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5.4. SR 06-07-2010REQUEST FOR ACTION To Item Number Ci Council 5.4. Agenda Section Meeting Date Prepared by Administration une 7, 2010 Tim Simon, Finance Director Item Description Reviewed by Presentation of the Comprehensive Annual Financial Report Lori ohnson, Ci Administrator and Audit Results for the Year Ended December 31, 2009 Reviewed by Action Requested The City Council is asked to review and accept the Comprehensive Annual Financial Report for the City of Elk River for the year ended December 31, 2009. Background/Discussion Andrew Berg, Governmental Services Partner with Abdo, Eick, & Meyers will present a powerpoint presentation of the City's 2009 Comprehensive Annual Financial Report (CAFR) and audit results. The presentation on the CAFR will review the general fund activity, some of the special revenue funds, and all the enterprise funds. Much of this information is summarized in the City of Elk River Management Letter. The Fire Relief report will be briefly discussed as a formal presentation was made at the quarterly board meeting on June 1. The CAFR will be available on the City's website shortly after this Council meeting. The following are some highlighted areas of the CAFR and corresponding page numbers. Transmittal letter -page 1-4 Independent Auditor's report -page 8-9 Management's Discussion and Analysis -page 10-19 Budget and Actual (General Fund) -page 27 Enterprise Funds -page 28-35 Statistical Section -page 88-117 Financial Impact None Attachments The following items have been distributed to the Mayor and Council: • Comprehensive Annual Financial Report for the year ended December 31, 2009 • City of Elk River Management Letter • Federal Financial Award Programs and Other Reports (Legal compliance/Internal control) • Elk River Fire Department Relief Association Financial Statements and Supplementary Information • Elk River Fire Relief Management Letter I ActlOn Motion by Second by Vote C:\Documents and Settings\XPMUser\Local Settings\Temporary Internet Files\OLK66\2009Auditpresentation.doc Follow Up C:\Documents and Settings\XPMUser\Local Settings\Temporary Internet Files\OLK66\2009Auditpresentation.doc i~ Comprehensive Annual Financial Report For the Year Ended December 31, 2009 4 City of El: Minnesota -s C ~ CITY OF ELK RIVER, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT 0 For the Year Ended December 31, 2009 t PREPARED BY THE FINANCE DEPARTMENT Member of Government Finance Officers Association ' of the United States and Canada CITY OF ELK RIVER, MINNESOTA ' TABLE OF CONTENTS DECEMBER 31, 2009 Paee No• ' I. INTRODUCTORY SECTION ' Letter of Transmittal Certificate of Achievement 1 5 Organizational Chart 6 Elected and Appointed Officials 7 ' FINANCIAL SECTION II . Independent Auditor's Report 8 ' Management's Discussion and Analysis 10 Basic Financial Statements: Government-wide Financial Statements: ' Statement of Net Assets 20 Statement of Activities 21 Fund Financial Statements: Balance Sheet -Governmental Funds 23 ' Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 24 ' Statement of Revenues, Expenditures, and Changes in Fund Balances -Governmental Funds 25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 26 ' Statement of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual -General Fund 27 Statement of Net Assets -Proprietary Funds 28 ' Statement of Revenues, Expenses, and Changes in Fund Net Assets -Proprietary Funds 30 Statement of Cash Flows -Proprietary Funds 32 ' Statement of Fiduciary Net Assets -Developer Escrow Agency Fund 36 Notes to Financial Statements 37 Required Supplementary Information Schedule of Funding Progress -Elk River Fire Relief Pension Plan 63 Schedule of Funding Progress -Other Postemployment Benefits 63 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: ' Combining Balance Sheet - Nonmajor Governmental Funds 64 Combining Statement of Revenues, Expenditures, and Changes ' in Fund Balances - Nonmajor Governmental Funds 65 Nonmajor Special Revenue Funds: Subcombining Balance Sheet - Nonmajor Special Revenue Funds 66 ' Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Special Revenue Funds 69 Special Revenue Funds: Schedules of Revenues, Expenditures, and Changes in ' Fund Balance -Budget and Actual: Library 72 CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2009 Page No. Ice Arena 73 Pinewood Golf Course 74 Landfill 75 Economic Development Authority 76 Noxunajor Debt Service Funds: Subcombining Balance Sheet - Nonmajor Debt Service Funds 77 Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Debt Service Funds 79 Nonmajor Capital Projects Funds: Subcombining Balance Sheet-Nonxnajor Capital Projects Funds 81 Subcombining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Capital Projects Funds 82 Statement of Changes in Assets and Liabilities - Developer Escrow Agency Fund 83 Component Unit Financial Statements: Housing and Redevelopment Authority: Fund Financial Statements: Balance Sheet 84 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Assets 85 Statement of Revenues, Expenditures, and Change in Fund Balance 86 Reconciliation of the Statement of Revenues, Expenditures, and Change in Fund Balance of Governmental Fund to the Statement of Activities 87 III. STATISTICAL SECTION (UNAUDITED) Net Assets by Component 88 Changes in Net Assets 90 Fund Balances of Governmental Funds 94 Changes is Fund Balances of Governmental Funds 96 Electric Sales 98 Principal Electric Customers 99 Tax Capacity, Market Value and Estimated Actual Value of Taxable Property 100 Property Tax Rates 102 Principal Taxpayers 103 Property Tax Levies and Collections 104 Ratios of Outstanding Debt by Type 105 Ratios of General Bonded Debt Outstanding 107 Computation of Direct and Overlapping Debt 108 Legal Debt Margin Information 109 Pledged-Revenue Coverage 111 Demographic and Economic Statistics 113 Principal Employers 114 Full-Time Equivalent Employees by Function 115 Operating Indicators by Function 116 Capital Asset Statistics by Function 117 n n u ii n J u i 1 0 ii i ' INTRODUCTORY SECTION 7 0 I~ I~l u ~/ Cit of ' y Elk River 1 This a e has been left blank intentionall , P g Y ' ~~ ' City of Elk -~-~ River 1 ' June 7, 2010 ' Honorable Mayor Klinzing, Members of the City Council, and Citizens of Elk River: ' The Comprehensive Annual Financial Report (CAFR) for the City of Elk River for the fiscal year ended December 31, 2009, is hereby submitted. Minnesota State Statutes and the City's ordinance require an annual audit of the City's accounts by the State Auditor's Office or by independent certified public ' accountants. The firm of Abdo, Eick, and Meyers was selected to perform the City's audit and their unqualified opinion has been included in this report. The independent auditor's report is included in the financial section of this report. i n i~ I!~ This report was prepared by the City's Finance Deparhnent and responsibility for both the completeness and accuracy of this data, as well as the fairness of this presentation including all enclosures, rests with the City. To the best of my knowledge and belief, the enclosed data are accurate in all material respects and are recorded in a manner designed to present fairly the financial position and the results of operations of the various funds of the City. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to both protect the City's assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of these financial statements in accordance with generally accepted accounting principles (GAAP). Internal accounting controls are designed to provide reasonable but not absolute assurance regarding the safeguarding of the City's assets against loss, theft, or misuse, and ensuring that adequate financial records are maintained for preparing financial statements, and maintaining accountability for assets. The development of an appropriate internal control system requires estimates and judgments by management to ensure that the costs do not exceed the benefits of the system. The City of Elk River's internal control structure is designed so that the estimated costs of control do not exceed the benefits. Generally accepted accounting principles require that management provide a narrative introduction overview and analysis to accompany the basic financial statements in the form of MD&A. This letter of transmittal is designed to compliment the MD&A and should be read in conjunction with it. The City of Elk River's MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Elk River was originally incorporated in 1880 and consolidated with Elk River Township in 1978 to form a city of 44 square miles. The City of Elk River is located in Sherburne County and serves as the county seat. Elk River is located approximately halfway between the metropolitan areas of Minneapolis/St. Paul and Saint Cloud along the Mississippi River. The City of Elk River has been growing and will not reach full development in the near future. The current population is approximately 23,945. Population at full build out is estimated to be 40,000. Urban services are available to about one- third of the land area in the City. The City of Elk River operates under a statutory form of government consisting of a four member City Council and a Mayor who is also a voting member. Council members are elected by ward to a four-year term with two Council seats up for election each even year. The Mayor is also elected to a four-year term. The City Council is responsible for adopting the City's budget and tax levy, passing resolutions and ordinances, all hiring and firing decisions, policy making, development and growth planning, and overall direction of the City. In addition to providing general government services, the City of Elk River provides a full range of other services including police and fire protection, building and other safety inspections, planning and zoning, economic development, environmental services, parks and recreation, library, street, snow removal, infrastructure maintenance and repair, and others. The City provides municipal water, sewer, garbage, and electric services and operates two off-sale liquor stores. The annual budget serves as the foundation for the City of Elk River's financial planning and control. Budget requests are submitted by all departments to the Finance Department each May. The Finance Department compiles these requests into a proposed budget. The Finance Department and City Administrator review the information and present a draft budget to the Council in August for consideration. Following Council discussion and public input, the final tax levy and budget are approved in December. The City's Financial Management Plan allows department heads to make administrative budget amendments (excluding personal service and capital outlay) throughout the year as long as the total department budget does not change and the amendment is approved by the City Administrator and Finance Director. The Council approves additional budget amendments in December of each year. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund this comparison is presented on page 27 as part of the basic financial statements for the governmental funds. For other governmental funds with appropriated annual budgets this comparison is presented in the governmental fund subsection of this report. Local economy The local- economy has slowed as evidenced by a decrease in building permits with a construction value of $10,460,008 being issued in 2009. This is a 33 percent decrease from 2008. New commercial, industrial, and institutional building accounted for $1,650,863 of new value, and an additional $5,417,836 in additions and remodeling and $3,391,309 in residential construction make up the balance. The number of housing units added declined from 25 in 2008 to 20 in 2009. The average value of new homes increased to $187,297. Single family homes accounted for 16 of the new housing units compared to 25 built in 2008. In 2009 new commercial/industrial construction was limited due to economic conditions. Projects of note included, the Goodwill store relocated to a new building in Elk Ridge Center development, Gradient Technology completed construction of an expansion to its research & development facility in Elk River Business Park, and construction of the Northstar Commuter Rail Station. Despite national trends, employment in Elk River's largest employers remained fairly stable. Only one company reported over 50 layoffs (RRT -June 2009). The City continued the 1715Y Avenue Focused Area Study of the redevelopment and development opportunities surrounding the Northstar Depot and the City-owned Gateway Business Park. The Gateway Business Park is located adjacent to the Northstar Commuter Rail Station. The commuter trains began service in November 2009. Elk River's station has one of the largest ridership numbers along the '~ u ii fl 0 0 J ii 1 ii ' rail line that runs from Minneapolis to Big Lake. With the anticipated completion of the study in 2010, the City will begin marketing its 75-acres for commercial/industrial development. ' The City undertook a federal grant initiative entitled, Neighborhood Stabilization Program (NSP), to stimulate ownership and rehabilitation of foreclosed homes in Elk River's hardest hit neighborhoods. The NSP program provided down payment assistance of $5,000 to $10,000 to income eligible ' homeowners. In addition to NSP, other City foreclosure initiatives included implementing a coordinated system to monitor foreclosed homes/neighborhoods and prevention efforts by providing foreclosure counseling referrals to residents. ' Long-term financial planning ' As part of a yearly budget process the City Council reviews the updated Financial Management Plan. The Financial Management Plan provides along-range forecast that brings together future expenditures, revenues, and development of the City. The Council has been diligent in maintaining a level tax rate. ' This plan provides the information needed to develop in a manner that will sustain or expand City services while keeping the property taxes stable. Department heads take part in this process to estimate staff additions, service levels, and capital needs for the next ten years. ' In addition, the City Council continually reviews cash flow analysis and long-term planning as part of the comprehensive Capital Improvement Plan (CIP) process. The CIP is a 5-year planning tool that forecasts the City's capital needs based on the City's long-range plans, goals, and policies. Relevant Financial Policies ' The total unreserved, designated fund balance in the general fund (47.3 percent of next year's budgeted general fund expenditures) falls within the policy guidelines set by the Council for budgetary and planning purposes (minimum of 40 percent). The fund balance is used to accommodate cash flows and ' the timing of tax and state aid receipts which are received twice a year. Following the close of the fiscal year and review of the financial management plan fund balance policy, the Council at its discretion decides to what funds the remaining balance will be allocated. 