 7,832,478 55

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) b) Firefighters Pension Plan The City of Fort Myers Firefighters Retirement System authorizes investments in savings and money market deposit accounts of a national bank, a state bank or a savings and loan institution insured by the Federal Deposit Insurance Corporation, provided the amount obligated does not exceed the insured amount; obligations of the U.S. Government or guaranteed as to principal and interest by the U.S. Government or by an agency of the U.S. Government; stocks, commingled funds administered by national or state banks, mutual funds and bonds or other evidences of indebtedness, issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the United States or the District of Columbia; and foreign securities. Fixed income securities must be rated AAA, AA or A by S&P or Aaa, Aa, or A by Moody s. Money markets must have a rating of A1 by S&P or P1 by Moody s. Investments in short sales, margin purchases or borrowing, private placement or other restricted securities (not freely marketable), commodities, puts, calls, straddles or hedging, warrants or other options, except as part of the purchase of another security, tax-exempt bonds, repurchase agreements, venture capital, illiquid investments, any investment prohibited by State or Federal law, and any investment not specifically allowed as part of the Firefighter s Retirement System Investment Policy Statement, are prohibited. Concentration of Credit Risk: Not more than 5% of the fund s assets shall be invested in the common stock or capital stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company. The value of bonds issued by a single corporation shall not exceed 10% of the total fund. Investments in corporate common stock and convertible bonds shall not exceed 65% of the fund assets at cost or 75% of the fund assets at market value. Foreign securities shall not exceed 25% of the assets of the fund at market value. Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of the counterparty, the General Employees Pension Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Pursuant to Section 112.661 (10), Florida Statutes, the Plan s investment policy states that securities should be held with a third-party custodian, and all securities purchased by, and all collateral obtained by the pension fund should be designated as an asset of the Plan. As of September 30, 2010, the Plan s investment portfolio was held with a third-party custodian as required by the statute. Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates that will adversely affect the fair value of an investment or a deposit. The Plan s foreign investment policy states that foreign securities shall not exceed 25% of the assets of the fund at market value. The Plan s foreign investment as of September 30, 2010, was comprised of mutual funds in international equity, which amounted to $3,565,341 or 9.59% of the Plan s total assets at fair market value. 56

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) b) Firefighters Pension Plan (continued) At September 30, 2010, the Firefighters Pension Plan investments, other than stocks and stock related funds, were as follows: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 1-5 6-10 More Than 10 Money Market $ 980,990 $ 980,990 $ - $ - $ - U.S. Government and agencies securities 95,907 - - 95,907 - Corporate bonds 6,854,283-2,210,483 3,834,233 809,567 Mortgage backed Securities 138,875-138,875 - - Asset backed securities 1,690,949-887,059 803,890 - Total investments $ 9,761,004 $ 980,990 $ 3,236,417 $ 4,734,030 $ 809,567 c) Police Officers Pension Plan The City of Fort Myers Police Officers Pension Plan adopted an Investment Policy Statement, which sets forth investments in equity, fixed income and cash equivalent securities. The investments in equity securities shall not exceed 70% (at cost value) or 75% (at market value) of the investment manager s total portfolio. Fixed income securities must follow the guidelines of securities rated A or higher by Moody s or by S& P rating services; securities must be issued by a corporation organized under the laws of the U.S., any state or organized territory of the U.S., or the District of Columbia; investments in Collateralized Mortgage Obligations (CMO) shall be limited to 15% of the market value of the investment managers total portfolio; all issues must be backed by mortgage securities issued, guaranteed, or fully insured by the Government National Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA) or that are rated Aaa by Moody s or AAA by S&P rating services; all issues must pass the FFIEC High Risk Security Test on an annual basis; any CMO issue held in the investment managers portfolio that fails the FFIEC test shall be sold at the earliest beneficial opportunity; there is no limit imposed on investments in fixed income securities issued directly by the U.S. Government or any agency or instrumentality thereof; foreign bonds are prohibited; fixed income securities may be managed through the purchase of open-end, noload mutual funds or commingled funds as long as these funds in aggregate adhere to the fixed income guidelines herein. Cash equivalent securities may be invested in the following short-term investments: money market or short-term investment fund (STIF); direct obligations of the U.S. Government, its agencies or instruments with a maturity of one year or less; commercial paper issued by U.S. corporations that has maturity of 270 days or less and that is rated A-1 by S&P or P-1 by Moody s; bankers acceptances and Certificates of Deposit issued by the largest 50 banks in the United States (in terms of total assets). Investments in interest only or principal only CMOs, precious metals, limited partnerships of any kind, real estate, direct investment in repurchase agreements, venture capital, futures contracts, options contracts, trading on margin and short selling are prohibited. 57

Notes to the Financial Statements, continued September 30, 2010 NOTE 2 DEPOSITS AND INVESTMENTS (continued) c) Police Officers Pension Plan (continued) Concentration of Credit Risk: No more than 25% at market value of the plan s total assets may be invested in foreign equity securities; no more than 5% at cost value may be invested in the shares of a single corporate issuer; investments in those corporations whose stock has been publicly traded for less than one year is limited to 15%; investments issued by Corporations with total market capitalization of $3 billion or less shall not exceed 20% of total equity portfolio value (at market); securities may be managed through the purchase of open-end, no-load mutual funds or commingled funds as long as these funds in aggregate adhere to the equity guidelines; 80% of all domestic equity securities shall be ranked in the top three ratings of a major rating service from the Moody s, S&P or Value Line. Custodial Credit Risk: Custodial credit risk is the risk that, in the event of the failure of the counterparty, the General Employees Pension Plan will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Pursuant to Section 112.661 (10), Florida Statutes, the Plan s investment policy states that securities should be held with a third-party custodian, and all securities purchased by, and all collateral obtained by the pension fund should be designated as an asset of the Plan. As of September 30, 2010, the Plan s investment portfolio was held with a third-party custodian as required by the statute. Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The Plan s foreign investment policy states that no more than 25% at market value of the Plan s total assets may be invested in foreign securities. The Plan s foreign investment as of September 30, 2010 was comprised of mutual funds in international equity, which amounted to $3,012,411 or 5.98% of the Plan s total assets at fair market value. At September 30, 2010, the Police Officers Pension Plan investments, other than stocks and stock related funds, were as follows: Investment Maturities (in Years) Investment Type Fair Value Less Than 1 1-5 6-10 More Than 10 Money Market $ - $ - $ - $ - $ - U.S. Government and agencies securities 130,363 - - - 130,363 Mortgage backed securities 6,372,305-1,056,439 994,732 4,321,134 Corporate bonds 9,291,017-734,196 7,953,908 602,913 Total investments $ 15,793,685 $ - $ 1,790,635 $ 8,948,640 $ 5,054,410 58

Notes to the Financial Statements, continued September 30, 2010 NOTE 3 RECEIVABLES, ACCRUED LIABILITIES AND DEFERRED REVENUE 1. Receivables Receivables as of September 30, 2010 for the City s governmental activities, individual major governmental funds, nonmajor funds in the aggregate, internal service funds and applicable allowances for uncollectible accounts are as follows: Trans- Nonmajor Revenue portation General Govern- Internal General Bonds Capital Capital mental Service Fund and Notes Projects Projects Funds Fund Total Receivables: Accounts (gross) $ 2,963,808 $ - $ 4,368,762 $ - $ 89,508 $ 879 $ 7,422,957 Allowance for uncollectibles (310,278) - (4,368,762) - (528) - (4,679,568) Accounts (net) 2,653,530 - - - 88,980 879 2,743,389 Special Assessments: Current 36,789 - - - - - 36,789 Deferred 49,087 - - - - - 49,087 Total 85,876 - - - - - 85,876 Interest: Unrestricted 25,273-112,305 43,788 30,903 26,724 238,993 Restricted - 1,982 - - - - 1,982 Total 25,273 1,982 112,305 43,788 30,903 26,724 240,975 Notes (gross) 400,000 - - - 2,617,719-3,017,719 Allowance for uncollectibles - - - - (2,617,719) - (2,617,719) Notes (net) 400,000 - - - - - 400,000 Total Net Receivables $ 3,164,679 $ 1,982 $ 112,305 $ 43,788 $ 119,883 $ 27,603 $ 3,740,240 Significant uncollectibles: The allowance for uncollectible accounts receivable in the General Fund includes $188,403 owed to the City of Fort Myers by the Dunbar Industrial Action Development Corporation (DIAD) resulting from State Housing Initiative Program (SHIP) funds and a direct loan. In the Transportation Capital Projects Fund, the City set up an allowance for the final installment of $4,368,762 due for a Developer Agreement. Due to the economic downturn, the cash payment has not been made and the City expects to receive road capital improvements if the cash payment is not feasible. The allowance for uncollectible notes receivable in the Nonmajor Governmental Funds relates to mortgage assistance provided by the Attainable Workforce Housing Fund, State Housing Initiative Partnership (SHIP) Fund, and Community Development Block Grant Fund. The Attainable Workforce Housing Fund provides loans to eligible residents with income of 150% of the median income for Lee County. The SHIP program 59

Notes to the Financial Statements, continued September 30, 2010 NOTE 3 RECEIVABLES, ACCRUED LIABILITIES AND DEFERRED REVENUE (continued) 1. Receivables (continued) provides a deferred payment loan with no interest to eligible recipients to fund the gap between what the financial institute will lend and what the homebuyer can afford to pay for newly constructed single-family homes and existing homes within the City. Receivables for the City s business-type activities, including individual major funds and allowances for uncollectible accounts, are as follows: Water - Solid Other Wastewater Waste Business-Type Utility Fund Funds Total Receivables: Accounts (gross) $ 5,773,399 $ 1,449,068 $ 786,883 $ 8,009,350 Allowance for uncollectibles (1,114,904 ) (279,786 ) (136,263 ) (1,530,953) Accounts (net) 4,658,495 1,169,282 650,620 6,478,397 Interest: Unrestricted 7,164 4,145 13,684 24,993 Restricted 31,829 293 2,233 34,355 Total 38,993 4,438 15,917 59,348 Total Net Receivables $ 4,697,488 $ 1,173,720 $ 666,537 $ 6,537,745 2. Accrued Liabilities Other accrued liabilities at September 30, 2010 were as follows: Salaries and Due to Benefits Fiduciary Funds Other Liabilities Total Governmental Activities: General Fund $ 2,956,967 $ 1,606,443 $ 383,665 $ 4,947,075 Revenue Bonds and Notes - - 15,000 15,000 Transportation Capital Projects - - 3,045 3,045 General Capital Projects - - 11,186 11,186 Nonmajor Governmental Funds - - 37,228 37,228 Internal Service Fund - - 89,237 89,237 Total Governmental Activities $ 2,956,967 $ 1,606,443 $ 539,361 $ 5,102,771 Business-type activities: Water-Wastewater Utility $ - $ - $ 114,792 $ 114,792 Solid Waste - - 9,248 9,248 Nonmajor Business-type funds - - 47,200 47,200 Total Business-type activities $ - $ - $ 171,240 $ 171,240 60

Notes to the Financial Statements, continued September 30, 2010 NOTE 3 RECEIVABLES, ACCRUED LIABILITIES AND DEFERRED REVENUE (continued) 3. Deferred Revenue Deferred revenues from resources that have been received but not yet earned are reported on both the government-wide Statement of Activities and on the governmental fund financial statements. The governmental fund financial statements may also report deferred revenue from receivables for revenues that are not considered available to liquidate liabilities for the current period. The components of deferred revenue as of September 30, 2010 are as follows: Capital Nonmajor General Projects Governmental Total Receivables earned but not available: Special Assessments $ 49,087 $ - $ - $ 49,087 Communication Service Tax 165,093 - - 165,093 Code Enforcement 754,688 - - 754,688 Grant receipts - 1,764,570 422,905 2,187,475 Total Unavailable 968,868 1,764,570 422,905 3,156,343 Deferred/Unearned revenues: Prepaid Occupational Licenses 546,220 - - 546,220 Special Assessments 543 - - 543 Cemetery 11,686 - - 11,686 Grant receipts not yet earned - - 6,025 6,025 Rental income - - 14,396 14,396 Total Deferred/Unearned 558,449-20,421 578,870 Total Deferred Revenue $ 1,527,317 $ 1,764,570 $ 443,326 $ 3,735,213 NOTE 4 RESTRICTED ASSETS Certain assets of the proprietary funds at September 30, 2010 are restricted for certain purposes. These assets included cash and cash equivalents, investments and interest receivable. Proprietary Funds Water - Wastewater Solid Nonmajor Utility Waste Business-type Purpose Fund Fund Funds Customer deposits $ 4,975,034 $ - $ - Revenue bond debt service accounts 13,759,567 18,807 17,910 Impact fee capital contributions accounts 972,235 - - Revenue bond renewal and replacement accounts 5,682,919 169,427 112,438 Revenue bond and note construction accounts 9,898,977-1,174,693 Capital project accounts 1,485,766 15,463 65,619 Other purposes - - 251,451 Total restricted assets $ 36,774,498 $ 203,697 $ 1,622,111 61

Notes to the Financial Statements, continued September 30, 2010 NOTE 5 - CAPITAL ASSETS Beginning Balance Additions and Transfers In Retirements and Transfers Out Ending Balance Governmental Activities: Capital assets not being depreciated Land $ 27,565,734 $ 282,171 $ (2,902,799) $ 24,945,106 Antiques and Exhibits 1 900,427 - - 900,427 Construction in progress 5,713,624 8,655,564 (3,136,147) 11,233,041 Intangibles-easements 389,076 3,011,445-3,400,521 Total capital assets not being depreciated 34,568,861 11,949,180 (6,038,946) 40,479,095 Capital asset being depreciated Buildings 19,859,691 - - 19,859,691 Improvements 35,664,487 1,632,989-37,297,476 Equipment 23,345,601 425,268 (632,730) 23,138,139 Intangibles-software - 128,100-128,100 Infrastructure 231,177,623 3,557,589-234,735,212 Total capital assets being depreciated 310,047,402 5,743,946 (632,730) 315,158,618 Less accumulated depreciation for Buildings 8,046,536 644,213-8,690,749 Improvements 10,770,555 1,827,407-12,597,962 Equipment 15,617,023 2,181,457 (500,102) 17,298,378 Intangibles-software - 39,240-39,240 Infrastructure 157,383,650 7,000,805-164,384,455 Total accumulated depreciation 191,817,764 11,693,122 (500,102) 203,010,784 Total capital assets being depreciated, net 118,229,638 (5,949,176) (132,628) 112,147,834 Total governmental activities capital assets, net $ 152,798,499 $ 6,000,004 $ (6,171,574) $ 152,626,929 Business-Type Activities: Capital assets not being depreciated Land Water-Wastewater $ 954,695 $ - $ - $ 954,695 Burrough's Home 788,866 - (788,866) - Fort Myers Country Club 168,966 - - 168,966 Eastwood Golf Course 729,261 - - 729,261 Yacht Basin 195,315 - - 195,315 Parking Garage 551,713 - - 551,713 Department of Cultural and Historical Affairs - 788,866-788,866 Harborside Event Center 399,327 - - 399,327 Total land 3,788,143 788,866 (788,866) 3,788,143 Construction in progress Water-Wastewater 28,207,412 6,088,900 (26,906,517) 7,389,795 Stormwater 2,977,280 194,712 (2,308,841) 863,151 Solid Waste - 18,794-18,794 Yacht Basin 156,947 3,945 (118,494) 42,398 Total construction in progress 31,341,639 6,306,351 (29,333,852) 8,314,138 Total capital assets not being depreciated 35,129,782 7,095,217 (30,122,718) 12,102,281 Capital assets being depreciated Buildings Water-Wastewater 60,679,141 9,627,676-70,306,817 Imaginarium 289,963 - (289,963) - Burrough's Home 717,477 - (717,477) - Southwest Florida Museum of History 229,764 - (229,764) - Fort Myers Country Club 913,707 - - 913,707 Eastwood Golf Course 2,049,951 - - 2,049,951 Yacht Basin 490,620 - - 490,620 Skatium 33,430 - - 33,430 Parking Garage 5,510,642 - - 5,510,642 Department of Cultural and Historical Affairs - 1,237,204-1,237,204 Harborside Event Center 10,644,935 - - 10,644,935 Total buildings 81,559,630 10,864,880 (1,237,204) 91,187,306 62

Notes to the Financial Statements, continued September 30, 2010 NOTE 5 - CAPITAL ASSETS (continued) Beginning Additions and Retirements and Ending Balance Transfers In Transfers Out Balance Capital assets being depreciated (continued) Improvements other than buildings Water-Wastewater 330,234,886 27,526,855-357,761,741 Stormwater 2,860,969 2,800,171-5,661,140 Imaginarium 24,400 - (24,400) - Burrough's Home 299,916 - (299,916) - Southwest Florida Museum of History 5,158 - (5,158) - Fort Myers Country Club 2,162,190 - - 2,162,190 Eastwood Golf Course 4,305,370 - - 4,305,370 Yacht Basin 6,677,223 239,724-6,916,947 Skatium 102,122 - - 102,122 Department of Cultural and Historical Affairs - 329,474-329,474 Harborside Event Center 220,603 - - 220,603 Total improvements other than buildings 346,892,837 30,896,224 (329,474) 377,459,587 Equipment Water-Wastewater 6,453,643 81,688-6,535,331 Solid Waste 6,161,176 298,117 (164,623) 6,294,670 Stormwater 708,365 - - 708,365 Building Permit & Inspections 786,421 - - 786,421 Imaginarium 51,803 - (51,803) - Burrough's Home 10,240 - (10,240) - Southwest Florida Museum of History 84,094 - (84,094) - Fort Myers Country Club 547,254 - (14,482) 532,772 Eastwood Golf Course 519,800 - - 519,800 Yacht Basin 72,525 - - 72,525 Skatium 81,729 - - 81,729 Department of Cultural and Historical Affairs - 146,137 (38,001) 108,136 Harborside Event Center 747,024 - - 747,024 Total equipment 16,224,074 525,942 (363,243) 16,386,773 Antiques and Exhibits Department of Cultural and Historical Affairs 1-160,500-160,500 Imaginarium 1 122,500 - (122,500) - Total antiques and exhibits 122,500 160,500 (122,500) 160,500 Total capital assets being depreciated 444,799,041 42,447,546 (2,052,421) 485,194,166 Less accumulated depreciation for Buildings Water-Wastewater 35,041,293 1,999,400-37,040,693 Imaginarium 84,949 - (84,949) - Burrough's Home 223,124 - (223,124) - Southwest Florida Museum of History 158,898 - (158,898) - Fort Myers Country Club 605,337 22,646-627,983 Eastwood Golf Course 150,682 51,231-201,913 Yacht Basin 475,838 10,182-486,020 Skatium 3,343 1,671-5,014 Parking Garage 921,708 307,236-1,228,944 Department of Cultural and Historical Affairs - 537,326-537,326 Harborside Event Center 5,934,261 395,290-6,329,551 Total buildings 43,599,433 3,324,982 (466,971) 46,457,444 63

Notes to the Financial Statements, continued September 30, 2010 NOTE 5 - CAPITAL ASSETS (continued) Beginning Additions and Retirements and Ending Balance Transfers In Transfers Out Balance Less accumulated depreciation (continued) Improvements other than buildings Water-Wastewater 81,650,261 9,395,999-91,046,260 Stormwater 214,159 160,137-374,296 Imaginarium 305 - (305) - Burrough's Home 273,279 - (273,279) - Southwest Florida Museum of History 5,158 - (5,158) - Fort Myers Country Club 2,161,093 1,097-2,162,190 Eastwood Golf Course 2,236,304 119,797-2,356,101 Yacht Basin 2,444,307 190,482-2,634,789 Skatium 29,168 14,565-43,733 Department of Cultural and Historical Affairs - 293,281-293,281 Harborside Event Center 102,287 20,174-122,461 Total improvements other than buildings 89,116,321 10,195,532 (278,742) 99,033,111 Equipment Water-Wastewater 5,226,708 446,157-5,672,865 Solid Waste 2,544,314 840,561 (117,588) 3,267,287 Stormwater 577,466 36,962-614,428 Building Permit & Inspections 420,086 135,650-555,736 Imaginarium 36,151 - (36,151) - Burrough's Home 10,240 - (10,240) - Southwest Florida Museum of History 84,094 - (84,094) - Fort Myers Country Club 450,872 30,065 (14,482) 466,455 Eastwood Golf Course 433,576 36,485-470,061 Yacht Basin 59,822 5,326-65,148 Skatium 67,416 3,407-70,823 Department of Cultural and Historical Affairs - 135,231 (38,000) 97,231 Harborside Event Center 697,318 12,998-710,316 Total equipment 10,608,063 1,682,842 (300,555) 11,990,350 Antiques and Exhibits Department of Cultural and Historical Affairs 1-160,500-160,500 Imaginarium 1 122,500 - (122,500) - Total antiques and exhibits 122,500 160,500 (122,500) 160,500 Total accumulated depreciation 143,446,317 15,363,856 2 (1,168,768) 157,641,405 Total depreciable capital assets, net 301,352,724 27,083,690 (883,653) 327,552,761 Total business-type activities capital assets, net $ 336,482,506 $ 34,178,907 $ (31,006,371) $ 339,655,042 1 The City owns various collections of works of art, historical treasures, educational exhibits and similar assets that are housed in the Imaginarium and Edison-Ford Estates. In compliance with the City s Capital Asset Capitalization Policy, the City does not capitalize the collections because, in each case, the collections meet the following three criteria under GAAP, which qualify the collections for exclusion from financial reporting: 1) the collection is held for public exhibition, education, or research in furtherance of public service rather than for financial gain; 2) the collection is protected, kept unencumbered, cared for and preserved; and 3) the collection is subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections, or the sales of collection items is prohibited by law. 2 Total depreciation expense for business-type activities for fiscal year 2010 is $14,304,223. The difference between depreciation expense and the increase in accumulated depreciation is $1,059,633 which is a result of $998,698 capital assets transferred from business-type activities to business-type activities and $60,936 reclassed from equipment to antiques and exhibits. Capital assets are transferred at historical cost, which requires the accumulated depreciation associated with the asset to also be transferred. 3 Statement No. 51 of the Governmental Accounting Standards Board (GASB), Accounting and Financial Reporting for Intangible Assets, states that retroactive reporting of intangible assets considered to have indefinite useful lives as of the effective date of the Statement is not required but should be permitted. GASB Statement 51 also states that retroactive reporting of internally generated intangible assets is not required. The City chose not to apply GASB Statement 51 retroactively. 64

Notes to the Financial Statements, continued September 30, 2010 NOTE 5 - CAPITAL ASSETS (continued) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 3,178,779 Public Safety: Police 111,714 Fire 258,749 Protective services 19,302 Physical environment 34,958 Transportation 7,019,933 Economic environment 208,391 Culture and recreation 861,296 Total depreciation expense - governmental activities $ 11,693,122 Business-type activities: Water-Wastewater $ 11,818,620 Solid Waste 840,561 Stormwater 197,099 Building Permit & Inspections 135,650 Fort Myers Country Club 53,808 Eastwood Golf Course 207,513 Yacht Basin 205,990 Skatium 19,643 Parking Garage 307,236 Department of Cultural and Historical Affairs 89,641 Harborside Event Center 428,462 Total depreciation expense - business-type activities $ 14,304,223 65

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT Bonds and notes outstanding at September 30, 2010 consist of the following for governmental activities: Maximum Purpose of Amount Amount Interest Annual Issue Issued Outstanding Rate Debt Service Governmental Activities: Revenue Bonds: Gulf Breeze Loan Pool, 1999 Refunding $ 10,420,000 $ 7,200,000 5.56% $ 1,753,762 Series 2001A City Facilities 1,840,000 485,000 (1) 3.800% - 5.000% 494,943 Series 2002A Refunding 20,625,000 4,875,000 4.000% - 5.000% 2,629,438 Series 2004A Gas Tax Transportation 18,335,000 12,430,000 2.000% - 5.000% 1,686,264 League of Cities Loan Pool, 2005C Refunding 4,970,000 4,780,000 3.000% - 5.000% 603,925 Series 2006 Refunding 58,195,000 58,195,000 4.000% - 5.000% 4,752,659 Series 2007 Refunding 33,743,640 32,177,110 5.000% 5,134,156 Total Revenue Bonds 148,128,640 120,142,110 Notes Payable: Section 108 Housing Loan, 1997 Housing Projects 300,000 125,000 (2) Revenue Improvement Streetscape Note, Series 2005 DRA Project 7,450,000 5,953,846 4.010% Total Notes 7,750,000 6,078,846 (4) 25,000 (3) 734,908 Total for Governmental Activities $ 155,878,640 $ 126,220,956 (1) The amount issued for the Series 2001A bonds is net of $7,835,000, which was subsequently refunded. (2) Interest is set on an index of 3 month LIBOR plus 20 basis points as published in the Wall Street Journal. As of September 30, 2010, the 3 month LIBOR was 0.29000. (3) Principal portion only has been disclosed, as interest is a variable rate, thus maximum interest is not known. (4) The City amended the Series 2005 DRA Note on December 9, 2009 to achieve a lower interest rate. The maturity date of the note changed from January 1, 2012 to January 1, 2022. The City pledged revenues, which comprise the Utilities Tax, Franchise Fees, Communications Services Tax, Guaranteed Entitlement Funds, Occupational License Tax, and the Sales Tax, as the sources of repayment for the following debt issues. Pledged revenues received in 2010 totaled $21,777,721. Governmental Unit Note (Gulf Breeze Loan Pool) refunded the outstanding Taxable Improvement Revenue Bonds, Series 1992B; Taxable Capital Improvement Revenue Bonds, Series 1998A; Taxable Capital Improvement Revenue Bonds, Series 1998B. The note is payable through December 1, 2015. Principal and interest paid for the current fiscal year totaled $1,268,880, which is 5.83% of total 2010 pledged revenues. Improvement Revenue Bonds, Series 2001A, were issued to provide funds to finance various capital improvements within the City. The bonds are payable through December 1, 2010. Principal and interest paid for the current fiscal year totaled $499,285, which is 2.29% of total 2010 pledged revenues. Taxable Improvement Refunding Revenue Bonds, Series 2002A, refunded the outstanding Refunding and Improvement Revenue Bonds, Series 1986-1. The bonds are payable through December 1, 2011. Principal and interest paid for the current fiscal year totaled $2,625,163, which is 12.05% of total 2010 pledged revenues. 66

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Improvement and Refunding Revenue Bonds, Series 2006, were issued to provide funds to finance various capital improvements within the City and advance refund a portion of the outstanding Improvement Revenue Bonds, Series 2001A. The bonds are payable through December 1, 2036. Principal and interest paid for the current fiscal year totaled $2,624,806, which is 12.05% of total 2010 pledged revenues. Improvement Revenue Refunding Bonds, Series 2007, refund a portion of the outstanding Improvement Refunding Revenue Bonds, Series 1997A. The bonds are payable through December 1, 2022. Principal and interest paid for the current fiscal year totaled $2,499,125, which is 11.48% of total 2010 pledged revenues. Bonds and notes outstanding at September 30, 2010 consist of the following for business-type activities: Maximum Purpose of Amount Amount Interest Annual Issue Issued Outstanding Rate Debt Service Business-type Activities: Utility System Revenue Bonds: Series 1993A Includes a Refunding $ 48,920,000 $ 15,485,000 3.750% - 5.850% $ 3,193,446 capital appreciation series Series 2003A Refunding 29,130,000 20,635,000 2.000% - 4.750% 2,371,171 Series 2006A Refunding 38,925,000 38,380,000 4.000% - 5.750% 5,229,975 Series 2009 Refunding 53,895,000 53,895,000 Variable (2) 7,217,051 Total Utility System Revenue Bonds 170,870,000 128,395,000 State Revolving Fund Loans Utility System 107,024,117 70,144,134 (1) 2.310% - 3.160% 7,003,850 Utility 2008 FRUFC Loan Utility System 22,983,000 22,983,000 3.250% - 4.000% 23,465,643 Utility Revenue Note, Series 2008A Utility System 50,000,000 50,000,000 5.060% 6,583,641 Total Utility System 350,877,117 271,522,134 Solid Waste Revenue Bonds Series 2007 Refunding 478,584 456,366 5.000% 72,817 Total Solid Waste System 478,584 456,366 Other Revenue Bonds Series 2007 Refunding 457,776 436,524 5.000% 69,651 Total Other Revenue Bonds 457,776 436,524 Yacht Basin Note, Series 2005 5,000,000 4,682,814 4.630% 386,877 Total Business-type Activities $ 356,813,477 $ 277,097,838 (1) Total amount authorized is $107,024,117, including service fees. As of September 30, 2010, only $81,098,937, including service fees and capitalized interest, was drawn down. (2) Interest is calculated in a weekly mode and is payable on a monthly basis. The business-type outstanding debt consists of Revenue Bonds and Notes for the Water-Wastewater Fund, the Solid Waste Fund, and for the non-major funds for the Fort Myers Country Club and Yacht Basin. These Revenue Bonds and Notes are obligations of the City and are payable solely from the operations of the System, net of specified operating expenses. 67