1 0 Changes in state law over the past several years have resulted in funding changes for both schools and local governments. Reductions in both Market Value Homestead Credits (MVHC) and Local Government Aids (LGA) programs have resulted in revenue losses to the City. Due to the uncertainty in receiving the aid from the state, the LGA and MVHC revenues are not included in the 2010 budget. The City does not expect in the short-term to see LGA and MVHC amounts restored to previously years levels. In addition, the State Legislature did reinstate levy limits starting in 2009 for three consecutive years and will have an impact on future budgeting parameters thru the 2011 budget. Major Initiatives After years of planning and development, Northstar Commuter Rail began offering service on November 16. Elk River Station, the largest depot on the commuter rail line that runs from Big Lake to Minneapolis, has had the highest ridership of any of the stations since the commuter rail line began operating. Northstar provides fast and convenient transportation for morning and afternoon commuters plus there is limited weekend and special event service. In the fall of 2009, the City completed a major east/west connection between Highway 169 and CR-13. The project will assist in improving traffic movement to and from Highway 169 and the eastern part of the City. The City received a federal grant in the amount of $996,000 to assist with construction of this project. Awards and Acknowledgements The Government Finance Officers Association of the United Stated and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Elk River for its CAFR for the fiscal year ended December 31, 2008. This was the 20th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement the government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement program requirements and it will be submitted to the GFOA to determine its eligibility for another certificate. The preparation of this report is made possible by the efficient and dedicated services of the entire staff of the City Administrator's office and Finance Department. The Mayor and City Council are to be commended for their diligence and resolve in keeping the City in sound and stable financial condition. The City Council's commitment to continually plan for the City's future and dedication to maintain high financial standards has helped the City maintain its strong financial condition during a long period of growth and subsequent slowdown. Respectfully submitted, Timothy Simon Finance Director 0 r CIII ii n L 0 u ii 7 ii 0 Certificate of Achievement for Excellence in Financial Reporting Presented [o City of Elk River Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2008 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual fmancial reports (CAFRs) achieve the highest standards in government accounting and fmancial reporting. ~,c~ oFf,~ 4 /OFTH~~N NtiEP STRtES~y y ~ tjI ~~A{1~t a ,~~~~~~° President Executive Director 5 This page has been left blank intentionally i 7 i 0 7 ~I 0 i~ CITY OF ELK RIVER ORGANIZATIONAL CHART -City Clerk -Finance -Planning -Police Admin. -Fire Admin. -Recreation -Building Maint. -Electric - HR/Payroll -Information Tech. -Building Safety -Patrol -Fire Inspections -Park Maintenance -Engineering -Water -Cable TV -Liquor -Environmental -Investigations -Emergency Mgmt. - Sr. Center -Streets - Economic Develop. -Support Services -Ice Arena -Equip. Services - Reserves -Golf Course -Sewer - Library CITY OF ELK RIVER, MINNESOTA ELECTED AND APPOINTED OFFICIALS YEAR ENDED DECEMBER 31, 2009 CITY COUNCIL Stephanie Klinzing Nicholas Zerwas Jerry Gumphrey Paul Motin Matthew Westgaard Mayor Council member Council member Council member Council member APPOINTED PERSONNEL Lori Johnson Timothy Simon Jeff Beahen T. John Cunningham William Maertz Terry Maurer Term Expires December 31, 2010 2010 2012 2010 2012 City Administrator Finance Director Police Chief Fire Chief Parks & Recreation Director Public Works Director 7 1 r 7 i FINANCIAL SECTION I'~ This page has been left blank intentionally u r i r C i 0 J u Kiver ~' 'A~D~ ~ ~..EI I~c~ J ~• ~ c ~ ~~ ` 11Y.~~~ I,I1P Certi r`e<i 1'rzirlic ~ccatuilar~ls ~ (~~~t.~ult<axts .r ' 5201 I:de~r .-~~~rnrjc Suite 3 i(? l~.diua. Alti 55E3G INDEPENDENT AUDITOR' S REPORT 1 Honorable Mayor and Council ' City of Elk River, Minnesota We have audited the accompanying fmancial statements of the governmental activities, the business-type activities, the discretely ' presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City), as of and for the year ended December 31, 2009, which collectively comprise the City's basic fmancial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these fmancial statements based on our audit. The prior year comparative information has been derived from ' the City's 2008 fmancial statements and, in our report dated May 7, 2009, we expressed unqualified opinions on the respective proprietary fund fmancial statements. ' We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial 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 fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the ' amounts and disclosures in the fmancial 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 fmancial statements referred to above present fairly, in all material respects, the respective fmancial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City as of December 31, 2009, and the respective changes in fmancial position and t cash flows, where applicable, thereof and the budgetary comparison for the General fund 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 May 13, 2010 on our consideration of the City's internal control over fmancial reporting and 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 fmancial reporting and compliance and the results of that testing, and not to provide an opinion on the internal ' control over fmancial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. ' 952.835.9090 Fax 952.835.3261 www.aemcpas.com Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 10 through 19 and the schedule of funding progress on page 63 be presented to supplement the basic fmancial statements. Such information, although not a part of the basic fmancial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of fmancial reporting for placing the basic fmancial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic fmancial statements, and other knowledge we obtained during our audit of the basic fmancial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the fmancial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund fmancial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic fmancial statements. The combining and individual fund fmancial statements and schedules have been subj ected to the auditing procedures applied in the audit of the basic fmancial statements and, in our opinion, are fairly stated in all material respects in relation to the basic fmancial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic fmancial statements and, accordingly, we express no opinion on them. Ot~~.~mw~,ur~ May 13, 2010 Minneapolis, Minnesota ABDO, EICK & MEYERS, LLP Certified Public Accountants 952.835.9090 Fax 952.835.3261 we~v.aemcpas.com 0 J ii r 7 u ' Reserved Designated Undesignated C n 0 7 i Management's Discussion and Analysis As management of the City of Elk River, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2009. We encourage readers to consider the information presented here in conjunction with the additional information that we have furnished in our letter of transmittal, which can be found on pages 1 - 4 of this report. Financial Highlights The assets of the City of Elk River exceeded its liabilities at the close of the most recent fiscal year by $199,827,280 (net assets). Of this amount, $48,628,472 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. The City's total net assets increased by $1,791,332. As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund balances of $30,180,383. Special General Revenue Debt Service Capital Projects Total $ - $ 4,051,002 5,699,575 8,310,831 - (466,294) $ 2,484,203 $ - $ 6,535,205 - 10,509,779 24,520,185 - (408,713) (875,007) $ 5,699,575 $ 11,895,539 $ 2,484,203 $ 10,101,066 $ 30,180,383 The City of Elk River's total long-termliabilities decreased $2,312,237 during the current fiscal year, from $53,302,636 to $50,990,399. Governmental activities: Bonds payable Capital leases Contracts for deeds Compensated absences Net OPEB obligation Total governmental activities Business-type activities: Bonds payable Notes payable Compensated absences Net OPEB obligation Total business-type activities Total City long-term liabilities Beginning Ending Balance Additions Reductions Balance $ 29,278,979 $ 2,074,311 $ (2,968,817) $ 28,384,473 53,042 - (36,050) 16,992 1,786,750 - (157,250) 1,629,500 1,097,095 318,152 (351,435) 1,063,812 88,295 3,324 - 91,619 32,304,161 2,395,787 (3,513,552) 31,186,396 17,910,000 - (1,000,000) 16,910,000 2,701,994 - (177,348) 2,524,646 367,191 139,660 (166,814) 340,037 19,290 10,030 - 29,320 20,998,475 149,690 (1,344,162) 19,804,003 $ 53,302,636 $ 2,545,477 $ (4,857,714) $ 50,990,399 ' 10 ii Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City of Elk River's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide fmancial statements, 2) fund fmancial statements, and 3) notes to the fmancial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Elk River's finances; in a manner similar to aprivate-sector business. The statement of net assets presents information on all of the City of Elk River'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 of Elk River is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Elk River that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Elk River include general government, public safety, public works, culture and recreation, economic development and interest on long-term debt. The business-type activities of the City of Elk River include municipal liquor, garbage, sewer, water, and electric. The government-wide fmancial statements include not only the City of Elk River itself (known as the primary government), but also a legally separate Housing & Redevelopment Authority (HRA) for which the City of Elk River is financially accountable. Financial information for the HRA is reported separately from the fmancial information presented for the primary government itself. The Elk River Municipal Utilities, although also legally separate, functions for all practical purposes as a department of the City of Elk River, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 20 - 22 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Elk River, like other state and local goverrunent, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Elk River can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide fmancial statements. However, unlike the government-wide fmancial statements, governmental fund fmancial 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 maybe 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 by the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 11 0 C C C i r u u 0 ~II 1 The City of Elk River maintains three individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General fund, Street Improvements, and Improvement Projects. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds ' is provided in the form of combining statements elsewhere in this report. The City of Elk River adopts an annual appropriated budget for its General fund and some special revenue funds. A ' budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget. • The basic governmental fund financial statements can be found on pages 23 - 27 of this report. ' Proprietary funds. When the City of Elk River charges customers for the services it provides -whether to outside customers or to other departments of the City -these services are generally reported in proprietary funds. Proprietary funds are reported in the same ~vay that all activities are reported in the statement of net assets and the statement of ' revenues, expenses, and changes in net assets. The enterprise funds are the same as the business-type activities reported in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City of Elk River uses enterprise funds to account for its municipal liquor, garbage, sewer, water, and electric operations. t The basic proprietary fund financial statements can be found on pages 28 - 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 of Elk River's own program. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 36 of this report. ' Notes to Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 37 - 62 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 of Elk River's progress in funding its obligation to provide pension and other postemployment benefits to its employees. Required supplementary information can be found on ' page 63 of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found ' on pages 64 - 87 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 of Elk River, assets exceeded liabilities by $199,827,280 at the close of the most recent fiscal year. By far, the largest portion of the City of Elk River's net assets (73 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Elk River uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Elk River's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. u u ' 12 City of Elk River Net Assets Governmental Business-type Activities Activities Total 2009 2008 2009 2008 2009 2008 Current and other assets $37,178,428 $37,496,172 $24,144,259 $21,916,101 $61,322,687 $59,412,273 Capital assets 115,740,382 116,004,739 79,036,507 81,362,894 194,776,889 197,367,633 Total assets 152,918,810 153,500,911 103,180,766 103,278,995 256,099,576 256,779,906 Long-term liabilities outstanding 31,186,396 32,304,161 19,804,003 20,998,475 50,990,399 53,302,636 Other liabilities 2,271,663 2,607,276 3,010,234 2,834,046 5,281,897 5,441,322 Total liabilities 33,458,059 34,911,437 22,814,237 23,832,521 56,272,296 58,743,958 Invested in capital assets net of related debt 86,149,417 85,390,968 59,601,861 60,750,900 145,751,278 146,141,868 Restricted 4,723,030 5,569,773 724,500 724,500 5,447,530 6,294,273 Unrestricted 28,588,304 27,628,733 20,040,168 17,971,074 48,628,472 45,599,807 Total net assets $119,460,751 $118,589,474 $80,366,529 $79,446,474 $199,827,280 $198,035,948 An additional portion of the City of Elk River's net assets (3 percent) represents resources that are subject to external restrictions on how they maybe used. The remaining balance of unrestricted net assets ($48,628,472) maybe used to meet the City of Elk River's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Elk River is able to report positive balances in all three categories of net assets, both for the City as a whole, as well as for its separate governmental and business-type activities. Governmental activities. Governmental activities account for 60% of the City of Elk River's net assets. The total increase in net assets for governmental activities is $871,277 accounting for 49% of the total growth in net assets for the City. 13 ' Key elements of this increase are as follows: City of Elk River Changes in Net Assets ' Governmental Business-type Activities Activities Total 2009 2008 2009 2008 2009 2008 Revenues: Program revenues: ' Charges for services $ 2,150,803 $ 2,643,916 $ 35,270,716 $ 33,966,545 $ 37,421,519 $ 36,610,461 Operating grants and contributions 758,958 977,411 92,957 149,327 851,915 1,126,738 Capital grants and contributions 2,599,593 4,302,760 267,233 888,925 2,866,826 5,191,685 General revenues: ' Property taxes 12,521,133 12,136,707 12,521,133 12,136,707 Other taxes 156,894 - - - 156,894 - Grants and contributions not restricted to specific programs 1,940,274 1,775,536 - - 1,940,274 1,775,536 ' Unrestricted investmenteamings 548,651 1,215,053 367,883 534,485 916,534 1,749,538 Gain on disposal of capital assets 20,013 - - 2,000 20,013 2,000 Total revenues 20,696,3]9 23,051,383 35,998,789 35,541,282 56,695,108 58,592,665 ' Expenses: General government 2,777,568 3,286,350 - - 2,777,568 3,286,350 Public safety 6,106,181 6,715,607 - - 6,106,181 6,715,607 Public works 5,397,058 5,875,992 - - 5,397,058 5,875,992 ' Culture and recreation 3,767,312 3,549,637 3,767,312 3,549,637 Economic development 1,569,432 1,893,707 1,569,432 1,893,707 Interest on long-term debt 1,252,493 1,315,275 - - 1,252,493 1,315,275 Municipal liquor - 5,374,867 5,465,233 5,374,867 5,465,233 ' Garbage = 1,256,177 1,166,709 1,256,177 1,166,709 Sewer 1,784,428 1,851,655 1,784,428 1,851,655 Water - - 2,348,707 2,452,717 2,348,707 2,452,717 Electric Total expenses - 20,870,044 - 22,636,568 23,269,553 34,033,732 21,939,223 32,875,537 23,269,553 54,903,776 21,939,223 55,512,105 Increase (decrease)in net assets before transfers Transfers (173,725) 1 045 002 414,8]5 1 050 301 1,965,057 1 045 002 2,665,745 1 050 301 1,791,332 3,080,560 , , , , ( , , ) ( , , ) Change in net assets 871,277 1,465,116 920,055 1,615,444 1,791,332 3,080,560 ' Net assets -beginning 118,589,474 117,124,358 79,446,474 77,948,007 198,035,948 195,072,365 Prior period adjustment - - - (116,977) - (116,977) Net assets - beginning, as restated 118,589,474 117,124,358 79,446,474 77,831,030 198,035,948 194,955,388 ' Net assets -endin $ ] 19 460 751 $ 118 589 474 $ 80 366 529 $ 79 446 474 $ 199 827 280 $ 198 035 948 g , , , , , , , , , , , , ' • A decrease in building and development related revenues due to the economic environment accounts primarily for the decrease in charges for services. • Capital grants and contributions decreased due to a $2,000,000 county grant received in 2008 to help fund the ' YMCA construction. • Property tax collections increased $384,426 due to an increase in the property tax levy for 2009. • For the first time in 2009, the cable commission remitted cable franchise taxes to the City. ' • Investment income decreased $666,402 due to market rate conditions. • For the most part, decreases in expenses were due to budgetary reductions and sound fiscal control by city departments. 1 ' 14 Below are specific graphs which provide comparisons of the governmental activities revenues and expenditures. Revenues by Source -Governmental Activities Gain ondisposal of capital assets Charges forservices 0.1% Transfers 9.9% 4.8% eratin rants and Other taxes OP g g I contributions Property ti 57.6% 3S% Capital grants and contributions 12.0% Grants and contributions not restricted 8.9% rricted investment earnings 2S% 15 Business-type activities. Business-type activities increased the City of Elk River's net assets by $920,055 which accounts for 51 percent of the total growth in the net assets of the City. Key elements of this increase are as follows: • Charges for services for business-type activities totaled $35,270,716. The electric utility accounts for 69% of the total. Overall charges for services increased $1,304,171 or 4% when compared to 2008. This increase was due mainly to increased electric usage. • As a result of the decrease in construction activity, connection fees were down $651,692. • Investment income decreased by $166,602 due to market rate conditions. • The increase in operating expenses is a result from the increase in purchased power for the electric utility of $1,539,856 or l0% over 2008. Below are graphs showing the business-type activities revenue and expense comparisons. Revenues by Source -Business-type Activities Unrestricted investment earnings 1.0% Capital grants and contributions 0.7% Operating grants and contributions 0.3% arges for services 98.0% 16 Financial Analysis of the Government's Funds Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $30,180,383. Approximately 78% of this total amount ($23,645,178) constitutes unreserved fund balance, which is available for spending at the City's discretion. The remainder of fund balance ($6,535,205) is reserved to indicate that it is not available for new spending because it has already been committed to provide for 1) debt service ($2,484,203), 2) capital equipment/projects ($1,744224), 3) landfill mitigation ($1,695,115), 4) notes receivable ($480,421), or 5) prepaid items ($131,242). The General fund is the chief operating fund of the City of Elk River. The total fund balance of the General fund increased $508,913 during the current year. Key factors are as follows: • Property tax collections were down by $143,535, gravel tax collections were down by $75,567 and interest income was down by $89,270. • Licenses and permits and charges for services were affected by the decline in building and development activity due to the economic environment. • Expenditures were under budget by $576,758 due to sound fiscal control by city departments. The Street Improvements fund increased by $243,861, due primarily to the timing of project revenues and the issuance of debt to fund project costs incurred. The Improvement Projects fund increased $282,743, due to special assessment collections and the transfer in of closed bond funds. Proprietary funds. The City of Elk River's proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net assets in the respective proprietary funds are Municipal Liquor - $4,217,754, Garbage - $383,498, Sewer - $4,196,133, Water - $5,266,291, and Electric - $5,976,492. The Sewer fund net assets decreased $167,137 due to the construction slow down as reflected in the connection fees collected and the decrease in interest income due to market rate conditions. All other proprietary funds had increases in net assets. General Fund Budgetary Highlights Differences between the original budget and the final budget for the General fund amounted to $360,050. The revenue budgets were amended to reflect the reduction in Local Government Aid (LGA) and Market Value Homestead Credit (MVHC) from the State of Minnesota, the addition of cable franchise taxes, the increase in charges for services because of added recreation programs, and the increase in recreation-sponsored contributions. The expenditure budgets were amended to reflect decreases in all the categories for budgetary cuts in personal services, supplies, and services resulting from the reduction in LGA and MVHC and decreases in transfers out for corresponding budget reductions in the ice arena and golf course operations. Capital Asset and Debt Administration Capital Assets. The City of Elk River's investment in capital assets for its governmental and business type activities as of December 31, 2009, amounts to $194,776,889 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment and infrastructure. The total decrease in the City of Elk River's investment in capital assets for the current year was 1 percent (a .2 percent decrease for governmental activities and a 3 percent decrease for business-type activities). 17 n n 0 v 0 0 r i Major capital asset events during the current fiscal year included the following: • The completion of a recreation facility totaling $12,117,568. • $431,318 in park improvements and equipment, $136,004 in public safety vehicles and $284,075 in public works equipment. • Reconstruction of residential and collector streets totaled $558,136. • Construction began on a new east/west street corridor ~dthin the City totaling $4,256,305 as of the end of the current fiscal year. • Additions of system improvements for Sevt~er - $4,412,078, Water - $211,199 and Electric - $1,214,469. CitS~ of Elk River Capital Assets (Net of Depreciation) Governmental Activities 2009 2008 Business-type Activities 2009 2008 Total 2009 2008 Land $ 37,407,782 $ 37,210,682 $ 1,516,631 $ 1,516,631 $ 38,924,413 $ 38,727,313 Construction in progress 4,555,760 13,068,992 84,648 4,288,629 4,640,408 17,357,621 ' Buildings 27,751,898 17,076,838 12,938,824 8,969,593 40,690,722 26,046,431 Other improvements 2,497,413 2,698,571 - - 2,497,413 2,698,571 Equipment 3,635,105 3,769,995 1,359,287 1,462,666 4,994,392 5,232,661 Infrastructure 39,892,424 42,179,661 63,137,117 65,125,375 103,029,541 107,305,036 Total $ 115,740,382 $ 116,004,739 $ 79,036,507 $ 81,362,894 $ 194,776,889 $ 197,367,633 1 Additional information on the City's capital assets can be found in Note 3D on pages 47 - 49 of this report. 7 i Long-term debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $50,990,399, a decrease of $2,312,237 from 2008. General obligation improvement bonds ($16,677,757) were issued to fmance the construction of a library, a recreation facility and a street corridor project. General obligation revenue bonds ($17,610,000) were used to finance the construction of an ice arena, a liquor store, and sewer, water and electric systems. Lease revenue bonds ($6,175,000) were used to fmance the construction of a public safety/city hall facility. Special assessment bonds ($3,970,000) fmanced improvement projects within the City and are assessed to the benefiting properties. Tax increment bonds ($440,000) fmanced the City's economic development program. Certificates of indebtedness ($421,716) fmanced capital equipment purchases. Additional long-term debt in the amount of $16,992 is for capital leases, $1,629,500 is for contracts for deeds, $2,524,646 is for notes payable, $1,403,849 is for compensated absences, and $120,939 is for other postemployment benefits obligations. 18 Cite of Elk River Outstanding Debt t Governmental Business-type Activities Activities Total 2009 2008 2009 2008 2009 2008 Bonds payable: ' G.O. bonds $ 16,677,757 $ 15,412,946 $ - $ - $ 16,677,757 $ 15,412,946 G.O. revenue bonds 700,000 955,000 16,910,000 17,910,000 17,610,000 18,865,000 Lease revenue bonds 6,175,000 7,170,000 - - 6,175,000 7,170,000 ' Special assessment bonds 3,970,000 4,480,000 - - 3,970,000 4,480,000 Tax increment bonds 440,000 505,000 - - 440,000 505,000 Certificates of indebtedness 421,716 756,033 - - 421,716 756,033 ' Total bonds payable 28,384,473 29,278,979 16,910,000 17,910,000 45,294,473 47,188,979 Capital ceases 16,992 53,042 - - 16,992 53,042 Contracts for deeds 1,629,500 1,786,750 - - 1,629,500 1,786,750 ' Notes payable - - 2,524,646 2,701,994 2,524,646 2,701,994 Compensated absences 1,063,812 1,097,095 340,037 367,191 1,403,849 1,464,286 Net OPEB obligation 91,619 88,295 29,320 19,290 120,939 107,585 , Total $ 31,186,396 $ 32,304,161 $ 19,804,003 $ 20,998,475 $ 50,990,399 $ 53,302.,636 ' The City maintains a bond rating of Aa3 from Moody's for general obligation debt. State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total Estimated Taxable ' Market Value. The current debt limitation for the City of Elk River is $67,527,057. Only $16,053,016 of the City's net outstanding debt is counted within the statutory limitation. Additional information on the City of Elk River's long-term debt can be found in Note 3G on pages 51 - 55 of this report. ' Economic Factors and Next Year's Budget , The City of Elk River estimates that the demand for city services will grow at a slower level as in prior years due to the anticipated slow down in building activity. This was taken into consideration in preparation of the City's 2010 budget. The property tax levy is set annually and is adjusted as necessary to fund the cost of providing services to our citizens and customers. Charges for services are evaluated each year and adjusted if warranted. The City expects to keep the tax rate ' consistent in upcoming years. Requests for Information ' This financial report is designed to provide a general overview of the City of Elk River's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to City of Elk River, Attn: Finance Director, 13065 Orono Pkwy, Elk ' River, Minnesota 55330 or by calling (763) 635-1000. i ~i 19 ' ' BASIC FINANCIAL STATEMENTS 1 C i J cty of Elk River This page has been left blank intentionally 1 ii 0 0 n C C L u CITY OF ELK RIVER, MINNESOTA STATEMENT OF NET ASSETS DECEMBER 31, 2009 Primary Government ' Governmental Business-type Component Activities Acti~~ities Total Unit - IIRA ASSETS ' Cash and investments $ 30,202,389 $ 16,012,380 $ 46.214,769 $ 704,311 Restricted cash and investments - 724,500 724,500 - Cash v~rith fiscal agent 71,665 2,588,901 2,660,556 ' Receivables (net): = Interest 164,980 98,787 263,767 Taxes 833,003 - 833,003 22,210 ' Accounts 577,323 2,174,452 2,751,775 Special assessments 4;232,290 4,232,290 = Notes 1,037,486 - 1,037,486 400,000 Due from other governments 125,502 90,223 215,725 6,042 ' Due from primary government 304,679 Internal balances (197,442) 197,442 - - ' Inventories Prepaid items - 131,242 1,916,002 95,160 1,916,002 226,402 = Deferred charges - 246,412 246,412 - Property held for resale - - - 823,146 ' Capital assets: Nondepreciable 41,963,542 1,601,279 43,564,821 Depreciable (net) 73,776,840 77,435,228 151,212,068 - 3 180 766 576 256 099 2 260 388 Total assets 152,918,810 , , 10 , , , , LIABILITIES ' Accounts payable 641,948 2,528,717 3,170,665 1,785 Salaries payable 246,424 96,611 343,035 1,843 Due to other governments 106,696 107,997 214,693 = ' Due to component unit 304,679 304,679 Accrued interest payable 509,396 275,384 784,780 7,441 Unearned revenue 462,520 1,525 464,045 - ' Non-current liabilities: Due within one year 2,773,160 4,118,305 6,891,465 103,462 Due in more than one year 28,413,236 15,685,698 44,098,934 167,126 4 237 56 272 296 281 657 Total liabilities 33,458,059 , 22,81 , ; , NET ASSETS ' Invested in capital assets, net of related debt 86,149,417 59,601,861 145,751,278 - Restricted for: Debt service 3,027,915 724,500 3,752,415 - Landfill mitigation 1,695,115 - 1,695,115 - Unrestricted 28,588,304 20,040,168 48,628,472 1,978,731 ' Total net assets $ 119,460,751 $ 80,366,529 $ 199,827,280 $ 1,978,731 ' The notes to the financial statements ar e an integral part of this statement. ' 2 0 C CITY OF ELK RIVER, MINNESOTA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2009 Functions/Programs Primary Government: Governmental Activities: General government Public safety Public works Culture and recreation Economic development Interest on long-term debt Total governmental activities Operating Charges for Grants and Expenses Services Contributions Capital Grants and ' Contributions Business-type Activities: Municipal liquor Garbage Sewer Water Electric Total business-type activities Total primary government Component Unit: Housing and Redevelopment Authority $ 2,777,568 $ 334,100 $ 20,974 $ - 6,106,181 634,242 371,338 24,650 5,397,058 47,860 84,722 2,311,279 ' 3,767,312 1,074,266 280,424 263,664 1,569,432 1,252,493 60,335 - 1,500 - - - , 20,870,044 2,150,803 758,958 2,599,593 5,374,867 6,094,058 - - 1,256,177 1,194,937 92,957 - 1,784,428 1,504,785 - 105,647 2,348,707 2,218,816 - 83,378 ' 23,269,553 24,258,120 - 78,208 34,033,732 35,270,716 92,957 267,233 , $ 54,903,776 $ 37,421,519 $ 851,915 $ 2,866,826 ' $ 131,055 $ 3,396 $ 32,013 $ 103,146 General revenues: Property taxes: Levies for general purposes Levies for debt service Tax increments Other taxes Grants and contributions not restricted Unrestricted investment earnings Gain on disposal of capital assets Transfers Total general revenues and transfers Change in net assets Net assets -beginning Net assets -ending The notes to the fmancial statements are an integral part of this statement. 21 ~I J J 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-Type Component Activities Activities Total Unit - HRA $ (2,422,494) $ - $ (2,422,494) $ - (5,075,951) - (5,075,951) - (2,953,197) - (2,953,197) - (2,148,958) - (2,148,958) - (1,507,597) - (1,507,597) - (1,252,493) - (1,252,493) - (15,360,690) - (15,360,690) - (15,360,690) 719,191 31,717 (173,996) (46,513) 1,066,775 1,597,174 1,597,174 719,191 31,717 (173,996) (46,513) 1,066,775 1,597,174 (13,763,516) - 7,500 9,979,103 - 9,979,103 305,344 1,461,888 - 1,461,888 - 1,080,142 - 1,080,142 - 156,894 - 156,894 - 1,940,274 - 1,940,274 10,996 548,651 367,883 916,534 8,073 20,013 - 20,013 - 1,045,002 (1,045,002) 16,231,967 (677,119) 15,554,848 324,413 871,277 920,055 1,791,332 331,913 118,589,474 79,446,474 198,035,948 1,646,818 $ 119,460,751 $ 80,366,529 $ 199,827,280 $ 1,978,731 22 0 ~' ~~ ' of I ~.~ aver ~ 1 This page has been left blank intentionally 0 r J u u CITY OF ELK RIVER, MINNESOTA GOVERNMENTAL FUNDS BALANC E SHEET DECEMBER 31, 2009 ' Other Total General Street Improvement Govemmental Govemmental Fund Improvements Projects Funds Funds ' ASSETS Cash and investments $ 5,800,923 $ 5,104,177 $ 4,092,193 $ 15,205,096 $ 30,202,389 Cash with fiscal agent - - - 71,655 71,655 Receivables: Interest 38,100 28,778 22,657 75,445 164,980 Taxes 668,105 1,320 13,037 150,541 833,003 Accounts 23,181 27,552 - 526,590 577,323 Special assessments - 1,166,409 1,628,896 1,436,985 4,232,290 Notes - - - 1,037,486 1,037,486 ' Due from other governments 31,457 94,028 17 125,502 Due from other funds 67,788 159,971 - 497,420 725,179 Due from component unit 5,066 - - - 5,066 Prepaid items - - - 131,242 131,242 ' Total assets $ 6,634,620 $ 6,582,235 $ 5,756,783 $ 19,132,477 $ 38,106,115 LIABILITIES AND FUND BALANCES Liabilities: ' Accounts payable $ 241,853 $ 209,362 $ 425 $ 190,308 $ 641,948 Salaries payable 231,274 - - 15,150 246,424 Due to other govemments - - - 106,696 106,696 Due to other funds 1,426 _ 921,195 922,621 Due to component unit = 309,745 309,745 Deferred revenue 460,492 1,152,659 1,636,290 2,448,857 5,698,298 Total liabilities 935,045 1,362,021 1,636,715 3,991,951 7,925,732 Fund balances: ' Reserved for: Debt service - - - 2,484,203 2,484,203 Capital equipment/projects - - - 1,744,224 1,744,224 Landfill mitigation - - - 1,695,115 1,695,115 ' Notes 480,421 480,421 Prepaid items 131,242 131,242 Unreserved reported in: ' Designated: General fund, for working capital 5,699,575 5,699,575 Special revenue funds, for working capital - - 2,319,346 2,319,346 Special revenue funds, for development projects - - - 1,056,223 1,056,223 Special revenue funds, for future debt requirements - - - 4,846,544 4,846,544 Special revenue funds, for OPEB obligations - - - 88,718 88,718 ' Capital projects funds, for capital projects 5,220,214 4,120,068 1,169,497 10,509,779 Undesignated: Special revenue funds - - - (466,294) (466,294) Capital projects funds - - - (408,713) (408,713) ' Total fund balances 5,699,575 5,220,214 4,120,068 15,140,526 30,180,383 Total liabilities and fund balances $ 6,634,620 $ 6,582,235 $ 5,756,783 $ 19,132,477 $ 38,106,115 0 I~~ The notes to the financial statements are an integral part of this statement. 23 CITY OF ELK RIVER, MINNESOTA RECONCILIATION' OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS DECEMBER 31, 2009 FUND BALANCE-TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net assets are different because: 1. Capital assets used in governmental activities are not current fmancial resources and therefore are not reported in the governmental funds: Governmental capital assets Less accumulated depreciation 2. Deferred revenue in governmental funds is susceptible to full accrual on the government-wide statements. 3. Long-term liabilities are not payable with current fmancial resources and are therefore not reported in the governmental funds: Bonds payable Capital leases Contracts for deeds Accrued interest payable Compensated absences Net OPEB obligation NET ASSETS OF GOVERNMENTAL ACTIVITIES The notes to the fmancial statements are an integral part of this statement. 