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Arbitrage The bonds and notes in Governmental and Business-type Activities are subject to arbitrage. The arbitrage rebate requirement requires issuers of tax exempt debt to rebate to the U.S. Treasury investment income arising from proceeds of tax exempt debt to the extent that such income results from an investment yield in excess of the bond yield. Changes in governmental long term debt for the year ended September 30, 2010 are summarized as follows: Beginning Balances Additions Reductions Ending Balances Amounts Due Within One Year Revenue bonds payable $ 126,104,835 $ - $ 5,962,725 $ 120,142,110 $ 6,241,375 Plus: Original issue premium and deferred defeasance costs 3,394,868-230,132 3,164,736 - Net bonds payable 129,499,703-6,192,857 123,306,846 6,241,375 Notes payable 7,841,236-1,762,390 6,078,846 521,154 Compensated absences 3,368,233 260,362 112,508 3,516,087 1,334,506 Other postemployment benefits 3,101,037 1,321,793-4,422,830 - Termination benefits 243,844-201,162 42,682 42,682 Fire and Police pension payable 7,926,268 11,162,720 7,926,268 11,162,720 11,162,720 Claims and judgments 5,159,042 2,292,634 2,661,397 4,790,279 2,347,700 Governmental-type Totals $ 157,139,363 $ 15,037,509 $ 18,856,582 $ 153,320,290 $ 21,650,137 Changes in business-type long term debt for the year ended September 30, 2010 are summarized as follows: Amounts Beginning Ending Due Within Balances Additions Reductions Balances One Year Water-Wastewater Utility Fund Water-Wastewater bonds $ 127,023,852 $ 53,895,000 $ 57,156,972 $ 123,761,880 (1) $ 5,600,000 Less: Unamortized original issue discount/(premium) and deferred defeasance costs 3,975,665 3,125,556 2,344,214 4,757,007 - Net bonds payable 123,048,187 50,769,444 54,812,758 119,004,873 5,600,000 Derivative instrument - 7,351,345-7,351,345 - Swaption premium liability 264,000 2,114,240-2,378,240 - Swaption exercise fee 1,132,680 - - 1,132,680 - Net derivative instrument 1,396,680 9,465,585-10,862,265 - State Revolving Loan 71,551,743 2,712,665 4,120,274 70,144,134 5,119,224 FRUFC Loan 22,983,000 - - 22,983,000 - Revenue Note, Series 2008A 50,000,000 - - 50,000,000 - Taxable Short Term GO Note, Series 2009 53,412,000-53,412,000 - - Due to private sources 2,832,963 - - 2,832,963 - Compensated absences 369,984 33,697 19,716 383,965 103,167 Other postemployment benefits 469,029 221,339-690,368 - Termination benefits 53,409-41,611 11,798 11,798 Fund totals 326,116,995 63,202,730 112,406,359 276,913,366 10,834,189 (1) Difference between the $123,761,880 and $128,395,000 shown on the "Amount Outstanding" schedule is due to the 1993A capital appreciation bonds. The difference of $4,633,120 is compounded interest on those bonds. 68

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Business-type long term debt (continued) Amounts Beginning Ending Due Within Balances Additions Reductions Balances One Year Solid Waste Fund Revenue bonds 467,751-11,385 456,366 $ 12,075 Less: Unamortized original issue discount/(premium) and deferred defeasance costs (7,555) - (570) (6,985) - Net bonds payable 475,306-11,955 463,351 12,075 Compensated absences 148,329-29,728 118,601 11,409 Other postemployment benefits 167,286 68,636-235,922 - Termination benefits 17,803-13,870 3,933 3,933 Fund totals 808,724 68,636 55,553 821,807 27,417 Other Enterprise Funds Other revenue bonds 447,414-10,890 436,524 11,550 Less: Unamortized original issue discount/(premium) and deferred defeasance costs (7,796) - (588) (7,208) - Net bonds payable 455,210-11,478 443,732 11,550 Note payable 4,845,108-162,294 4,682,814 170,046 Compensated absences 319,704 19,702 34,947 304,459 110,213 Other postemployment benefits 377,972 156,292-534,264 - Termination benefits 88,369-69,363 19,006 19,006 Fund totals 6,086,363 175,994 278,082 5,984,275 310,815 Business-type totals $ 333,012,082 $ 63,447,360 $ 112,739,994 $ 283,719,448 $ 11,172,421 Annual debt service requirements to maturity for general revenue bonds and notes are as follows: Fiscal Year Governmental Activities Revenue Bonds Total Principal Interest Required Principal Notes and Loans Interest Total Required 2011 $ 6,241,375 $ 5,493,001 $ 11,734,376 $ 521,154 $ 246,662 $ 767,816 2012 6,556,515 5,198,741 11,755,256 521,154 225,226 746,380 2013 6,941,995 4,883,579 11,825,574 521,154 203,765 724,919 2014 7,262,000 4,543,571 11,805,571 521,154 182,287 703,441 2015 6,288,035 4,208,718 10,496,753 521,154 160,789 681,943 2016-2020 26,885,225 16,857,462 43,742,687 2,480,769 497,394 2,978,163 2021-2025 16,106,965 11,766,803 27,873,768 992,307 59,687 1,051,994 2026-2030 15,435,000 8,261,916 23,696,916 - - - 2031 and thereafter 28,425,000 4,613,209 33,038,209 - - - Total 120,142,110 $ 65,827,000 $ 185,969,110 6,078,846 $ 1,575,810 $ 7,654,656 Current Portion (6,241,375) (521,154) Premium/discount deferred refunding loss 3,164,736 - Long term portion $ 117,065,471 $ 5,557,692 69

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Annual debt service requirements to maturity for business-type revenue bonds and notes are as follows: Business-Type Activities Water-Wastewater Revenue Bonds Water-Wastewater Notes Total Total Fiscal Year Principal Interest Required Principal Interest Required 2011 $ 5,600,000 $ 5,831,689 $ 11,431,689 $ 5,119,224 $ 5,377,762 $ 10,496,986 2012 5,865,000 5,853,311 11,718,311 28,336,647 4,660,696 32,997,343 2013 6,140,000 5,611,701 11,751,701 6,020,440 4,026,162 10,046,602 2014 7,720,000 5,314,140 13,034,140 6,193,808 3,856,528 10,050,336 2015 6,775,000 4,879,891 11,654,891 6,365,200 3,681,766 10,046,966 2016-2020 35,740,000 19,407,202 55,147,202 32,625,160 15,623,317 48,248,477 2021-2025 12,955,000 13,549,229 26,504,229 37,057,050 9,369,064 46,426,114 2026-2030 16,440,000 9,971,988 26,411,988 21,409,605 1,865,569 23,275,174 2031 and thereafter 31,160,000 5,443,006 36,603,006 - - - Total 128,395,000 $ 75,862,157 $ 204,257,157 143,127,134 $ 48,460,864 $ 191,587,998 Current portion (5,600,000) (5,119,224) Premium/discount deferred refunding loss (2,344,214) - Long-term portion $ 120,450,786 $ 138,007,910 Solid Waste Revenue Bonds Other Revenue Bonds Total Total Fiscal Year Principal Interest Required Principal Interest Required 2011 $ 12,075 $ 22,516 $ 34,591 $ 11,550 $ 21,537 $ 33,087 2012 14,559 21,851 36,410 13,926 20,901 34,827 2013 52,647 20,170 72,817 50,358 19,293 69,651 2014 55,200 17,474 72,674 52,800 16,715 69,515 2015 31,671 15,302 46,973 30,294 14,637 44,931 2016-2020 183,885 50,479 234,364 175,890 48,284 224,174 2021-2025 106,329 6,774 113,103 101,706 6,480 108,186 Total 456,366 $ 154,566 $ 610,932 $ 436,524 $ 147,847 $ 584,371 Current portion (12,075) (11,550) Premium/discount deferred refunding loss 6,985 7,208 Long-term portion $ 451,276 $ 432,182 Other Revenue Notes Fiscal Total Total Year Principal Interest Required Requirements 2011 $ 170,046 $ 216,830 $ 386,876 $ 22,383,229 2012 177,582 209,295 386,877 45,173,768 2013 186,655 200,222 386,877 22,327,648 2014 195,572 191,305 386,877 23,613,542 2015 204,916 181,961 386,877 22,180,638 2016-2020 1,180,176 754,208 1,934,384 105,788,601 2021-2025 1,491,076 443,308 1,934,384 75,086,016 2026-2030 1,076,791 83,839 1,160,630 50,847,792 2031 and thereafter - - - 36,603,006 Total 4,682,814 $ 2,280,968 $ 6,963,782 $ 404,004,240 Current portion (170,046) Long-term portion $ 4,512,768 70

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Derivatives and Hedging Activities: Pay-fixed, receive variable interest rate swaption On January 16, 2004, the City of Fort Myers entered into a forward interest rate swap agreement with the Bank of America. Pursuant to the agreement, the City received an upfront payment of $1,760,000 and the bank reserved the option to enter into a swap with the City (the swap option ). On September 1, 2009, Bank of America delivered notice to the City of its intent to exercise its swap option on October 1, 2009 and paid the City an exercise fee of $1,132,680. The exercise fee was designed to pay for the call premium associated with the 1999A Bonds and costs of issuance, which comprise the underwriter s takedown for placing the bonds with investors and various legal and advisory fees. Pursuant to the swap, the City pays the bank on a monthly basis an amount determined by applying the fixed interest rate of 5.179% to the notional amount of the swap. The bank is required to pay the City on a monthly basis an amount determined by applying the USD-SIFMA Municipal Swap Index to the same notional amount. The scheduled expiration of the swap is October 1, 2029. The swap agreement is considered to be a derivative instrument under Governmental Accounting Standards Board Statement No. 53, Accounting and Financial Reporting for Derivative Instruments (GASB 53). A consultant was engaged by the City to determine the fair value of this agreement and to evaluate its effectiveness as a hedge as of September 30, 2010. The fair value approximates the termination payment that would have been due had the swap been terminated as of September 30, 2010. As of September 30, 2010, the City s interest rate swap agreement had been determined to be an effective hedge, as defined by GASB 53, and the City recorded the fair value of the agreement on the statement of net assets. The fair value is displayed on the statement of net assets as a liability designated Derivative instrument. The change in fair value for fiscal year 2010 is included in the asset account identified as Deferred outflow on derivative instrument. The fair value excludes accrued interest. To conform to the provisions of GASB 53, the City restated the net assets for its Business-type Activities as of September 30, 2009 to record an adjustment for the swaption premium liability that relates to the upfront payment received in fiscal year 2004 and amortized accordingly. Business-type Activities Net assets, as previously stated $ 124,183,559 Adjustment for swaption premium liability (2,009,932) Net assets, restated as of September 30, 2009 $ 122,173,627 Objective of the swap: The swap agreement was executed in order to achieve a potential debt service savings through a synthetic current refunding of the City s $60,890,000 of Series 1999A callable bonds. The notional amount of the swap is $53,715,000, which corresponds to the callable bonds maturing through 2029. 71

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Derivatives and Hedging Activities (continued) Terms of the swap: The terms of the swap, the fair value, change in fair value, and the credit rating of Bank of America are displayed in the table below. Counterparty: Bank of America Moody s / Standard & Poor s Credit Ratings (2) : Aa3 / A+ Associated Bond Series Notional Amount as of September 30, 2010 Effective Date Swap Maturity Date Cash (Paid) Received Terms Fair Value (1) as of September 30, 2010 Increase (Decrease) in Fair Value for the Fiscal Year Ended September 30, 2010 1999A Utility Refunding Revenue Bonds $53,715,000 1/16/2004 10/1/2029 $2,892,680 Pay 5.179%; Receive SIFMA ($7,351,345) ($292,307) (1) A positive fair value represents money due to the City by Bank of America upon an assumed termination of the swap while a negative value represents the amount payable by the City. (2) Moody s has given Aa3 rating of Bank of America a negative outlook and Standard & Poor s has given the A+ rating a negative outlook. Risks: Credit risk: A swap potentially exposes the City to credit risk with the counterparty. The fair value of the swap represents the City s current potential credit exposure to the swap counterparty, assuming the occurrence of a termination event. Any early termination amount payable to one party (the payee) by the other party (the payer), in circumstances where there is a defaulting party or affected party in the case of a termination event, will, at the option of the other party, be reduced by its set-off against any amount(s) payable by the payee to the payer. The City does not have a policy on entering master netting arrangements; however, the International Swap Dealers Association Master Agreement (ISDA) for the swap contains a provision on netting. There is no requirement for either party to post collateral subject to credit risk. As of September 30, 2010, the City did not have a net credit risk exposure to Bank of America because the swap position had a negative net fair value, as set forth in the foregoing table. 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 swap s fair value. Basis risk: The swap exposes the City to basis risk if the relationship between the variable rate and BMA Municipal Swap Index converge, therefore changing the synthetic rate on the bonds. If a change occurs that results in rate convergence, the expected cost savings may not be realized. Termination risk: The derivative contract for the swap uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay or deliver, credit support default, and bankruptcy. Upon the occurrence of a termination event, the City or Bank of America may terminate the swap in which event the City may be obligated to make a substantial payment to Bank of America or the City may receive a substantial payment from Bank of America. The amount of such potential termination payment under the swap agreement would be calculated based on the then current interest rate market, the schedule of the notional principal amount under the remaining term of the swap agreement, and other market related factors that are beyond the control of the City. If either party terminates the swap, the variable rate bond would no longer carry a synthetic interest rate. In addition, if the swap has a negative fair value at the date of termination, the City would be liable to Bank of America for payment equal to the swap s fair value. 72

Notes to the Financial Statements, continued September 30, 2010 NOTE 6 LONG TERM DEBT (continued) Derivatives and Hedging Activities (continued) As of September 30, 2010, debt service requirements of the variable rate debt and net swap payments were as follows. As rates vary, the variable rate bond interest payment and net swap payment will vary. Fiscal Variable Rate Bond Interest Rate Total Year Principal Interest Swap, Net Required 2011 $ 4,425,000 $ 2,538,865 $ 475,217 $ 7,439,082 2012 4,655,000 2,562,051 436,058 7,653,109 2013 4,885,000 2,323,106 394,853 7,602,959 2014 5,140,000 2,066,071 351,598 7,557,669 2015 2,275,000 1,801,774 306,135 4,382,909 2016-2020 13,320,000 7,113,995 1,207,137 21,641,132 2021-2025 8,425,000 4,125,753 702,891 13,253,644 2026-2030 10,770,000 1,732,488 296,987 12,799,475 Total $ 53,895,000 $ 24,264,103 $ 4,170,876 $ 82,329,979 NOTE 7 PRIOR YEAR DEFEASED DEBT AND LONG-TERM REFUNDING Prior year defeased debt In prior years, the City defeased certain revenue bonds by placing the proceeds of the new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liabilities for the defeased bonds are not included in the City s financial statements. On September 30, 2010, $11,935,000 of bonds and notes outstanding were considered defeased. Governmental-Type Activities Revenue Bonds Improvement Series 1982-1 $ 4,100,000 Improvement Series 2001A 7,835,000 Total Governmental-Type Activities $ 11,935,000 Current Refunding On November 3, 2009, the City issued its City of Fort Myers, Florida Variable Rate Utility System Refunding Revenue Bonds, Series 2009, in the amount of $53,895,000, bearing a variable interest rate. Interest will be calculated in a Weekly Mode and paid on a monthly basis. The bonds were issued to provide sufficient funds to (i) currently refund the City s outstanding Utility System Refunding Revenue Bonds, Series 1999A and (ii) to pay certain costs and expenses relating to the issuance of the Series 2009 Bonds. This obligation is expected to be repaid over a period of 19.92 years at an assumed interest rate of approximately 5.179% plus the variable interest rate calculated in the Weekly Mode. As a result, the liability for the refunded bonds was removed from the business-type activities column of the statement of net assets. The issuance provided net proceeds of $59,934,432, which is inclusive of i) underwriter s discounts and costs of issuance totaling $517,950, and ii) deposits to reserve funds totaling $4,906,752. As a result of the refunding, an economic loss (the difference between the net present values of the old and new debt payments) of $2,030,923 was experienced. 73

Notes to the Financial Statements, continued September 30, 2010 NOTE 8 REDEVELOPMENT TRUST FUND Pursuant to Florida Statue 163.387, the schedule below provides a summary of the sources and amounts of deposits into, and the amount and purpose of withdrawals from, the Redevelopment Trust Fund (Community Redevelopment Agency Fund) for the fiscal year ended September 30, 2010. Deposits Withdrawals Sources of deposits: Tax increment revenue $ 5,267,427 $ - Charges for services 25,730 - Operating contributions 133,823 - Interest and investment income 63,437 - Grant: FDCA Waterfronts FCP Program 37,141 - Miscellaneous 2,642 - Purpose of withdrawals: Personal services - 953,550 Professional services - 586,369 Contract services - 114,572 Utilities - 97,280 Rentals and leases - 137,147 ITS service charges and capital recovery - 65,600 Insurance - 27,000 Repairs and maintenance - 81,024 Printing and binding - 7,085 Advertising - 56,769 Public relations - 26,715 Public relations, special events - 164,352 Tax increment rebates - 1,770,660 Taxes and assessments - 6,885 General administrative expense - 189,200 Office supplies - 9,878 Travel and transportation - 5,592 Freight and postage - 1,956 Dues and subscriptions - 2,598 Debt service, principal payments - 553,407 Debt service, interest payments - 151,966 Debt service, bond issue cost - 356,087 Subsidy for Police department - 354,500 Funding for capital projects and road improvements - 173,726 Totals $ 5,530,200 $ 5,893,918 74

Notes to the Financial Statements, continued September 30, 2010 NOTE 9 INTERFUND RECEIVABLES, PAYABLES AND ADVANCES The composition of interfund balances as of September 30, 2010 is as follows: 1. Due to/from other funds (balances expected to be repaid within one year): Receivable Fund Payable Fund Amount General Fund Carillon Woods Agency $ 20 Nonmajor Enterprise Funds 18,327 Nonmajor Governmental Funds 635,789 Internal Service Funds 146,733 Total due to General Fund $ 800,869 The amount for the General Fund receivable that is payable by the Carillon Woods Agency represents lien releases filed by the City on behalf of the Carillon Woods Special Assessment District. The General Fund receivables due from the Nonmajor Enterprise Funds, Nonmajor Governmental Funds and Internal Service Funds relates to interim end of year funding. 2. Advances to/from other funds (balances not expected to be repaid within one year): Receivable Fund Payable Fund Amount General Fund Nonmajor Governmental Funds $ 617,000 Internal Service Funds 200,000 Total due to General Fund $ 817,000 Nonmajor Governmental Funds Nonmajor Governmental Funds $ 200,000 Nonmajor Enterprise Funds Nonmajor Enterprise Funds 23,000 The amounts due to all of the funds represent the non-current portion of advances made to the payable funds. The General Fund receivable due from Nonmajor Governmental Funds is comprised of advances to the Dr. Martin Luther King, Jr. Boulevard Redevelopment and Cleveland Avenue Redevelopment TIF Districts. The General Fund receivable due from Internal Service Funds is comprised of advances to the Public Works Warehouse. The Nonmajor Governmental Funds receivable and payable is an intrafund advance to the Fort Myers Redevelopment Agency by the Cleveland Avenue Redevelopment TIF District. The Nonmajor Enterprise Funds receivable and payable is an intrafund advance to the Harborside Event Center by the Downtown Parking Garages fund. 75

Notes to the Financial Statements, continued September 30, 2010 NOTE 10 INTERFUND TRANSFERS Transfers In: Revenue Transportation General Capital General Fund Bond and Notes Capital Projects Projects Transfers Out: General Fund (1) $ - $ 10,738,766 $ 429,425 $ 134,182 Revenue Bonds and Notes (2) - - - 59,628 Transportation Capital Projects (3) - 1,708,000 - - General Capital Projects Funds (3) 256 59,628 1,063,669 - Nonmajor Governmental Funds (4) 654,501 398,942-501,227 Water-Wastewater (5) 5,218,000 - - - Solid Waste (5) 4,375,000 - - - Internal Service (6) 4,051,700 68,507 5,567 24,617 Nonmajor Business-type (7) 147,791 155,157-142 Total Transfers $ 14,447,248 $ 13,129,000 $ 1,498,661 $ 719,796 Transfers In: Nonmajor Water- Nonmajor Total Governmental Wastewater Business-type Transfers Transfers Out: General Fund (1) $ 5,802,056 $ 72,717 $ 2,314,600 $ 19,491,746 Revenue Bonds and Notes (2) - - - 59,628 Transportation Capital Projects (3) - - 91,407 1,799,407 General Capital Projects Funds (3) - - 495,772 1,619,325 Nonmajor Governmental Funds (4) - - 8,846 1,563,516 Water-Wastewater (5) - - - 5,218,000 Solid Waste (5) - - - 4,375,000 Internal Service (6) - - - 4,150,391 Nonmajor Business-type (7) - - 2,149,298 2,452,388 Total Transfers $ 5,802,056 $ 72,717 $ 5,059,923 $ 40,729,401 (1) Transfers from the General Fund were used to fund debt service needs, capital improvements and grant matching. Transfers to Revenue Bonds and Notes include $9,339,322 for General Parity sinking fund deposits. The transfers to the Nonmajor Governmental Funds include $3,441,668 for tax increment funding and $1,528,600 to subsidize the Facilities Management fund. Transfers to the Nonmajor Business-type funds relate to subsidies for the new Department of Cultural & Historical Affairs enterprise fund, Yacht Basin, Harborside Event Center, and Skatium. (2) The transfer from the Revenue Bonds and Notes Fund was used for capital improvements. (3) Transfers from the two major Capital Projects Funds were used for funding debt service and capital projects. (4) Transfers from Nonmajor Governmental Funds funded debt service, capital project needs and contributed to General Fund operations. Transfers to Nonmajor Business-type funds relate to the transfer of funds to reimburse the Parking Garage fund for the construction of the Pavese parking lot. (5) Transfers from the Water-Wastewater Utility Fund and Solid Waste Fund were used to contribute to General Fund operations. (6) Transfers from the Internal Service Fund were used to contribute to General Fund operations and to fund debt service and capital projects needs. (7) Transfers from the Nonmajor Business-type funds were used to contribute to General Fund operations and to fund debt service and capital project needs. Transfers between the Nonmajor Business-type funds were used to create the new Department of Cultural & Historical Affairs enterprise fund. 76

Notes to the Financial Statements, continued September 30, 2010 NOTE 11 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budget Annual budgets are legally adopted for the General Fund, Debt Service Funds, Enterprise Funds, Internal Service Funds, Trust and Agency Funds and certain Special Revenue Funds. The adoption of the annual budget also includes Capital Project Funds for the respective year along with approval of the five-year Capital Improvement Program. Reports that compare the budget to actual results for the major operating funds of the city are prepared and presented to the City Council on a quarterly basis to ensure control through fund management. Budgets of all fund types are prepared on a modified accrual basis. This means that revenues are recognized when they become measurable and available and expenditures are recognized when they are incurred. The same is true for the basis of accounting with the exception of proprietary funds, which are converted at year end to the full accrual basis. Therefore, presentation of budget versus actual results contained in the Budgetary Comparison Schedules, are only provided for governmental funds. All encumbrances lapse at fiscal year end and, if necessary, are encumbered again in the following year. Supplemental appropriations made during the fiscal year are included in the Final Budget columns on the Budgetary Comparison Schedules and are explained as follows: General Fund appropriations increased by $3,228,576 with funding coming from reserves. Of this amount, $2,705,266 is attributable to re-appropriated funds to complete capital improvement projects that were approved in prior fiscal years, as the fiscal year 2010 original budget included only new funding for projects. There was also $523,310 in other re-appropriated funds for items that were unable to be completed in fiscal year 2009 that includes the following: $24,550 for construction of the Lee Memorial bus shelter, $3,470 related to moving expenditures for the Assistant City Manager position, $2,051 for Bulletproof Vest Grant funds, and $493,239 for carried over encumbrances on purchase orders. General Fund appropriations increased $765,830 and $604,666, respectively, for Fire and Police pension plan payments funded with the Fire and Police Insurance Premium Taxes. General Fund appropriations increased $150,519 for various studies and reviews by outside consultants. These studies and reviews are paid by various developers to help expedite the permitting process. Land Acquisition Fund appropriations increased by $221,607 as a result of the re-appropriation of unspent funds from fiscal year 2009 for capital improvement projects that were not completed. Street Maintenance Fund appropriations increased by $159,623 as a result of the re-appropriation of unspent funds from fiscal year 2009 to complete improvements to the Pavese Law Firm parking lot. Public Art Fund appropriations increased by $250,000 as a result of the re-appropriation of unspent funds from fiscal year 2009 for capital improvement projects that were not completed. Law Enforcement Equipment Fund appropriations increased by $147,700 with funding coming from reserves to accommodate the purchase of ten police pursuit vehicles. Facilities Management and Construction Fund appropriations increased by $313,882 as a result of re-appropriated, unspent funds from fiscal year 2009 to accommodate facility special projects and building repairs in the amount of $304,382 and professional services in the amount of $9,500. 77

Notes to the Financial Statements, continued September 30, 2010 NOTE 11 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued) FEMA Grant Fund Hurricane Charley appropriations increased in total by $572,164, of which $500,180 was funded with reserves as a result of the re-appropriation of unspent funds in the amount of $479,333 from fiscal year 2009 for capital improvement projects that were not completed. The remaining reserves in the amount of $20,847, along with funds provided by Wilma in the amount of $34,254 and Tropical Storm Fay in the amount of $37,730 were used for payment of grant close-out adjustments. Expenditures may not exceed appropriations at a department level, except for the Community Redevelopment Agency, which uses the fund level as their budgetary control. The City Manager, the Director of Finance and the Budget Manager have the authority to approve the transfer (reclassification of funds) of funds within a department, within a fund. Transfers that are greater than $50,000 are presented to Council on a quarterly basis following their implementation. Transfers that are less than $50,000 are not presented to Council unless the cumulative total reaches $50,000 in any department and are then reported on a quarterly basis as well. In most cases, divisions are required to transfer funds only to meet unanticipated needs or to reflect organizational changes. Budgetary control during the year is maintained on a department basis, within a fund, and not a line item basis. Whereas the adopted budget is meant to control and provide for the efficient and economical running of the City, amendments (increases or decreases in appropriations and/or revenue estimates) to a budget may be required during the year to properly account for unanticipated needs or opportunities. Budget amendments in the amount of $50,000 or less (excluding use of reserves and changes to capital projects) require the approval of the City Manager and the Director of Finance, or their designees. All such amendments are presented to City Council on a quarterly basis following their implementation. All amendments to appropriations greater than $50,000, any adjustments to reserves, and/or adjustments to capital projects require City Council approval prior to implementation into the adopted budget. The City follows the following procedures in establishing the legally adopted budget: During the fourth quarter of the fiscal year, the City Manager submits to City Council a proposed budget for the fiscal year commencing the following October 1. The budget includes proposed expenditures and the means of financing them. Public hearings are conducted in the month of September to obtain taxpayer comments. On or before September 30 th, the budget is legally enacted by City Council through passage of an ordinance and a resolution setting the millage and fixing the budget appropriations as required by the State of Florida. 78

Notes to the Financial Statements, continued September 30, 2010 NOTE 12 RESERVED AND DESIGNATED FUND BALANCES The following are reserved and designated fund balances as of September 30, 2010: General Fund Revenue Bonds and Notes Transportation Capital Projects Funds General Capital Projects Funds Major Funds Reserved for: Prepaid expenditures $ 54,958 $ - $ - $ - Advances to other funds 817,000 - - - Notes receivable 400,000 - - - Debt service - 7,135,436 - - Capital projects - - 63,074,304 24,170,771 Total Reserved $ 1,271,958 $ 7,135,436 $ 63,074,304 $ 24,170,771 Unreserved, Designated for: Appropriations for Capital Projects $ 3,222,031 $ - $ 32,000 $ - Fiscal Year 2011 Budget Support 4,627,642 - - - Total Unreserved, Designated $ 7,849,673 $ - $ 32,000 $ - Special Revenue Funds Permanent Funds Nonmajor Funds Fiduciary Funds Reserved for: General government - Land Acquisition $ 2,691 $ - - Economic environment - Attainable Workforce Housing 540,000 - - Community Redevelopment Agency 512,102 - - Public safety - Ned Foulds Police Award - 2,000 - General Employees' Pension Plan - - 64,597,608 Police Officers' Retirement System - - 57,452,475 Municipal Firefighters' Pension Trust Fund - - 41,564,385 Total Reserved $ 1,054,793 $ 2,000 $ 163,614,468 Unreserved, Designated for: General government - FEMA Disaster Grant $ 45,408 $ - $ - Land Acquisition 976,600 - - Facilities Management 97,930 - - Physical environment - Cemetery Maintenance 899,160 - - Beautification 106,897 - - Patrons of Palms 18,292 - - Public safety - Winkler Safe Neighborhood 431,700 - - Law Enforcement Equipment 232,630 - - Transportation - Street Maintenance 200,000 - - Economic environment - Community Redevelopment Agency 2,036,587 - - Culture and Recreation - Public Art 1,000 - - Total Unreserved, Designated $ 5,046,204 $ - $ - 79