24 $162,711,928 (46,971,546) $ 30,180,383 115,740,382 5,235,778 (28,384,473) (16,992) (1,629,500) (509,396) (1,063,812) (91,619) (31,695,792) $119,460,751 ' CITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2009 REVENUES Taxes: Other Total General Street Improvement Govemmental Governmental Fund Improvements Projects Funds Funds Property taxes $ 9,072,965 $ 16,542 $ 50,948 $ 3,188,739 $ 12,329,194 ' Other taxes Licenses and permits 156,894 322,338 - - - 156,894 322,338 Intergovernmental revenue 922,988 1,237,368 1,747 955,894 3,117,997 Charges for services 537,674 - 2,591 925,633 1,465,898 Fines and forfeits 127,642 - - 13,987 141,629 Special assessments - 626,853 406,121 431,374 1,464,348 ' Interest income 90,730 102,920 75,321 279,680 548,651 Miscellaneous: Landfill host fee - 139,283 - 789,273 928,556 Refunds and reimbursements 60,888 - - 93,197 154,085 ' Other 29,290 600 741,435 771,325 Total revenues 11,321,409 2,123,566 536,728 7,419,212 21,400,915 ' EXPENDITURES Current: General govemment 2,379,939 78,940 2,458,879 Public safety 5,174,528 - - 202,680 5,377,208 Public works 1,743,227 655,740 24,924 232,206 2,656,097 Culture and recreation 1,616,712 - - 1,049,434 2,666,146 ' Economic development 1,589,464 1,589,464 Debt service: Principal - - - 3,162,117 3,162,1]7 Interest and service charges - - - 1,289,087 1,289,087 ' Capital outlay: General government 41,360 81,665 123,025 Public safety 57,599 - - 120,002 177,601 ' Public works Culture and recreation 6,127 - = 267,718 411,728 273,845 411,728 Infrastructure/development projects 3,319,619 321,504 3,641,123 Total expenditures 11,019,492 3,975,359 346,428 8,485,041 23,826,320 ' Excess (deficiency) ofrevenues over (under) expenditures 301,917 (1,851,793) 190,300 (1,065,829) (2,425,405) OTHER FINANCING SOURCES (USES) Transfers in 590,100 2],343 113,786 2,162,395 2,887,624 Transfers out (383,104) - (21,343) (1,438,175} (1,842,622) ' Issuance of debt 2,074,311 2,074,311 Sale of capital assets - - - 16,629 16,629 Total other financing sources (uses) 206,996 2,095,654 92,443 740,849 3,135,942 ' Net change in fund balances 508,913 243,861 282,743 (324,980) 710,537 Fund balances -January 1 5,190,662 4,976,353 3,837,325 15,465,506 29,469,846 ' Fund balances -December 31 $ 5,699,575 $ 5,220,214 $ 4,120,068 $ 15,140,526 $ 30, 180,383 n The notes to the fmancial statements are an integral part of this statement. 25 CITY OF ELK RIVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, ' AND CHANGES IN FU1~TD BALANCES OF GOVERl~'MENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2009 ' NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FiJNDS $ 710,537 ' Amounts reported for governmental activities in the statement of activities are different because: ' 1. 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 and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. ' Capital outlay Depreciation expense $ 5,029,218 (5,292,468) (263,250) 2. The net effect of various miscellaneous transactions involving capital assets including donations and disposals, which increase net assets. ' Donations 24,650 Disposals Depreciation on disposals (240,309) 214 552 (1 107) ' , , 3. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the governmental funds. ' Property taxes 191,939 Special assessments (858,010) Notes receivable (63,191) (729,262) ' 4. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current ' fmancial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. ' Issuance of long-term debt (2,074,311) Repayment of principal of long-term debt 3,162,117 1,087,806 ' 5. Some expenses reported in the statement of activities do not require use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Accrued interest payable 36,594 ' Compensated absences 33,283 Net OPEB obligation (3,324) 66,553 ' CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 871,277 ' The notes to the financial statements are an integral part of this statement. 26 ' CITY OF ELK RIVER, MINNESOTA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEA'IBER 31, 2009 REVENUES Taxes: Property taxes Other taxes Licenses and permits Intergovernmental revenue Charges for services Fines Interest income Miscellaneous revenue: Refunds and reimbursements Other Total revenues EXPENDITURES ' Current: General government Public safety Public works Culture and recreation ' Capital outlay: General government Public safety Public works ' Total expenditures r u r Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance -January 1 Fund balance -December 31 Budget Variance with Original Final Actual Final Budget $ 9,547,550 $ 9,216,500 $ 9,072,965 $ (143,535) 150,000 229,000 156,894 (72,106) 353,550 353,550 322,338 (31,212) 983,600 921,150 922,988 1,838 594,500 606,000 537,674 (68,326) 157,000 157,000 127,642 (29,358) 180,000 180,000 90,730 (89;270) 54,000 54,000 60,888 6,888 25,800 28,300 29,290 990 12,046,000 11,745,500 11,321,409 (424,091) 2,700,850 2,611,250 2,379,939 231,311 5,575,950 5,381,200 5,174,528 206,672 1,985,700 1,867,500 1,743,227 124,273 1,727,700 1,609,100 1,616,712 (7,612) 43,000 43,000 41,360 1,640 72,500 72,500 57,599 14,901 11,700 11,700 6,127 5,573 12,117,400 11,596,250 11,019,492 576,758 (71,400) 149,250 301,917 152,667 590,100 590,100 590,100 - (518,700) (379,300) (383,104) (3,804) 71,400 210,800 206,996 (3,804) - 360,050 508,913 148,863 5,190,662 5,190,662 5,190,662 - $ 5,190,662 $ 5,550,712 $ 5,699,575 $ 148,863 The notes to the financial statements are an integral part of this statement. ' 27 n CITY OF ELK RIVER, MINNESOTA STATEMENT OF NET ASSETS ' PROPRIETARY FUND S DECEMBER 31, 2009 Municipal Liq uor Garbage ' Current Year Prior Year Cun-ent Year Prior Year ASSETS Cun-ent assets: Cash and investments $ 3,826,409 $ 3,400,274 $ 363,322 $ 308,640 , Restricted cash and investments - - - - Cash with fiscal aeent ~ - - - - Receivables: Interest 21,185 31,822 1,935 2,787 ' Accounts 1,181 1,286 7,297 12,669 Due from other goverrunents - - 53,099 - Due from other funds - - 95,831 89,403 Inventories 852,451 886,431 - - ' Prepaid items 7,688 7,546 - - Total current assets 4,708,914 4,327,359 521,484 413,499 Noncurrent assets: ' Defened charges 2,102 2,516 - - Capital assets: Nondepreciable 823,761 823,761 - - Depreciable 3,270,350 3,269,095 - - ' Accumulateddepreciation (1,319,981) (1,215,561) - - Total capital assets 2,774,130 2,877,295 - - Total noncurrent assets 2,776,232 2,879,811 - - ' Total assets 7,485,146 7,207,170 521,484 413,499 LIABILITIES Current liabilities: ' Accounts payable 367,839 382,779 137,266 93,472 Salaries payable 18,022 16,687 720 668 Due to other govenunents - - - - Due to other funds - - - - ' Unearned revenue 1,525 1,214 - - Accrued interest 18,375 20,156 - - Compensated absences payable -current 24,789 27,176 - - Notes payable -current - - - - ' Bonds payable -current 100,000 95,000 - - Total current liabilities 530,550 543,012 137,986 94,140 Noncurrent liabilities: ' Compensated absences payable 58,586 55,771 - - Net other postemployment benefits obligation 4,126 4,126 - - Notes payable Bonds payable - 880,000 980,000 - - - - ' Total noncunrent liabilities 942,712 1,039,897 - - Total liabilities 1,473,262 1,582,909 137,986 94,140 NET ASSETS ' Invested in capital assets, net of related debt 1,794,130 1,802,295 - - Restricted for debt service - - - - Unrestricted 4,217,754 3,821,966 383,498 319,359 ' Total net assets $ 6,011,884 $ 5,624,261 $ 383,498 $ 319,359 The notes to the financial statements are an integral part of this statement. 28 ' i Sewer Current Year Prior Year III i 0 J Current Year Water Electric Prior Year Current Year Prior Year Total Current Year $ 3,954,869 $ 3,837,262 $ 2,500,960 $ 1,935,458 $ 5,366,820 $ 3,908,552 $ 16,012,380 - - - - 724,500 724,500 724,500 - - 2,588,901 2,592,096 - - 2,588,901 21,893 35,914 27,684 9,188 26,090 27,557 98,787 2,813 - 101,538 288,808 2,061,623 2,023,188 2,174,452 - - - - 37,124 3,161 90,223 291,222 295,778 128,850 128,850 1,581 3,202 517,484 - - 28,722 31,611 1,034,829 1,329,459 1,916,002 - - 12,184 8,687 75,288 61,628 95,160 4,270,797 4,168,954 5,388,839 4,994,698 9,327,855 8,081,247 24,217,889 15,964 18,588 110,622 124,941 117,724 128,894 246,412 411,095 4,504,119 81,539 132,645 284,884 344,735 1,601,279 36,886,514 32,616,674 31,688,565 31,473,921 50,450,158 49,445,896 122,295,587 (12,662,155) (11,971,258) (9,013,862) (8,085,680) (21,864,361) (19,975,453) (44,860,359) 24,635,454 25,149,535 22,756,242 23,520,886 28,870,681 29,815,178 79,036,507 24,651,418 25,168,123 22,866,864 23,645,827 28,988,405 29,944,072 79,282,919 28,922,215 29,337,077 28,255,703 28,640,525 38,316,260 38,025,319 103,500,808 34,806 136,657 29,818 46,887 1,958,988 1,712,425 2,528,717 11,545 8,806 5,515 4,758 60,809 39,723 96,611 - - - 107,997 97,749 107,997 - - 14,810 17,978 305,232 326,617 320,042 - - - - - - 1,525 18,589 20,620 1]4,136 119,956 124,284 131,489 275,384 11,350 7,020 37,998 33,154 79,840 99,464 153,977 - - - 179,328 177,348 179,328 160,000 150,000 3,012,500 426,250 512,500 328,750 3,785,000 236,290 323,103 3,214,777 648,983 3,328,978 2,913,565 7,448,581 9,387 10,299 30,893 34,948 87,194 99,359 186,060 4,951 4,951 - - 20,243 10,213 29,320 - - - - 2,345,318 2,524,646 2,345,318 1,065,000 1,225,000 4,167,500 7,180,000 7,012,500 7,525,000 13,125,000 1,079,338 1,240,250 4,198,393 7,214,948 9,465,255 10,159,218 15,685,698 1,315,628 1,563,353 7,413,170 7,863,931 12,794,233 13,072,783 23,134,279 23,410,454 23,774,535 15,576,242 15,914,636 18,821,035 19,259,434 59,601,861 - - - - 724,500 724,500 724,500 ' 4,196,133 3,999,189 5,266,291 4,861,958 5,976,492 4,968,602 20,040,168 $ 27,606,587 $ 27,773,724 $ 20,842,533 $ 20,776,594 $ 25,522,027 $ 24,952,536 $ 80,366,529 29 CITY OF ELK RIVER, A'HNNESOTA STATEDZENT OF REVENUES, EKPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2009 Municipal Liquor Garbage v Current Year Prior Year Current Year Prior Year Sales and cost of sales: Sales $ 6,076,245 $ 6,209,322 $ - $ - Cost of sales (4,354,597) (4,421,064) - - Gross profit 1,721,648 1,788,258 - - Operating revenues: User charges - - 1,188,754 1,153,377 Delinquency collections - - 6,183 6,780 Other 4,727 4,335 92,957 22,975 Total operating revenues 4,727 4,335 1,287,894 1,183,132 Operating expenses: Personal services 595,758 623,815 29,631 26,866 Supplies 13,755 20,653 41,438 59 Purchased power - - - - Otherservicecharges 239,496 225,143 1,185,108 1,139,784 Depreciation 126,391 125,489 - - Total operating expenses 975,400 995,100 1,256,177 1,166,709 Operating income (loss) 750,975 797,493 31,717 16,423 Nonoperating revenues (expenses): Connection charges - - - - Interest income 68,932 125,346 6,783 11,055 Miscellaneous revenue 13,086 - - - Interest expense (44,456) (48,655) - - Amortization expense (414) (414) - - Gain (loss) on sale of capital assets - - - - Total nonoperating revenues (expenses) 37,148 76,277 6,783 11,055 Income before contributions and transfers 788,123 873,770 38,500 27,478 Transfers in - - 25,639 37,883 Transfers out (400,500) (471,548) - - Change in net assets 387,623 402,222 64,139 65,361 Total net assets -January 1 5,624,261 5,222,039 319,359 253,998 Prior period adjustments - - - - Total net assets, restated -January 1 5,624,261 5,222,039 319,359 253,998 Total net assets -December 31 $ 6,011,884 $ 5,624,261 $ 383,498 $ 319,359 The notes to the financial statements are an integral part of this statement. 30 II~ n ii n L i r Sewer Current Year Prior Year $ - $ _ Water _ Current Year Prior Year - $ - $ - $ Electric Current Year Prior Year Total - $ - $ 6,076;245. - - (4,354,597) - 1,721,648 1,502,423 1,501,619 2,182,110 2,109,014 23,846,258 22,531,766 28,719,545 - - 24,319 21,110 209,064 187,553 239,566 2,362 9,546 - 8,922 172,421 222,584 272,467 ],504,785 1,511,165 2,206,429 2,139,046 24,227,743 22,941,903 29,231,578 398,697 422,932 423,126 442,557 1,700,994 1,615,414 3,148,206 100,902 95,205 248,326 235,337 133,347 117,437 537,768 - - - - 16,318,126 14,778,270 16,318,126 403,649 442,217 430,985 507,519 2,647,498 3,035,938 4,906,736 833,135 838,424 956,993 974,848 2,126,794 2,057,851 4,043,313 1,736,383 1,798,778 2,059,430 2,160,261 22,926,759 21,604,910 28,954,149 (231,598) (287,613) ]46,999 (21.215) 1,300,984 1,336,993 1,999,077 105,647 351,620 83,378 236,536 78,208 300,769 267,233 71,859 190,614 132,452 51,873 87,857 155,597 367,883 - - 12,387 - 30,377 126,969 55,850 (45,421) (50,253) (274,958) (279,292) (299,452) (314,775) (664,287) (2,624) (2,624) (14,319) (13,164) (11,169) (11,169) (28,526) 2,000 - - (32,173) (8,369) (32,173) 129,461 491,357 (61,060) (4,047) (146,352) 249,022 (34,020) (102,137) 203,744 85,939 (25,262) 1,154,632 1,586,015 1,965,057 - - - - - - 25,639 (65,000) (56,000) (20,000) (20,000) (585,141) (540,636) (1,070,641) (167,137) 147,744 65,939 (45,262) 569,491 1,045,379 920,055 27,773,724 27,625,980 20,776,594 20,830,416 24,952,536 24,015,574 79,446,474 - - - (8,560) - (108,417) - 27,773,724 27,625,980 20,776,594 20,821,856 24,952,536 23,907,157 79,446,474 $ 27,606,587 $ 27,773,724 $ 20,842,533 $ 20,776,594 $ 25,522,027 $ 24,952,536 $ 80,366,529 31 CITY OF ELK RIVER, MINNESOTA STA TEMENT OF CASH FLOWS ' PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2009 ' Municipal Liquor Garbage Current Year Prior Year Current Year Prior Year CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 6,076,662 $ 6,210,329 $ 1,140,154 $ 1,157,965 Other operating cash receipts 23,143 4,335 92,957 22,975 Payments to suppliers (4,588,952) (4,738,377) (1,182,124) (1,136,597) Payments to employees (593,994) (575,720) (29,579) (26,340) Net cash provided by operating activities 916,859 900,567 21,408 18,003 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds - - 25,639 37,883 Transfers to other funds (400,500) (471,548) - - Decrease (increase) in due from other funds - - - - Increase (decrease) in due to other funds - - - - Net cash provided (used) by , noncapital financing activities (400,500) (471,548) 25,639 37,883 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES ' Acquisition of capital assets (28,556) - - - Principalpaid on capital debt (95,000) (75,000} - - Payments on short term account to acquire capital assets - - - - Proceeds of revenue bonds - - - - ' Withdrawal from escrow fund - - - - Payment to escrow agent for refunded bond - - - - Interestpaid on capital debt (46,237) (50,062) - - Principal paid on promissory note - - - - Netcash used by capital and related fmancing activities (169,793) (125,062) - - CASH FLOWS FROM INVESTING ACTIVITIES ' Interest received 79,569 118,614 7,635 10,226 Net increase (decrease) in cash and cash equivalents 426,135 422,571 54,682 66,112 ' Cash and cash equivalents, January 1 3,400,274 2,977,703 308,640 242,528 Cash and cash equivalents, December 31 $ 3,826,409 $ 3,400,274 $ 363,322 $ 308,640 ' Reconciliation of cash and cash equivalents , to the statement of net assets: Cash and investments $ 3,826,409 $ 3,400,274 $ 363,322 $ 308,640 Restricted cash and investments - - - - Total cash and cash equivalents $ 3,826,409 $ 3,400,274 $ 363,322 $ 308,640 , The notes to the financial statements are an integral part of this statement. u Continued 1 Sewer Water Electric Total Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year ' $ 1,609,454 $ 1,851,418 $ 2,419,649 $ 2,325,309 $ 24,114,123 $ 23,171,758 $ 35,360,042 2,362 9,546 65,563 (3,704) 12,506 202,455 196,531 (606,043) (458,084) (718,046) (840,686) (18,793,418) (17,617,200) (25,888,583) (392,540) (414,729) (377,420) (393,982) (1,332,138) (1,362,656) (2,725,671) 613,233 988,151 1,389,746 1,086,937 4,001,073 4,394,357 6,942,319 ' _ _ _ _ - - 25,639 (65,000) (56,000) (20,000) (20,000) (585,141} (540,636) (1,070,641) - - - - 1,621 (3,202) 1,621 - - (3,168) 2,932 (21,385) 30,302 (24,553) (65,000) (56,000) (23,168) (17,068) (604,905) (513,536) (1,067,934) (319,054) (3,746,547) (211,199) (954,311) (1,214,469) (2,030,658) (1,773,278) (150,000) (145,000) (426,250) (790,000) (328,750) (320,000) (1,000,000) _ (49,287) _ (89,019) _ _ 3,026,604 _ - - - 37,939 - - - - (2,630,036) - - - (47,452) (52,065) (280,778) (250,744) (306,657) (316,535) (681,124) ' (177,348) (177,060) (177,348) (516,506) (3,943,612) (918,227) (1,609,835) (2,027,224) (2,933,272) (3,631,750) ' 85,880 210,632 117,151 81,037 89,324 145,826 379,559 117,607 (2,800,829) 565,502 (458,929) 1,458,268 1,093,375 2,622,144 3,837,262 6,638,091 1,935,458 2,394,387 4,633,052 3,539,677 14,114,686 $ 3,954,869 $ 3,837,262 $ 2,500,960 $ 1,935,458 $ 6,091,320 $ 4,633,052 $ 16,736,880 ' ' $ 3,954,869 $ 3,837,262 $ 2,500,960 $ 1,935,458 $ 5,366,820 $ 3,908,552 $ 16,012,380 - - - - 724,500 724,500 724,500 ' $ 3,954,869 $ 3,837,262 $ 2,500,960 $ 1,935,458 $ 6,091,320 $ 4,633,052 $ 16,736,880 0 ' 33 CITY OF ELK RIFER, MINNESOTA STATEMENT OF CASH FLOR'S PROPRIETARY FUNDS PEAR ENDED DECEMBER 31, 2009 Reconciliation of operating income (loss) to net cash prodded by operating activities: Operating income (loss) Adjusrinents to reconcile operating income (loss) to net cash provided by operating activities: Other revenue related to operations Depreciation expense (Increase) decrease in assets: Accounts receivable Due from other funds Due from other govennents Inventories Prepaid items Increase (decrease)in: Accounts payable Salaries payable Due to other govenunents Unearned revenue OPEB liability Compensated absences payable Net cash provided by operating activities Noncash capital and related financing acti~~ities: Municipal Liquor Garbage Current Year Prior Year Current Year Prior Year $ 750,975 $ 797,493 $ 31,717 $ 16,423 18,416 - - - 126,391 125,484 - - 105 1,037 5,372 2,535 - - (6,428) (2,736) - - (53,099) - 33,980 (32,530) - - (142) (1,246) - - (14,941) (37,741) 43,794 1,255 1,335 4,273 52 526 311 (30) - - - 4,126 - - 429 39,696 - - $ 916,859 $ 900,567 $ 21,408 $ 18,003 Amortization of deferred charges $ 414 $ 414 $ - $ - Deferred charges on bonds issued - - - - Priorperiod adjusrinent to accumulated depreciation - - - - Assets purchased on account - - - - Disposa] of capital assets 27,301 - - - Interest payment on revenue bonds from escrow cash - - - - The notes to the financial statements are an integral part of this statement. 34 Sewer Water Electric Tota] Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year $ (231,598) $ (287,613) $ 146,999 $ (21,215) $ 1,300,984 $ 1,336,993 $ 1,999,077 105,647 351,620 95,765 236,536 108,585 427,738 328,413 833,135 838,424 956,993 974,848 2,126,794 2,057,851 4,043,313 (2,813) - 187,270 (56,477) (38,435) (117,665) 151,499 4,556 (1,467) - - - - (1,872) - - - - (33,963) 35,274 (87,062) - - 2,889 (4,724) 294,630 54,312 331,499 - - (3,497) (3,950) (13,660) 51,853 (17,299) (101,851) 78,984 1,781 (35,529) 246,563 516,660 175,346 2,739 1,759 757 1,543 21,086 16,942 25,969 - - - - 10,248 21,954 10,248 _ _ _ _ - - 311 - 4,951 - - 10,030 10,213 10,030 3,418 1,493 789 (4,095) (31,789) (17,768) (27,153) $ 613,233 $ 988,151 $ 1,389,746 $ 1,086,937 $ 4,001,073 $ 4,394,357 $ 6,942,319 $ 2,624 $ 2,624 $ 14,319 $ 13,164 $ 11,169 $ 11,169 $ 28,526 - - - 58,396 - - - - - - 8,560 - 108,417 - - 18,850 - - - 142,238 33,999 - - 266,697 8,369 436,236 - - 84,834 37,939 - - 84,834 35 CITY OF ELK RIVER, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS ' DEVELOPER ESCRO«' AGENCY FUND DECEMBER 31, 2009 Agency Fund ' ASSETS Cash $ 43,515 Accounts receivable 2,503 ' Total assets $ 46,018 ' LIABILITIES Accounts payable Refundable deposits payable $ 1,234 784 44 ' , Total liabilities $ 46,018 t 1 ' ' The notes to the fmancial statements are an integral part of this statement. 36 ' 0 ii n J i CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Elk River operates under the "Optional Plan A" form of government as defined in the State of Minnesota Statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and four elected Council Members. The Council exercises legislative authority and determines all matters of policy. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Elk River (the primary government) and its component units. The Elk River Municipal Utilities is considered to be part of the primary government. The Elk River Municipal Utilities was established and statutory authority is provided in accordance with Chapter 412.321 of the Minnesota Statutes and is considered to be part of the City. The Utilities Commission has three council approved members who serve overlapping three year terms. The statutes provide the City Council all the discretionary authority necessary to operate the utilities, except as its powers have been delegated to the Commission. The Utility funds are included with the enterprise funds of this report. Separate financial statements for the Utilities maybe obtained at the Elk River Municipal Utilities, 13069 Orono Pkwy, Elk River. The City has considered all potential units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization's governing body, and (1) the ability of the primary government to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on the primary government. The City has the following component units: Blended Component Unit t The Economic Development Authority (EDA) was created to carry out economic and industrial development and redevelopment within the City in accordance with policies established by the City Council. The seven member board consists of three Council Members, the Mayor and three other council approved members. The EDA may not exercise ' any of its authorized powers without prior approval of the City Council. The activities of the EDA are blended and reported as a special revenue fund. i 0 Discretely Presented Component Unit The Housing and Redevelopment Authority (HRA) is a separate legal entity created for the purpose of providing redevelopment within the government's jurisdiction. The board consists of five council appointed members, one of which is a Council Member. The City Council has the ability to approve the HRA's budget. The HRA is presented as a governmental fund type. The financial statements for the HRA are included in the financial section of this report. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfiznd activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. 37 CITY OF ELK RIVER, MINNESOTA ' NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 ' Note 1: SUMAZARY OF SIGNIFICANT ACCOUNTIISTG POLICIES -CONTINUED ' The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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 operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though ' the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. ' C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The goverrunent-wide financial statements are reported using the economic resources measurement focus and the accrual ' basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all ' eligibility requirements imposed by the provider have been met. The City's only fiduciary funds are agency funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Governmental fund financial statements are reported using the current financial resources measurement focus and the ' modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is ' incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. ' Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the ' government. Non-exchange transactions, in which the City receives value without directly giving equal value in return, include ' property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year ' when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange , transactions must also be available before it can be recognized. Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the modified ' accrual basis, receivables that will not be collected within the available period have also been reported as deferred revenue in the fund financial statements. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. d ~ r ii n 0 u n IJ J n CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED The government reports the following major governmental funds: The General fund is the government's primary operating fund. It accounts for all fmancial resources of the general government, except those required to be accounted for in another fund. The Street Improvements capital projects fund is used to account for the construction of street improvement projects throughout the City. The Improvement Projects capital projects fund is used to account for the construction of various improvements within the City. The government reports the following major proprietary funds: The Municipal Liquor fund accounts for the operations of the City's off-sale liquor stores. The Garbage fund accounts for the activities of the City's garbage collection and recycling programs. The Sewer fund accounts for the activities of the City's sanitary sewer treatment system. The mater fund accounts for the activities of the City's water distribution system. The Electric fund accounts for the activities of the City's electric distribution system Additionally, the government reports the following fund types: Fiduciary funds account for assets held by the City in a trustee capacity or as an agent on behalf of others. The Developer Escrow agency fund is used to account for resources received from developers for the payment of expenses incurred by the City for private development projects. The Developer Escrow agency fund is omitted from the government-wide fmancial statements, and is included separately within the statement of fiduciary net assets. Private-sector standards of accounting and fmancial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund fmancial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The goverment has elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from government-wide fmancial statements. Exceptions to this general rule are charges between the City's sewer, water and electric functions and various other functions of the government. 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 nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise 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 nonoperating revenues and expenses. 39 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED When both restricted and unrestricted resources are available for use; it is the government's policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings from such investments are allocated to the respective funds on the basis of applicable cash balance participation of each fund. Investments are reported at fair value, based upon quoted market prices. The Minnesota Municipal Money Market fund operates in accordance with appropriate State of Minnesota laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. Financial statements of the Minnesota Municipal Money Market fund can be obtained by contacting Voyageur Asset Management at 100 South Fifth Street, Suite 2300, Minneapolis, MN 55402-1240. 2. Receivables and Payables Due To/From Other Funds During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as "due from other funds" or "due to other funds" on the balance sheets of the fund financial statements. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Prope Taxes The City Council annually adopts a tax levy and certifies it to the County in December each year for collection the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property as of January 1 and are payable by the property owner in May and October each year. The taxes are collected by the County Treasurer and tax settlements are made to the City three times a year, in January, July and December. Taxes payable on homestead property, as defined by Minnesota statutes, are partially reduced by a market value credit aid. The credit is paid to the City by the State in lieu of taxes levied against the homestead property. The State remits this credit in two equal installments in October and December each year. In the fund financial statements, taxes that remain unpaid at December 31 are classified as delinquent taxes receivable and are fully offset by deferred revenue, because they are not known to be available to finance current expenditures. Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements. Accounts Receivable Accounts receivable include amounts billed for services provided before year end. It is the City's policy to charge uncollectibles directly to operations as accounts become worthless. The Utilities has established a reserve for uncollectible accounts which is adjusted annually based on the receivable activity. No substantial losses from present receivable balances are anticipated. A summary of the Utilities' uncollectible account balances at December 31, 2009 and December 31, 2008 is as follows: 40 u ii r r ~~~ ~i~ ~II~ I'~ ~i r i~ J u n CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOU1vTI1~TG POLICIES -CONTINUED Increase 2009 2008 (Decrease) Electric $ 78,750 $ 78,750 $ - Water 26.250 26,250 - Total $ 105.000 $ 105 000 $ - Special Assessments Special assessments receivable include the following components: Delinquent -includes amounts billed to properly o~mers but not paid. Deferred -includes assessment installments that will be billed to property owners in future years. Special assessments in the fund financial statements are recognized as receivable and deferred revenue when the levy against the benefited property is adopted by the City Council and certified to the County for collection.. Deferred revenue for governmental activities is susceptible to full accrual on the government-wide statements. Notes Receivable 0 0 The City received grant proceeds from the State of Minnesota to fund economic development projects. These funds have been loaned to several businesses and the terms of repayment vary with each loan. Under terms of the grant agreement, a portion of the original grant will be returned to the State of Minnesota and is reported as a due to other governments liability. The portion of the notes receivable loaned to businesses in the Revolving Loan fund is offset by deferred revenue. Deferred revenue in governmental activities is susceptible to full accrual on the government- wide statements. 3. Inventories and Prepaid Items For the proprietary funds, inventories are valued at cost, which approximates market, using the first-in, first-out (FIFO) method. Inventories are recorded as an expense when sold or consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. ' 4. Restricted Assets The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond issues. They will be used for future debt service. 1 5. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government- wide fmancial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or ' estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Donated capital assets are recorded at estimated fair market value at the date of donation. ' With the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities), the City chose to include all such items regardless of their acquisition date. The City was able to obtain historical costs for the initial reporting of these assets through public works project records. Major expenditures for improvements or capital ' asset projects are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, net of interest earned on the invested proceeds over the same period. ' 41 CITY OF ELK RIVER, MINNESOTA ' NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 ' Note 1: SUAZn'IARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED , Property, plant, and equipment of the City, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Assets Years , Buildings and improvements 10 - 40 Other park improvements 10 - 20 Machinery and equipment 3 - 20 , Public domain infrastructure 15 - 50 System infrastructure 4 - 50 Com 6 ensated Absences , p . It is the government's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Unused vacation can be accrued by the employees up to a maximum of 240 hours, the limit of which is determined ' by years of service. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. In the event a liability is recorded in the governmental funds, the General fund would be used to liquidate the compensated absences payable. Employees can also accrue an unlimited amount of unused sick leave. Employees with two or more years of service are entitled to receive severance pay equal to 50 percent of unused sick leave, up to a maximum of 480 hours. The liability for severance pay is accounted for the same as accrued vacation pay. 7. Long-term Obligations ' In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. ' In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other fmancing sources. Premiums received on debt issuances are reported as other fmancing sources while discounts on debt issuances are reported as other fmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are ' reported as debt service expenditures. 8. 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 restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. , 9. Net Assets In the government-wide financial statements, net assets represent the difference between assets and liabilities. Net assets are displayed in three components: a. Invested in capital assets, net of related debt -Consists of capital assets, net of accumulated depreciation ' reduced by any outstanding debt attributable to acquire capital assets. b. Restricted net assets -Consist of net assets restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. 