Notes to the Financial Statements, continued September 30, 2010 NOTE 13 SELF-INSURANCE PROGRAM The City has purchased commercial insurance to cover property damage. This coverage provides a loss limit of $10,000,000 all risk property coverage; $10,000,000 additional all risk with wind damage excluded; $2,691,100 EDP/Fine Arts and Miscellaneous Equipment coverage, and $10,126,300 flood insurance with $2,555,400 coverage for personal property. The City has also purchased commercial excess coverage for workers compensation, which covers claims greater than $400,000 and less than $1,000,000 for each occurrence. For workers compensation claims less than $400,000 and greater than $1,000,000 per occurrence, the City is self-insured. Additional coverage includes EMT Liability, Law Enforcement Liability, Public Officials Liability, Excess Auto Liability, Crime/Employee Dishonesty, and Statutory Death. The City of Fort Myers provides all eligible employees a group medical plan and group term life coverage equal to one times the annual salary rounded to the next higher thousand. In addition, the City makes a defined contribution of $200 per month per employee or will pay 70% of the dependent medical coverage. The defined contribution may be applied to the cost of dependent medical, or; applied to the cost of any optional employee benefit, or; taken as taxable income. The City is self-insured for general liability risk in the amount of $100,000 per individual and $200,000 per occurrence in accordance with Section 768.28, Florida Statutes. The City has purchased commercial excess coverage for general liability up to $2,000,000 per occurrence, $6,000,000 per aggregate for claims which may exceed statutory limits. Premiums are charged by the City s Risk Management Internal Service Fund to various City departments and are available to pay claims, claim reserves and administrative costs of the program. Settlements have not exceeded insurance coverage for the past seventeen years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claim liabilities are actuarially calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payouts, and other economic and social factors, utilizing a 4% discount. The unpaid claim estimates and funding recommendations were developed by the actuary using the following methodology: 1. Estimate ultimate losses for all past fiscal accident periods and prospective fiscal accident periods by coverage, net of specific excess reinsurance, based on various actuarial projection methods. 2. Subtract cumulative paid losses from our ultimate loss estimates by accident period to determine the estimated reserves, net of specific excess coverage, as of September 30, 2010. 3. Determine funding recommendations by discounting both the estimated reserve by accident period and the prospective year estimated ultimate loss estimates to reflect investment income, and then adding a margin for adverse deviation. The liability for the claims and judgments are reported as self-insurance claims payable in the Risk Management Internal Service Fund. Activity in the balances of claims liabilities for the years ending September 30, 2010 and 2009 are as follows: 2010 2009 Unpaid claims, beginning of fiscal year $ 4,498,847 $ 4,434,217 Incurred claims (including IBNRs) 2,292,634 2,373,118 Claim payments (2,001,202 ) (2,308,488 ) Unpaid claims, end of fiscal year $ 4,790,279 $ 4,498,847 80

Notes to the Financial Statements, continued September 30, 2010 NOTE 14 COMMITMENTS AND CONTINGENCIES Litigation, Claims and Assessments There are several pending claims and lawsuits arising from the normal course of business in which the City is involved. Estimated liabilities related to most unsettled claims have been accrued under the City s selfinsurance program, and management believes the self-insurance reserves recorded in the Risk Management Fund are adequate to cover losses for which the City may be liable. Although the outcome of these lawsuits and pending claims are not presently determinable, the City s attorneys are not aware of any such claims against the City that would have a material effect on the basic financial statements or the adequacy of the appropriate reserves on deposit in the Risk Management Fund. Construction Contracts The Water Wastewater Utility Fund had outstanding commitments of uncompleted construction contracts totaling $8,545,477. These projects relate primarily to the manhole and pipeline rehabilitation and the utility lines associated with the widening of State Road 82. Funding for these projects is mostly from revenue bond proceeds and pay-as-you-go. Other nonmajor enterprise funds had construction contract commitments totaling $264,198, primarily for the construction of stormwater collection and drainage systems. The Transportation Capital Projects Fund had outstanding commitments of $18,225,136, consisting mostly of State Road 82 widening project and engineering design costs for the Hanson Street Extension. The funding for State Road 82 is provided by state contributions and the funding for Hanson Street Extension/Cocos-Ortiz Avenue Road is from Impact Fees. Other nonmajor governmental-type funds had commitments outstanding of $984,857, mainly for the design of a new fire station. Defeased Debt At various dates in prior years, the City has placed proceeds from refunding bond issues and City cash contributions in irrevocable refunding escrow accounts. The monies deposited in the escrow accounts are invested in obligations that, together with interest earned thereon, should provide amounts sufficient for payment of all principal and interest on the refunded bond issues on each remaining payment date. The likelihood of the earnings and principal maturities of the investment obligations not being sufficient to pay the refunded bond issues appears remote. Accordingly, the escrow accounts and the refunded bonds are not included in the City s balance sheet at September 30, 2010. Outstanding balances of the refunded bond issues are presented in Note 7. Grants The City has received numerous federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to a request for reimbursements by the grantor agency if any expenditures are disallowed under the terms of the grant. City management believes disallowances, if any, will not be material. Road, Water, Wastewater and Fire Impact Fees Credits The City offers road, water and wastewater and fire impact fee credits to developers who construct or provide certain infrastructure improvements. Credits may be earned in special assessment districts, which are financed by the City, and residential and commercial projects. The credits may be used to offset future impact fees and have a standard life of ten years from date of issuance, unless a longer period is specifically authorized by City Council. The developer who earned them may use the credits or the credits may be transferred to another party under certain circumstances. If the credits are not used within the authorized timeframe, they will expire. Chapter 122, Land Development Code allows the City to create water and sewer impact fee credits for capital improvements of utility mains. The credits are created when the construction is completed and accepted by the City for maintenance. The road impact fee credits include credits for land dedicated to the 81

Notes to the Financial Statements, continued September 30, 2010 NOTE 14 COMMITMENTS AND CONTINGENCIES (continued) City. The City also participates with the Lee County Road Impact Fee Ordinance through an interlocal agreement. The Lee County Road Impact Fee Ordinance allows for the issuance of impact fee credits for land dedication for approved roads shown on the City s transportation element of the Capital Improvement Program. As of September 30, 2010, there was approximately $33,992,511 of total impact fee credits earned and outstanding. Available Earned Water $ 185,070 $ 185,070 Sewer 161,353 161,353 Road 33,134,435 33,134,435 Fire 511,653 511,653 Total $ 33,992,511 $ 33,992,511 NOTE 15 RELATED ORGANIZATION TRANSACTIONS The Housing Authority of the City of Fort Myers is considered a related organization. A related organization is one for which the primary government (The City of Fort Myers appoints a voting majority of the board but does not exercise financial control) is not financially accountable. During the fiscal year that ended September 30, 2010, the City received $88,409 from the Housing Authority for providing additional police protection. NOTE 16 EMPLOYEE RETIREMENT PLANS Plan Descriptions and Contribution Information: The City maintains three separate single-employer plans: one for the police officers, one for the firefighters and one for the general employees that covers substantially all other full-time City employees. These plans are defined benefit plans and are maintained as pension trust funds and included as part of the City s reporting entity. City ordinance and state law require contributions be determined by actuarial studies at least every three years. Stand-alone financial reports are not issued. Membership in each plan consisted of the following on October 1, 2010, the date of the latest actuarial valuation. General Employees Pension Plan Police Officers Retirement System Municipal Firefighters Pension Trust Fund Retiree and beneficiaries receiving benefits 419 124 81 Terminated plan members entitled to but not yet receiving benefits 228 14 10 DROP plan members entitled to but not yet receiving benefits 18 2 1 Active plan members 548 167 106 Total 1,213 307 198 82

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 EMPLOYEE RETIREMENT PLANS (continued) General Employees Pension Plan Plan Description: The General Employees Pension Plan (GEPP) provides retirement, disability and death benefits to plan members and their beneficiaries. The City Council has the authority to establish and amend the benefit provisions of the plan. Contributions: Contribution requirements are established by the City Code Section 62-185. This section may be amended by the City Council. Members of the plan are required to contribute the following percentages of their annual covered salary: Tier 1 3.1%; Tier 2 6.6%; Tier 3 8.5%; and Tier 4 12.8%. The City is required to contribute at actuarially determined amounts. Administrative costs of the GEPP are financed through plan contributions and investment earnings. Funded Status and Funding Progress: As of October 1, 2010, the most recent actuarial valuation date, the plan was 51.24 percent funded. The actuarial accrued liability for benefits was $137,465,641 and the actuarial value of assets was $70,436,426, resulting in an unfunded actuarial accrued liability (UAAL) of $67,029,215. The covered payroll (annual payroll of active employees) was $25,753,922, and the ratio of the UAAL to the covered payroll was 260.27 percent. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Police Officers Retirement System Plan Description: The Police Officers Retirement System (PORS) provides retirement, disability, death benefits and cost of living adjustments to plan members and their beneficiaries. The City Council has the authority to establish and amend the benefit provisions of the plan. There were three changes in actuarial assumptions approved by the Plan s Board of Trustees in September 2010: 1) The final salary load was increased from 20% to 30%; 2) An update of the assumed mortality rates using the RP2000 Table which replaced the 1983 Group Annuity Mortality table; and 3) The turnover assumption has been revised to reflect the heavier turnover for members under 24 and over 40. Contributions: Contribution requirements are established by City Code Section 62-75. This section may be amended by the City Council. Members of the plan are required to contribute 10% of their annual covered salary. The city is required to contribute at actuarially determined rates less amounts received from the State of Florida for insurance surcharges on policies sold within the City. The State s contribution to the PORS for fiscal year 2010 was $604,665. The City recognizes these on-behalf payments as revenues and expenditures in the governmental funds financial statements. Funded Status and Funding Progress: As of October 1, 2010, the most recent actuarial valuation date, the plan was 49.04 percent funded. The actuarial accrued liability for benefits was $128,492,914 and the actuarial value of assets was $63,010,078, resulting in an unfunded actuarial accrued liability (UAAL) of $65,482,836. The covered payroll (annual payroll of active employees) was $11,433,914, and the ratio of the UAAL to the covered payroll was 572.71 percent. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. 83

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 EMPLOYEE RETIREMENT PLANS (continued) Municipal Firefighter s Pension Trust Fund Plan Description: The Municipal Firefighters Pension Trust Fund (MFPTF) provides retirement, disability, death benefits and cost of living adjustments to plan members and their beneficiaries. The City Council has the authority to establish and amend the benefit provisions of the plan. There were three changes in actuarial assumptions approved by the Plan s Board of Trustees in September 2010: 1) The final salary load was increased from 20% to 30%; 2) An update of the assumed mortality rates using the RP2000 Table which replaced the 1983 Group Annuity Mortality table; and 3) The retirement assumption has been revised to be the earlier of age 53 or 26 years of service. Contributions: Contribution requirements are established by City Code Section 62-135. This section may be amended by the City Council. Members of the plan are required to contribute 8% of their annual covered salary. The City is required to contribute at actuarially determined rates less amounts received from the State of Florida for insurance surcharges on policies sold within the City. The State s contribution to the MFPTF for fiscal year 2010 was $765,829. The City recognizes these on-behalf payments as revenues and expenditures in the governmental funds financial statements. Funded Status and Funding Progress: As of October 1, 2010, the most recent actuarial valuation date, the plan was 51.50 percent funded. The actuarial accrued liability for benefits was $84,336.612 and the actuarial value of assets was $43,429,828, resulting in an unfunded actuarial accrued liability (UAAL) of $40,906,784. The covered payroll (annual payroll of active employees) was $7,230,421, and the ratio of the UAAL to the covered payroll was 565.76 percent. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. Annual Pension Costs and Net Pension Obligations: The City has no net pension obligations as all actuarially determined amounts are contributed each year or shortly thereafter. The City s annual pension costs for the fiscal year ended September 30, 2010 were $6,148,648 for GEPP, $7,500,168 for PORS and $4,678,884 for MFPTF. Other Information The annual required contribution for the current year, for each plan, was determined as part of the most recent actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions include the following: (a) 8.4% rate of return on investment and 6% projected salary increase, which includes 5% inflation, for GEPP, (b) 8.5% rate of return on investment and 6% projected salary increase, which includes 3% inflation, for PORS and (c) 8.5% rate of return on investments and 7% projected salary increase, which includes 3% inflation, for MFPTF. Effective October 1, 2008, the actuarial value of assets for all three plans is determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four year period. Likewise, the unfunded actuarial accrued liability (UAAL) for all three plans will be amortized using the level percentage of the pay-closed method with various components of the UAAL being amortized over remaining periods that vary from one to thirty years. 84

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 EMPLOYEE RETIREMENT PLANS (continued) Retirement Plan for City Officials Not Eligible for Current Defined Benefit Plan Plan Description: On May 7, 2007, City Council passed Resolution No. 2007-26, which authorized the establishment of a governmental money purchase plan and trust for City employees. On June 5, 2007, the City adopted the City of Fort Myers 401(a) Plan for employees who are not eligible for the City s defined benefit plans. The City shall contribute 12% of earnings for the plan year and the employee is required to contribute 3% of their earnings. In addition, on December 28, 2008, the City entered into an employment contract with the Chief of Police, whereby the City contributes 15.3% of his salary to an IRC Section 457 Deferred Compensation Plan. The deferred compensation amounts are not available for withdrawal by employees until termination, retirement, death or unforeseeable emergency. The plan is administered by an unrelated financial institution on behalf of the City. Contributions: Contribution requirements for the City Manager are determined by the employment agreement. Currently, the City will provide a retirement benefit equal to 15.3% of salary. No employee contribution or vesting period is required. As of September 30, 2010, the City Manager and one Council member were the only participants in the 401(a) Plan and the 2010 contributions totaled $25,813. For the Section 457 Plan, the 2010 contributions totaled $32,833. Three-Year Trend Information Fiscal Year Ending Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation GEPP 09/30/08 $ 4,556,016 100% $ - 09/30/09 5,568,800 100-09/30/10 6,148,648 100 - PORS 1 09/30/08 3,172,079 100-09/30/09 5,297,500 100-09/30/10 7,500,167 100 - MFPTF 1 09/30/08 2,864,882 100-09/30/09 3,798,438 100-09/30/10 4,678,884 100-1 Figures for PORS and MFPTF include applicable premium tax refunds from the State of Florida that were passed through the City to the respective trust funds. 85

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 EMPLOYEE RETIREMENT PLANS (continued) The information presented in the required supplementary schedules was determined as a part of the actuarial valuations at the dates indicated. General Employees' Police Officers' Municipal Firefighters Pension Plan Retirement System Pension Trust Fund Valuation date 10/01/08 10/01/09 10/01/09 Actuarial cost method Entry Age Normal Entry Age Normal Entry Age Normal Amortization method Level percent of Level percent of Level percent of pay, closed pay, closed pay, closed Remaining amortization period 27 27 27 Asset valuation method 4 years smooth 4 years smooth 4 years smooth of market value of market value of market value Actuarial assumptions: Investment rate of return net of investment related expenses 8.4% 8.5% 8.5% Projected salary increase * 6.0% 6.0% 7.0% * Includes inflation at 5.0% 3.0% 3.0% Cost-of-living adjustment Rate at age 60 2.5% ** 3.0% 3.0% ** COLA s for Tier 3 & Tier 4 members only 86

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 - EMPLOYEE RETIREMENT PLANS (continued) Statement of Net Assets - Pension Trust Funds General Employees' Police Officers' Retirement System Municipal Firefighters' Pension Pension Plan Trust Fund Total ASSETS Cash and cash equivalents $ 3,288,003 $ 2,020,569 $ 982,148 $ 6,290,720 Receivables Employer 1,606,443 6,895,502 4,267,218 12,769,163 Interest and dividends 187,973 214,122 121,099 523,194 Total receivables 1,794,416 7,109,624 4,388,317 13,292,357 Investments, at fair value U.S. government agency securities 6,742,656 130,363 95,907 6,968,926 Municipal bonds 1,850,111 - - 1,850,111 Corporate stock 24,227,641 21,275,465 13,299,282 58,802,388 Corporate bonds 4,990,719 9,291,017 6,854,283 21,136,019 Mortgage backed securities 7,702,141 6,372,305 138,875 14,213,321 Asset backed securities 1,054,793-1,690,949 2,745,742 Mutual funds: Fixed income 2,338,765 - - 2,338,765 Equity - 8,240,723 9,158,835 17,399,558 Real estate - - 1,390,451 1,390,451 International equity 7,625,299 3,012,411 3,565,341 14,203,051 Private placements 609,604 - - 609,604 Real estate investment trusts 75,000 - - 75,000 International securities: Bonds and notes 545,910 - - 545,910 Stocks 1,790,351 - - 1,790,351 Total investments 59,552,990 48,322,284 36,193,923 144,069,197 Total assets 64,635,409 57,452,477 41,564,388 163,652,274 LIABILITIES Accrued and other liabilities 37,801 - - 37,801 Total liabilities 37,801 - - 37,801 NET ASSETS Held in trust for pension benefits $ 64,597,608 $ 57,452,477 $ 41,564,388 $ 163,614,473 (A schedule of funding progress for each pension plan is presented on page 95.) 87

Notes to the Financial Statements, continued September 30, 2010 NOTE 16 - EMPLOYEE RETIREMENT PLANS (continued) Statement of Changes in Fiduciary Net Assets-Pension Trust Funds General Employees' Pension Plan Police Officers' Retirement System Municipal Firefighters' Pension Trust Fund Total ADDITIONS Contributions Employer $ 6,148,648 $ 6,895,502 $ 4,267,218 $ 17,311,368 State of Florida - 604,665 765,829 1,370,494 Plan members 1,298,872 1,159,026 627,352 3,085,250 Total contributions 7,447,520 8,659,193 5,660,399 21,767,112 Investment income Net appreciation (depreciation) in fair value of investments 4,059,670 2,846,805 2,551,803 9,458,278 Interest and dividends 1,368,382 1,347,094 913,004 3,628,480 Total investment gains (losses) 5,428,052 4,193,899 3,464,807 13,086,758 Less: Investment expenses 317,923 216,259 214,633 748,815 Net investment gains (losses) 5,110,129 3,977,640 3,250,174 12,337,943 Miscellaneous revenue 91,615 20,143 16,828 128,586 Total increases (decreases) 12,649,264 12,656,976 8,927,401 34,233,641 DEDUCTIONS Benefits paid 6,255,391 7,049,891 3,795,462 17,100,744 Administrative expenses 83,217 62,900 60,061 206,178 Total deductions 6,338,608 7,112,791 3,855,523 17,306,922 Change in net assets 6,310,656 5,544,185 5,071,878 16,926,719 NET ASSETS Held in trust for pension benefits Beginning of year 58,286,952 51,908,292 36,492,510 146,687,754 End of year $ 64,597,608 $ 57,452,477 $ 41,564,388 $ 163,614,473 NOTE 17 - DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Service ( IRS ) Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or the hardship distribution criteria as defined in IRS Code Section 457. Because the assets of the plan are held in trust and are the sole property of the participants, no balances or financial information relative to the plan is reported in the basic financial statements. 88

Notes to the Financial Statements, continued September 30, 2010 NOTE 18 SPECIAL ASSESSMENT DEBT WITH NO GOVERNMENTAL COMMITMENT On May 27, 1994, the City issued a bond in the amount of $2,630,000 to finance the Special Assessment Geographical Area No. 35, Carillon Woods Drainage Project. This bond was to be repaid solely by special assessments levied against the property owners benefiting from the project. The bond documents contained a covenant that the City would appropriate, if necessary, legally available non-ad valorem revenues to replenish deficiencies in the Debt Service Fund or the reserve fund until the project was completed. Upon completion of the project, the bond resolution provides for the release of this covenant. In September 2000, the bondholder, a local financial institution, released the City from this covenant. At that point, the City s only obligations were, and are, to invoice property owners, collect the payments of the special assessment levies (including initiating and prosecuting foreclosure action, if necessary) and remit the amounts collected to the bondholder. The City has no other obligations in this matter. Accordingly, the City has removed the debt from its books, and accounts for the collection of the assessment levies and the payment to the bondholder in an agency fund. The amount of the debt removed from the City s accounts was $879,506. The balance of the bond outstanding at September 30, 2010 is $242,747. NOTE 19 SUBSEQUENT EVENTS The City had no subsequent events to disclose for fiscal year 2010. NOTE 20 CONSTRUCTION PROJECT INTEREST COSTS In accordance with Statement of Financial Accounting Standards (SFAS) No. 34, Capitalization of Interest Cost, and No. 62, Capitalization of Interest Costs in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants, the City capitalizes construction in progress interest costs in the Water- Wastewater, Solid Waste, and Yacht Basin fund. For fiscal year ended September 30, 2010, total interest expense was $12,208,300, of which $1,981,793 was capitalized. Capitalized interest for the Water- Wastewater fund totaled $1,891,475, and the Yacht Basin Fund capitalized $90,318 in interest. NOTE 21 OTHER POSTEMPLOYMENT BENEFITS In addition to providing pension benefits, the City has a single-employer healthcare plan that allows retirees to purchase health, life, vision and dental benefits at the same rate as active employees, in accordance with state statutes. To be eligible for this benefit, the employee must retire from the City, have no break between his/her active employment and retirement, and be collecting pension benefits from one of the City s three pension plans. The retirees pay all premiums for the coverage elected. In order to comply with the requirements of GASB 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, the City contracted with a certified actuarial firm to provide an actuarial valuation of postemployment benefits. The postemployment health insurance benefits will continue to be offered on a pay-as-you-go basis with the same premium subsidy rates that active employees receive. As required by the State of Florida Statute 112.0801(1), the claims experience of the retirees is comingled with that of active employees in determining the health plan cost. In accordance with GASB 45, the co-mingling of claims requirement equates to an implicit subsidy to retirees that creates an OPEB liability on the part of the City. Therefore, the City has incurred a liability for the implicit rate subsidy as the City implemented GASB 45. The City does not intend to fund the actuarial accrued liability. 89

Notes to the Financial Statements, continued September 30, 2010 NOTE 21 OTHER POSTEMPLOYMENT BENEFITS (continued) The City s annual other postemployment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB 45. The calculation produced an unfunded obligation of $5,883,384 and an ARC as 6.47% of average projected payroll. The following table shows the components of the City s OPEB cost for the year, the amount contributed to the plan, and changes in the City s net OPEB obligation: Annual required contribution (ARC) $ 2,589,458 Interest on net OPEB obligation 205,766 Adjustment to ARC (254,960)) Annual OPEB cost 2,540,264 Contributions made (772,204)) Increase in net OPEB obligation 1,768,060 Net OPEB obligation-beginning of year 4,115,324 Net OPEB obligation-end of year $ 5,883,384 The City s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the year are as follows: Year Ending Annual OPEB Cost Percentage of OPEB Cost Contributed Net OPEB Obligation 09/30/08 $ 3,142,380 24.2% $ 2,381,211 09/30/09 2,448,313 29.2% 4,115,324 09/30/10 2,540,264 30.4% 5,883,384 As of October 1, 2008, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $16,271,673, and the actuarial value of assets was zero, resulting in an unfunded actuarial accrued liability (UAAL) of $16,271,673. The covered payroll (annual payroll of active employees) was $40,053,162, and the ratio of the UAAL to the covered payroll was 40.6 percent. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits. A separate, publicly available postemployment benefit plan report is not prepared for the defined benefit plans. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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 with past expectations and new estimates are made about the future. 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 time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. 90

Notes to the Financial Statements, continued September 30, 2010 NOTE 21 OTHER POSTEMPLOYMENT BENEFITS (continued) The information presented in the required supplementary schedule was determined as a part of the actuarial valuation at the date indicated: Valuation date 10/01/2008 Actuarial cost method Unit credit Amortization method Level dollar, closed Remaining amortization period 30 years Asset valuation method Market value Actuarial assumptions: Investment rate 5.0% per year, compounded annually Projected salary increase 0.0% per year Healthcare cost trend 8.0% initially 5.0% ultimately, in 2013 NOTE 22 TERMINATION BENEFITS On July 21, 2008, City Council approved an early out retirement incentive program for members of the General Employees, Police Officers and Firefighters pension plans. Eligible plan members received an additional four (4) years of credited service and/or age and two (2) years health insurance (employee only) or cash equivalent. Eligible employees were given a thirty day window from August 5, 2008 to September 5, 2008, to make an irrevocable election to enter the program. The timeframe for the actual retirement date was August 5, 2008 to December 31, 2008. A total of 372 employees were eligible to participate in the program and 158 employees elected to accept the terms of the buyout. Of the 158 participants in the program, 47 employees elected to receive the health insurance benefit option and 111 employees chose to receive the cash payment. At a current rate of $457 per employee, $1,826 was expensed in September 2008 for those employees that chose to retire in August 2008. A rate of $518 per month per employee was used for all calculations covering the periods after September 30, 2008. This amount was the blended HMO rate that the City paid for each employee under their contract with Blue Cross/Blue Shield of Florida for fiscal year 2009. Based on this rate, a lump sum payment of $12,424 was provided to each participant that chose the cash payment option in their final paycheck. The total cash payout was $1,379,100. The estimated cost for the 47 participants that elected to receive the health insurance benefit option was originally based on a ten percent increase (10%) per year. The estimated cost for 2011, $75,793, was updated with the actual blended HMO rate of $584 that the City will pay per month for each employee under the contract with Blue Cross/Blue Shield of Florida. The actual cost for fiscal year 2011 is $77,419. NOTE 23 ASSETS HELD FOR RESALE Community Redevelopment Agency The asset held for resale in the Community Redevelopment Agency (CRA) fund consists of the McCollum Hall property acquired by the Fort Myers Redevelopment Agency (FMRA) on May 13, 2008 to preserve the existing historical building. The property will then be sold to a private developer for restoration and redevelopment of the building for commercial, entertainment and cultural events. The purchase by the City consisted of an upfront payment of $217,335 and twenty-four monthly payments totaling $165,165 at an interest rate of 6.000%. The carrying value of property held for resale at September 30, 2010 is $512,102, which approximates net realizable value. This amount comprises the purchase of the building in fiscal year 2008, $382,500, plus the purchase of three land parcels in fiscal year 2009, $129,602. The three parcels of land consist of the 91

Notes to the Financial Statements, continued September 30, 2010 NOTE 23 ASSETS HELD FOR RESALE (continued) primary parcel, which supports the McCollum Hall building, and two adjoining vacant lots. The amounts of the assets held for resale are offset by a reservation of fund balance in the CRA fund. Community Development Block Grant The U.S. Department of Housing and Urban Development s (HUD) new Neighborhood Stabilization Program (NSP) provides targeted emergency assistance to state and local governments to acquire and redevelop foreclosed properties that might otherwise become sources of abandonment and blight within their communities. In fiscal year 2009, the City was allocated $2,297,318 of NSP funding, which was provided through HUD s Community Development Block Grant (CDBG) Program under the Housing and Economic Recovery Act of 2008. The City is using the funds to purchase foreclosed houses at a discount and rehabilitate or redevelop them in response to rising foreclosures and falling home values. The City earmarked $1,493,257 to acquire and rehabilitate fifteen residential units for homeownership, and budgeted an additional $300,000 of City monies for demolitions. Of the fifteen units, five units will be available for households with income levels that are at least 51% - 80% of Area Median Income (AMI) and ten units will be available for households with income levels that are 81% - 120% of AMI. In fiscal year 2009, five residential units were purchased for a total of $172,377 and rehabilitated. During fiscal year 2010, the City purchased and rehabilitated seven foreclosed residential units; six units of the total twelve rehabilitations were sold. As of September 30, 2010, six properties remain as assets held for resale for total of $179,590. The City also earmarked $574,329 for the acquisition, rehabilitation, financing, and resale of multi-family rental properties. After the completion of the rehabilitation of these properties, the units will be transferred to local non-for-profit agencies to provide rental assistance to households with incomes less than 50% AMI. During fiscal year 2009, one multi-family rental unit was purchased for $217,872 and rehabilitated. As of September 30, 2010, the unit remains available for purchase. NOTE 24 FUND DEFICIT The Grants Fund had a $357,948 fund balance deficit at September 30, 2010, resulting from expenditures for which related revenue was not recognized because of the timing of reimbursement. The deficit was eliminated subsequent to year-end upon receipt of reimbursement funding. 92

Required Supplementary Information Other than Management s Discussion & Analysis 93