42 , ' CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS ' DECEMBER 31, 2009 ' Note 1: SUMMARY OF SIGNIFICA'N'T ACCOUI\TING POLICIES -CONTINUED o. Unrestricted net assets -All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt". f 10. Comparative Data/Reclassifications ' Comparative total data for the prior year have been presented only for individual enterprise funds in the fund financial statements in order to provide an understanding of the changes in the financial position and operations of these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation. Note 2: STEWARDSHIP, COMPLLAINTCE, AND ACCOUNTABILITY ' A. Budgetary Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated ' budgets are legally adopted for the General fund and the Library, Ice Arena, Pinewood Golf Course, Landfill and Economic Development Authority special revenue funds. Project-length fmancial plans are adopted for all capital projects funds. All annual appropriations lapse at fiscal year end. ' On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's administrator so that a budget maybe prepared. Before September 15, the proposed budget is presented to the City Council for review and approval. The City Council holds public hearings and may add to, subtract from, or change ' appropriations. Any changes in the budget must be within the revenue and reserves estimated as available or the revenue estimates must be changed by an affirmative vote by a majority of the City Council. ' The budget is prepared by fund, function, and activity and includes information on the past year, current year estimates, and requested appropriations for the next fiscal year. Expenditures may not legally exceed budgeted appropriations at the fund level without Council approval. Spending control is established by the amount of expenditures budgeted for the fund, but management control is exercised at the department level. Reported budget amounts are as originally adopted or ' as amended by Council approved supplemental appropriations and budget transfers. Supplemental budgetary appropriations decreased $360,050 due mainly to the loss of state aids. ' B. Excess of Expenditures Over Appropriations For the year ended December 31, 2009, expenditures exceeded appropriations in the Library fund by $10,021, the Pinewood Golf Course fund by $8,076 and the Landfill fund by $21,686. These over expenditures were funded by ' available fund balance and transfers. C. Deficit Fund Equity ' The Park Dedication special revenue fund had a deficit fund balance of $684,938 as of December 31, 2009 and is expected to be covered with future fund revenues. ' The TIF Districts capital projects fund deficit fund balance of $408,713 at December 31, 2009 is expected to be eliminated by future tax increments. r 43 CITY OF ELK RIVER, MINNESOTA , NOTES TO FINANCL~L STATEMENTS DECEMBER 31, 2009 ' Note 3: DETAILED NOTES ON ALL FUNDS ' A. Deposits and Investments Deposits Custodial credit risk for deposits is the risk that in the event of a bank failure, the City's deposits may not be returned or the City will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes, the City maintains deposits at the depository banks authorized by the City Council, all of which are ' members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds. Authorized collateral includes the legal investments as prescribed by Minnesota statutes, as well as ' certain first mortgage notes, and certain other state or local government obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than that furnishing the collateral. ' At year end, the City's carrying amount of deposits was $8,831,767 and the bank balance was $9,924,124. The bank balance was covered by federal depository insurance totaling $6,238,973 and the remaining balance was covered by securities held by the pledging fmancial institution's agent in the City's name. ' The carrying amount of deposits for the HRA, a discretely presented component unit, was $704,311 and the bank balance was $704,322. The bank balance was covered by federal depository insurance and securities held by the pledging fmancial institution's agent in the HRA's name. ' Investments ' ' Minnesota Statutes and the City s investment policy authorize the City to invest in the following: a. Direct obligations or obligations guaranteed by the United States or its agencies. ' b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. c. General obligations of the State of Minnesota or any of its municipalities. d. Bankers acceptances of United States Banks eligible for purchase by the Federal Reserve System. ' e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and maturing in 270 days or less. The City's investment policy follows Minnesota State Statutes which reduces the City's exposure to credit, custodial credit and interest rate risks. Specific risk information for the City is as follows: • Custodial credit risk -For investments, custodial credit risk is the risk that in the event of a failure of the ' counterparty, the government would not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. As of December 31, 2009 all investments were insured or ' registered, or securities were held by the City or its agent in the City's name. • Credit risk -Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State law limits investments in commercial paper that is rated in the highest quality category by at least two nationally recognized rating agencies. The City's investment policy does not further limit the ratings of their investments. 44 ' u i ~~ i 0 i CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED • Concentration risk -Concentration risk is the risk of loss that maybe caused by the city's investment in a single issuer. The City does not have a formal policy that limits the amount of investments in a single issuer. As of December 31, 2009, more than 5% of the City's investments v~ere held in the following U.S. Agencies: Federal National Mortgage Association (27%), Federal Home Loan Bank (24%}, Federal Home Loan Mortgage Corporation (20%), and Federal Farm Credit (2%). • Interest rate risk - In accordance with its investment policy, the City diversifies its investment portfolio to eliminate the risk of loss resulting from the over-concentration of assets in a specific maturity. The maturities selected shall provide for stability of income and reasonable liquidity. The Minnesota Municipal Money Market Fund (4M Fund) is an external investment pool allowable under Minnesota Statutes and regulated by the Board of Directors of the League of Minnesota Cities. The 4M Fund is a customized cash management and investment program for Minnesota public funds designed to address the daily and long term investment needs of Minnesota cities and other municipal entities. The 4M Fund is an unrated 2a7-like pool and the fair value of the position in the pool is the same as the value of pool shares. Financial statements of the 4M Fund can be obtained by contacting Voyageur Asset Management at 100 South Fifth Street Suite 2300, Minneapolis, MN 55402-1240. As of December 31, 2009, the City had the following investments that are insured or registered, or securities held by the City or its agent in the City's name. Fair Value Credit Segmented and Quality/ Time Carrying Types of Investments Ratings (1) Distribution (2) Amount Pooled investments: Minnesota Municipal Money Market Fund N/A Less than 6 months $ 7,213,376 Non-pooled investments: U.S. Treasuries N/A Less than 6 months 2,660,556 U.S. Government Securities AAA Less than 6 months 503,750 AAA 1 to 5 years 18,856,556 AAA More than 5 years 1,524,712 Total U.S. Government Securities 20,885,018 Negotiable CD's N/A Less than 6 months 2,211,201 6 to 12 months 42,000 1 to 5 years 6,740,869 Total negotiable CD's 8,994,070 Money Market Funds N/A Less than 6 months 1,053,828 Total investments 40,806,848 Deposits 8,831,767 Cash on hand 4,725 Total cash and investments $ 49,643.340 (1) Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk. (2) Interest rate risk is disclosed using the segmented time distribution method. N/A Indicates not applicable. 45 CITY OF ELK RNER, MINNESOTA ' NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 ' Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED , Cash and investments are presented in the fmancial statements as follows: Primary Component , Government Unit - HRA Statement of Net Assets Cash and investments $ 46,214,769 $ 704,311 Restricted cash and investments 724,500 - ' Cash with fiscal agent 2,660,556 - Statement of Fiduciary Net Assets Cash and investments 43,515 - , Total $ 49,643,340 $ 704,311 ' B. Notes Receivable ' The City has made several business subsidy loans to local businesses, some of which were funded with grant proceeds received from the state and federal governments. The terms of repayment vary with each loan and will be repaid over a period of five years. Under the terms of the grant agreement, a portion of the state grant will be returned to the State of Minnesota and the City retains the remainder of the grant repayments. Notes receivable of $557,065 in the Revolving ' Loan fund, $460,146 in the DTED Grant/Loan fund, and $20,275 in the EDA DTED Loan fund are outstanding at December 31, 2009. ' In 2006, the HRA issued a loan to a developer to assist in the fmancing of a housing development for the benefit of low and moderate income residents which was funded with state grant proceeds. Repayment of the loan is deferred for 30 years, payable in one lump sum at an interest rate of one percent. ' C. Deferred Revenue ' Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: ' L ~~ u 46 ' CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED Delinquent property taxes receivable: General fund Street Improvements fund Improvement projects fund Nonmaj or funds Delinquent special assessments: Street improvements fund Improvement projects fund Nonmajor funds Special assessments not yet due: Street improvements fund Improvement projects fund Nonmaj or funds Notes receivable not yet due: Nonmaj or funds Unearned park dedication credits: Nonmajor funds Unearned miscellaneous fees: Nonmajor funds Total Unavailable $ 460,492 927 9,275 102,110 34,742 56,341 11,932 1,116,990 1,570,674 1,421,926 450,369 - 2,819 $ 5,235,778 $ 462,520 Unearned $ - 459,701 D. Capital Assets In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the government-wide statement of net assets. Capital asset activity for the year ended December 31, 2009 was as follows: 47 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 u Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED ' Beginning Ending Primary Government Balance Additions Deletions Balance ' Governmental activities: Capital assets not being depreciated: Land $ 37,210,682 $ 197,100 $ - $ 37,407,782 Construction in progress 13,068,992 3,870,730 (12,383,962) 4,555,760 Total capital assets not being depreciated 50,279,674 4,067,830 (12,383,962) 41,963,542 Capital assets being depreciated: , Buildings 24,048,759 12,063,229 - 36,111,988 Other improvements 4,245,935 79,995 - 4,325,930 Equipment 8,930,208 668-,640 (240,309) 9,358,539 ' Infrastructure 70,393,793 558,136 - 70,951,929 Total capital assets being depreciated 107,618,695 13,370,000 (240,309) 120,748,386 ' Less accumulated depreciation for: Buildings 6,971,921 1,388,169 - 8,360,090 Other improvements 1,547,364 281,153 - 1,828,517 Equipment 5,160,213 777,773 (214,552) 5,723,434 ' Infrastructure 28,214,132 2,845,373 - 31,059,505 Total accumulated depreciation 41,893,630 5,292,468 (214,552) 46,971,546 Total capital assets ' being depreciated, net 65,725,065 8,077,532 (25,757) 73,776,840 Governmental activities capital assets, net $ 116.004,739 $ 12,145.362 $(12,409,719) $ 115,740.382 ' Business-type activities: Capital assets not being depreciated: ' Land $ 1,516,631 $ - $ - $ 1,516,631 Construction in progress 4,288,629 1,306,708 (5,510,689) 84,648 Total capital assets ' not being depreciated 5,805,260 1,306,708 (5,510,689) 1,601,279 Capital assets being depreciated: Buildings 15,248,374 4,455,217 (142,238) 19,561,353 ' Equipment 4,794,298 220,887 (293,998) 4,721,187 Collection and distribution 96,762,914 1,250,133 - 98,013,047 Total capital assets being depreciated 116,805,586 5,926,237 (436,236) 122,295,587 ' Less accumulated depreciation for: Buildings 6,278,781 485,986 (142,238) 6,622,529 Equipment 3,331,632 318,936 (288,668) 3,361,900 ' Collection and distribution 31;637,539 3,238,391 - 34,875,930 Total accumulated depreciation 41,247,952 4,043,313 (430,906) 44,860,359 Total capital assets ' being depreciated, net 75,557,634 1,882,924 (5,330) 77,435,228 Business-type activities capital assets, net $ 81,362,894 $ 3,189,632 $ (5,516,0191 $ 79.036,507 ' 48 ' 0 C fl i n ~~ CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FiTNDS -CONTINUED Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 303,114 Public safety 712,016 Public works 3,145,728 Culture and recreation 1,131,610 Total depreciation expense -governmental activities $ 5,292,468 Business-type activities: Municipal liquor $ 126,391 Sewer 833,135 Water 956,993 Electric 2,126,794 Total depreciation expense -business-type activities $ 4.043,313 Construction commitments At December 31, 2009, the City had construction project contracts in progress. The commitments related to the remaining contract balances are summarized as follows: Project 193rd Avenue Great Northern Trail Total Spent Remaining to date Commitment $ 3,142,277 $ 344,078 220,735 14,097 $ 3,363,012 $ 358,175 E. Interfund Receivables, Payables, and Transfers The composition of interfund balances as of December 31, 2009 is as follows: Due to/from other funds: Receivable Fund Payable Fund Amount General General General Street improvements Garbage Sewer Sewer Water Electric Electric Nonmajor governmental funds Nonmajor governmental funds Nonmaj or governmental funds Total Electric $ 44,526 Water 14,510 Nonmajor governmental funds 8,752 Nonmajor governmental funds 159,971 Electric 95,831 Electric 119,422 Nonmajor governmental funds 171,800 Nonmajor governmental funds 128,850 General 1,426 Nonmajor governmental funds 155 Electric 45,453 Water 300 Nonmajor governmental funds 451,667 $ 1,242,663 49 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED The interfund receivable and payable balances result mainly from the distribution of utility collections and the lending/borrowing arrangements between funds. Due to/from component unit: Receivable Entity Payable Entity Amount Primary government -General Fund Component unit - HRA $ 5,066 Component unit - HRA Primary government - TIF Districts 309,745 Interfund transfers: Governmental funds: Major funds - General Street improvements Improvement projects Nonmajor funds Total governmental funds Proprietary funds: Transfer In Transfer Out $ 590,100 $ 383,104 21,343 - 113,786 21,343 2,162,395 1,438,175 2,887,624 1,842,622 Municipal liquor - 400,500 Garbage 25,639 - Sewer - 65,000 Water - 20,000 Electric - 585,141 Total proprietary funds 25,639 1,070,641 Total $ 2,913,263 $ 2,913,263 Interfund transfers are used to 1) allocate resources to the funds that received benefit from services provided by another fund, 2) move revenues from the fund with collection authorization to debt service funds as principal and interest payments come due, and 3) close completed bond and project funds. F. Leases The City has entered into several lease agreements as lessee for financing the acquisition of golf course equipment. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. The assets acquired through capital leases are as follows: Asset: Equipment Less: Accumulated depreciation Total Governmental Activities ~i ~i ~i ~i ~i C I~ J i ~i 0 $ 42,480 ' (16,992) $ 25,488 50 , CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED The future minimum lease obligations and the net present value of these minimum lease payments as of December 31, 2009, were as follows: Governmental Year Ending Dec. 31 Activities 2010 $ 8,496 2011 8,496 Total minimum lease payments $ 16,992 G. Long-term Debt Long-term debt obligations outstanding at year end are summarized as follows: Issue Maturity Interest PRIMARY GOVERNMENT Date Date Rate GOVERNMENTAL ACTIVITIES: General Obligation Bonds: 2006C G.O. Capital Improvement Bonds 2007D EDA G.O. Bonds 2008A EDA G.O. Bonds State-Aid Road Bonds Total general obligation bonds General Obligation Revenue Bonds: 1996C G.O. Ice Arena Bonds Lease Revenue Bonds: 2002A Public Safety Building Lease Revenue Bonds Special Assessment Bonds: 2003A G.O. Improvement Bonds 2005A G.O. Improvement Bonds 2007C G.O. Improvement Bonds Total special assessment bonds Tax Increment Bonds 2000A G.O. Tax Increment Bonds Certificates of Indebtedness: 2005D G.O. Equipment Certificates 2006B G.O. Equipment Certificates 2007B G.O. Equipment Certificates Total equipment certificates Total bonded indebtedness Capital leases Contracts for deeds Compensated absences payable Net OPEB obligation Total governmental activities indebtedness Authorized Payable and Issued 12.131/09 12/14/2006 2/1/2027 3.80-4.05% $ 3,220,000 $ 3,025,000 11/8/2007 2/1/2033 3.80-4.30% 10,000,000 10,000,000 2/20/2008 2/1/2015 3.38% 2,000,000 1,775,000 7/7/2008 8/20/2013 1.31% 2,352,256 1,877,757 17,5 72,256 16,677,757 8/1/1996 12/1;2013 5.70% 2,100,000 700,000 9/1/2002 2/1/2023 2.00-4.85% 8,000,000 6,175,000 12/9/2003 2/1/2014 2.00-4.00% 1,255,000 425,000 6/14/2005 2!1/2016 2.75-3.70% 1,070,000 765,000 6/26/2007 2/1/2018 4.00% 3,090,000 2,780,000 5,415,000 3,970,000 11/1/2000 2/1/2015 4.45-5.30% 800,000 440,000 6/1/2005 2/1/2010 3.90% 645,000 146,750 6/1/2006 2/1/2011 3.80% 437,000 174,800 6/1/2007 2/1/2010 5.20% 300,500 100,166 1,382,500 421,716 35,269,756 28,384,473 5/3/2006 11/1/2011 42,480 16,992 1/15/2006 4/6/2013 5.50-6.00% 2,505,000 1,629,500 - 1,063,812 - 91,619 $ 37,817,236 $ 31,186,396 51 CITY OF ELK RIVER, MINNESOTA NOTES TO FI1~TA_>\'CIAL STATEMENTS DECEMBER 31, 2009 Vote 3: DETAILED NOTES ON ALL FUNDS -CONTINUED PRIMARY GOVERNMENT BUSINESS-TYPE ACTIVITIES: General Obligation Revenue Bonds: 2001A G.O. Water Revenue Bonds 2002B City Hall Expansion Revenue Bonds 2003B G.O. Water