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (GAAP Basis) General Fund For the Year Ended September 30, 2010 Variance with Budgeted Amounts Final Budget - Original Final Actual Amounts Positive/(Negative) REVENUES Taxes $ 48,036,400 $ 49,406,896 $ 49,322,481 $ (84,415) Licenses and permits 8,018,800 8,018,800 7,769,030 (249,770) Intergovernmental revenue 6,015,500 6,015,500 5,696,052 (319,448) Charges for services 1,068,600 1,114,660 1,290,607 175,947 Fines and forfeitures 1,126,000 1,126,000 1,306,392 180,392 Miscellaneous 9,043,045 12,476,994 5,539,988 (6,937,006) Contributions - private source - 6,176 10,043 3,867 Total revenues 73,308,345 78,165,026 70,934,593 (7,230,433) EXPENDITURES Current: General Government - Council - Mayor Pro Tem 7,200 14,771 13,530 1,241 Council - Ward I 77,500 75,800 71,444 4,356 Council - Ward 2 83,300 81,800 77,676 4,124 Council - Ward 3 70,400 66,029 65,243 786 Council - Ward 4 72,900 72,900 66,451 6,449 Council - Ward 5 75,100 75,100 68,589 6,511 Council - Ward 6 83,700 83,700 76,928 6,772 Council - Mayor 210,600 149,300 147,808 1,492 City Manager 699,300 683,770 568,780 114,990 Legal 863,900 948,900 841,067 107,833 City Clerk 1,448,100 1,482,800 1,288,162 194,638 Financial Services 3,373,600 3,336,725 3,184,596 152,129 Human Resources 1,678,600 1,678,600 1,159,864 518,736 Real Estate 440,700 440,700 384,187 56,513 Community Development 976,300 1,032,771 948,720 84,051 Contributions 75,700 75,700 75,486 214 General Contingencies 70,000 188,445-188,445 Insurance 169,200 169,200 169,200 - Total General Government 10,476,100 10,657,011 9,207,731 1,449,280 Public Safety - Police 29,177,502 29,812,715 29,508,987 303,728 Fire 15,675,300 16,421,832 16,048,929 372,903 Protective Inspections 1,940,900 1,951,898 1,805,083 146,815 Total Public Safety 46,793,702 48,186,445 47,362,999 823,446 Transportation - Public Works 491,600 579,589 422,434 157,155 Insurance 8,400 8,400 8,400 - Total Transportation 500,000 587,989 430,834 157,155 Physical Environment - Public Works 6,430,100 6,930,961 5,384,551 1,546,410 Culture and Recreation - Public Works 2,560,800 2,670,164 2,577,675 92,489 Contributions 304,300 314,944 314,931 13 Special Events 116,500 150,987 105,296 45,691 Arts and Culture 215,000 215,000 214,800 200 Total Culture and Recreation 3,196,600 3,351,095 3,212,702 138,393 Total Current 67,396,502 69,713,501 65,598,817 4,114,684 Total expenditures 67,396,502 69,713,501 65,598,817 4,114,684 Excess of revenues over expenditures 5,911,843 8,451,525 5,335,776 (3,115,749) OTHER FINANCING SOURCES (USES) Transfers in 14,407,500 14,407,500 14,447,248 39,748 Transfers out: Debt services transfers out (11,110,100) (10,836,500) (10,738,766) 97,734 Capital funding transfers out (1,350,000) (3,629,315) (563,607) 3,065,708 General transfers out (7,859,243) (8,393,210) (8,189,373) 203,837 Total transfers out (20,319,343) (22,859,025) (19,491,746) 3,367,279 Total other financing sources and uses (5,911,843) (8,451,525) (5,044,498) 3,407,027 Net change in fund balances - - 291,278 291,278 Fund balances - beginning 20,979,031 20,979,031 20,979,031 - Fund balances - ending $ 20,979,031 $ 20,979,031 $ 21,270,309 $ 291,278 94

Employees' Pension Plans Schedule of Funding Progress For the Year Ended September 30, 2010 Actuarial Accrued Unfunded Liability Actuarial UAAL Actuarial (AAL) Accrued Annual as a % of Actuarial Value of Entry Age Liability Funded Covered Covered Valuation Assets Normal (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) City of Fort Myers General Employees' Pension Plan (GEPP) 10/01/10 $ 70,436,426 $ 137,465,641 $ 67,029,215 51.24% $ 25,753,922 260.27% 10/01/09 68,557,608 131,773,409 63,215,801 52.03% 27,501,914 229.86% 10/01/08 67,568,410 125,300,972 57,732,562 53.92% 27,702,349 208.40% 10/01/07 64,986,923 98,169,411 33,182,488 66.20% 29,887,088 111.03% 10/01/06 56,118,295 88,715,825 32,597,530 63.26% 27,860,696 117.00% 10/01/05 48,715,164 75,131,467 26,416,303 64.84% 23,736,481 111.29% City of Fort Myers Police Officers' Retirement System (PORS) 10/01/10 $ 63,010,078 $ 128,492,914 $ 65,482,836 49.04% $ 11,433,914 572.71% 10/01/09 59,939,152 118,630,585 58,691,433 50.53% 10,581,863 554.64% 10/01/08 60,180,721 109,844,156 49,663,435 54.79% 8,809,084 563.78% 10/01/07 61,672,881 91,346,437 29,673,556 67.52% 11,693,120 253.77% 10/01/06 55,458,957 80,937,307 25,478,350 68.52% 10,560,277 241.27% 10/01/05 50,394,100 71,677,541 21,283,441 70.31% 9,694,615 219.54% City of Fort Myers Municipal Firefighters' Pension Trust Fund (MFPTF) 10/01/10 $ 43,429,828 $ 84,336,612 $ 40,906,784 51.50% $ 7,230,421 565.76% 10/01/09 41,426,687 81,722,634 40,295,947 50.69% 7,376,175 546.30% 10/01/08 44,758,888 80,669,695 35,910,807 55.48% 6,775,452 530.01% 10/01/07 43,051,155 68,478,808 25,427,653 62.87% 8,055,337 315.66% 10/01/06 38,458,513 60,749,188 22,290,675 63.31% 6,460,951 345.01% 10/01/05 34,612,495 53,634,943 19,022,448 64.53% 6,028,303 315.55% 95

Employees' Pension Plans Schedule of Contributions from Employer and Others For the Year Ended September 30, 2010 Year Annual Ended Required Percentage September 30, Contribution Contributed City of Fort Myers General Employees' Pension Plan (GEPP) (1) 2010 $ 6,148,648 100.00% 2009 5,568,800 100.01% 2008 4,556,016 100.77% 2007 3,927,766 100.00% 2006 3,242,074 100.00% 2005 2,584,260 100.01% City of Fort Myers Police Officers' Retirement System (PORS) (2) 2010 $ 7,500,167 100.00% 2009 5,297,500 100.00% 2008 3,172,079 100.00% 2007 2,963,248 100.00% 2006 2,544,683 100.00% 2005 2,175,702 100.00% City of Fort Myers Municipal Firefighters' Pension Trust Fund (MFPTF) (2) 2010 $ 4,678,884 100.00% 2009 3,798,438 100.00% 2008 2,864,882 100.00% 2007 2,456,184 100.00% 2006 2,415,989 100.00% 2005 1,451,442 100.00% (1) (2) Includes only required employer contributions. Includes required contributions by employer and excise tax refunds on certain insurance policies. The amount of excise tax refunds provided by the State to be included above are "frozen" per Florida Statutes. Monies received in excess of the "frozen" amount are not included above but must be applied to Plan enhancements. 96

Schedule of Other Postemployment Benefits (OPEB) For the Year Ended September 30, 2010 Schedule of Funding Progress Unfunded Actuarial Actuarial UAAL Actuarial Accrued Accrued Annual as a % of Actuarial Value of Liability Liability Funded Covered Covered Valuation Assets (Unit Credit) (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 10/01/08 $ - $ 16,271,673 $ 16,271,673 0.00% $ 40,053,162 40.6% 10/01/07-22,351,815 22,351,815 0.00% 49,879,048 44.8% 97

98

Combining Statements and Schedules

CITY OF FORT MYERS Major Governmental Funds Description Revenue Bonds and Notes To account for the accumulation of resources and the payment of principal and interest related to the City s Governmental Unit Note (Loan from the City of Gulf Breeze, Florida Local Government Loan Program, Series 1985B); Governmental Unit Note, Series 2000A (Loan from the Florida Municipal Loan Council Revenue Bond, Series 2000A); Improvement Revenue Bonds, Series 2001A; Improvement Refunding Revenue Bonds, 2002A; Gas Tax Revenue Bonds, Series 2004A; Governmental Unit Note, Series 2005C (Loan from the Florida Municipal Loan Council Revenue Bond, Series 2005C); Improvement and Refunding Revenue Bonds, Series 2006; Improvement Refunding Revenue Bonds, Series 2007; and Capital Improvement Refunding Revenue Note, Series 2008. 99

100

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Revenue Bonds and Notes For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 500 $ 500 $ 9,597 $ 9,097 Total revenues 500 500 9,597 9,097 EXPENDITURES Debt service: Principal retirement 7,780,200 7,506,600 7,146,708 359,892 Interest 5,778,800 5,778,800 5,775,937 2,863 Fiscal charges 13,100 13,100 12,105 995 Total expenditures 13,572,100 13,298,500 12,934,750 363,750 Excess (deficiency) of revenues over (under) expenditures (13,571,600) (13,298,000) (12,925,153) 372,847 OTHER FINANCING SOURCES (USES) Transfers in 13,571,600 13,298,000 13,129,000 (169,000) Transfers out - - (59,628) (59,628) Total other financing sources and uses 13,571,600 13,298,000 13,069,372 (228,628) Net change in fund balances - - 144,219 144,219 Fund balances - beginning 6,991,217 6,991,217 6,991,217 - Fund balances - ending $ 6,991,217 $ 6,991,217 $ 7,135,436 $ 144,219 101

CITY OF FORT MYERS Nonmajor Governmental Funds Description SPECIAL REVENUE FUNDS Law Enforcement Trust To account for the proceeds collected under the Florida Contraband Forfeiture Act to be used for school resource officers, crime prevention, safe neighborhoods, drug abuse education and prevention programs, and for other law enforcement purposes and providing matching funds to obtain federal grants. Federal Forfeiture To account for federal forfeiture proceeds, which can be expended for any activity calculated to enhance future investigations, support investigations and operations that may result in further seizures and forfeitures. FEMA Disaster Grant To account for the expenditures related to the damage caused by Hurricane Charley and the associated cleanup cost to be reimbursed by the Federal government. Grants To account for monies, received from various Federal, State and local agencies or private foundations, which must be expended according to the terms of grant requirements. Land Acquisition To account for the sale of land in the industrial park and the acquisition and development of land for City purposes. Cemetery Maintenance To provide for perpetual maintenance for the city-owned cemetery. Off Duty Pay To account for off duty pay for police officers. Beautification To account for the beautification and maintenance of certain parks funded by both the city and private citizens. Special Assessment Geographical Area Administration To account for Special Assessment District administration fees. Police Training To account for the $2 assessment paid by persons convicted for violation of city ordinances. This assessment may be used for criminal justice education and training for the local government unit s officers and support personnel. Street Light Maintenance To account for the accumulation of funds to provide repairs and maintenance for certain street light poles and ballasts. Street Maintenance To account for funds received from the State for traffic light and street maintenance. Winkler Safe Neighborhood To account for the debt service payments related to bonds issued by the City directly related to the Winkler Safe Neighborhood Improvement District. Public Art Fund To account for proceeds from in-lieu contributions and all other revenue to support Public Art. Law Enforcement Equipment Fund To account for donations required of developers for law enforcement equipment purchases necessitated by commercial and residential development. Attainable Workforce Housing Assistance Program To account for resources from developer contributions to provide loans to eligible residents with income of 150% of the median income for Lee County. 102

CITY OF FORT MYERS Nonmajor Governmental Funds Description Hurricane Shelter To account for developer contributions made to rehabilitate downtown buildings for use as hurricane shelters. Public-Private Parking To account for developer fees paid in lieu of the provision for parking. East Riverside Community Center To account for operations and maintenance of the community center, built for the citizens and visitors of Fort Myers and Lee County. Para-Transit Fund To account for developer contributions made annually for a downtown trolley system. Patrons of the Palms To account for operations and resources related to maintaining palm trees, to enhance the City s identity as the City of Palms. State Housing Initiative Partnership Program To account for funds received from the State of Florida to assist very low, low, and moderate income persons or families in becoming single-family homeowners. Facilities Management and Construction To account for all repairs and the maintenance and management of various City-owned facilities. Community Redevelopment Agency Business Development Center To account for the administration and resources of a learning laboratory for entrepreneurial enterprises with reasonably priced rental real estate and services to accommodate the needs of start up businesses. Downtown Redevelopment Area To account for the operations and resources related to the Downtown Redevelopment Area. Other Redevelopment Areas To account for the administration and resources related to implementing the Velasco Village Redevelopment Area, the Central Fort Myers Redevelopment Area, the Cleveland Avenue Redevelopment Areas, and the Martin Luther King Redevelopment Areas. Community Development Block Grant Program To account for monies received from the U.S. Department of Housing and Urban Development for community redevelopment. Crime Prevention Fund To account for monies received from fines, which are used to advance the crime prevention program. Submerged Land Lease To account for funds for the improvement of water quality and public water access for the Caloosahatchee River, Billy s Creek and other Fort Myers waterways. PERMANENT FUND Ned Fould s Police Award Fund To account for a donation to the City to provide an award to the City s Police Officer of the Year. The interest is awarded to the Officer of the Year with the principal being retained in the fund. 103

Combining Balance Sheet Nonmajor Governmental Funds September 30, 2010 Special Revenue Funds Law FEMA Enforcement Federal Disaster Trust Forfeiture Grant Grants ASSETS Cash and cash equivalents $ 175,867 $ 89,790 $ 54,183 $ - Investments 56,594 29,740 17,696 - Accounts receivable, net - - - - Interest receivable 394 205 125 - Due from other governmental agencies - - - 496,078 Prepaid items - - - - Notes receivable - - - - Allowance for notes receivable - - - - Advances to other funds - - - - Assets held for resale - - - - Total assets $ 232,855 $ 119,735 $ 72,004 $ 496,078 LIABILITIES Accounts and contracts payable $ 4,593 $ 9,519 $ 9,750 $ 13,170 Accrued and other liabilities 63 - - 2,754 Due to other funds - - - 470,356 Due to other governmental agencies - - - - Funds held in escrow - - - - Customer deposits - - - - Deferred revenue - - - 367,746 Advances from other funds - - - - Total liabilities 4,656 9,519 9,750 854,026 FUND BALANCES Reserved - - - - Unreserved: Designated - - 45,408 - Undesignated 228,199 110,216 16,846 (357,948) Total fund balances 228,199 110,216 62,254 (357,948) Total liabilities and fund balances $ 232,855 $ 119,735 $ 72,004 $ 496,078 104

Special Revenue Funds Land Acquisition Cemetery Maintenance Off Duty Pay Beautification SAGA Admin $ 2,216,367 $ 674,272 $ 163,303 $ 80,161 $ 135,491 734,105 223,333 54,090 26,551 44,876 - - 24,137 - - 5,112 1,555 377 185 313 - - 7,824 - - - - - - - - - - - - - - - - - - - - - - - - - - - $ 2,955,584 $ 899,160 $ 249,731 $ 106,897 $ 180,680 $ 7,325 $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - 6,308 - - - - 708 - - - - - - - 7,325-7,016 - - 2,691 - - - - 976,600 899,160-106,897-1,968,968-242,715-180,680 2,948,259 899,160 242,715 106,897 180,680 $ 2,955,584 $ 899,160 $ 249,731 $ 106,897 $ 180,680 (continued) 105

Combining Balance Sheet Nonmajor Governmental Funds September 30, 2010 Police Training Special Revenue Funds Street Light Maintenance Street Maintenance Winkler Safe Neighborhood ASSETS Cash and cash equivalents $ 60,734 $ 111,176 $ 607,682 $ 977,501 Investments 20,117 36,309 201,276 323,768 Accounts receivable, net - - 945 - Interest receivable 140 256 1,402 2,235 Due from other governmental agencies 2,397-434,198 - Prepaid items - - 1,442 - Notes receivable - - - - Allowance for notes receivable - - - - Advances to other funds - - - - Assets held for resale - - - - Total assets $ 83,388 $ 147,741 $ 1,246,945 $ 1,303,504 LIABILITIES AND FUND BALANCES Accounts and contracts payable $ 2,282 $ - $ 77,950 $ 5,928 Accrued and other liabilities 2,812-3,851 40 Due to other funds - - - - Due to other governmental agencies - - - - Funds held in escrow - - - - Customer deposits - - - - Deferred revenue - - - - Advances from other funds - - - - Total liabilities 5,094-81,801 5,968 FUND BALANCES Reserved - - - - Unreserved: Designated - - 200,000 431,700 Undesignated 78,294 147,741 965,144 865,836 Total fund balances 78,294 147,741 1,165,144 1,297,536 Total liabilities and fund balances $ 83,388 $ 147,741 $ 1,246,945 $ 1,303,504 106

Public Art Law Enforcement Equipment Special Revenue Funds Attainable Workforce Hurricane Housing Shelter Public-Private Parking East Riverside Community Center $ 174,190 $ 175,956 $ 815,083 $ 253,866 $ 274,346 $ 17,086 57,695 57,465 266,198 82,910 90,868 5,660 - - - - - - 402 406 1,880 586 633 39 - - - - - - - - - - - - - - 173,885 - - - - - (173,885) - - - - - - - - - - - - - - - $ 232,287 $ 233,827 $ 1,083,161 $ 337,362 $ 365,847 $ 22,785 $ - $ - $ 1,523 $ - $ - $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1,523 - - - - - 540,000 - - - 1,000 232,630 - - - - 231,287 1,197 541,638 337,362 365,847 22,785 232,287 233,827 1,081,638 337,362 365,847 22,785 $ 232,287 $ 233,827 $ 1,083,161 $ 337,362 $ 365,847 $ 22,785 (continued) 107

Combining Balance Sheet Nonmajor Governmental Funds September 30, 2010 Special Revenue Funds State Housing Initiative Patrons of the Palms Facilities Management & Construction Para-Transit Partnership ASSETS Cash and cash equivalents $ 105,588 $ 13,717 $ 768,458 $ 517,183 Investments 34,972 4,543 254,529 168,908 Accounts receivable, net 54,451 - - 5,156 Interest receivable 244 32 1,772 1,193 Due from other governmental agencies - - - - Prepaid items - - 167 837 Notes receivable - - 1,225,702 - Allowance for notes receivable - - (1,225,702) - Advances to other funds - - - - Assets held for resale - - - - Total assets $ 195,255 $ 18,292 $ 1,024,926 $ 693,277 LIABILITIES Accounts and contracts payable $ - $ - $ 24,592 $ 26,689 Accrued and other liabilities - - 54 21,584 Due to other funds - - - - Due to other governmental agencies - - - 1,069 Funds held in escrow - - - - Customer deposits - - - - Deferred revenue 54,451 - - 12,651 Advances from other funds - - - - Total liabilities 54,451-24,646 61,993 FUND BALANCES Reserved - - - - Unreserved: Designated - 18,292-97,930 Undesignated 140,804-1,000,280 533,354 Total fund balances 140,804 18,292 1,000,280 631,284 Total liabilities and fund balances $ 195,255 $ 18,292 $ 1,024,926 $ 693,277 108

Special Revenue Funds Community Community Redevelopment Development Crime Agency Block Grant Prevention Submerged Land Lease Permanent Fund Ned Foulds' Police Award Fund Total Nonmajor Governmental Funds $ 4,859,435 $ - $ 29,908 $ 40,992 $ 1,781 $ 13,394,116 1,615,319-9,905 13,577 582 4,431,586 4,291 - - - - 88,980 11,249-69 95 4 30,903-302,032 373 - - 1,242,902 19,634 - - - - 22,080-1,218,132 - - - 2,617,719 - (1,218,132) - - - (2,617,719) 200,000 - - - - 200,000 512,102 397,462 - - - 909,564 $ 7,222,030 $ 699,494 $ 40,255 $ 54,664 $ 2,367 $ 20,320,131 $ 159,211 $ 129,499 $ - $ - $ - $ 472,031 4,628 1,075 - - - 36,861-165,433 - - - 635,789 186 397,462 - - - 398,717 - - - - 367 367 16,068 - - - - 22,376 1,745 6,025 - - - 443,326 817,000 - - - - 817,000 998,838 699,494 - - 367 2,826,467 512,102 - - - 2,000 1,056,793 2,036,587 - - - - 5,046,204 3,674,503-40,255 54,664-11,390,667 6,223,192-40,255 54,664 2,000 17,493,664 $ 7,222,030 $ 699,494 $ 40,255 $ 54,664 $ 2,367 $ 20,320,131 109

Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2010 Special Revenue Funds Law FEMA Enforcement Federal Disaster Trust Forfeiture Grant Grants REVENUES Taxes $ - $ - $ - $ - Intergovernmental revenue - - 792 995,630 Charges for services - - - - Fines and forfeitures 194,731 119,030 - - Miscellaneous 3,429 12,806 2,497 - Contributions-private source - - - - Total revenues 198,160 131,836 3,289 995,630 EXPENDITURES Current: General government - - 197,430 - Public safety: Police 83,213 69,244-1,257,921 Fire - - - 126,945 Transportation - - - - Economic environment - - - - Culture and recreation - - 433,926 - Debt service: Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 83,213 69,244 631,356 1,384,866 Excess (deficiency) of revenues over (under) expenditures 114,947 62,592 (628,067) (389,236) OTHER FINANCING SOURCES (USES) Transfers in - - - 31,288 Transfers out - - - - Total other financing sources and uses - - - 31,288 Net change in fund balances 114,947 62,592 (628,067) (357,948) Fund balance - beginning 113,252 47,624 690,321 - Fund balance - ending $ 228,199 $ 110,216 $ 62,254 $ (357,948) 110

Special Revenue Funds Land Acquisition Cemetery Maintenance Off Duty Pay Beautification SAGA Admin $ - $ - $ - $ - $ - - - - - - - - 614,265 - - - - - - - 30,197 8,044 1,906 7,938 1,613 - - - - - 30,197 8,044 616,171 7,938 1,613 63,416 - - - - - - 574,232 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 63,416-574,232 - - (33,219) 8,044 41,939 7,938 1,613-56,200 - - - (162,470) - - - - (162,470) 56,200 - - - (195,689) 64,244 41,939 7,938 1,613 3,143,948 834,916 200,776 98,959 179,067 $ 2,948,259 $ 899,160 $ 242,715 $ 106,897 $ 180,680 (continued) 111

Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2009 Special Revenue Funds Police Street Light Street Winkler Safe Training Maintenance Maintenance Neighborhood REVENUES Taxes $ - $ - $ 2,318,845 $ 986,411 Intergovernmental revenue - - 525,696 - Charges for services - - - - Fines and forfeitures - - - - Miscellaneous 47,009 1,569 265,569 12,209 Contributions-private source - - - - Total revenues 47,009 1,569 3,110,110 998,620 EXPENDITURES Current: General government - - - - Public safety: Police 33,744 - - 399,746 Fire - - - - Transportation - 9,412 3,116,704 - Economic environment - - - - Culture and recreation - - - - Debt service: Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures 33,744 9,412 3,116,704 399,746 Excess (deficiency) of revenues over (under) expenditures 13,265 (7,843) (6,594) 598,874 OTHER FINANCING SOURCES (USES) Transfers in - - 609,000 - Transfers out - - (8,847) (398,942) Total other financing sources and uses - - 600,153 (398,942) Net change in fund balances 13,265 (7,843) 593,559 199,932 Fund balance - beginning 65,029 155,584 571,585 1,097,604 Fund balance - ending $ 78,294 $ 147,741 $ 1,165,144 $ 1,297,536 112

Public Art Law Enforcement Equipment Special Revenue Funds Attainable Workforce Hurricane Housing Shelter Public-Private Parking East Riverside Community Center $ - $ - $ - $ - $ - $ - - - - - - - - - - - - - - - - - - - 2,142 2,192 10,439 3,166 3,266 204 7,866 840 - - - - 10,008 3,032 10,439 3,166 3,266 204 - - - - - - - - - - - - - - - - - - - - - - - - - - 146,485 - - - - - - - - - - - - - - - - - - - - - - - 146,485 - - - 10,008 3,032 (136,046) 3,166 3,266 204 - - - - - - (35,159) - - - - - (35,159) - - - - - (25,151) 3,032 (136,046) 3,166 3,266 204 257,438 230,795 1,217,684 334,196 362,581 22,581 $ 232,287 $ 233,827 $ 1,081,638 $ 337,362 $ 365,847 $ 22,785 (continued) 113

Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2009 Special Revenue Funds State Housing Facilities Patrons of Initiative Management Para-Transit the Palms Partnership & Construction REVENUES Taxes $ - $ - $ - $ - Intergovernmental revenue - - 35,837 - Charges for services - - - - Fines and forfeitures - - - - Miscellaneous 1,229 163 12,061 177,394 Contributions-private source 60,717 - - - Total revenues 61,946 163 47,898 177,394 EXPENDITURES Current: General government - - - 1,659,325 Public safety: Police - - - - Fire - - - - Transportation - - - - Economic environment - - 510,804 - Culture and recreation - - - - Debt service: Principal retirement - - - - Interest and fiscal charges - - - - Total expenditures - - 510,804 1,659,325 Excess (deficiency) of revenues over (under) expenditures 61,946 163 (462,906) (1,481,931) OTHER FINANCING SOURCES (USES) Transfers in - - - 1,528,600 Transfers out - - - (474,872) Total other financing sources and uses - - - 1,053,728 Net change in fund balances 61,946 163 (462,906) (428,203) Fund balance - beginning 78,858 18,129 1,463,186 1,059,487 Fund balance - ending $ 140,804 $ 18,292 $ 1,000,280 $ 631,284 114

Community Redevelopment Agency Special Revenue Funds Community Development Crime Block Grant Prevention Submerged Land Lease Permanent Fund Ned Foulds' Police Award Fund Total Nonmajor Governmental Funds $ 1,690,459 $ - $ - $ - $ - $ 4,995,715 37,141 2,243,513 - - - 3,838,609 - - - - - 614,265 - - 7,634 - - 321,395 180,481 231,988 412 31,542-1,051,465 150 - - - - 69,573 1,908,231 2,475,501 8,046 31,542-10,891,022 - - - - - 1,920,171 - - - - - 2,418,100 - - - - - 126,945 - - - - - 3,126,116 4,304,231 2,441,073 - - - 7,402,593 - - - - - 433,926 553,407 25,000 - - - 578,407 508,053 9,428 - - - 517,481 5,365,691 2,475,501 - - - 16,523,739 (3,457,460) - 8,046 31,542 - (5,632,717) 3,576,968 - - - - 5,802,056 (483,226) - - - - (1,563,516) 3,093,742 - - - - 4,238,540 (363,718) - 8,046 31,542 - (1,394,177) 6,586,910-32,209 23,122 2,000 18,887,841 $ 6,223,192 $ - $ 40,255 $ 54,664 $ 2,000 $ 17,493,664 115

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Law Enforcement Trust Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Fines and forfeitures $ 5,000 $ 84,000 $ 194,731 $ 110,731 Miscellaneous 12,000 12,000 3,429 (8,571) Total revenues 17,000 96,000 198,160 102,160 EXPENDITURES Current: Police 17,000 96,000 83,213 12,787 Excess (deficiency) of revenues over (under) expenditures - - 114,947 114,947 Net change in fund balances - - 114,947 114,947 Fund balances - beginning 113,252 113,252 113,252 - Fund balances - ending $ 113,252 $ 113,252 $ 228,199 $ 114,947 116

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Federal Forfeiture Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Fines and forfeitures $ 50,000 $ 62,500 $ 119,030 $ 56,530 Miscellaneous 113,500 113,500 12,806 (100,694) Total revenues 163,500 176,000 131,836 (44,164) EXPENDITURES Current: Police 163,500 176,000 69,244 106,756 Excess (deficiency) of revenues over (under) expenditures - - 62,592 62,592 Net change in fund balances - - 62,592 62,592 Fund balances - beginning 47,624 47,624 47,624 - Fund balances - ending $ 47,624 $ 47,624 $ 110,216 $ 62,592 117

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual FEMA Disaster Grant For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Intergovernmental $ - $ - $ 792 $ 792 Miscellaneous - 676,764 2,497 (674,267) Total revenues - 676,764 3,289 (673,475) EXPENDITURES Current: General government - 197,431 197,430 1 Culture and recreation - 479,333 433,926 45,407 Total expenditures - 676,764 631,356 45,408 Excess (deficiency) of revenues over (under) expenditures - - (628,067) (628,067) Net change in fund balances - - (628,067) (628,067) Fund balances - beginning 690,321 690,321 690,321 - Fund balances - ending $ 690,321 $ 690,321 $ 62,254 $ (628,067) 118

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Grants For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Intergovernmental $ 2,915,476 $ 3,652,719 $ 995,630 $ (2,657,089) Total revenues 2,915,476 3,652,719 995,630 (2,657,089) EXPENDITURES Current: Public safety: Police 2,823,903 3,255,085 1,257,921 1,997,164 Fire 102,716 430,126 126,945 303,181 Total expenditures 2,926,619 3,685,211 1,384,866 2,300,345 Excess (deficiency) of revenues over (under) expenditures (11,143) (32,492) (389,236) (356,744) OTHER FINANCING SOURCES (USES) Transfers in 11,143 32,492 31,288 (1,204) Total other financing sources and uses 11,143 32,492 31,288 (1,204) Net change in fund balances - - (357,948) (357,948) Fund balances - beginning - - - - Fund balances - ending $ - $ - $ (357,948) $ (357,948) 119

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Land Acquisition Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 185,000 $ 406,607 $ 30,197 $ (376,410) Total revenues 185,000 406,607 30,197 (376,410) EXPENDITURES Current: General government 185,000 185,000 63,416 121,584 Excess (deficiency) of revenues over (under) expenditures - 221,607 (33,219) (254,826) OTHER FINANCING SOURCES (USES) Transfers out - (221,607) (162,470) 59,137 Total other financing sources and uses - (221,607) (162,470) 59,137 Net change in fund balances - - (195,689) (195,689) Fund balances - beginning 3,143,948 3,143,948 3,143,948 - Fund balances - ending $ 3,143,948 $ 3,143,948 $ 2,948,259 $ (195,689) 120

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Cemetery Maintenance Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 10,000 $ 10,000 $ 8,044 $ (1,956) Total revenues 10,000 10,000 8,044 (1,956) EXPENDITURES Current: Economic environment 66,200 66,200-66,200 Excess (deficiency) of revenues over (under) expenditures (56,200) (56,200) 8,044 64,244 OTHER FINANCING SOURCES (USES) Transfers in 56,200 56,200 56,200 - Total other financing sources and uses 56,200 56,200 56,200 - Net change in fund balances - - 64,244 64,244 Fund balances - beginning 834,916 834,916 834,916 - Fund balances - ending $ 834,916 $ 834,916 $ 899,160 $ 64,244 121

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Off Duty Pay For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Charges for services $ 775,100 $ 775,100 $ 614,265 $ (160,835) Miscellaneous - - 1,906 1,906 Total revenues 775,100 775,100 616,171 (158,929) EXPENDITURES Current: Police 775,100 775,100 574,232 200,868 Excess (deficiency) of revenues over (under) expenditures - - 41,939 41,939 Net change in fund balances - - 41,939 41,939 Fund balances - beginning 200,776 200,776 200,776 - Fund balances - ending $ 200,776 $ 200,776 $ 242,715 $ 41,939 122

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Beautification Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 7,938 $ 7,938 Total revenues - - 7,938 7,938 Excess (deficiency) of revenues over (under) expenditures - - 7,938 7,938 Net change in fund balances - - 7,938 7,938 Fund balances - beginning 98,959 98,959 98,959 - Fund balances - ending $ 98,959 $ 98,959 $ 106,897 $ 7,938 123

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Assessment Geographical Area Administration For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 1,613 $ 1,613 Total revenues - - 1,613 1,613 Excess (deficiency) of revenues over (under) expenditures - - 1,613 1,613 Net change in fund balances - - 1,613 1,613 Fund balances - beginning 179,067 179,067 179,067 - Fund balances - ending $ 179,067 $ 179,067 $ 180,680 $ 1,613 124

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Police Training Fund For the Year Ended September 30, 2010 Variance with Final Budget - Budgeted Amounts Positive Original Final Actual Amounts (Negative) REVENUES Miscellaneous $ 75,300 $ 75,300 $ 47,009 $ (28,291) Total revenues 75,300 75,300 47,009 (28,291) EXPENDITURES Current: Police 75,300 75,300 33,744 41,556 Excess (deficiency) of revenues over (under) expenditures - - 13,265 13,265 Net change in fund balances - - 13,265 13,265 Fund balances - beginning 65,029 65,029 65,029 - Fund balances - ending $ 65,029 $ 65,029 $ 78,294 $ 13,265 125

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Street Light Maintenance Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 11,300 $ 11,300 $ 1,569 $ (9,731) Total revenues 11,300 11,300 1,569 (9,731) EXPENDITURES Current: Transportation 11,300 11,300 9,412 1,888 Excess (deficiency) of revenues over (under) expenditures - - (7,843) (7,843) Net change in fund balances - - (7,843) (7,843) Fund balances - beginning 155,584 155,584 155,584 - Fund balances - ending $ 155,584 $ 155,584 $ 147,741 $ (7,843) 126

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Street Maintenance Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Taxes $ 2,300,000 $ 2,300,000 $ 2,318,845 $ 18,845 Intergovernmental revenue 520,000 520,000 525,696 5,696 Miscellaneous 236,500 400,223 265,569 (134,654) Total revenues 3,056,500 3,220,223 3,110,110 (110,113) EXPENDITURES Current: Transportation 3,665,500 3,829,223 3,116,704 712,519 Total expenditures 3,665,500 3,829,223 3,116,704 712,519 Excess (deficiency) of revenues over (under) expenditures (609,000) (609,000) (6,594) 602,406 OTHER FINANCING SOURCES (USES) Transfers in 609,000 609,000 609,000 - Transfers out - - (8,847) (8,847) Total other financing sources and uses 609,000 609,000 600,153 (8,847) Net change in fund balances - - 593,559 593,559 Fund balances - beginning 571,585 571,585 571,585 - Fund balances - ending $ 571,585 $ 571,585 $ 1,165,144 $ 593,559 127

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Winkler Safe Neighborhood Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Taxes $ 982,200 $ 982,200 $ 986,411 $ 4,211 Miscellaneous 38,100 38,100 12,209 (25,891) Total revenues 1,020,300 1,020,300 998,620 (21,680) EXPENDITURES Current: Police 490,700 490,700 399,746 90,954 Excess (deficiency) of revenues over (under) expenditures 529,600 529,600 598,874 69,274 OTHER FINANCING SOURCES (USES) Transfers out (529,600) (529,600) (398,942) 130,658 Total other financing sources and uses (529,600) (529,600) (398,942) 130,658 Net change in fund balances - - 199,932 199,932 Fund balances - beginning 1,097,604 1,097,604 1,097,604 - Fund balances - ending $ 1,097,604 $ 1,097,604 $ 1,297,536 $ 199,932 128

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public Art Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ 250,000 $ 2,142 $ (247,858) Contributions - private source - - 7,866 7,866 Total revenues - 250,000 10,008 (239,992) Excess (deficiency) of revenues over (under) expenditures - 250,000 10,008 (239,992) OTHER FINANCING SOURCES (USES) Transfers out - (250,000) (35,159) 214,841 Total other financing sources and uses - (250,000) (35,159) 214,841 Net change in fund balances - - (25,151) (25,151) Fund balances - beginning 257,438 257,438 257,438 - Fund balances - ending $ 257,438 $ 257,438 $ 232,287 $ (25,151) 129

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Law Enforcement Equipment Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 85,000 $ 232,700 $ 2,192 $ (230,508) Contributions - private source 15,500 15,500 840 (14,660) Total revenues 100,500 248,200 3,032 (245,168) EXPENDITURES Current: Police 50,500 15,570-15,570 Total current 50,500 15,570-15,570 Capital outlay: Police 50,000 232,630-232,630 Total capital outlay 50,000 232,630-232,630 Total expenditures 100,500 248,200-248,200 Excess (deficiency) of revenues over (under) expenditures - - 3,032 3,032 Net change in fund balances - - 3,032 3,032 Fund balances - beginning 230,795 230,795 230,795 - Fund balances - ending $ 230,795 $ 230,795 $ 233,827 $ 3,032 130

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Attainable Workforce Housing Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ 1,173,592 $ 10,439 $ (1,163,153) Total revenues - 1,173,592 10,439 (1,163,153) EXPENDITURES Current: Economic environment - 1,173,592 146,485 1,027,107 Excess (deficiency) of revenues over (under) expenditures - - (136,046) (136,046) Net change in fund balances - - (136,046) (136,046) Fund balances - beginning 1,217,684 1,217,684 1,217,684 - Fund balances - ending $ 1,217,684 $ 1,217,684 $ 1,081,638 $ (136,046) 131

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Hurricane Shelter Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 3,166 $ 3,166 Total revenues - - 3,166 3,166 Excess (deficiency) of revenues over (under) expenditures - - 3,166 3,166 Net change in fund balances - - 3,166 3,166 Fund balances - beginning 334,196 334,196 334,196 - Fund balances - ending $ 334,196 $ 334,196 $ 337,362 $ 3,166 132

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Public-Private Parking Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 3,266 $ 3,266 Total revenues - - 3,266 3,266 Excess (deficiency) of revenues over (under) expenditures - - 3,266 3,266 Net change in fund balances - - 3,266 3,266 Fund balances - beginning 362,581 362,581 362,581 - Fund balances - ending $ 362,581 $ 362,581 $ 365,847 $ 3,266 133

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual East Riverside Community Center Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 204 $ 204 Total revenues - - 204 204 Excess (deficiency) of revenues over (under) expenditures - - 204 204 Net change in fund balances - - 204 204 Fund balances - beginning 22,581 22,581 22,581 - Fund balances - ending $ 22,581 $ 22,581 $ 22,785 $ 204 134

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Para-Transit Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 1,229 $ 1,229 Contributions - private source - - 60,717 60,717 Total revenues - - 61,946 61,946 Excess (deficiency) of revenues over (under) expenditures - - 61,946 61,946 Net change in fund balances - - 61,946 61,946 Fund balances - beginning 78,858 78,858 78,858 - Fund balances - ending $ 78,858 $ 78,858 $ 140,804 $ 61,946 135

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Patrons of the Palms Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 163 $ 163 Total revenues - - 163 163 Excess (deficiency) of revenues over (under) expenditures - - 163 163 Net change in fund balances - - 163 163 Fund balances - beginning 18,129 18,129 18,129 - Fund balances - ending $ 18,129 $ 18,129 $ 18,292 $ 163 136

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual State Housing Initiative Partnership Program (SHIP) For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Intergovernmental revenue $ 51,419 $ 51,419 $ 35,837 $ (15,582) Miscellaneous 44,899 1,183,226 12,061 (1,171,165) Total revenues 96,318 1,234,645 47,898 (1,186,747) EXPENDITURES Current: Economic environment 96,318 1,234,645 510,804 723,841 Excess (deficiency) of revenues over (under) expenditures - - (462,906) (462,906) Net change in fund balances - - (462,906) (462,906) Fund balances - beginning 1,463,186 1,463,186 1,463,186 - Fund balances - ending $ 1,463,186 $ 1,463,186 $ 1,000,280 $ (462,906) 137

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Facilities Management and Construction Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ 443,500 $ 757,381 $ 177,394 $ (579,987) Total revenues 443,500 757,381 177,394 (579,987) EXPENDITURES Current: General government 1,672,100 1,811,109 1,659,325 151,784 Excess (deficiency) of revenues over (under) expenditures (1,228,600) (1,053,728) (1,481,931) (428,203) OTHER FINANCING SOURCES (USES) Transfers in 1,528,600 1,528,600 1,528,600 - Transfers out (300,000) (474,872) (474,872) - Total other financing sources and uses 1,228,600 1,053,728 1,053,728 - Net change in fund balances - - (428,203) (428,203) Fund balances - beginning 1,059,487 1,059,487 1,059,487 - Fund balances - ending $ 1,059,487 $ 1,059,487 $ 631,284 $ (428,203) 138

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Community Redevelopment Agency For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Taxes $ 1,765,000 $ 1,690,459 $ 1,690,459 $ - Intergovernmental revenue - - 37,141 37,141 Miscellaneous 763,900 3,009,132 180,481 (2,828,651) Contributions - private source - - 150 150 Total revenues 2,528,900 4,699,591 1,908,231 (2,791,360) EXPENDITURES Current: Economic environment 4,385,000 5,728,344 4,304,231 1,424,113 Total current 4,385,000 5,728,344 4,304,231 1,424,113 Debt service: Principal retirement 1,082,300 553,697 553,407 290 Interest and fiscal charges 270,100 508,045 508,053 (8) Total debt service 1,352,400 1,061,742 1,061,460 282 Capital outlay: Economic environment 70,000 33,743-33,743 Total capital outlay 70,000 33,743-33,743 Total expenditures 5,807,400 6,823,829 5,365,691 1,458,138 Excess (deficiency) of revenues over (under) expenditures (3,278,500) (2,124,238) (3,457,460) (1,333,222) OTHER FINANCING SOURCES (USES) Loan Issuance 75,000 275,000 - (275,000) Transfers in 3,708,000 3,661,968 3,576,968 (85,000) Transfers out (504,500) (1,812,731) (483,226) 1,329,505 Total other financing sources and uses 3,278,500 2,124,237 3,093,742 969,505 Net change in fund balances - (1) (363,718) (363,717) Fund balances - beginning 6,586,910 6,586,910 6,586,910 - Fund balances - ending $ 6,586,910 $ 6,586,909 $ 6,223,192 $ (363,717) 139

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Community Development Block Grant For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Intergovernmental revenue $ 755,878 $ 2,748,402 $ 2,243,513 $ (504,889) Miscellaneous 2,255 1,060,702 231,988 (828,714) Total revenues 758,133 3,809,104 2,475,501 (1,333,603) EXPENDITURES Current: Economic environment 638,706 3,689,677 2,441,073 1,248,604 Total current 638,706 3,689,677 2,441,073 1,248,604 Debt service: Principal retirement 25,000 25,000 25,000 - Interest and fiscal charges 9,427 9,427 9,428 (1) Total debt service 34,427 34,427 34,428 (1) Total expenditures 673,133 3,724,104 2,475,501 1,248,603 Excess (deficiency) of revenues over (under) expenditures 85,000 85,000 - (85,000) OTHER FINANCING SOURCES (USES) Transfers out (85,000) (85,000) - 85,000 Total other financing sources and uses (85,000) (85,000) - 85,000 Net change in fund balances - - - - Fund balances - beginning - - - - Fund balances - ending $ - $ - $ - $ - 140

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Crime Prevention Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Fines and forfeitures $ 14,000 $ 14,000 $ 7,634 $ (6,366) Miscellaneous 33,000 33,000 412 (32,588) Total revenues 47,000 47,000 8,046 (38,954) EXPENDITURES Current: Police 47,000 47,000-47,000 Excess (deficiency) of revenues over (under) expenditures - - 8,046 8,046 Net change in fund balances - - 8,046 8,046 Fund balances - beginning 32,209 32,209 32,209 - Fund balances - ending $ 32,209 $ 32,209 $ 40,255 $ 8,046 141

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Submerged Land Lease Fund For the Year Ended September 30, 2010 Budgeted Amounts Original Final Actual Amounts Variance with Final Budget - Positive (Negative) REVENUES Miscellaneous $ - $ - $ 31,542 $ 31,542 Total revenues - - 31,542 31,542 Excess (deficiency) of revenues over (under) expenditures - - 31,542 31,542 Net change in fund balances - - 31,542 31,542 Fund balances - beginning 23,122 23,122 23,122 - Fund balances - ending $ 23,122 $ 23,122 $ 54,664 $ 31,542 142

CITY OF FORT MYERS Nonmajor Enterprise Funds Description Building Permits and Inspections To account for operations and maintenance related to the City s issuance of building permits and the subsequent inspections. Stormwater To account for the operations and maintenance of stormwater run-off mechanisms throughout the City. Imaginarium To account for the operations and maintenance related to the City-owned hands-on children s museum. Burrough s Home To account for the operations and maintenance related to the City-owned, historically preserved home. Southwest Florida Museum of History To account for the operations and maintenance related to the City-owned historical museum. Fort Myers Country Club To account for the operations and maintenance related to the City-owned Fort Myers Country Club. Eastwood Golf Course To account for the operations and maintenance related to the City-owned Eastwood Golf course. Yacht Basin To account for the operations and maintenance of the City-owned yacht basin and dock facilities. Harborside Event Center To account for the operations and maintenance of the Harborside Convention Center and Exhibition Hall. These facilities are available to the public on a rental basis or for City-sponsored functions. Downtown Parking Garages To account for the operations and maintenance related to the City-owned Main Street Parking Garage and City of Palms Parking Garage. Skatium To account for the operations and maintenance related to the City-owned skating and recreation center. Department of Cultural and Historical Affairs To consolidate and account for the operations and maintenance of the Imaginarium hands-on childrens museum, the Burrough s Home, and Southwest Florida Museum of History. 143

Combining Statement of Net Assets Nonmajor Enterprise Funds September 30, 2010 Building Permits and Inspections Burrough's Home Southwest Florida Museum of History Stormwater Imaginarium ASSETS Current assets: Cash and cash equivalents $ 3,536,156 $ 1,161,214 $ - $ - $ - Investments 1,171,784 476,716 - - - Restricted cash and cash equivalents 31,208 - - - - Restricted investments 10,192 - - - - Accounts receivable, net - 516,180 - - - Interest receivable 8,231 3,320 - - - Restricted interest receivable - - - - - Due from other governments - 455,520 - - - Inventories - - - - - Prepaid items 906 141 - - - Total current assets 4,758,477 2,613,091 - - - Noncurrent assets: Advances to other funds - - - - - Unamortized bond issue costs - - - - - Capital assets: Land and improvements - - - - - Construction in progress - 863,151 - - - Buildings, net - - - - - Improvements other than building, net - 5,286,844 - - - Equipment, net 230,685 93,937 - - - Total noncurrent assets 230,685 6,243,932 - - - Total assets 4,989,162 8,857,023 - - - LIABILITIES Current liabilities: Accounts and contracts payable 5,192 184,792 - - - Accrued and other liabilities 1,126 7,441 - - - Due to other funds - - - - - Due to other governments 2,709 - - - - Unearned revenue - - - - - Customer deposits 41,400 - - - - Compensated absences 42,886 7,329 - - - Termination benefits 9,831 5,243 - - - Accrued interest payable - - - - - Notes payable - - - - - Revenue bonds - - - - - Total current liabilities 103,144 204,805 - - - Noncurrent liabilities: Compensated absences 36,081 29,270 - - - Other postemployment benefits payable 196,925 39,810 - - - Advances from other funds - - - - - Notes payable - - - - - Revenue bonds - - - - - Total noncurrent liabilities 233,006 69,080 - - - Total liabilities 336,150 273,885 - - - NET ASSETS Invested in capital assets, net of related debt 230,685 6,243,932 - - - Restricted: Capital projects - 5,528 - - - Culture & recreation - - - - - Debt service - - - - - Renewal & replacement - - - - - Transportation - - - - - Unrestricted 4,422,327 2,333,678 - - - Total net assets $ 4,653,012 $ 8,583,138 $ - $ - $ - 144

Fort Myers Country Club Eastwood Golf Course Yacht Basin Harborside Event Center Downtown Dept of Cultural Total Parking and Historical Nonmajor Garages Skatium Affairs Enterprise Funds $ 1,125 $ 52,112 $ 42,484 $ 118,618 $ 56,845 $ 22,160 $ 435,687 $ 5,426,401 12 17,204 18,238 39,894 18,838 6,946 143,997 1,893,629 19,901 2,350 992,025 165,774 10,563 969 4,412 1,227,202 650 768 324,212 54,305 792 316 1,441 392,676 - - 76,310 30,281 8,443 19,406-650,620-125 233 574 137 51 1,013 13,684 - - 2,151 82 - - - 2,233 - - - - - - - 455,520 - - 78,871 - - 7,133 17,359 103,363 35,415 37,742 - - 53,232 - - 127,436 57,103 110,301 1,534,524 409,528 148,850 56,981 603,909 10,292,764 - - - - 23,000 - - 23,000 501-24,453 - - - - 24,954 168,966 729,261 195,315 399,327 551,713-788,866 2,833,448 - - 42,398 - - - - 905,549 285,724 1,848,038 4,600 4,315,384 4,281,698 28,416 699,878 11,463,738-1,949,269 4,282,158 98,142-58,389 36,193 11,710,995 66,317 49,739 7,377 36,708-10,906 10,905 506,574 521,508 4,576,307 4,556,301 4,849,561 4,856,411 97,711 1,535,842 27,468,258 578,611 4,686,608 6,090,825 5,259,089 5,005,261 154,692 2,139,751 37,761,022 14,490 19,719 29,472 110,153 4,138 26,079 11,349 405,384 3,472 6,597 3,672 7,313 34 12,790 4,755 47,200 18,327 - - - - - - 18,327 2,642 3,118 4,993 2,605 2,807 1,286 1,413 21,573 - - 1,060 - - 588-1,648 - - 68,274 110,252 1,200-4,440 225,566 8,377 10,643 5,322 18,623 - - 17,033 110,213 1,966 - - - - - 1,966 19,006 7,275-17,396 - - - - 24,671 - - 170,046 - - - - 170,046 11,550 - - - - - - 11,550 68,099 40,077 300,235 248,946 8,179 40,743 40,956 1,055,184 16,563 9,880 13,725 39,733-25,231 23,763 194,246 37,023 42,402 38,670 72,115-44,901 62,418 534,264 - - - 23,000 - - - 23,000 - - 4,512,768 - - - - 4,512,768 432,182 - - - - - - 432,182 485,768 52,282 4,565,163 134,848-70,132 86,181 5,696,460 553,867 92,359 4,865,398 383,794 8,179 110,875 127,137 6,751,644 77,275 4,576,307 (150,966) 4,849,561 4,833,411 97,711 1,535,842 22,293,758 501-1,184,546 104 - - - 1,190,679 - - - - - - 28 28 10,635 - - - - - - 10,635 - - 65,041 47,397 - - 156,306 268,744 - - - - 7,347 - - 7,347 (63,667) 17,942 126,806 (21,767) 156,324 (53,894) 320,438 7,238,187 $ 24,744 $ 4,594,249 $ 1,225,427 $ 4,875,295 $ 4,997,082 $ 43,817 $ 2,012,614 $ 31,009,378 145

Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Nonmajor Enterprise Funds For the Year Ended September 30, 2010 Southwest Building Florida Permits and Burrough's Museum of Inspections Stormwater Imaginarium Home History OPERATING REVENUES Charges for services $ 1,706,870 $ 2,823,622 $ - $ - $ - Rent - - - - - Miscellaneous 488 25,223 - - - Total operating revenues 1,707,358 2,848,845 - - - OPERATING EXPENSES Personal services 1,767,720 996,056 - - - Contractual services 31,391 183,851 - - - Materials and supplies 10,466 225,594 - - - General and administrative 280,346 134,598 - - - Utilities 14,086 127 - - - Depreciation 135,650 197,099 - - - Insurance 33,700 59,000 - - - Repairs and maintenance 1,225 8,964 - - - Travel 2,659 1,017 - - - Rentals 411,008 247,600 - - - Total operating expenses 2,688,251 2,053,906 - - - Operating income (loss) (980,893) 794,939 - - - NONOPERATING REVENUES (EXPENSES) Operating grants and contributions - - - - - Interest income 41,807 18,889 - - - Gain (loss) on disposal of capital assets - - - - - Interest expense and bond issue costs - - - - - Total nonoperating revenues (expenses) 41,807 18,889 - - - Income (loss) before contributions and transfers (939,086) 813,828 - - - Capital grants and contributions - 247,366 - - - Transfers in - 612,517 - - - Transfers out - - (376,170) (1,517,456) (188,362) Total contributions and transfers in (out) - 859,883 (376,170) (1,517,456) (188,362) Change in net assets (939,086) 1,673,711 (376,170) (1,517,456) (188,362) Total net assets - beginning 5,592,098 6,909,427 376,170 1,517,456 188,362 Total net assets - ending $ 4,653,012 $ 8,583,138 $ - $ - $ - 146

Fort Myers Eastwood Harborside Downtown Dept of Cultural Total Country Golf Yacht Event Parking and Historical Nonmajor Club Course Basin Center Garages Skatium Affairs Enterprise Funds $ 1,304,460 $ 1,658,111 $ 1,874,689 $ 1,969 $ 689,925 $ 967,125 $ 697,897 $ 11,724,668 14,875 27,581 30,187 794,681 45,769 - - 913,093 803 14,107 44,872 537 8,134 251 291 94,706 1,320,138 1,699,799 1,949,748 797,187 743,828 967,376 698,188 12,732,467 491,442 544,455 482,558 960,024-509,283 814,728 6,566,266 435,335 481,357 26,992 68,907 681,154 85,600 167,879 2,162,466 99,945 105,694 1,040,783 112,560 80 120,535 123,023 1,838,680 114,319 113,347 143,699 184,137 19,222 82,505 181,712 1,253,885 66,432 132,448 127,269 179,908 3,879 194,276 135,228 853,653 53,808 207,513 205,990 428,462 307,236 19,643 89,641 1,645,042 67,500 67,500 67,500 135,000-67,500 84,400 582,100 31,143 32,926 103,586 51,409 14,658 35,427 58,043 337,381 - - - - - - 4,799 8,475 95,377 111,547 65,197 95,072-59,384 98,004 1,183,189 1,455,301 1,796,787 2,263,574 2,215,479 1,026,229 1,174,153 1,757,457 16,431,137 (135,163) (96,988) (313,826) (1,418,292) (282,401) (206,777) (1,059,269) (3,698,670) - - - - - - 17,725 17,725 325 2,256 18,859 2,517 442 147 8,260 93,502 925 - - - - - - 925 (21,370) - (136,380) - - - - (157,750) (20,120) 2,256 (117,521) 2,517 442 147 25,985 (45,598) (155,283) (94,732) (431,347) (1,415,775) (281,959) (206,630) (1,033,284) (3,744,268) - - - - - - - 247,366 106,800-451,700 623,161 8,847 211,000 3,045,898 5,059,923 (8,300) (171,125) (27,823) (40,600) (100,000) (22,552) - (2,452,388) 98,500 (171,125) 423,877 582,561 (91,153) 188,448 3,045,898 2,854,901 (56,783) (265,857) (7,470) (833,214) (373,112) (18,182) 2,012,614 (889,367) 81,527 4,860,106 1,232,897 5,708,509 5,370,194 61,999-31,898,745 $ 24,744 $ 4,594,249 $ 1,225,427 $ 4,875,295 $ 4,997,082 $ 43,817 $ 2,012,614 $ 31,009,378 147

Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended September 30, 2010 Southwest Building Florida Permits and Burrough's Museum of Inspections Stormwater Imaginarium Home History CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,706,618 $ 3,176,803 $ - $ - $ - Cash payments to suppliers for goods and services (787,359) (1,198,880) - - - Cash payments to employees for services (1,778,257) (984,862) - - - Other operating revenue 739 25,223 - - - Other operating payments (12,992) (123,561) - - - Net cash provided by (used in) operating activities (871,251) 894,723 - - - CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Grants and private contributions - - - - - Decrease in due to other funds (46,300) (9,300) - - - Increase in due to other funds - - - - - Repayment of advance to other funds - - - - - Repayment of advance from other funds - - - - - Transfers in - 3,423,963 - - - Transfers out - (2,811,446) (172,225) (164,976) (136,609) Net cash provided by (used in) noncapital financing activities (46,300) 603,217 (172,225) (164,976) (136,609) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets - (686,042) - - - Fiscal charges - - - - - Grants and private contributions - 247,366 - - - Interest paid on notes, bonds and advances - - - - - Principal paid on notes and bonds - - - - - Proceeds from sale of capital assets - - - - - Net cash used in capital and related financing activities - (438,676) - - - CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 48,290 12,147 - - - Purchase of investment securities (35,839) (397,491) - - - Proceeds from the sale of investments - - - - - Net cash provided by (used in) investing activities 12,451 (385,344) - - - Net increase (decrease) in cash and cash equivalents (905,100) 673,920 (172,225) (164,976) (136,609) Cash and cash equivalents at beginning of year 4,472,464 487,294 172,225 164,976 136,609 Cash and cash equivalents at end of year $ 3,567,364 $ 1,161,214 $ - $ - $ - RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ (980,893) $ 794,939 $ - $ - $ - Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 135,650 197,099 - - - Other postemployment benefits 41,137 23,421 - - - Changes in assets and liabilities: Increase (decrease) in accounts payable - other (12,646) - - - - Increase (decrease) in accounts payable - supplier (2,726) (461,550) - - - (Increase) decrease in bad debt - 123,512 - - - Increase (decrease) in compensated absences (16,999) 8,608 - - - (Increase) decrease in customer receivables - 229,670 - - - (Increase) decrease in inventory (97) (141) - - - Increase (decrease) in benefits payable (34,677) (20,835) - - - Net cash provided by (used in) operating activities $ (871,251) $ 894,723 $ - $ - $ - Noncash investing, capital, and financing activities: Interest receivable / unrealized gain (loss) $ (6,483) $ 6,742 $ - $ - $ - Contributions - private sources - - - - - 148