Revenue Bonds 2004A Electric Revenue Bonds 2005B G.O. Sewer Revenue Refunding Bonds 2005C Liquor Revenue Bonds 2006A Electric Revenue Bonds 2007A Electric Revenue Bonds 2008A Water Revenue Refunding Bonds Total bonded indebtedness Promissory note Compensated absences payable Net OPEB obligation Total business-type activities indebtedness Total City indebtedness COMPONENT UNIT Contract for deed Issue Maturity Interest Authorized Payable Date Date Rate and Issued 12/31/09 10/1/2001 9/1/2002 12/9/2003 8/1/2004 6/14/2005 6/1/2005 3/2/2006 3/28/2007 2/20/2008 2/1/2022 2/1/2023 2/1/2014 2/1/2015 2/1/2016 2/1/2015 8/ 1/2021 2/ 1 /2022 2/1/2022 2.50-4.90% $ 3,590,000 $ 2,730,000 3.00-5.00% 1,695,000 1,340,000 2.00-3.70% 1,995,000 1,095,000 3.00-4.25% 940,000 615,000 3.00-4.00% 1,660,000 1,225,000 4.50% 1,200,000 980,000 3.15-4.00% 3,595,000 3,030,000 4.00% 2,875,000 2,875,000 2.50-3.65% 3,085,000 3,020,000 20, 63 5, 000 16, 910, 000 3/19/2002 12/31/2022 12/28/2006 1/15/2012 -% 3,521,000 2,524,646 - 340,037 - 29,320 $ 24,156,000 $ 19,804,003 $ 61,973,236 $ 50,990,399 6.00% $ 504,000 $ 270,588 Annual debt service requirements to maturity for long-term obligations are as follows: Primary Government -Governmental Activities G.O. Bonds G.O. Revenue Bonds Lease Revenue Bonds Principal Interest Principal Interest Principal Interest 2010 $ 860,000 $ 594,553 $ 160,000 $ 39,900 $ 335,000 $ 262,230 2011 881,000 587,609 170,000 30,780 350,000 249,638 2012 907,000 567,048 180,000 21,090 360,000 236,145 2013 849,757 542,007 190,000 10,830 375,000 221,809 2014 450,000 523,842 - - 390,000 206,602 2015 - 2019 2,720,000 2,338,968 - - 2,210,000 766,476 2020 - 2024 3,375,000 1,746,259 - - 2,155,000 212,360 2025-2029 3,680,000 1,001,663 - - - - 2030 - 2033 2,955,000 261,160 - - - - Total $ 16,677,757 $ 8,163,109 $ 700,000 $ 102,600 $ 6,175,000 $ 2,155,260 ~i 11 n n 52 ~~I ' CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS ' DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED ' Primary Government -Governmental Acti~~ities Special Assessment Bonds 'Tax Increment Bonds Certificates of Indebtedness ' Principal Interest Principal Interest Principal Interest 2010 ~ 510,000 $ 143,011 $ 65,000 8 20,766 $ 334,316 $ 10,448 2011 505,000 124,185 70,000 17,458 87,400 1,661 2012 505,000 105,223 70,000 13,975 - - 2013 510,000 85,980 75,000 10,312 - - ' 2014 475,000 67,020 80,000 6,320 = _ 2015 - 2018 1,465,000 107,552 80,000 2,120 Total $ 3,970,000 $ 632,971 $ 440,000 $ 70,951 $ 421,716 ~ 12,109 ' Primary Government - Governmental Activities Primary Government -Business-Type Acti~~ties Contracts for deeds G.O. Revenue Bonds Notes Payable Principal Interest Principal Interest Principal Interest ' 2010 $ 138,250 $ 94,397 $ 3,785,000 $ 582,000 $ 179,328 $ - 2011 81,250 88,762 1,320,000 476,840 182,436 - 2012 - 84,600 1,375,000 429,157 183,444 - ' 2013 1,410,000 84,600 1,450,000 378,344 186,588 2014 - - 1,510,000 323,955 189,348 2015 - 2019 4,765,000 996,628 980,184 - ' 2020 - 2023 = = 2,705,000 181,195 623,318 Tota] $ 1,629,500 $ 352,359 $ 16,910,000 ~ 3,368,119 $ 2,524,646 $ - Component Unit ' Contract for deed Principal Interest ' 2010 103,462 14,707 2011 109,763 8,406 2012 57,363 1,721 l 834 270 588 $ 24 Tota $ , , 53 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS -CONTINUED Long-term liability activity for the year ended December 31, 2009 was as follows: Beginning PRIMARY GOVERNMENT Balance GOVERNMENTAL ACTIVITIES: Bonds payable: General obligation bonds $ 15,412,946 G.O. revenue bonds 955,000 Lease revenue bonds 7,170,000 Special assessment bonds 4,480,000 Tax increment bonds 505,000 Certificates of indebtedness 756,033 Total bonds payable 29,278,979 Capital leases Contracts for deeds Compensated absences Net OPEB obligation Governmental activity long-term liabilites BUSINESS-TYPE ACTIVITIES: Bonds payable G.O. revenue bonds Notes payable Compensated absences Net OPEB obligation Business-type activity long-term liabilities Total primary government long-term liabilities COMPONENT UNIT Contract for deed C i Ending Due Within ' Additions Reductions Balance One Year $ 2,074;311 $ (809,500) $ 16,677,757 $ 860,000 - (255,000) 700,000 160,000 - (995,000) 6,175,000 335;000 - (510,000) 3,970,000 510,000 - (65,000) 440,000 65,000 - (334,317) 421,716 334,316 2,074,311 (2,968,817) 28,384,473 2,264,316 53,042 - (36,050) 16,992 8,496 1,786,750 - (157,250) 1,629,500 138,250 1,097,095 318,152 (351,435) 1,063,812 362,098 88.295 3,324 - 91,619 - $ 32,304,161 $ 2,395,787 $(3,513,552) $ 31,186,396 $ 2,773.160 $ 17,910,000 $ - $(1,000,000) $ 16,910,000 $ 3,785,000 2,701,994 - (177,348) 2,524,646 179,328 367,191 139,660 (166,814) 340,037 153,977 19,290 10,030 - 29,320 - $ 20,998,475 $ 149,690 $(1,344,162) $ 19,804,003 $ 4,118,305 $ 53,302.636 $ 2,545.477 $(4,857.714) $ 50,990,399 $ 6.891,465 $ 368,111 $ - $ (97,523) $ 270,588 $ 103.462 For the governmental activities, bonds payable can be summarized in the following categories: The general obligation bonds were used to construct a library, a recreation facility and finance a street improvement project. The recreation facility is leased to the YMCA, which has pledged to pay one-third of the $11,775,000 bonds outstanding. The bonds are general obligations of the City and are backed by its full faith and credit. The general obligation revenue bonds were used for the construction of various drainage projects and expansion of an indoor ice arena. The bonds are payable from revenues but are backed by the full faith and credit of the City. The lease revenue bonds were used for the construction of city hall and a public .safety building and the expansion of city hall. The bonds are payable from annual lease payments received by the EDA from the City. 54 7 7 C n 0 J 7 u J CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3: DETAILED NOTES ON ALL FUNDS - CONTIl\'UED The special assessment bonds are used to fmance assessable improvements within the City. The bonds are payable primarily from special assessments levied against properties benefited by the improvements. In addition, the bonds are general obligations of the City and are backed by its full faith and credit. The tax increment bonds are used to fmance land acquisition and other public costs to facilitate development v,~ithin the tax increment district. The bonds are payable from tax increment revenues generated by existing and new development within the district. In addition, the bonds are general obligations of the City and are backed by its full faith and credit. The certificates of indebtedness are used to finance the purchase of capital equipment. The certificates are general obligations backed by the full faith and credit of the City. For the governmental activities, the City also entered into capital leases to fmance the purchase of capital equipment and contracts for deeds were used to fmance the acquisition of park property. Compensated absences are generally liquidated through the General fund. For the business-type activities, the general obligation revenue bonds are used to finance the acquisition and construction of major capital facilities. The bonds are payable from net revenues of the benefiting enterprise fund but are backed by the full faith and credit of the City. The City also issued a promissory note to provide for the construction of a landfill gas generator. The note is to be paid from revenue of the system and is secured by the facility. The City issued $3,085,000 of G.O. Water Revenue Refunding Bonds on May 1, 2008 to provide resources for the advance refunding of $2,575,000 of the G.O. Water Revenue Bonds, Series 2001A, which will be redeemed on February 1, 2010. The City will continue to pay, as due, principal and interest on the Series 2001A Bonds at the rates and amounts specified to the call date (February 1, 2010). The refunded bonds will be called and paid by the Escrow Account. The transaction resulted in a reduction of $120,378 of future debt service payments, which is a present value savings of $82,990. The HRA entered into a contract for deed for the purchase of property for subsequent resale for redevelopment purposes. Note 4: OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool with approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (1BNRs). The City's management is not aware of any incurred but not reported claims. B. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that maybe disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial. 55 CITY OF ELK RIVER, MINNESOTA ' NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 ' Note 4: OTHER INFORMATION -CONTINUED ' The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. The City's management is not aware of any instances of noncompliance which would have a material effect on the financial ' statements. C. Concentrations ' The City receives a significant amount of its annual general fund revenue from the State of Minnesota from the Local Government Aid (LGA) and Market Value Homestead Credit (MVHC) programs. The amount received in 2009 was $293,344 for LGA and $331,265 for MVHC. This accounted for 5.5% of general fund revenue. The State of Minnesota ' has proposed adjustments to these aids in the 2010 budget. As of the date of this report the effect of any un-allotment on the aids is not determinable. D. Territorial Acquisition Agreement ' The Utilities has entered into an agreement to transfer ownership of electric plant and electric service to customers in certain areas currently receiving electric service from Connexus Energy. ' The cost of property purchased from Connexus Energy will be net book value. The Utilities will also pay for loss of revenue for each area acquired based on a formula outlined in the agreement. ' In addition, the Utilities will compensate Connexus Energy for the loss of revenue from the future sale of electricity to electric customers in the areas acquired from Connexus Energy for a period of ten years from the date of sale of each individual area. ' During 2009 and 2008, the Utilities paid $9,469 and $248,976, respectively, under this agreement, including $9,469 in 2009 and $32,838 in 2008 for loss of revenues. All amounts paid are included in property and equipment. ' E. Pension Plans 1. Public Employees Retirement Association ' a. Plan Description All full-time and certain part-time employees of the City of Elk River are covered by defined benefit pension ' plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (PEKE) and the Public Employees Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in ' accordance with Minnesota Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are ' covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters and peace officers who qualify for membership by statute are covered by the PEPFF. , PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive ' years of allowable service, age, and years of credit at termination of service. ~I 56 ' CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS ' DECEMBER 31, 2009 ' Note 4: OTHER INFORMATION -CONTINUED Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each ' remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of sen~ice. For all PEPFF and PERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of ' service equa190. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to ' eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree-no survivor annuity is payable. There are also various types ' of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify ' for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to ' active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. ' PERA issues a publicly available fmancial report that includes financial statements and required supplementary information for PERF and PEPFF. That report maybe obtained on the Internet at www.mnpera.or~, by writing to PERA, at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800- 652-9026. ' b. Funding Policy ' Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 9.1 % and 6.0%, respectively, of their annual covered salary in 2009. PEPFF members ' were required to contribute 9.4% of their annual covered salary in 2009. The City of Elk River is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 6.75% for Coordinated Plan PERT members, and 14.1 % for PEPFF members. Employer contribution rates for the Coordinated Plan will increase to 7.0%, effective January 1, 2010. The City's contributions to the Public Employees Retirement Fund for the years ending December 31, 2009, 2008, and 2007 were $496,994, $496,832, and $466,348, respectively. The City's contributions to the Public Employees Police & Fire Fund for the years ending December 31, 2009, 2008, and 2007 were $340,677, $317,807, and $259,059, respectively. ' The City's contributions were equal to the contractually required contributions for each year as set by state statute. J ' S7 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 4: OTHER INFORMATION -CONTINUED 2. Volunteer Fire Department Relief Association a. Plan Description The Elk River Fire Relief Association is the administrator of a single employer public employee defined benefit retirement system (PERS) established to provide benefits for members of the Elk River Fire Department. The Fire Relief Association maintains a separate Special fund to accumulate assets to fund the retirement benefits earned by the Fire Department's membership. Funding for the relief association is derived primarily from an insurance premium tax in accordance with the Volunteer Firefighter's Relief Association Financing Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980). The Fire Relief Association issues a publicly available fmancial report that includes financial statements and required supplementary information. The report may be obtained by writing to the Elk River Fire Department Relief Association, 13073 Orono Parkway, Elk River, MN 55330. b. Funding Policy The fmancial requirements of the Special fund are determined in accordance with Section 69.772 of the Minnesota Statutes, which requires the payment of pension benefits in a lump sum or optionally in annual installments. The Association is comprised of volunteers and therefore members have no contribution requirements. During the year, the City recognized as revenue and as expenditure on-behalf payments of $97,024 made by the State of Minnesota for the Fire Relief Association. The following summarizes the City's annual pension cost and other related information for the current year: 1 ~I J l Annual Pension Cost $127,024 , Contributions Made: City State Aid $30,000 $97 024 ' , Actuarial Valuation Date 12/31/09 Actuarial Cost Method Entry age normal , Amortization Method Level dollar closed Remaining Amortization Period: ' Normal cost 20 years Prior service cost 5 years Asset valuation method Market ' Actuarial Assumptions Investment rate of return 5% ' Projected salary increases N/A Inflation rate N/A Cost of living adjustments None ' n 58 ' f CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 4: OTHER INFORMATION -CONTINUED Three Year Trend Information ' Annual Percentage Year Pension of APC Net Pension Ending Cost (APC) Contributed Obligation 12/31/07 $ 159,023 100% $ - 12/31/08 143,999 100% - 12/31/09 127,024 100% - 0 u n 0 r F. Other Postemployment Benefits (OPEB) 1. City of Elk River a. Plan Description The City provides other postemployment health insurance benefits for retired employees through two defined benefit plans: Municipal Retirees Health Plan (MRHP), asingle-employer plan, and Utilities Retirees Health Plan (URHP), amulti-employer plan. Each plan provides benefits for eligible retirees and their dependents through the City's group health insurance plans, which cover both active and retired members. Since the premium is a blended rate determined on the active and retiree population, the retirees are receiving an implicit rate subsidy. The MRHP and URHP do not issue publicly available fmancial reports. b. Funding Policy Contribution requirements are reviewed at the time changes are made to the plans. Benefit provisions for MRHP are established and amended by the City. The Utilities has been delegated authority to establish and amend benefit provisions for URHP. Eligible retirees receiving benefits are required to pay 100% of the total premium. c. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost for each plan is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The unfunded actuarial liabilities included in the ARC was amortized over one year for the MRHP and is amortized over thirty years for the URHP. The URHP has elected to calculate the ARC and related information using the alternative measurement method permitted for employers in plans with fewer than one hundred total plan members. 