Fort Myers Country Club Eastwood Golf Course Yacht Basin Harborside Event Center Downtown Parking Garages Skatium Dept of Cultural and Historical Affairs Total Non-Major Enterprise Funds $ 1,319,335 $ 1,685,692 $ 1,936,169 $ 796,506 $ 733,382 $ 970,519 $ 697,897 $ 13,022,921 (923,764) (1,030,513) (1,548,272) (799,968) (771,952) (638,687) (847,385) (8,546,780) (483,740) (526,569) (471,648) (934,940) - (498,690) (752,078) (6,430,784) 803 14,107 44,872 537 8,134 251 291 94,957 (319) (892) (47,938) 39,222 (5,763) (1,435) (1,106) (154,784) (87,685) 141,825 (86,817) (898,643) (36,199) (168,042) (902,381) (2,014,470) - - - - - - 17,725 17,725 - (6,300) (6,300) (9,100) - (5,400) - (82,700) 12,627 - - - - - - 12,627 - - - - 11,500 - - 11,500 - - - (11,500) - - - (11,500) 107,478 244 725,965 747,172 8,847 211,000 1,469,146 6,693,815 (8,978) (171,370) (302,088) (164,610) (100,000) (22,552) (6,200) (4,061,054) 111,127 (177,426) 417,577 561,962 (79,653) 183,048 1,480,671 2,580,413 - - (34,858) - - - - (720,900) (588) - - - - - - (588) - - - - - - - 247,366 (21,510) - (224,584) - - - - (246,094) (10,890) - (162,293) - - - - (173,183) 925 - - - - - - 925 (32,063) - (421,735) - - - - (892,474) 381 2,465 13,094 4,499 1,083 73 5,215 87,247 - - (45,413) - - (4,336) (143,406) (626,485) 1,804 3,456-50,176 18,716 - - 74,152 2,185 5,921 (32,319) 54,675 19,799 (4,263) (138,191) (465,086) (6,436) (29,680) (123,294) (282,006) (96,053) 10,743 440,099 (791,617) 27,462 84,142 1,157,803 566,398 163,461 12,386-7,445,220 $ 21,026 $ 54,462 $ 1,034,509 $ 284,392 $ 67,408 $ 23,129 $ 440,099 $ 6,653,603 $ (135,163) $ (96,988) $ (313,826) $ (1,418,292) $ (282,401) $ (206,777) $ (1,059,269) $ (3,698,670) 53,808 207,513 205,990 428,462 307,236 19,643 89,641 1,645,042 11,037 12,249 11,629 24,297-12,636 19,887 156,293 151 (122) (19,447) 42,259 (3,795) 645 5,853 12,898 (16,831) 11,021 8,546 23,989 (1,695) 5,556 16,104 (417,586) - - 6,754 (8,699) - - - 121,567 3,582 5,636 (720) 787 - (2,043) 40,796 39,647 - - 24,540 8,554 (2,312) 3,395-263,847 2,647 2,516 (10,283) - (53,232) (1,097) (17,359) (77,046) (6,916) - - - - - 1,966 (60,462) $ (87,685) $ 141,825 $ (86,817) $ (898,643) $ (36,199) $ (168,042) $ (902,381) $ (2,014,470) $ (56) $ (209) $ 5,765 $ (1,982) $ (641) $ 74 $ 3,045 $ 6,255 - - - - - - 17,725 17,725 149

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CITY OF FORT MYERS Internal Service Funds Description Central Garage To account for repair operations and maintenance related to City-owned vehicles. Information Technology Services To account for the City s information systems, hardware, software and maintenance. Public Works Warehouse Operations To account for all inventory received into the warehouse along with the issues out to user departments. Risk Management To account for the activities related to general liability, auto liability and physical damage, police and firefighters professional liability and workers compensation provided to other departments of the City. 151

Combining Statement of Net Assets Internal Service Funds September 30, 2010 Central Garage Information Technology Services Public Works Warehouse Operations Risk Management Total ASSETS Current assets: Cash and cash equivalents $ 970,039 $ 416,272 $ - $ 6,962,777 $ 8,349,088 Investments 320,598 137,878-6,047,004 6,505,480 Restricted cash and cash equivalents - - - 3,337,569 3,337,569 Accounts receivable, net - - - 879 879 Interest receivable 2,234 960-23,530 26,724 Due from other governments - - - 267 267 Inventories 156,192-507,391-663,583 Prepaid items - 122,978-96,670 219,648 Total current assets 1,449,063 678,088 507,391 16,468,696 19,103,238 Noncurrent assets: Capital assets: Intangible assets - 88,860 - - 88,860 Buildings, net 6,513 - - - 6,513 Equipment, net 1,497,624 884,482-3,687 2,385,793 Total noncurrent assets 1,504,137 973,342-3,687 2,481,166 Total assets 2,953,200 1,651,430 507,391 16,472,383 21,584,404 LIABILITIES Current liabilities: Accounts and contracts payable 169,958 8,621 27,287 26,595 232,461 Accrued and other liabilities 10,814 73,371-5,052 89,237 Due to other funds - - 146,733-146,733 Compensated absences 11,440 6,363 4,300-22,103 Termination benefits 1,966 - - - 1,966 Claims and judgments - - - 2,347,700 2,347,700 Total current liabilities 194,178 88,355 178,320 2,379,347 2,840,200 Noncurrent liabilities: Compensated absences 32,632 67,089 1,246 5,794 106,761 Other postemployment benefits payable 86,355 120,242 7,963 15,479 230,039 Advances from other funds - - 200,000-200,000 Claims and judgments - - - 2,442,579 2,442,579 Total noncurrent liabilities 118,987 187,331 209,209 2,463,852 2,979,379 Total liabilities 313,165 275,686 387,529 4,843,199 5,819,579 NET ASSETS Invested in capital assets, net of related debt 1,504,137 973,342-3,687 2,481,166 Unrestricted 1,135,898 402,402 119,862 11,625,497 13,283,659 Total net assets $ 2,640,035 $ 1,375,744 $ 119,862 $ 11,629,184 $ 15,764,825 152

Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Internal Service Funds For the Year Ended September 30, 2010 Information Public Works Central Technology Warehouse Risk Garage Services Operations Management Total OPERATING REVENUES Charges for services $ 4,518,900 $ 4,445,100 $ 315,396 $ 5,092,628 $ 14,372,024 Miscellaneous 3,151 31-206,513 209,695 Total operating revenues 4,522,051 4,445,131 315,396 5,299,141 14,581,719 OPERATING EXPENSES Personal services 981,362 1,528,547 135,938 221,236 2,867,083 Contractual services 5,943 2,500 816 106,661 115,920 Materials and supplies 2,488,565 149,927 327,203 2,125 2,967,820 General and administrative 304,350 204,224-146,992 655,566 Utilities 43,197 531,646 - - 574,843 Depreciation 864,640 482,916-4,022 1,351,578 Insurance 33,700 5,100-1,296,246 1,335,046 Self insurance claims - - - 2,001,202 2,001,202 Repairs and maintenance 11,629 720,292 - - 731,921 Travel 1,895 10,990-271 13,156 Rentals 83,700 388,542 11,000 13,300 496,542 Total operating expenses 4,818,981 4,024,684 474,957 3,792,055 13,110,677 Operating income (loss) (296,930) 420,447 (159,561) 1,507,086 1,471,042 NONOPERATING REVENUES (EXPENSES) Interest income 11,426 3,594-104,048 119,068 Gain (loss) on disposal of capital assets 10,155 - - - 10,155 Total nonoperating revenues (expenses) 21,581 3,594-104,048 129,223 Income (loss) before contributions and transfers (275,349) 424,041 (159,561) 1,611,134 1,600,265 Contributions from other funds 57,478 - - - 57,478 Transfers out (1,700,000) (1,421,607) - (1,028,784) (4,150,391) Total contributions and transfers in (out) (1,642,522) (1,421,607) - (1,028,784) (4,092,913) Change in net assets (1,917,871) (997,566) (159,561) 582,350 (2,492,648) Total net assets - beginning 4,557,906 2,373,310 279,423 11,046,834 18,257,473 Total net assets - ending $ 2,640,035 $ 1,375,744 $ 119,862 $ 11,629,184 $ 15,764,825 153

Combining Statement of Cash Flows Internal Service Funds For the Year Ended September 30, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Central Garage Information Technology Services Public Works Warehouse Operations Cash received from customers $ 4,520,313 $ 4,445,100 $ 315,395 Cash payments to suppliers for goods and services (2,941,096) (2,139,281) (282,190) Cash payments to employees for services (965,991) (1,483,504) (128,655) Other operating revenue 3,151 31 - Net cash provided by (used in) operating activities 616,377 822,346 (95,450) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Decrease in due to other funds (15,000) (17,600) - Increase in due to other funds - - 95,450 Transfers in - 477 - Transfers out (1,700,000) (1,422,084) - Net cash provided by (used in) noncapital financing activities (1,715,000) (1,439,207) 95,450 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (84,036) (123,508) - Grants and private contributions 57,478 - - Proceeds from sale of capital assets 10,155 - - Net cash used in capital and related financing activities (16,403) (123,508) - CASH FLOWS FROM INVESTING ACTIVITIES Interest received on investments 17,990 7,868 - Purchase of investment securities - - - Proceeds from the sale of investments 164,422 123,105 - Net cash provided by (used in) investing activities 182,412 130,973 - Net increase (decrease) in cash and cash equivalents (932,614) (609,396) - Cash and cash equivalents at beginning of year 1,902,653 1,025,668 - Cash and cash equivalents at end of year $ 970,039 $ 416,272 $ - RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ (296,930) $ 420,447 $ (159,561) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 864,640 482,916 - Other postemployment benefits 24,125 38,559 3,316 Changes in assets and liabilities: Increase (decrease) in accounts payable - supplier 101,527 (67,991) (8,700) Decrease in compensated absences (1,818) 6,484 3,966 Decrease in customer receivables 1,413 - - (Increase) decrease in inventory (69,645) (58,069) 65,529 Decrease in benefits payable (6,935) - - Net cash provided by (used in) operating activities $ 616,377 $ 822,346 $ (95,450) Noncash investing, capital and financing activities: Interest receivable / unrealized gain (loss) $ (6,564) $ (4,274) $ - 154

Risk Management Total Internal Service $ 5,095,320 $ 14,376,128 (759,560) (6,122,127) (1,669,859) (4,248,009) 206,513 209,695 2,872,414 4,215,687 (3,200) (35,800) - 95,450-477 (1,028,784) (4,150,868) (1,031,984) (4,090,741) - (207,544) - 57,478-10,155 - (139,911) 97,824 123,682 (997,571) (997,571) 500 288,027 (899,247) (585,862) 941,183 (600,827) 9,359,163 12,287,484 $ 10,300,346 $ 11,686,657 $ 1,507,086 $ 1,471,042 4,022 1,351,578 5,476 71,476 204,962 229,798 1,852 10,484 2,692 4,105 1,146,324 1,084,139 - (6,935) $ 2,872,414 $ 4,215,687 $ 6,224 $ (4,614) 155

156

CITY OF FORT MYERS Fiduciary Funds Description Agency Funds These funds are used to account for monies that are collected by the City and held in a custodial capacity until remitted to the proper authority. Carillon Woods Special Assessment Geographical Area Fund To account for monies that are collected by the City and remitted to the bondholder. The City has met all the conditions in the bond resolution and no longer has any obligation for this debt. EMS Impact Fees Fund To account for the City s collection of impact fees for EMS services. The fees are remitted to the County. School Board Impact Fees Fund To account for the City s collection of impact fees for the School Board. The fees are remitted to the County. Unclaimed Funds Fund To account for funds that the City has been holding, and if not claimed, will eventually be remitted to the State of Florida. Employees Special Events Fund To account for money held for special events for the City s employees. The Special Events Committee raises its own funds and the City provides the tracking and accounting of those funds. 157

Combining Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended September 30, 2010 Balance September 30, 2009 Balance September 30, 2010 Additions Deletions Carillon Woods Special Assessment Geographical Area ASSETS Cash and short-term investments $ 7,000 $ 41,111 $ (37,299) $ 10,812 Certificate of deposits 220,749 2,744-223,493 Interest receivable 240 174 (240) 174 Deferred special assessments receivable 142,111 6,414 (41,004) 107,521 Total assets $ 370,100 $ 50,443 $ (78,543) $ 342,000 LIABILITIES Due to other funds $ 168 $ 45,271 $ (45,419) $ 20 Due to noteholders 369,932 5,172 (33,124) 341,980 Total liabilities $ 370,100 $ 50,443 $ (78,543) $ 342,000 EMS Impact Fees ASSETS Cash and short-term investments $ 5,883 $ 39,169 $ (40,419) $ 4,633 Interest receivable 10 24 (26) 8 Total assets $ 5,893 $ 39,193 $ (40,445) $ 4,641 LIABILITIES Due to other governmental agencies $ 5,893 $ 39,193 $ (40,445) $ 4,641 Total liabilities $ 5,893 $ 39,193 $ (40,445) $ 4,641 School Board Impact Fees ASSETS Cash and short-term investments $ 27,615 $ 301,392 $ (280,521) $ 48,486 Interest receivable 45 253 (214) 84 Total assets $ 27,660 $ 301,645 $ (280,735) $ 48,570 LIABILITIES Due to other governmental agencies $ 27,660 $ 301,645 $ (280,735) $ 48,570 Total liabilities $ 27,660 $ 301,645 $ (280,735) $ 48,570 Unclaimed Funds ASSETS Cash and short-term investments $ 6,406 $ 54,703 $ (54,472) $ 6,637 Total assets $ 6,406 $ 54,703 $ (54,472) $ 6,637 LIABILITIES Accrued and other liabilities $ 6,406 $ 54,703 $ (54,472) $ 6,637 Total liabilities $ 6,406 $ 54,703 $ (54,472) $ 6,637 Employees' Special Events ASSETS Cash and short-term investments $ 29,622 $ 44,028 $ (41,780) $ 31,870 Interest receivable 48 166 (159) 55 Total assets $ 29,670 $ 44,194 $ (41,939) $ 31,925 LIABILITIES Accounts Payable $ 308 $ 33,467 $ (31,355) $ 2,420 Accrued and other liabilities 29,362 10,727 (10,584) 29,505 Total liabilities $ 29,670 $ 44,194 $ (41,939) $ 31,925 Total - All Agency Funds ASSETS Cash and short-term investments $ 76,526 $ 480,403 $ (454,491) $ 102,438 Certificate of deposits 220,749 2,744-223,493 Deferred special assessments receivable 142,111 6,414 (41,004) 107,521 Interest receivable 343 617 (639) 321 Total assets $ 439,729 $ 490,178 $ (496,134) $ 433,773 LIABILITIES Accounts and contracts payable $ 308 $ 33,467 $ (31,355) $ 2,420 Accrued and other liabilities 35,768 65,430 (65,056) 36,142 Due to other governmental agencies 33,553 340,838 (321,180) 53,211 Due to other funds 168 45,271 (45,419) 20 Due to noteholders 369,932 5,172 (33,124) 341,980 Total liabilities $ 439,729 $ 490,178 $ (496,134) $ 433,773 158

CITY OF FORT MYERS Capital Assets Used in the Operation of Governmental Funds 159

Capital Assets Used in the Operation of Governmental Funds (1) Comparative Schedules by Source September 30, 2010 Governmental Funds Capital Assets: 2010 2009 Land $ 24,456,654 $ 27,060,268 Land (Infill Development) 488,452 505,466 Buildings 19,798,249 19,798,249 Improvements other than buildings 37,297,476 35,664,487 Machinery and Equipment 12,380,205 12,432,748 Infrastructure 234,735,212 231,566,699 Antiques and Museum Pieces 900,427 900,427 Intangibles 3,400,521 - Construction in progress 11,233,041 5,713,624 Total government funds capital assets $ 344,690,237 $ 333,641,968 Investment in Governmental Funds Capital Assets by Source: General Fund $ 188,627,486 $ 188,668,754 Capital Projects Funds 151,377,380 140,318,680 Donations 4,685,371 4,654,534 Total investment in governmental fund capital assets $ 344,690,237 $ 333,641,968 (1) This schedule presents only the capital asset balances, at cost, related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 160

Capital Assets Used in the Operation of Governmental Funds (1) Schedule by Function and Activity September 30, 2010 General Government Function and Activity Land Buildings Improvements Other than Buildings Equipment Council $ 58,296 $ 7,000 $ - $ 23,512 Financial and administrative - 308,401-173,301 Comprehensive planning 348,544 158,734 191,374 - Other general government 488,473 883,311 5,145,110 1,736,416 Total General Government 895,313 1,357,446 5,336,484 1,933,229 Public Safety Law Enforcement - 475,071 980,654 3,766,325 Fire 4,017,108 2,025,575 126,942 4,783,675 Protective Inspections 9,614-289,107 61,432 Total Public Safety 4,026,722 2,500,646 1,396,703 8,611,432 Physical Environment Conservation and resource management 14,350-2,789,264 17,834 Other physical environment 82,850 398,496 57,631 503,097 Total Physical Environment 97,200 398,496 2,846,895 520,931 Transportation Road and street facilities 4,988,286 38,020 134,629 440,205 Parking facilities - - 25,120 91,667 Other transportation 196,171 575,885 631,024 - Total Transportation 5,184,457 613,905 790,773 531,872 Economic Environment Industry development 475,000 520,230 4,879,877 88,099 Other economic environment 1,336,580 185,000 422,143 - Total Economic Environment 1,811,580 705,230 5,302,020 88,099 Culture and Recreation Parks and recreation 2,693,042 4,343,188 10,436,568 672,373 Special recreation facilities 10,236,792 9,868,800 10,755,721 10,605 Other culture and recreation - 10,538 432,312 11,664 Total Culture and Recreation 12,929,834 14,222,526 21,624,601 694,642 Construction in progress - - - - Total government funds capital assets $ 24,945,106 $ 19,798,249 $ 37,297,476 $ 12,380,205 (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 161

Capital Assets Used in the Operation of Governmental Funds (1) Schedule by Function and Activity September 30, 2010 Function and Activity General Government Infrastructure Antiques and Museum Pieces Intangibles Construction in Progress Council $ - $ - $ - $ - $ 88,808 Financial and administrative - - - - 481,702 Comprehensive planning - - - - 698,652 Other general government - - 3,086,591-11,339,901 Total General Government - - 3,086,591-12,609,063 Public Safety Law Enforcement - - - - 5,222,050 Fire - - - - 10,953,300 Protective Inspections - - - - 360,153 Total Public Safety - - - - 16,535,503 Physical Environment Conservation and resource management - - - - 2,821,448 Other physical environment - - - - 1,042,074 Total Physical Environment - - - - 3,863,522 Transportation Road and street facilities 230,260,246-313,930-236,175,316 Parking facilities - - - - 116,787 Other transportation 3,557,837 - - - 4,960,917 Total Transportation 233,818,083-313,930-241,253,020 Economic Environment Industry development - - - - 5,963,206 Other economic environment - - - - 1,943,723 Total Economic Environment - - - - 7,906,929 Culture and Recreation Parks and recreation 917,129 - - - 19,062,300 Special recreation facilities - 900,427 - - 31,772,345 Other culture and recreation - - - - 454,514 Total Culture and Recreation 917,129 900,427 - - 51,289,159 Construction in progress - - - 11,233,041 11,233,041 Total government funds capital assets $ 234,735,212 $ 900,427 $ 3,400,521 $ 11,233,041 $ 344,690,237 Total (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 162

Capital Assets Used in the Operation of Governmental Funds (1) Schedule of Changes by Function and Activity September 30, 2010 Function and Activity General Government Balance September 30, 2009 Additions Deletions Balance September 30, 2010 Council $ 88,808 $ - $ - $ 88,808 Financial and administrative 481,702 - - 481,702 Comprehensive planning 698,652 - - 698,652 Other general government 10,904,817 452,096 (17,012) 11,339,901 Total General Government 12,173,979 452,096 (17,012) 12,609,063 Public Safety Law Enforcement 4,928,366 308,919 (15,235) 5,222,050 Fire 10,981,051 171,916 (199,667) 10,953,300 Protective Inspections 360,153 - - 360,153 Total Public Safety 16,269,570 480,835 (214,902) 16,535,503 Physical Environment Conservation and resource management 2,821,448 - - 2,821,448 Other physical environment 1,027,374 14,700-1,042,074 Total Physical Environment 3,848,822 14,700-3,863,522 Transportation Road and street facilities 235,963,655 211,661-236,175,316 Parking facilities 116,787 - - 116,787 Other transportation 840,143 4,120,774-4,960,917 Total Transportation 236,920,585 4,332,435-241,253,020 Economic Environment Industry development 5,926,442 36,764-5,963,206 Other economic environment 1,521,580 422,143-1,943,723 Total Economic Environment 7,448,022 458,907-7,906,929 Culture and Recreation Parks and recreation 19,120,439 - (58,139) 19,062,300 Special recreation facilities 31,772,345 - - 31,772,345 Other Culture and Recreation 374,582 79,932-454,514 Total culture and recreation 51,267,366 79,932 (58,139) 51,289,159 Construction in progress 5,713,624 8,655,564 (3,136,147) 11,233,041 Total government funds capital assets $ 333,641,968 $ 14,474,469 $ (3,426,200) $ 344,690,237 (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 163

164

Statistical Section

CITY OF FORT MYERS Statistical Section This part of the City of Fort Myers s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures and required supplementary information says about the City s overall financial health. Contents Page Financial Trends 166 These schedules contain trend information to help the reader understand how the City s financial performance and well-being have changed over time. Revenue Capacity 174 These schedules contain information to help the reader assess the City s most significant revenue sources, the property tax and water and wastewater sales. Debt Capacity 178 These schedules present information to help the reader assess the affordability of the City s current levels of outstanding debt and the City s ability to issue additional debt in the future. Note: The Constitution of the State of Florida (FS200.181) and the City of Fort Myers set no legal debt limit. Demographic and Economic Information 186 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City s financial activities take place. Operating Information 187 These schedules contain service data to help the reader understand how the information in the City s financial report relates to the services the City provides and the activities it performs. 165

Schedule 1 - Net Assets by Component Last Eight Fiscal Years (accrual basis of accounting) 2003 2004 2005 Governmental activities Invested in capital assets, net of related debt $ (40,995,030) $ (31,182,834) $ (31,745,240) Restricted Capital projects 4,995,487 20,281,526 22,460,276 Culture & recreation - - - Debt service 9,700,188 5,202,726 5,563,914 Economic environment - - - General government - - - Impact fee projects - - - Public safety: Expendable - - - Nonexpendable - - - Renewal and replacement - - - Transportation - - - Community development projects 1,449,051 2,230,167 1,291,775 Other purposes 2,531,639 2,328,766 2,671,262 Unrestricted 11,560,226 (10,889,551) 9,116,853 Total governmental activities net assets $ (10,758,439) $ (12,029,200) $ 9,358,840 Business-type activities Invested in capital assets, net of related debt $ 21,931,360 $ 34,620,053 $ 32,871,231 Restricted Capital projects 462,441 799,897 3,513,430 Culture & recreation - - - Debt service 5,391,677 7,121,780 6,286,650 Impact fee projects 2,714,424 1,904,637 2,650,934 Physical environment - - - Public safety - - - Renewal and replacement 1,625,037 2,948,675 5,022,800 Transportation - - - Operations and maintenance 18,156 3,597,043 4,381,071 Other purposes - 1,959,223 - Unrestricted 6,187,701 (2,978,319) 15,610,564 Total business-type activities net assets $ 38,330,796 $ 49,972,989 $ 70,336,680 Primary government Invested in capital assets, net of related debt $ (19,063,670) $ 3,437,219 $ 1,125,991 Restricted Capital projects 5,457,928 21,081,423 25,973,706 Culture & recreation - - - Debt service 15,091,865 12,324,506 11,850,564 Economic environment - - - General government - - - Impact fee projects 2,714,424 1,904,637 2,650,934 Physical environment - - - Public safety: Expendable - - - Nonexpendable - - - Renewal and replacement 1,625,037 2,948,675 5,022,800 Transportation - - - Community development projects 1,449,051 2,230,167 1,291,775 Operations and maintenance 18,156 3,597,043 4,381,071 Other purposes 2,531,639 4,287,989 2,671,262 Unrestricted 17,747,927 (13,867,870) 24,727,417 Total primary government net assets $ 27,572,357 $ 37,943,789 $ 79,695,520 166

Schedule 1 - Net Assets by Component (continued) Last Eight Fiscal Years (accrual basis of accounting) 2006 2007 2008 2009 2010 $ 20,470,042 (1) $ 34,487,088 $ 43,367,922 $ 40,276,557 $ 46,344,509 25,862,555 22,751,244 42,577,813 46,286,423 51,823,762-260,789 276,244 280,019 255,071 4,555,317 6,119,514 6,662,297 6,991,217 7,135,436-5,860,914 (2) 7,509,337 9,267,781 8,305,107-1,314,159 1,276,433 1,255,036 1,271,958-34,824,240 22,540,220 21,822,142 19,039,083-3,646,476 2,193,757 2,121,578 1,862,166-2,000 2,000 2,000 2,000-560,448 640,338 688,227 619,991-1,902,651 1,097,513 1,347,675 2,000,218 1,347,833 - - - - 3,820,055 - - - - 37,033,475 (1) 26,720,050 27,802,898 29,110,288 19,333,583 $ 93,089,277 (1) $ 138,449,573 (2) $ 155,946,772 $ 159,448,943 $ 157,992,884 $ 30,338,162 $ 54,548,382 (2) $ 53,546,225 (3) $ 73,491,549 $ 80,328,915 14,891,747 141,342 12,071,684 6,075,450 1,198,244-192,390 - - 28 10,641,510 7,106,456 5,335,395 9,552,634 11,400,208 3,785,913 4,469,102 5,788,394 2,839,477 972,235-4,708,732 20,814 201,877 142,889-101,230 - - - 4,096,616 3,616,097 5,425,078 6,074,195 6,121,090-28,601 17,430 12,005 7,347 11,660,878 - - - - - - - - - 12,352,612 (1) 31,211,703 28,307,366 23,926,440 21,024,664 $ 87,767,438 (1) $ 106,124,035 (2) $ 110,512,386 (3) $ 122,173,627 $ 121,195,620 $ 50,808,204 (1) $ 89,035,470 $ 96,914,147 (3) $ 113,768,106 $ 126,673,424 40,754,302 22,892,586 54,649,497 52,361,873 53,022,006-453,179 276,244 280,019 255,099 15,196,827 13,225,970 11,997,692 16,543,851 18,535,644-5,358,507 7,509,337 9,267,781 8,305,107-1,314,159 1,276,433 1,255,036 1,271,958 3,785,913 39,293,342 28,328,614 24,661,619 20,011,318-4,708,732 20,814 201,877 142,889-3,747,706 2,193,757 2,121,578 1,862,166-2,000 2,000 2,000 2,000 4,096,616 4,176,545 6,065,416 6,762,422 6,741,081-1,931,252 1,114,943 1,359,680 2,007,565 1,347,833 - - - - 11,660,878 - - - - 3,820,055 - - - - 49,386,087 58,434,160 (2) 56,110,264 53,036,728 40,358,247 $ 180,856,715 (1) $ 244,573,608 (2) $ 266,459,158 (3) $ 281,622,570 $ 279,188,504 Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. (1) Restated per Note 8 in FY 2007. (2) Restated per Note 8 in FY 2008. (3) Restated per Note 6 in FY 2010. 167

Schedule 2 - Changes in Net Assets Last Eight Fiscal Years (accrual basis of accounting) Expenses 2003 2004 2005 Governmental activities: General government $ 4,706,677 $ 5,021,131 $ 7,422,156 Police 17,035,059 19,612,239 20,437,591 Fire 9,508,859 10,423,509 12,028,065 Protective inspections 1,153,655 1,775,111 2,057,353 Other 132,209 76,199 - Physical environment 3,990,051 7,743,144 5,026,688 Transportation 4,250,237 4,017,322 4,321,224 Economic environment 11,175,866 11,713,598 12,819,838 Culture & recreation 3,553,746 2,665,106 2,844,748 Interest on long-term debt 6,793,068 4,528,927 5,242,840 Total governmental activities expenses 62,299,427 67,576,286 72,200,503 Business-type activities: Utilities 24,231,507 25,794,035 27,369,279 Solid Waste 6,828,184 6,705,705 7,543,459 Permitting and Inspection 1,529,035 2,110,272 3,079,786 Stormwater - - - Historical Homes 5,388,760 5,600,816 5,212,204 Department of Cultural and Historical Affairs (3) - - - Downtown Parking - - - Golf Courses 2,850,346 2,914,373 2,988,419 Skatium - - - Yacht Basin 1,540,247 1,872,794 2,073,777 Harborside Event Center 1,582,598 1,629,205 2,004,218 Total business-type activities expenses 43,950,677 46,627,200 50,271,142 Total primary government expenses $ 106,250,104 $ 114,203,486 $ 122,471,645 Program Revenues Governmental activities: Charges for services: General government $ 467,343 $ 382,190 $ 421,660 Police 1,124,825 1,088,770 1,477,845 Fire 796,344 1,147,250 1,635,872 Protective inspections 1,847,892 2,140,524 3,210,468 Other public safety 166,394 189,894 - Physical environment 638,277 1,318,694 2,115,151 Transportation 1,093,802 974,323 897,439 Economic environment 12,380 8,611 11,904 Culture & recreation 750,679 537,649 386,808 Operating grants and contributions 12,559,681 5,280,845 13,515,314 Capital grants and contributions 6,126,385 9,360,318 11,461,804 Total governmental activities program revenues 25,584,002 22,429,068 35,134,265 Business type activities: Charges for services: Utilities 27,741,538 32,931,521 42,579,919 Solid Waste 9,958,222 10,288,935 10,957,668 Permitting and Inspection 1,783,936 3,353,767 5,018,610 Stormwater - - - Historical Homes 4,140,058 3,870,333 4,101,195 Department of Cultural and Historical Affairs (3) - - - Downtown Parking - - - Golf Courses 2,831,324 2,999,924 3,157,210 Skatium - - - Yacht Basin 1,847,284 1,988,904 2,220,849 Harborside Event Center 785,423 846,749 1,037,772 Operating grants and contributions 48,660 84,204 96,689 Capital grants and contributions 135,409 5,331,177 5,852,210 Total business-type activities program revenues 49,271,854 61,695,514 75,022,122 Total primary government program revenues $ 74,855,856 $ 84,124,582 $ 110,156,387 Net (Expense)/Revenue Government activities $ (36,715,425) $ (45,147,218) $ (37,066,238) Business-type activities 5,321,177 15,068,314 24,750,980 Total primary government net expense $ (31,394,248) $ (30,078,904) $ (12,315,258) 168

Schedule 2 - Changes in Net Assets (continued) Last Eight Fiscal Years (accrual basis of accounting) 2006 2007 2008 2009 2010 $ 11,150,038 $ 18,412,703 $ 16,492,461 $ 17,629,323 $ 16,675,130 22,782,979 27,757,527 31,773,124 29,213,985 31,887,208 14,307,615 17,417,874 20,194,245 17,983,913 16,722,815 2,331,605 2,641,533 2,778,609 2,402,582 1,555,000 69,939-16,738 - - 7,608,612 6,866,875 7,621,568 3,248,941 2,357,311 6,844,796 12,558,630 12,777,745 13,144,626 11,558,730 11,070,787 4,413,260 4,984,291 7,131,285 7,830,674 3,367,159 2,289,921 4,195,004 4,158,147 3,781,245 4,890,033 5,880,340 5,455,071 5,314,097 3,658,929 84,423,563 98,238,663 106,288,856 100,226,899 96,027,042 32,752,832 36,136,629 39,689,601 36,707,074 45,914,665 10,134,684 11,221,911 12,242,537 11,069,317 10,541,992 3,785,956 4,543,886 4,895,643 3,913,932 2,688,251 - - - 1,640,896 2,053,906 6,606,002 1,923,733 1,962,904 1,703,697 - - - - - 1,757,457-995,977 979,551 1,028,549 1,026,229 2,893,019 3,038,786 3,690,953 3,321,542 3,273,457-869,171 1,140,585 1,252,056 1,174,152 2,459,101 2,271,326 2,236,830 2,100,472 2,399,954 2,065,603 2,173,280 2,184,100 2,156,990 2,215,480 60,697,197 63,174,699 69,022,704 64,894,525 73,045,543 $ 145,120,760 $ 161,413,362 $ 175,311,560 $ 165,121,424 $ 169,072,585 $ 860,044 $ 1,219,844 $ 1,201,287 $ 597,963 $ 520,803 1,624,696 1,846,531 2,506,830 2,077,930 1,875,559 2,238,483 2,040,100 1,369,961 661,709 556,050 3,766,564 3,408,549 2,743,051 2,452,451 2,610,984 - - - - - 5,018,116 4,034,897 3,403,086 460,202 405,602 881,853 314,907 393,104 650-96,948 190,179 195,428 95,203 115,648 1,161,852 1,108,748 925,664 528,214 446,435 11,591,841 3,211,837 2,909,707 3,233,726 4,881,791 10,132,435 33,886,717 18,611,350 7,754,113 7,261,760 37,372,832 51,262,309 34,259,468 17,862,161 18,674,632 44,690,090 42,791,290 43,495,343 45,692,290 48,300,544 13,982,379 15,032,009 15,829,218 13,973,878 14,123,999 7,133,301 5,189,047 3,181,581 1,581,669 1,707,358 - - - 1,703,563 2,848,845 3,889,273 583,770 530,150 492,281 - - - - - 698,065-896,431 926,002 794,992 743,828 3,154,236 2,988,967 2,861,898 3,132,618 3,006,715-649,017 819,592 868,286 967,376 2,291,421 1,943,558 1,882,893 1,771,060 1,949,748 1,255,948 1,211,109 1,009,546 822,205 796,651 73,706 34,627 20,318 21,339 17,725 1,777,206 13,743,922 8,159,203 10,022,669 1,021,427 78,247,560 85,063,747 78,715,744 80,876,850 76,182,281 $ 115,620,392 $ 136,326,056 $ 112,975,212 $ 98,739,011 $ 94,856,913 $ (47,050,731) $ (46,976,354) $ (72,029,388) $ (82,364,738) $ (77,352,410) 17,550,363 21,889,048 9,693,040 15,982,325 3,136,738 $ (29,500,368) $ (25,087,306) $ (62,336,348) $ (66,382,413) $ (74,215,672) 169

Schedule 2 - Changes in Net Assets (continued) Last Eight Fiscal Years (accrual basis of accounting) 2003 2004 2005 General Revenues and Other Changes in Net Assets Governmental activities: Taxes Property taxes $ 19,256,514 $ 22,246,598 $ 23,278,536 Public service taxes 8,181,942 8,359,050 9,072,046 Franchise fees 3,171,205 3,595,504 4,091,067 Fuel taxes 3,810,615 4,166,216 4,421,926 Intergovernmental, unrestricted 5,315,316 16,402,012 7,230,199 Interest and investment income 290,951 493,400 1,405,519 Miscellaneous 748,791 1,723,735 3,648,960 Special Item - loss on disposal of capital assets - (16,331,552) (1) - Transfers 2,844,123 3,221,494 5,306,025 Total governmental activities 43,619,457 43,876,457 58,454,278 Business-type activities: Intergovernmental, unrestricted - 2,089 - Interest and investment income 186,683 161,260 600,800 Miscellaneous 17,815 3,553 317,936 Special Item - loss on disposal of capital assets - (371,529) - Extraordinary item - loss on disposal of capital assets - - - Transfers (2,844,123) (3,221,494) (5,306,025) Total business-type activities (2,639,625) (3,426,121) (4,387,289) Total primary government $ 40,979,832 $ 40,450,336 $ 54,066,989 Change in Net Assets Governmental activities $ 6,904,032 $ (1,270,761) $ 21,388,040 Business-type activities 2,681,552 11,642,193 20,363,691 Total primary government $ 9,585,584 $ 10,371,432 $ 41,751,731 Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. (1) In 2004, the City of Fort Myers sold the Boston Red Sox training stadium to Lee County. CITY OF FORT MYERS, FLORIDA Schedule 3 - Fund Balances, Governmental Funds Last Eight Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 General Fund Reserved $ 1,012,743 $ 849,555 $ 1,120,794 Unreserved 11,839,330 11,211,591 14,505,594 Total general fund $ 12,852,073 $ 12,061,146 $ 15,626,388 All Other Governmental Funds (1) Reserved $ 19,142,147 $ 30,529,253 $ 31,989,227 Unreserved, reported in: Special revenue funds 1,167,118 1,961,679 5,172,123 Capital projects funds 2,165,224 (2,106,664) 10,183,782 Total all other governmental funds $ 22,474,489 $ 30,384,268 $ 47,345,132 Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. (1) Values have been restated for All Other Governmental Funds for fiscal years 2003-2007 to include all Governmental Funds except the General Fund. Previously, only non-major governmental funds were stated and major governmental funds were not included in this value. 170

Schedule 2 - Changes in Net Assets (continued) Last Eight Fiscal Years (accrual basis of accounting) 2006 2007 2008 2009 2010 $ 30,911,466 $ 42,003,527 $ 45,442,009 $ 50,344,893 $ 40,719,474 9,695,679 10,079,097 10,409,177 10,457,952 9,241,071 5,142,126 5,639,004 5,848,743 6,003,066 5,276,818 4,673,335 4,628,004 4,310,420 4,213,436 4,096,370 12,675,556 9,489,130 8,765,202 8,321,085 6,957,210 3,525,314 7,290,750 6,315,299 3,942,860 1,828,164 2,897,638 2,050,485 1,226,523 1,077,076 864,496 - - 1,044,902 (2,329,858) - 3,490,982 10,654,246 6,164,312 3,836,399 6,912,748 73,012,096 91,834,243 89,526,587 85,866,909 75,896,351-3,420 1,566 - - 1,381,079 1,722,726 1,266,242 1,469,320 820,299 488,161 154,688 84,861 55,927 1,977,704 - - (493,046) - - (2) - (516,073) - - - (3,490,982) (10,654,246) (6,164,312) (3,836,399) (6,912,748) (1,621,742) (9,289,485) (5,304,689) (2,311,152) (4,114,745) $ 71,390,354 $ 82,544,758 $ 84,221,898 $ 83,555,757 $ 71,781,606 $ 25,961,365 $ 44,857,889 $ 17,497,199 $ 3,502,171 $ (1,456,059) 15,928,621 12,599,563 4,388,351 13,671,173 (978,007) $ 41,889,986 $ 57,457,452 $ 21,885,550 $ 17,173,344 $ (2,434,066) (2) (3) Footnote 22 in the CAFR for fiscal year ended September 30, 2007, provides an explanation on the loss on disposal of capital assets in 2007. Department of Cultural and Historical Affairs created by transfers of Historical Homes. CITY OF FORT MYERS, FLORIDA Schedule 3 - Fund Balances, Governmental Funds (continued) Last Eight Fiscal Years (modified accrual basis of accounting) 2006 2007 2008 2009 2010 $ 1,287,959 $ 1,314,159 $ 1,540,770 $ 1,255,036 $ 1,271,958 23,215,067 (2) 21,025,858 18,063,808 19,723,995 19,998,351 $ 24,503,026 (2) $ 22,340,017 $ 19,604,578 $ 20,979,031 $ 21,270,309 $ 37,166,835 $ 121,821,668 (3) $ 113,732,754 $ 99,854,714 $ 95,437,304 6,962,824 4,506,934 6,389,138 17,833,739 16,436,871 8,216,309 54,084 3,848,509 3,130,483 4,010,693 $ 52,345,968 $ 126,382,686 (3) $ 123,970,401 $ 120,818,936 $ 115,884,868 (2) (3) Restated per Note 8 in FY 2007. Restated per Note 8 in FY 2008. 171

Schedule 4 - Changes in Fund Balances, Governmental Funds Last Eight Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 Revenues Taxes $ 34,420,273 $ 38,367,367 $ 40,863,573 Licenses and permits 2,629,228 3,558,867 5,493,994 Intergovernmental revenue 18,434,148 21,003,688 24,021,809 Charges for services 2,515,158 2,670,077 2,818,568 Fines and forfeitures 1,025,235 1,016,186 1,366,138 Miscellaneous 11,132,686 13,580,032 19,061,604 Contributions-private source - - - Total revenues 70,156,728 80,196,217 93,625,686 Expenditures General government 6,964,442 8,035,630 9,149,117 Police 15,701,817 19,205,722 19,844,548 Fire 8,564,518 9,882,593 11,941,015 Protective inspections 1,190,015 1,853,761 2,181,067 Other 69,807 76,304 79,436 Physical environment 4,010,944 7,435,134 6,746,038 Transportation 3,173,618 3,186,708 4,060,018 Economic environment 11,248,546 11,346,696 11,382,239 Culture and recreation 1,916,367 1,882,958 2,057,640 Debt service Principal retirement 3,982,952 19,232,805 5,678,595 Interest and fiscal charges 5,317,525 5,034,609 5,090,152 Capital outlay 6,071,541 7,320,141 8,311,087 Total expenditures 68,212,092 94,493,061 86,520,952 Excess (deficiency) of revenues over expenditures 1,944,636 (14,296,844) 7,104,734 Other Financing Sources (Uses) Proceeds from capital lease 145,000 162,000 - Refunding bonds issued 20,625,000-4,970,000 Loan issuance 1,000,000 18,439,250 10,239,158 Premiums on bonds issued 265,996 60,500 162,030 Payments to bond escrow agent (20,605,500) - (6,184,141) Installment purchase proceeds - - - Transfers in 19,789,927 38,924,918 31,325,838 Transfers out (17,628,385) (36,170,972) (27,091,513) Total other financing sources (uses) 3,592,038 21,415,696 13,421,372 Net change in fund balances $ 5,536,674 $ 7,118,852 $ 20,526,106 Debt service as a percentage of noncapital expenditures 15.0% 27.8% 13.8% 172

Schedule 4 - Changes in Fund Balances, Governmental Funds (continued) Last Eight Fiscal Years (modified accrual basis of accounting) 2006 2007 2008 2009 2010 $ 50,355,834 $ 63,744,859 $ 67,214,000 $ 72,460,443 $ 56,023,267 7,119,353 5,800,522 3,945,544 2,653,764 7,769,030 22,971,635 12,128,101 15,152,934 14,436,061 15,200,316 3,051,386 2,463,448 2,338,282 2,049,235 1,904,872 1,564,364 1,336,678 1,746,548 1,710,236 1,627,787 20,814,296 42,903,188 23,565,634 11,252,513 8,967,946 1,042,629 1,772,843 495,302 84,019 109,246 106,919,497 130,149,639 114,458,244 104,646,271 91,602,464 10,002,264 12,005,049 12,899,973 12,403,450 11,127,904 22,932,514 29,803,835 30,804,324 31,121,908 31,927,083 13,354,210 17,290,483 18,849,554 18,354,021 16,175,874 2,370,527 2,891,600 2,686,967 2,736,868 1,805,083 69,939-16,738 - - 7,864,910 8,271,487 7,771,282 6,487,206 5,384,552 4,337,370 3,754,163 4,044,298 4,016,411 3,556,950 10,860,506 4,198,947 4,851,521 6,548,851 7,402,593 2,914,911 3,392,226 3,779,986 3,984,351 3,646,629 5,915,268 8,944,701 5,864,143 8,008,654 7,725,115 4,964,219 7,198,993 6,226,430 6,413,745 6,305,523 11,332,507 14,626,593 29,261,241 14,973,154 12,251,087 96,919,145 112,378,077 127,056,457 115,048,619 107,308,393 10,000,352 17,771,562 (12,598,213) (10,402,348) (15,705,929) - - - - - - 91,938,640 - - - 350,728 698,122 475,000 1,183,982 - - 3,624,802 - - - - (44,084,776) - - - - - 165,165 - - 29,971,744 85,420,893 42,781,199 37,706,723 35,596,761 (26,480,760) (83,997,941) (35,970,875) (30,265,369) (24,533,622) 3,841,712 53,599,740 7,450,489 8,625,336 11,063,139 $ 13,842,064 $ 71,371,302 $ (5,147,724) $ (1,777,012) $ (4,642,790) 12.7% 16.5% 12.4% 14.4% 14.8% Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. 173

Schedule 5 - Assessed Value and Estimated Value of Taxable Property Last Ten Fiscal Years ($ in thousands) Estimated Assessed Total Total Taxable Total Actual Value as a Tax Real Personal Assessed Allowable Assessed Direct Assessed Percentage of Year (1) Property Property Value Exemptions (2) Value Tax Rate Value (3) Actual Value (4) 2000 $ 2,479,783 $ 434,366 $ 2,914,149 $ 836,185 $ 2,077,964 5.7816 $ 2,913,987 71.31% 2001 2,629,771 464,512 3,094,283 884,465 2,209,818 7.7816 3,094,116 71.42% 2002 2,789,657 549,820 3,339,477 903,408 2,436,069 7.7816 3,339,368 72.95% 2003 3,186,259 626,590 3,812,849 1,016,964 2,795,885 7.7816 3,812,744 73.33% 2004 3,830,193 615,440 4,445,633 1,326,374 3,119,259 7.2100 4,445,922 70.16% 2005 5,298,629 679,982 5,978,611 1,877,768 4,100,843 7.2100 5,978,777 68.59% 2006 7,457,263 751,407 8,208,670 2,272,274 5,936,396 6.8000 8,208,512 72.32% 2007 8,718,202 800,698 9,518,900 2,474,874 7,044,026 6.2560 9,518,954 74.00% 2008 8,552,631 824,237 9,376,868 2,530,069 6,846,799 7.1634 9,376,608 73.02% 2009 6,418,351 802,995 7,221,346 1,837,252 5,384,094 7.4000 7,221,156 74.56% Source: Lee County Property Appraiser (1) Calendar year basis. (2) Allowable exemptions include the assessment differential value of capped parcels, which is more commonly known as the "Save Our Homes" constitutional amendment. (3) Estimated actual value is calculated by dividing total taxable assessed value by assessed value as a percentage of actual value. (4) Florida Statutes require assessments at just valuation. CITY OF FORT MYERS, FLORIDA Schedule 6 - Property Tax Rates - Direct and Overlapping Governments Last Ten Fiscal Years (per $1,000 of assessed value) City of Fort Myers Direct Rates Overlapping Rates GO Debt Total Lee School Total Direct & Tax Fiscal Operating Service Direct County District Overlapping Year (1) Year Millage (2) Millage Tax Rate General Other (3) Millage Rates (4) 2000 2000/01 5.7816 0.0000 5.7816 4.3277 3.1077 8.798 22.0150 2001 2001/02 7.7816 0.0000 7.7816 4.3277 3.1077 8.478 23.6950 2002 2002/03 7.7816 0.0000 7.7816 4.3277 3.0745 8.572 23.7558 2003 2003/04 7.7816 0.0000 7.7816 4.3277 3.0403 8.346 23.4956 2004 2004/05 7.2100 0.0000 7.2100 4.2612 2.6562 8.065 22.1924 2005 2005/06 7.2100 0.0000 7.2100 3.9332 2.6091 7.882 21.6343 2006 2006/07 6.8000 0.0000 6.8000 3.5216 2.2909 7.012 19.6245 2007 2007/08 6.2560 0.0000 6.2560 3.6506 1.7276 6.960 18.5942 2008 2008/09 7.1634 0.0000 7.1634 3.6506 1.6328 6.868 19.3148 2009 2009/10 7.4000 0.0000 7.4000 3.6506 1.6887 7.508 20.2473 Source: Lee County Tax Collector (1) Calendar year basis. (2) The city's operating millage tax rate may be increased only by a majority vote of the City Council. (3) 'Other' consists of Lee County Capital Improvement, Lee County Library Fund, Lee County All Hazards, and other Special Districts. (4) Total Direct and Overlapping Rates changed in fiscal year 2010 due to the addition of other overlapping rates. 174

Schedule 7 - Principal Property Tax Payers September 30, 2010 Current Year and Nine Years Ago ($ in thousands) 2010 (1) 2001 (2) Percentage of Percentage of Taxable Total Taxable Taxable Total Taxable Assessed Assessed Assessed Assessed Taxpayer Valuation Rank Value Valuation Rank Value Edison Mall Business Trust $ 87,734 1 1.63% $ 88,347 1 4.25% Gulf Stream Isles Apartments 19,081 2 0.35% Wal-Mart Stores East LP 16,123 3 0.30% Cypress Woods Associates LLC 12,969 4 0.24% Colonial Metro Properties LLC 12,792 5 0.24% Fort Myers Toyota Inc. 12,441 6 0.23% Colonial Fort Myers Apartments 11,669 7 0.22% Gulf Stream East LLC 11,141 8 0.21% Sam Galloway Ford Inc. 10,822 9 0.20% Cypress Legends LLC 10,620 10 0.20% TGM Gulfstream Inc. 32,825 2 1.58% Merry Land & Investments Co. Inc. 25,600 3 1.23% SW Florida Regional Medical Center 23,702 4 1.14% SptMrt Properties Trust 18,789 5 0.90% Amtel Group of Florida, Inc. 16,690 6 0.80% Huron Ft Myers, Inc 16,096 7 0.77% US Home 13,804 8 0.66% Feinstein Family Partnership 12,258 9 0.59% Sam Galloway Ford, Inc. 10,372 10 0.50% Total $ 205,392 3.82% $ 258,483 12.42% Source: (1) Lee County Property Appraiser - 2009 Tax Roll City of Fort Myers Budget Office - FY 2009-10 Budget Book (2) Lee County Property Appraiser - 2000 Tax Roll City of Fort Myers CAFR September 30, 2001 Notes: 2009 Total Taxable Assessed Value for Fiscal Year 2010 is $ 5,384,094. 2000 Total Taxable Assessed Value for Fiscal Year 2001 is $ 2,077,963. The comparative percentages in the 2001 CAFR are dissimilar due to the fact that Total Assessed Value was used as the basis of that calculation, whereas, total Taxable Assessed Value is used as the basis above in accordance with GASB 44. 175

Schedule 8 - Property Tax Levies and Collections Last Ten Tax Years ($ in thousands) Total Current Percent Prior Years Total Total Collections Tax Tax Tax Levy Tax Tax as Percent of Year (1) Levy Collections Collected Collections (2) Collections Current Levy 2000 $ 12,042 $ 11,852 98.4% $ 117 $ 11,969 99.4% 2001 17,238 17,082 99.1% 46 17,128 99.4% 2002 18,957 18,277 96.4% 560 18,837 99.4% 2003 21,813 21,095 96.7% 30 21,125 96.8% 2004 22,408 22,062 98.5% 42 22,104 98.6% 2005 29,306 28,988 98.9% 325 29,313 100.0% 2006 40,352 39,816 98.7% 60 39,876 98.8% 2007 43,837 43,286 98.7% 61 43,347 98.9% 2008 48,693 47,918 98.4% (24) 47,894 98.4% 2009 39,015 38,637 99.0% 395 39,032 100.0% Source: Lee County Tax Collector (1) (2) Calendar year basis. The Lee County Tax Collector auctions current year delinquent tax certificates in June of each year. The County cannot reasonably provide us with delinquent taxes by year. 176

Schedule 9 - Water Sold by Type of Customer and Wastewater Billed by Type of Customer Last Eight Fiscal Years (in millions of gallons) Water: Type of Customer 2003 2004 2005 2006 2007 2008 2009 Residential (1) 643.1 659.8 719.4 1,477.5 1,312.1 1,248.3 1,231.7 Commercial (1) 1,500.6 1,539.4 1,678.7 977.9 1,165.7 2,305.1 2,778.0 Total 2,143.7 2,199.2 2,398.1 2,455.4 2,477.8 3,553.4 4,009.7 Total direct rate per 1,000 gallons (1) $ 2.69 $ 3.10 $ 3.26 $ 3.42 $ 3.59 $ 3.31 $ 3.61 Wastewater: Type of Customer 2003 2004 2005 2006 2007 2008 2009 Residential (1) 1,126.4 1,128.2 1,280.7 1,407.3 1,254.8 1,198.0 1,183.6 Commercial (1) 561.1 663.6 683.5 681.2 643.4 645.7 670.4 Total 1,687.5 1,791.8 1,964.2 2,088.5 1,898.2 1,843.7 1,854.0 Total direct rate per 1,000 gallons (1) $ 5.79 $ 6.68 $ 7.01 $ 7.36 $ 7.73 $ 8.06 $ 8.79 Source: (1) City of Fort Myers Utility Billing Department (2) City of Fort Myers Budget Office Annual Budgets for fiscal years 2003-2009 Note: The City of Fort Myers rates change incrementally with increases in usage volume. 177

Schedule 10 - Ratio of Outstanding Debt by Type Last Ten Fiscal Years ($ in thousands) Fiscal Year Revenue Bonds Governmental Activities Capital Leases Notes Payable Special Assessment Debt Business-Type Activities Utility State Revenue Revolving Bonds Fund Loans 2001 $ 97,646 $ 555 $ 15,046 $ 143 $ 121,110 $ - 2002 94,224 380 14,674 95 117,315-2003 91,151 651 15,000-123,070 351 2004 105,065 451 14,725-118,840 2,394 2005 98,998 286 11,694-115,230 19,579 2006 93,225 48 12,369-148,115 30,711 2007 137,647-8,348-143,010 50,939 2008 131,834-8,937-137,670 74,014 2009 126,105-7,841-132,265 71,552 2010 120,142-6,079-128,395 70,144 178

Schedule 10 - Ratio of Outstanding Debt by Type (continued) Last Ten Fiscal Years ($ in thousands) Other Utility Debt Business-Type Activities Other Revenue Capital Bonds Leases Other Total Proprietary Primary Debt Government (1) Percentage of Personal Income (1) Per Capita (2) $ 97 $ 2,909 $ 285 $ - $ 237,791 17.31% $ 4,764 6,000 2,131 231-235,050 15.87 4,580-2,079 250-232,552 15.25 4,427 87 2,015 158-243,735 14.10 4,233 12,087 1,947 62 660 260,543 12.21 4,243 550 1,875-5,760 292,653 12.57 4,452 11,219 958-5,150 357,271 13.36 5,266 49,202 936-5,000 407,593 14.17 5,934 126,395 915-4,845 469,918 17.02 6,828 72,983 893-4,683 403,319 15.07 5,915 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (1) See Schedule 14 for personal income and population data. Percentage of Personal Income changed in fiscal year 2010 for 2001-2009 to use City data. Prior ratios were calculated with Lee County data. (2) Per Capita changed in fiscal year 2010 for 2001-2009 to use City data. 179

180

Schedule 11 - Direct and Overlapping Governmental Activities Debt September 30, 2010 Percentage Net Debt Applicable to Jurisdiction Outstanding Fort Myers (1) Amount Applicable to Fort Myers City of Fort Myers $ 113,900,735 100% $ 113,900,735 Overlapping Bonded Debt: Lee County 214,773,000 5.30% 11,393,166 School Board 527,282,563 5.30% 27,971,011 Total Overlapping Bonded Debt 742,055,563 39,364,177 Total net direct and net overlapping bonded debt $ 855,956,298 $ 153,264,912 Sources: Lee County Finance Division Lee County Clerk of Court Lee County School Board Finance Division City of Fort Myers Annual Budget Book (1) Calculated as a ratio of taxable valuation of property in the City of Fort Myers ($4,376,327,000) to total taxable valuation of property in Lee County ($82,498,303,000). 181

Schedule 12 - General Revenue Bonds - Pledged Revenue Coverage Last Ten Fiscal Years ($ in thousands) The following schedule shows debt service coverage based on pledged revenues and annual debt service. Fiscal Year Excess Utilities Tax Communications Tax Guaranteed Entitlement Funds Franchise Fees 2001 $ 6,955 $ - $ 893 $ 3,558 2002 4,032 5,021 893 2,867 2003 4,312 3,870 893 3,117 2004 4,689 3,670 893 3,542 2005 5,268 3,804 893 4,037 2006 5,507 4,189 893 5,088 2007 5,765 4,314 893 5,585 2008 5,727 4,682 893 5,794 2009 5,923 4,378 893 5,949 2010 6,338 3,571 893 5,223 (1) Added Interest to the Debt Service requirements in fiscal year 2010 for fiscal years 2001 to 2009. (2) Recalculated Bond Coverage for fiscal years 2001 to 2009 due to the addition of Interest to the Debt Service requirements in fiscal year 2010. The following schedule shows the bond coverage based on the bond document calculation. Fiscal Year Excess Utilities Tax Communications Tax Guaranteed Entitlement Funds Franchise Fees 2001 $ 6,955 $ - $ 893 $ 3,558 2002 4,032 5,021 893 2,867 2003 4,312 3,870 893 3,117 2004 4,689 3,670 893 3,542 2005 5,268 3,804 893 4,037 2006 5,507 4,189 893 5,088 2007 5,765 4,314 893 5,585 2008 5,727 4,682 893 5,794 2009 5,923 4,378 893 5,949 2010 6,338 3,571 893 5,223 (1) Recalculated Maximum Principal and Interest, based on maximum per fiscal year, in fiscal year 2010 for fiscal years 2001 to 2008. Prior calculations were based on maximum per bond year. (2) Recalculated Bond Coverages in fiscal year 2010, due to the change in Maximum Principal and Interest for fiscal years 2001 to 2008. 182

Schedule 12 - General Revenue Bonds - Pledged Revenue Coverage (continued) Last Ten Fiscal Years ($ in thousands) Occupational License Tax Half-Cent Sales Tax Total Pledged Revenues Debt Service Principal Interest (1) Bond Coverage (2) $ 1,290 $ 3,882 $ 16,578 $ 1,730 4,365 2.72 1,285 4,062 18,160 3,330 4,693 2.26 1,308 4,245 17,745 2,735 4,400 2.49 1,368 4,771 18,933 3,970 3,985 2.38 1,543 5,539 21,084 4,275 3,800 2.61 1,755 5,924 23,356 4,475 3,604 2.89 1,825 5,531 23,913 4,395 4,564 2.67 1,642 4,802 23,540 4,445 4,964 2.50 1,616 4,169 22,928 4,310 5,242 2.40 1,568 4,184 21,777 5,674 5,032 2.03 Occupational License Tax Half-Cent Sales Tax Total Pledged Revenues Maximum Principal and Interest (1) Bond Coverage (2) $ 1,290 $ 3,882 $ 16,578 $ 7,804 2.12 1,285 4,062 18,160 8,248 2.20 1,308 4,245 17,745 8,079 2.20 1,368 4,771 18,933 8,079 2.34 1,543 5,539 21,084 8,079 2.61 1,755 5,924 23,356 8,079 2.89 1,825 5,531 23,913 9,690 2.47 1,642 4,802 23,540 9,690 2.43 1,616 4,169 22,928 10,706 2.14 1,568 4,184 21,777 10,706 2.03 183

Schedule 13 - Water-Wastewater Utility - Pledged Revenue Coverage Last Ten Fiscal Years ($ in thousands) Coverage based on current year results and not calculated according to the bond documents. Fiscal Gross Utility Direct Operating Net Operating Pledged Impact Fees Total Available Year Revenues Expenses Revenues Available Revenues 2001 $ 23,974 $ 11,000 $ 12,974 $ 113 $ 13,087 2002 22,750 11,229 11,521 502 12,023 2003 27,471 12,392 15,079 480 15,559 2004 35,915 14,379 21,536 442 21,978 2005 42,560 19,677 22,883 704 23,587 2006 44,728 27,071 17,657 1,272 18,929 2007 42,899 29,723 13,176 3,029 16,205 2008 43,579 32,232 11,347 1,030 12,377 2009 (1) 45,692 33,194 12,498 56 12,554 2010 48,301 32,822 15,479-15,479 (1) Corrected fiscal year 2009 direct operating expenses and recalculated revenues and coverages. Coverage calculated according to the bond documents for coverage and additional bonds test. Fiscal Year Total Operating Revenues Total Operating Expenses Net Operating Revenues Adjustments Per Bond Documents Net Operating Revenues Available for Debt Service 2001 $ 23,974 $ 16,061 $ 7,913 $ 5,061 $ 12,974 2002 22,750 15,743 7,007 4,513 11,520 2003 27,349 17,186 10,163 4,793 14,956 2004 32,526 18,980 13,546 4,582 18,128 2005 42,560 19,677 22,883 4,369 27,252 2006 44,056 26,291 17,765 5,746 23,511 2007 41,588 26,536 15,052 5,038 20,090 2008 43,548 30,371 13,177 5,980 19,157 2009 (1) 46,069 30,262 15,807 9,453 25,260 2010 48,752 26,203 22,549 8,647 31,196 (1) Corrected fiscal year 2009 total operating expenses and recalculated revenues available for debt service. 184

Schedule 13 - Water-Wastewater Utility - Pledged Revenue Coverage (continued) Last Ten Fiscal Years ($ in thousands) Principal Debt Service Interest Bonded Coverage State Revolving Loan Debt Service Utility Bonds and Notes Coverage $ 2,995 $ 5,691 1.51 $ - 1.51 3,795 5,566 1.29-1.29 3,970 5,515 (2) 1.64 (3) - 1.64 (3) 4,230 5,361 2.30-2.48 3,610 5,250 2.67-2.67 6,040 5,948 1.58 649 1.55 5,105 6,747 (2) 1.37 1,436 1.22 5,340 6,560 (2) 1.04 2,200 0.88 5,405 8,647 0.89 5,170 0.65 4,050 8,344 1.25 6,021 0.84 (2) Corrected interest expense for fiscal years 2003, 2007 and 2008 Debt Service. (3) Recalculated coverages for fiscal year 2003 due to the corrected interest for debt service. Impact Fees Available for Debt Service Total Revenues Available for Debt Service Maximum Debt Service Coverage NOR Available for Debt Service (3) (4) Coverage Total Revenues Available State Revolving Loan Maximum Debt Service (4) (3) Coverage Total Revenues Debt Service (4) $ 113 $ 13,087 $ 9,528 1.36 1.37 $ - - 502 12,022 9,528 1.21 1.26 - - 481 15,437 11,114 1.35 1.39 - - 441 18,569 11,114 1.63 1.67 1,510 4.94 704 27,956 11,114 2.45 2.52 3,193 5.27 1,272 (2) 24,783 (2) 12,842 1.83 1.93 3,978 3.00 3,029 (2) 23,119 (2) 12,842 1.56 1.80 5,078 2.02 1,030 20,187 12,842 1.49 1.57 5,695 1.29 56 25,316 15,875 1.59 1.59 6,374 1.48-31,196 15,781 1.98 1.98 7,004 2.20 (2) (3) Corrected fiscal years 2006 and 2007. Pledged impact fees directly correspond to the impact fees available for debt service. In fiscal year 2010, changed Maximum Debt Service basis from bond year to fiscal year for fiscal years 2001-2009. (4) Recalculated coverages in fiscal year 2010 due to the changed in Maximum Debt Service basis from bond year to fiscal year. 185

Schedule 14 - Demographic and Economic Statistics Last Ten Fiscal Years Population Lee County (1) Total City of Personal Per Fort Lee Income (9) Capita Labor Unemployment Year Myers (2) County (3) (in thousands) Income (4) Force (5) Unemployed (5) Rate (5) 2001 49,909 454,918 $ 12,519,798 $ 30,938 187,087 5,142 2.7% 2002 (6) 51,323 475,073 13,706,331 28,851 194,566 7,544 3.9% 2003 (7) 52,527 495,088 14,375,870 29,037 211,031 8,984 4.3% 2004 (7) 57,585 521,253 15,644,366 29,540 226,516 8,129 3.6% 2005 (7) 61,412 549,442 19,098,604 31,487 256,557 8,774 3.4% 2006 (7) 65,729 585,608 20,736,965 33,073 278,098 6,823 2.5% 2007 67,851 (8) 615,741 (8) 24,266,353 39,410 (9) 295,730 15,344 5.2% 2008 68,689 (8) 623,725 (8) 26,111,623 41,864 (9) 284,605 26,200 9.2% 2009 68,819 (8) 615,124 (8) 24,674,348 41,954 (9) 272,069 37,789 13.9% 2010 68,190 (8) 613,546 (8) 24,077,000 38,653 (9) 274,975 37,201 13.5% As Projected 2015 74,915 (10) 691,079 (8) Sources: (1) City of Fort Myers statistics unattainable. (2) City of Fort Myers, Planning Department - projected numbers based on Lee County population increase; actual numbers not available (2001 and 2002). (3) Lee County Planning Department. (4) Bureau of Economic and Business Research, Woods & Poole MSA Profile; Sales and Marketing. Lee County, Florida, Comprehensive Annual Financial Report, Demographic Statistics (2002-2003). (5) Florida Department of Labor and Employment, Division of Labor, Employment and Training. Florida Agency for Workforce Innovation, Labor Market Statistics Center (2007-2010). (6) In 2002, statistical information for Lee County was obtained by the Economic and Business Research, University of Florida. (7) Bureau of Economic and Business Research Population for Counties and Municipalities Revenue (2003-2006). (8) Office of Economic and Demographic Research - Edr.state.fl. Population is projected. (9) Lee County, Florida, Comprehensive Annual Financial Report (2007-2010), Demographic Statistical Table. (10) City of Fort Myers, Community Development Department. Population is projected. 186

LEE COUNTY, FLORIDA Schedule 15 - Principal Employers (1) September 30, 2010 Current Year and Nine Years Ago 2010 (2) 2001 Percentage of Percentage of Total County Total County Employer Employees Rank Employment Employees Rank Employment Lee Memorial Health System 9,500 1 3.99% 5,300 2 2.52% Lee County School District 9,270 2 3.89% 8,026 1 3.81% Publix Super Markets 3,071 3 1.29% 3,752 3 1.78% Lee County Administration (3) 2,364 4 0.99% 1,740 5 0.83% Wal-Mart Corporation 1,967 5 0.83% 1,850 4 0.88% Lee County Sheriff's Office 1,585 6 0.67% - - - City of Cape Coral 1,409 7 0.59% 1,411 7 0.67% Chico's FAS, Inc. 1,388 8 0.58% - - - Target 1,100 9 0.46% - - - Florida Gulf Coast University 993 10 0.42% 996 10 0.47% U.S. Postal Service 749 13 0.31% - - - WCI Communities 276 39 0.12% 1,007 9 0.48% Bonita Bay Group 273 40 0.11% - - - Southwest Regional Medical Ctr - - - 1,600 6 0.76% Meristar Corporation - - - 1,270 8 0.60% Total 33,945 14.25% 26,952 12.80% Source: Lee County Clerk of Court and the Florida Agency for Workforce Innovation. (1) Information listed is from Lee County since statistics for the City of Fort Myers are not available. (2) As of July 2010. (3) 2001 figure includes Lee County Port Authority personnel. CITY OF FORT MYERS, FLORIDA Schedule 16 - Full-Time Equivalent Government - Employees by Function/Program Last Eight Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 Function General Government 117 118 122 132 145 146 143 120 Public Safety 407 435 474 494 528 530 513 412 Physical Environment 241 243 262 275 298 302 296 260 Transportation 22 23 24 24 24 25 23 19 Culture/Recreation 155 159 162 161 112 123 123 103 Community Development 11 12 13 13 21 17 17 14 Total 953 990 1,057 1,099 1,128 1,143 1,115 928 Source: City of Fort Myers Budget Office. Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. 187

Schedule 17 - Operations Indicators by Function/Program Last Eight Fiscal Years Function/Program 2003 2004 2005 2006 2007 2008 2009 2010 Facilities and services Miles of city maintained streets 221 233 230 260 272 240 (1) 240 240 Number of street lights 9,000 8,000 8,286 9,500 9,850 10,276 10,346 10,346 Culture and recreation Community centers 5 5 5 5 5 5 3 3 Parks (including golf courses) 40 28 29 30 31 32 36 37 Park acreage (including golf courses) 770 490 491 504 505 507 451 205 (3) Golf courses 2 2 2 2 2 2 2 2 Swimming pools 2 4 4 4 4 4 4 4 Tennis courts 21 21 21 16 16 16 16 16 Fire Number of stations 4 4 5 5 6 6 6 6 Number of fire personnel and officers 97 100 115 115 126 126 121 120 Number of calls answered 13,021 15,064 16,654 16,071 14,957 13,983 14,690 14,725 Number of inspections conducted 4,497 4,549 6,175 5,446 4,609 6,102 5,405 3,452 Police Number of stations 5 5 5 4 2 2 2 2 Number of police personnel and officers 245 277 263 193 203 244 257 268 Number of patrol units 82 82 82 91 100 113 120 120 Physical arrests 6,160 7,460 7,913 7,288 6,561 6,920 5,398 5,697 Traffic violations 18,909 13,500 18,844 17,921 17,991 15,655 10,213 20,964 Parking violations 16,583 9,750 11,545 8,455 6,861 5,974 7,616 6,976 Sewer system Miles of sanitary sewers 265 310 236 328 337 372 388 400 Number of treatment plants 2 2 2 2 2 2 2 2 Number of service connections 17,133 15,650 15,174 16,627 16,949 16,394 16,552 16,690 Daily average treatment in gallons 14,900,000 14,910,000 16,620,000 17,532,500 14,610,000 15,544,000 14,230,000 14,857,000 Maximum daily capacity of treatment plants, in gallons 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 23,000,000 Water system Miles of water mains 265 320 314 344 378 383 397 413 Number of service connections 14,973 18,137 17,026 18,598 18,893 20,194 20,576 21,010 Number of fire hydrants 1,500 1,500 1,500 1,500 3,483 3,644 4,600 4,600 Daily average finished flow in gallons 6,551,000 6,818,000 8,034,000 6,878,000 7,524,000 6,601,376 6,129,000 6,020,000 Maximum daily capacity of plants in gallon 7,883,000 7,800,000 9,300,000 9,404,000 9,438,000 12,000,000 (2) 12,000,000 12,000,000 Sources: Various city departments Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. (1) Calculation corrected to include only city maintained roads. Previous calculation was based upon all city roads, some of which were federal and state roads. (2) Water Plant enhancement (3) Allen Park was reduced to tennis court only. 188

Schedule 18 - Capital Assets Statistics by Function Last Eight Fiscal Years (in units) 2003 2004 2005 2006 2007 2008 2009 2010 Governmental Activities General Government (1) 163 166 302 314 340 759 716 727 Police 218 229 247 265 273 122 121 126 Fire 60 63 69 77 89 84 78 80 Protective services 34 37 39 39 41 23 14 14 Physical environment 69 69 85 88 90 63 61 65 Transportation (2) 58 65 71 84 3,197 3,197 3,229 3,272 Economic Environment 16 16 17 17 18 14 15 17 Culture and Recreation 109 119 158 165 394 358 366 373 Total 727 764 988 1,049 4,442 4,620 4,600 4,674 Business-type Activities Water/Wastewater 803 902 930 970 1,015 829 863 876 Solid Waste 64 70 80 99 120 94 102 102 Stormwater - - - - - - 16 19 Parking Garage - - - - 7 7 7 7 Edison-Ford Estates (3) 262 265 288 290 - - - - Skatium (4) - - - - 9 8 8 8 Yacht Basin 57 57 59 65 65 62 65 67 Fort Myers Country Club 99 99 102 106 109 76 77 81 Eastwood Golf Course 65 68 72 76 78 61 59 60 Imaginarium 77 77 79 81 82 14 15 - Burrough's Home (5) 21 21 22 22 22 15 15 - Southwest Florida Museum of History (5) 14 14 14 14 14 10 10 - Department of Cultural and Historical Affairs (5) - - - - - - - 40 Harborside Event Center 70 71 73 73 75 55 59 59 Building Permits and Inspections 3 15 18 23 23 17 15 15 Total 1,535 1,659 1,737 1,819 1,619 1,248 1,311 1,334 Sources: Various city departments Note: The City of Fort Myers implemented the government-wide information required by GASB Statement 44 retroactively to fiscal year 2003, which was the year the City implemented GASB Statement 34. (1) Increase in General Government for FY 2008 due to Internal Service Fund assets' allocation to Governmental activities. Easements increased from prior year. (2) Increase in Transportation due to GASB 34 implementation. (3) Decrease in Edison-Ford Estates due to transfer of all assets to the General Fund in fiscal year 2007. (4) Assets acquired due to transfer from governmental fund in fiscal year 2007. (5) Decrease in Imaginarium, Burrough's Home, and Southwest Florida Museum of History for FY 2010 due to the transfer of all assets to the Department of Cultural and Historical Affairs. 189

190

Single Audit Report

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 Honorable Mayor and City Council City of Fort Myers Fort Myers, Florida We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fort Myers, Florida (the "City") as of and for the year ended September 30, 2010, and have issued our report thereon dated March 16, 2011. We have also audited the financial statements of the City of Fort Myers, Florida Community Redevelopment Agency presented as other supplementary information in the accompanying combining financial statements as of and for the year ended September 30, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect 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. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 191

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 other matters involving internal control over financial reporting that we have reported to management of the City in a separate management letter dated March 16, 2011. This report is intended solely for the information and use of the management, others within the organization, City Council, the State of Florida Office of the Auditor General, and applicable federal and state agencies and is not intended to be and should not be used by anyone other than these specified parties. CHERRY, BEKAERT & HOLLAND, L.L.P. Orlando, Florida March 16, 2011 192

Schedule of Expenditures of Federal Awards and State Financial Assistance Projects September 30, 2010 FEDERAL FEDERAL OR CFDA PASS THROUGH FEDERAL/STATE AGENCY - PROGRAM TITLE NUMBER GRANT NUMBER FEDERAL GRANTS ACCRUED EXPENSES U.S. DEPARTMENT OF COMMERCE Pass through Florida Department of Community Affairs FDCA Waterfronts FCP Program 11.419 10-DR-BX-09-46-02-001 $ 37,141 Total U.S. Department of Commerce 37,141 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Community Development Block Grant Program Cluster Community Development Block Grant Program Entitlement Grant 14.218 B-07-MC-12-0006 178,062 Community Development Block Grant Program Entitlement Grant 14.218 B-08-MC-12-0006 712,660 Neighborhood Stabilization Program Revenue 14.218 B-08-MN-12-0008 1,155,857 ARRA - Community Development Block Grant Program 14.253 B-09-MY-12-0006 192,932 Total U.S. Department of Housing and Urban Development Grants Cluster 2,239,511 U.S. DEPARTMENT OF JUSTICE Bulletproof Vest Partnership Grant 2009 16.607 None 847 Bulletproof Vest Partnership Grant 2010 16.607 None 11,143 Pass through Florida Department of Law Enforcement Project Safe Neighborhood - PSN-JAM Unit Grant 08/09 16.609 2009-PSNM-LEE-1-V8-004 43,385 Project Safe Neighborhood - PSN-Grant Reduce Violence Crimes & Guns 16.609 2010-PSNM-LEE-1-A1-001 34,405 ARRA - COPS Hiring Recovery Program Revenue * 16.710 2009-RK-WX-0228 610,105 Pass through Florida Department of Law Enforcement Justice Assistance Grant (OJP) 2008 16.738 2008-DJ-BX-0152 2,397 Justice Assistance Grant (OJP) 2009 16.738 2009-DJ-BX-0428 87,890 ARRA - JAG Grant 2009 Revenue * 16.803 2009-SB-B9-2972 245,971 Total U.S. Department of Justice 1,036,143 U.S. DEPARTMENT OF TRANSPORTATION, FEDERAL HIGHWAY ADMINISTRATION Pass through State of Florida, Department of Transportation SR739 Landscape/Irrigation Hanson-MLK * 20.205 195766-2-58-01 / 0671018 S 63,831 ARRA - Culvert Replacement Carrell Road/Glenn Drive * 20.205 426793-1-58-01 / ARRA 180 B / APH5B 94,960 ARRA - Culvert Replacement Manuels Branch Bridge * 20.205 426747-1-58-01 / ARRA 178B / APH57 242,170 Pass through State of Florida, Department of Transportation Highway Safety Cluster DUI Checkpoint Program FY 2010 20.601 K08-10-06-14 97,207 Safety Belt Enforcement Grant 20.609 K4PT-10-21-33 / APV59 4,414 Total Highway Safety Cluster 101,621 Total Federal Highway Administration, Department of Transportation 502,582 U.S. ENVIRONMENTAL PROTECTION AGENCY Pass through Florida Department of Environmental Protection State Revolving Fund * 66.458 WW66712S 1,449,083 State Revolving Fund * 66.458 WW667130 76,702 State Revolving Fund * 66.458 WW667150 895,635 Total U.S. Environmental Protection Agency Grants 2,421,420 U.S. DEPARTMENT OF ENERGY ARRA - Energy Efficiency & Conservation Block Grant 81.128 DE-SC0003103 96,953 Total U.S. Department of Energy 96,953 U.S. DEPARTMENT OF HOMELAND SECURITY Pass through Florida Division of Emergency Management Hazard Mitigation / Dean Park Neighborhood Drainage Project, Phase II 97.039 06HM-7@09-46-02-041 24,109 Hazard Mitigation / Manuels Branch Watershed Improvement Drainage Project 97.039 08HM-F9-09-46-02-007 59,490 Wind Retrofit - FEMA Grant 97.039 09HM-12-09-46-02-012 58,859 State Homeland Security Grant 97.093 08DS-60-13-00-16-373 102,731 State Homeland Security Grant 97.093 09DS-51-13-00-16-409 14,714 Total U.S. Department of Homeland Security 259,903 TOTAL FEDERAL GRANTS $ 6,593,653 * Denotes Major Federal Program 193

Schedule of Expenditures of Federal Awards and State Financial Assistance Projects (continued) September 30, 2010 STATE CSFA STATE FEDERAL/STATE AGENCY - PROGRAM TITLE NUMBER GRANT NUMBER STATE GRANTS ACCRUED EXPENSES STATE OF FLORIDA, DEPARTMENT ENVIRONMENTAL PROTECTION Northern Ten Mile Canal Drainage Improvement 37.039 LP8919 $ 14,546 Total State of Florida, Department of Environmental Protection 14,546 FLORIDA HOUSING FINANCE CORPORATION State Housing Initiatives Partnership Program (S.H.I.P) 52.901 None 510,804 Total Florida Housing Finance Corporation 510,804 FLORIDA DEPARTMENT OF TRANSPORTATION State Road 82 (MLK Boulevard) Widening from Ortiz to Lee Boulevard (CR884) ** 55.020 195488 2 58 04/06 / 195488 2 68 01 / APG33 6,225,204 Total Florida Department of Transportation 6,225,204 TOTAL STATE GRANTS $ 6,750,554 TOTAL ALL FEDERAL AND STATE GRANTS $ 13,344,207 ** Denotes Major State Project. Expenses are cumulative through FY 2010. The accompanying notes to the schedule of expenditures of federal awards and state assistance are an integral part of this statement. 194

Notes to Schedule of Expenditures of Federal Awards and State Financial Assistance Projects Summary of Significant Accounting Policies: Basis of Presentation: The Schedule of Expenditures of Federal Awards and State Assistance is presented for each program by agency. Federal agencies include: U.S. Department of Commerce U.S. Department of Housing and Urban Development U.S. Department of Justice U.S. Department of Transportation U.S. Environmental Protection Agency U.S. Department of Energy U.S. Department of Homeland Security State awards include state programs, which by their grant documents require the adherence to reporting in accordance with the Single Audit Act of 1984 and OMB Circular A-133. State of Florida agencies include: Department of Environmental Protection Department of Transportation Florida Housing Finance Corporation Basis of Accounting: The City of Fort Myers recognizes grant revenues and expenditures as the related liabilities are incurred. Other revenues (i.e., interest earned) are recognized when they become measurable and available. For the purpose of this report, certain accounting procedures were followed which help illustrate the disbursements of the individual grants. Expenditures are presented on a modified accrual basis. All expenses and all capital outlays are reported as expenditures. This financial flow emphasis shows current year grant expenditures on an individual grant basis. 195

INDEPENDENT AUDITORS REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR FEDERAL AWARDS PROGRAM AND STATE FINANCIAL ASSISTANCE PROJECT AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 AND CHAPTER 10.550, RULES OF THE FLORIDA AUDITOR GENERAL Honorable Mayor and City Council City of Fort Myers Fort Myers, Florida COMPLIANCE We have audited the City of Fort Myers, Florida (the "City") compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement, and the requirements described in the State of Florida Department of Financial Services State Projects Compliance Supplement, that could have a direct and material effect on each of its major federal programs and state financial assistance projects for the year ended September 30, 2010. The City's major federal programs and state financial assistance projects are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal programs and state financial assistance projects is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations; 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 non-compliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal awards program or state financial assistance 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. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to its major federal programs and state financial assistance projects for the year ended September 30, 2010. 196

INTERNAL CONTROL OVER COMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs and state financial assistance projects. In planning and performing our audit, we considered the City s internal control over compliance with requirements that could have a direct and material effect on a major federal program or state financial assistance project in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133 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 financial assistance 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 financial assistance project will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the management, others within the organization, City Council, others within the entity and applicable state and federal agencies, and is not intended to be and should not be used by anyone other than these specified parties. CHERRY, BEKAERT & HOLLAND, L.L.P. Orlando, Florida March 16, 2011 197

Schedule of Findings and Questioned Costs Federal Awards Programs and State Financial Assistance Projects Year Ended September 30, 2010 Part I - Summary of Auditors' Results Financial Statement Section Type of auditors' report issued: Unqualified 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 Projects Section Internal control over major programs: Material weakness(es) identified? yes x no Significant deficiency(ies) identified? yes x none reported Type of auditors' report on compliance for major federal programs and state projects: Unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-133 and/or Chapter 10.550 yes x no 198

Schedule of Findings and Questioned Costs Federal Awards Programs and State Financial Assistance Projects Year Ended September 30, 2010 Part I - Summary of Auditors' Results (continued) Federal Awards and State Projects Section (continued) Identification of major federal programs and state projects: Federal Programs: Name of Program or Cluster Department of Justice - Public Safety Partnership and Community Policing Grants - COPS Hiring Recovery Program Department of Justice - Edward Byrne Memorial Justice Assistance Grant Department of Transportation - Highway Planning and Construction, Federal-Aid Highway Program Environmental Protection Agency - State Revolving Fund CFDA Numbers 16.710 16.803 20.205 66.458 State Projects: Name of Project Florida Department of Transportation - State Infrastructure Bank CSFA Numbers 55.020 Dollar threshold used to determine Type A programs: Federal State $ 300,000 $ 300,000 Auditee qualified as low-risk auditee for federal purposes? x yes no 199

Schedule of Findings and Questioned Costs Federal Awards Programs and State Financial Assistance Projects Year Ended September 30, 2010 Part II - Schedule of Financial Statement Findings This section identifies the significant deficiencies, material weaknesses, fraud, illegal acts, violations of provisions of contracts and grant agreements, and abuse related to the financial statements that are required to be reported in accordance with Government Auditing Standards. There were no financial statement findings required to be reported in accordance with Government Auditing Standards. Part III - Federal Award Findings and Questioned Costs This section identifies the significant deficiencies, material weaknesses, and material instances of noncompliance, including questioned costs, as well as any material abuse findings, related to the audit of major federal programs, as required to be reported by Section 510(a) of OMB Circular A-133. There were no findings required to be reported by Section 510(a) of OMB Circular A-133. Part IV - State Project Findings and Questioned Costs This section identifies the significant deficiencies, material weaknesses, and material instances of noncompliance, including questioned costs, as well as any material abuse findings, related to the audit of major state projects, as required to be reported by Chapter 10.550, Rules of the Auditor General - Local Governmental Entity Audits. There were no findings required to be reported by Chapter 10.550, Rules of the Auditor General - Local Governmental Entity Audits. 200

Summary Schedule of Prior Audit Findings and Corrective Action Plan Federal Awards Programs and State Financial Assistance Projects Year Ended September 30, 2010 Prior Year Audit Findings: Finding: 09-01 Audit Adjustments (Significant Deficiency) Condition: There were several accounts in which audit adjustments were proposed by the auditor. Some were considered immaterial by both the City and the auditor and subsequently considered passed adjustments. Others were subsequently posted by the City. Corrective Action: The City added additional tasks to its year end close schedule and audit assignment schedule to prevent future adjustments. Finding: 09-02 Noncompliance with the Davis-Bacon Act for U.S. Department of Housing and Urban Development Ford Home Restoration Grant Condition: Under the provisions of the Davis-Bacon Act (the Act ), contractors must submit a copy of their payroll and a statement of compliance each week to the City in which any contract work was performed. However, the City did not require the contractor on the Historic Preservation Emergency Repairs - Edison- Ford Estates project to submit a copy of their payroll nor a statement of compliance with the Act. Corrective Action: City departments may independently research and submit grant applications, and the receiving departments are responsible for the compliance terms of the grants. The Finance Department has centralized the grant oversight responsibility and review all grant agreements upon acceptance by City Council to document the requirements and reporting of each grant. The Finance Department then notifies the receiving department of the grant reporting requirements and follow up with the departments to ensure compliance. Corrective Action Plan: There were no audit findings in the current year independent auditors reports that required corrective action. 201

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Management Letter and Responses

INDEPENDENT AUDITORS MANAGEMENT LETTER Honorable Mayor and City Council City of Fort Myers Fort Myers, Florida We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Fort Myers, Florida (the City ), as of and for the year ended September 30, 2010, which collectively comprise the City s basic financial statements, and the financial statements of the City of Fort Myers Community Redevelopment Agency as of and for the year September 30, 2010, and have issued our report thereon dated March 16, 2011. 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; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. We have issued our 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, Independent Auditors Report on Compliance with Requirements that Could Have a Direct and Material Effect on each Major Federal Awards Program and State Financial Assistance Project and on Internal Control Over Compliance, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated March 16, 2011, should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter 10.550, Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditors 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. Corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In connection with our audit, nothing came to our attention that could cause us to believe that the City was in noncompliance with Section 218.415, Florida Statutes, regarding the investment of public funds. Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management letter of any recommendations to improve the City s financial management. In connection with our audit, we did not have any such recommendations. 203

Section 10.554(1)(i)4., Rules of the Auditor General, requires disclosure in the management letter of any violations of laws, regulations, contracts and 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 more than inconsequential. In connection with our audit, we did not have any such findings. Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. Section 10.554(1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, such matters noted are disclosed in Appendix A. Section 10.554(1)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in the management letter, unless disclosed in the notes to the financial statements. Such disclosure is included in notes to the financial statements. Section 10.554(1)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection with our audit of the financial statements of the City, the results of our tests did not indicate the City met any of the specified conditions of a financial emergency contained in Section 218.503(1), Florida Statutes. However, our audit does not provide a legal determination on the City s compliance with this requirement. Section 10.554(1)(i)7.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, 2010, 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, 2010. Our comparison of the financial report filed with the Florida Department of Financial Services to the City s 2010 audited financial statements resulted in no material differences. Pursuant to Sections 10.554(1)(i)7.c. and 10.556(7), Rules of the Auditor General, we applied financial condition assessment procedures as of September 30, 2010. 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. 204

Pursuant to Chapter 119, Florida Statutes, this management letter is a public record and its distribution is not limited. Auditing standards generally accepted in the United States of America require us to indicate that this letter is intended solely for the information and use of the City management, the Mayor, the City Council, the Florida Auditor General and applicable state and federal agencies, and is not intended to be and should not be used by anyone other than these specified parties. CHERRY, BEKAERT & HOLLAND, L.L.P. Orlando, Florida March 16, 2011 205

City of Fort Myers, Florida Appendix A Management Letter Comments Year Ended September 30, 2010 IDENTIFICATION OF GRANTS FOR PREPARATION OF THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE Observation 2010-1: As part of the independent auditors testing procedures, we make general inquiries regarding variances of changes in accounts. During this analysis, two grants were discovered, one of which was a major Florida Department of Transportation ( FDOT ) grant for State Road 82 widening, that were not reflected on the City s Schedule of Expenditures of Federal Awards and State Financial Assistance ( Schedule ) originally provided to us. It appears that the FDOT grant had initially been drafted as a Joint Project Agreement, resulting in the City not identifying it as a grant, but the final executed FDOT agreement provides amounts are State grant funding. Recommendation: We recommend that respective departments administering grants ensure they provide the finance department with identification of all grants administered and that the finance department thoroughly review all new sources of funds, joint projects or other items approved by the City Council, as well as new general ledger line items, in order to determine that all Federal and State grants are reported on the Schedule. Management s Response: The Finance Department will prepare a grants checklist and distribute to all departments to ensure that all alternate funding sources, such as grants, joint projects or other awards, are properly identified, reviewed and administered. In addition, the Year End Certification form will include a confirmation by each director that all grants and other funding information have been submitted to the Finance Department for the closing fiscal year. 206

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