59 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 4: OTHER INFORMATION - CONTII\TUED The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's ne t OPEB obligation: Municipal Utility Retiree Retiree Health Plan Health Plan Annual required contribution (ARC) $ 99,402 $ 10,213 Interest on net OPEB obligation 3,895 409 Adjustment to ARC (97,372) (592) Annual OPEB cost 5,925 10,030 Contributions made (2,601) - Increase in net OPEB obligation 3,324 10,030 Net OPEB obligation -beginning of year 97,372 10,213 Net OPEB obligation -end of year $ 100,696 $ 20,243 The City's annual OPEB cost, the percentage of ann ual OPEB cost contributed to the plan and the net OPEB obligation for December 31, 2009 and the preceding fiscal year was as fol lows: Percentage of Annual Employer Annual OPEB Net Pension Fiscal Year Ended OPEB Cost Contribution Cost Contributed Obligation MRHP: 12/31/2008 $ 99,402 $ 2,030 2% $ 97,372 12/31/2009 5,925 2,601 44% 100,696 URHP: 12/31/2008 $ 10,213 $ - - % $ 10,213 12/31/2009 10,030 - - % 20,243 d. Funded Status and Funding Progress As of the actuarial valuation date of January 1, 2008, the funded status of the plan was as follows: Municipal Utility Retiree Retiree Actuarial accrued liability (a) Actuarial value of plan assets (b) Unfunded actuarial accrued liability (a-b) Funded ratio (b/a) Covered payroll (c) Unfunded actuarial accrued liability as a percentage of covered payroll ((a - b) / c) $ 88,718 $ 56,892 w ~, , ~., w ..,~.., 0.00% 0.00% $ 4,095,000 $ 2,300,000 2.17% 2.47% ~. 60 ' CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS ' DECEMBER 31, 2009 Note 4: OTHER INFORMATION -CONTINUED 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 healthcare cost trends. 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. The schedule of funding progress, presented as required supplementary information, following the notes to the fmancial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. ' The unfunded actuarial accrued liability for the MRHP is designated in the Severance Pay special revenue fund. e. Actuarial Methods and Assumptions Projections of benefits for fmancial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 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. ' For the MRHP, in the January 1, 2008 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4% investment rate of return and an annual healthcare cost trend rate of 10% initially, reduced incrementally to an ultimate rate of 5% after 5 years. The actuarial value of assets ' was not determined as the City has not advance-funded its obligation. The plan's unfunded actuarial accrued liability was amortized as a level dollar amount over an open basis of one year. ' For the URHP, the following simplifying assumptions were made: RetiT°ement age for active employees -Based on the historical average retirement age for the covered group, active plan members were assumed to retire at age 62, or at the first subsequent year in which the member ' would qualify for benefits. Participation Rate - It is assumed that 10% of active participants continue coverage until age 65. Participants ' are assumed to continue in their current coverage type (single or family}. It is assumed that 100% of retirees will continue their current coverage until age 65. Life Expectancy -Life expectancies were based on mortality tables from the National Center for Health ' Statistics. The 2000 United States Life Tables for Males and for Females were used. Turnover -Non-group-specific age-based turnover data from GASB Statement 45 were used as the basis for ' assigning active member a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. ' Healthcare cost trend rate -The expected rate of increase in healthcare insurance premiums was based on projections of the Office of the Actuary at the Centers for Medicare & Medicaid Services. A rate of 10% initially, reduced to an ultimate rate of 5% after ten years, was used. ' Health insurance premiums - 2008 health insurance premiums for retirees were used as the basis for calculation of the present value of total benefits to be paid. ' Withdrawal -The probability that an employee will remain employed until the assumed retirement age was determined using non-group specific age-based turnover data provided in Table 1 in Paragraph 35b of GASB 45. ' 61 CITY OF ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 ' Note 4: OTHER INFORMATION -CONTINUED Actuarial Method -Projected Unit Credit with 30-year amortization of the unfunded liability. For the URHP, a discount rate of 4% was used based on the historical and expected returns of the Utilities' ' short-term investment portfolio. In addition, a simplified version of the entry age actuarial cost method was used. The unfunded actuarial accrued liability is being amortized as a level dollar amount over an open basis. The remaining amortization period at December 31, 2009, vas thirty years. G. Segment Information . The City maintains five enterprise funds that account for the municipal liquor operations, garbage collections, and sewer, t water and electric utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' balance sheet and statement of revenues, expenses, and changes in net assets balance, this information has not been repeated in the notes to the basic financial statements. ' H. Conduit Debt Obligations ' From time to time, the City has issued revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial, multi-family and educational facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payment received from the , benefited entity. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2009, there were five series of revenue bonds outstanding, with an aggregate principal payable ' amount of $16,666,788. L Commitments The City has received notice from their power supplier regarding the existing all requirement power contract exercising ' their right to give ten years notice to cancel the contract. The cancellation date would be effective September 30, 2018. The process has begun to renegotiate the existing contract, or contract with another power supplier. J. Subsequent Events On April 21, 2010, the City issued $7,370,000 General Obligation Capital Improvement Bonds to redeem the 2011 , through 2023 maturities of the EDA's $8,000,000 Public Safety Building Lease Revenue Bonds, Series 2002A and the EDA's $1,695,000 City Hall Expansion Revenue Bonds, Series 2002B. The bonds were issued in advance of the call date of the Series 2002A Bonds and Series 2002B Bonds and placed in an escrow account. The escrow account will be used to pay all principal and interest payments due on the Series 2002A Bonds and the Series 2002B Bonds from April 21, 2010 through February 1, 2013 and to pay the principal being called on February 2, 2013. The bonds have an average coupon rate of 3.57 percent and will mature on February 1, 2023. The net cash flow savings is calculated at $325,734. , u ii 62 ' CITY OF ELK RIVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION ' DECEMBER 31, 2009 ' Elk River Fire Relief Pension Plan Schedule of Funding Progress ' Assets in Excess of Pension Actuarial Actuarial Actuarial (Unfunded) Benefit ' Valuation Value of Accrued Accrued Percentage Per Year Date Assets Liability Liability Funded of Service 12/31/07 $ 2,420,742 $ 2,110,264 $ 310,478 114.7% $ 4,450 ' 12/31/08 1,696,536 2,392,353 (695,817) 70.9% 5,091 12/31/09 2,224,430 2,550,808 (326,378) 87.2% 5,091 1 Other Postemployment Benefits Schedules of Funding Progress ' Munici al Retiree Health Plan p Unfunded UAAL as a ' Actuarial Actuarial Actuarial Actuarial Annual Percentage Valuation Value of Accrued Accrued Funded Covered of Covered Date Assets (a) Liability (b) Liability (b -a) Rate Payroll (c) Payroll ((b-a)/c) 01/01/08 $ $ 88,718 $ 88,718 0.00% $ 4,095,000 2.17% ' Utilities Retiree Health Plan Unfunded UAAL as a ' Actuarial Actuarial Actuarial Actuarial Annual Percentage Valuation Value of Accrued Accrued Funded Covered of Covered Date Assets (a) Liability (b) Liability (b -a) Rate Payroll (c) Payroll ((b-a)/c) ' 01/01/08 $ - $ 56,892 $ 56,892 0.00% $ 2,300,000 2.47% ' 63 J n This page has been left blank intentionally 7 0 L r 7 Kiver NonMajor Governmental Funds Special Revenue Special revenue funds are used to account for the proceeds of proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. They are usually required by statute or local ordinance to finance particular functions or activities of government. Debt Service Debt service funds account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and other related costs. Capital Projects Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. CITY OF ELK RIVER, MLNNESOTA COMBIlSTI1S'G BALA~~TCE SHEET NONMAJOR GOVERNMENTAL FUI~TDS DECEMBER 31, 2009 ASSETS Cash and investments Cash with fiscal agent Receivables: Interest Taxes Accounts Special assessments Notes Due from other governments Due from other funds Prepaid items Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Salaries payable Due to other governments Due to other funds Due to component unit Deferred revenue Total liabilities Fund balances: Reserved for: Debt service Capital projects Landfill mitigation Notes Prepaid items Unreserved: Designated for: Working capital CapitaUdevelopment projects Future debt requirements Other postemployment benefits obligation Undesignated Total fund balances Total liabilities and fund balances Special Debt Capital Revenue Service Projects Funds Funds Funds $ 11,189,637 $ 2,371,007 $ 1,644,452 - 71,655 - Total Nonmaj or Governmental , Funds $ 15,205,096 ' 71,655 55,316 10,679 9,450 75,445 47,001 100,421 3,119 150,541 526,590 - - 526,590 10,661 1,426,324 - 1,436,985 1,037,486 - - 1,037,486 17 - - 17 349,420 - 148,000 497,420 131,242 - - 131,242 $ 13,347,370 $ 3,980,086 $ 1,805,021 $ 19,132,477 $ 99,087 $ 2,775 $ 88,446 $ 190,308 15,150 - - 15,150 106,696 - - 106,696 275,149 - 646,046 921,195 - - 309,745 309,745 955,749 1,493,108 - 2,448,857 1,451,831 1,495,883 1,044,237 3,991,951 - 2,484,203 - 2,484,203 1,744,224 - - 1,744,224 1,695,115 - - 1,695,115 480,421 - - 480,421 131,242 - - 131,242 2,319,346 - - 2,319,346 1,056,223 - 1,169,497 2,225,720 4,846,544 - - 4,846,544 88,718 - - 88,718 (466,294) - (408,713) (875,007) 11,895,539 2,484,203 760,784 15,140,526 $ 13,347,370 $ 3,980,086 $ 1,805,021 $ 19,132,477 64 CITY OF ELK RIVER, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2009 REVENUES Property taxes Intergovernmental revenue Charges for services Fines and forfeits Special assessments Interest income Miscellaneous revenue: Landfill host fee Refunds and reimbursements Other Total revenues EXPENDITURES Current: General government Public safety Public works Culture and recreation Economic development Debt service: Principal Interest and service charges Capital outlay: General government Public safety Public works Culture and recreation Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Sale of capital assets Total other financing sources (uses) Net change in fund balances Fund balances -January 1 Fund balances -December 31 Special Debt Capital Total Nonmajor Revenue Service Projects Governmental Funds Funds Funds Funds $ 663,158 $ 1,445,439 $ 1,080,142 $ 3,188,739 181,170 527,530 247,194 955,894 916,228 - 9,405 925,633 13,987 - - 13,987 9,650 421,724 - 431,374 231,519 15,358 32,803 279,680 789,273 - - 789,273 93,197 - - 93,197 507,701 233,034 700 741,435 3,405,883 2,643,085 1,370,244 7,419,212 78,940 - - 78,940 202,680 - - 202,680 232,206 - - 232,206 953,252 - 96,182 1,049,434 489,538 - 1,099,926 1,589,464 193,300 2,968,817 - 3,162,117 116,075 1,173,012 - 1,289,087 81,665 - - 81,665 - - 120,002 120,002 16,250 - 251,468 267,718 1,709 - 410,019 411,728 2,365,615 4,141,829 1,977,597 8,485,041 1,040,268 (1,498,744) (607,353) (1,065,829) 216,496 1,304,119 641,780 2,162,395 (1,145,880) (113,786) (178,509) (1,438,175) - - 16,629 16,629 (929,384) 1,190,333 479,900 740,849 110,884 (308,411) (127,453) (324,980) 11,784,655 2,792,614 888,237 15,465,506 $ 11,895,539 $ 2,484,203 $ 760,784 $ 15,140,526 65 City E This page has been left blank intentionally ~~ 7 0 i Kiver i n 0 L r NONMAJOR SPECIAL REVENUE FUNDS Library -This fund accounts for any library maintenance costs which are not paid by the Great River Regional Library System. Ice Arena -This fund accounts for the operation and maintenance of the ice arena which is funded by user fees. Pinewood Golf Course -This fund was established to account for the operation and maintenance of the municipal-owned nine-hole golf course which is funded by user fees. Senior Citizen Account -This fund is used to account for Senior Citizen program costs funded by revenues generated from Senior Citizen activities. Park Dedication -This fund accounts for park dedication fees from developers and expenditures for park land acquisitions and park capital improvements. Landfill -This fund was established to segregate solid waste surcharge revenues to be used for landfill abatement and other environmental issues. Landfill Construction Debris -This fund was established to account for the tax collected on construction debris deposited in the landfill and is to be used for related environmental issues. Revolving Loan -This fund was established to account for the City's portion of state economic development grant repayments which are used to fund other economic development projects. DTED Grant/Loan -This fund was established to account for the Department of Trade and Economic Development grant repayments which are used to fund economic development projects. Development Fund -This fund was established to attract businesses to develop within the City's business park. Capital Outlay Reserve -This fund was established to help build reserves for the purchase of capital equipment. Emergency/Insurance Reserve -This fund was opened to account for insurance deductibles and litigation costs not covered by insurance. The major source of revenue is from insurance premium refunds. Government Buildings Reserve -This fund is used to account for resources and expenditures related to government buildings projects. The major source of revenue is from landfill host fees. Drug Forfeiture Reserve -This fund was established to account for revenues received as a result of drug related crimes. These funds must be used for drug education and prevention. Severance Pay Reserve -This fund was established to account for resources earmarked for severance pay expenditures. NSP/RDF Reserve -This fund was established to account for revenues received from the license agreement between the City and Northern States Power. YMCA Grant -This fund was established to account for grant revenues received from the County for the YMCA. Economic Development Authority -This fund was established to account for a special tax levy authorized to help encourage development in the City. EDA DTED Loan -This fund was established to account for the Department of Trade and Economic Development grant repayments of the Economic Development Authority (EDA) which are used to fund economic development projects. I~ CITY OF ELK RIVER, MINNESOTA 5UBCOMBINING BALANCE SHEET NONMAJOR SPECLAL REVENUE FUNDS DECEMBER 31, 2009 ASSETS Cash and investments Receivables: Interest Taxes Accounts Special assessments Notes Due from other governments Due from other funds Prepaid items Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Salaries payable Due to other governments Due to other funds Deferred revenue Total liabilities Fund balances: Reserved for: Capital projects Landfill mitigation Notes Prepaid items Unreserved: Designated for: Working capital Development projects Future debt requirements Other postemployment benefits obligation Undesignated Total fund balances Total liabilities and fund balances Senior Pinewood Citizen Park Library Ice Arena Golf Course Account Dedication Landfill $ 409,376 $ - $ 6,850 $ 9,895 $ - $ 1,159,998 2,267 - - 55 - 6,499 5,476 - - - - - - 122,908 - - 4,000 29,004 $ 417,119 $ 122,908 $ 6,850 $ 9,950 $ 4,000 $ 1,195,501 $ 3,755 $ 36,854 $ 1,914 $ 133 $ - $ 7,979 - 9,632 2,117 - - 637 155 37,005 - - 229,237 - 3,886 - 2,819 - 459,701 - 7,796 83,491 6,850 133 688,938 8,616 - - - - - 1,186,885 409,323 - - - - _ - 39,417 - 9,817 (684,938) - 409,323 39,417 - 9,817 (684,938) 1,186,885 $ 417,119 $ 122,908 $ 6,850 $ 9,950 $ 4,000 $ 1,195,501 66 Continued Landfill Capital Emergency/ Government Ihug Severance Construction Revolving DTED Development Outlay Insurance Buildings Forfeiture Pay Debris Loan Grant/Loan Fund Reserve Reserve Reserve Reserve Reserve $ 673,909 $ 847,573 $ 201,234 $ 141,671 $ 1,296,579 $ 411,587 $ 2,426,325 $ 1,533 $ 140,247 3,731 4,693 1,114 784 7,380 2,355 13,434 8 777 - - - 12,878 - - - - - - 50,000 - 114,356 - 18,673 187,649 - - - - - - 10,661 - - - - - 557,065 460,146 - - - - - - - - - 185,425 37,005 1,722 - - - - - - - - 131,242 - - - $ 677,640 $ 1,459,331 $ 662,494 $ 455,114 $ 1,351,625 $ 565,579 $ 2,627,408 $ 1,558 $ 141,024 $ - $ - $ - $ 1,117 $ 16,759 $ 12,165 $ - $ 1,558 $ - - 106,696 - - - - - - - - 450,369 - 8,452 10,661 - - - - - 557,065 - 9,569 27,420 12,165 - 1,558 - - 902,266 202,348 445,545 - - - - - 508,230 - - - - - - - - - - 460,146 - - - - - - - - - - - 131,242 - - - - - - - 1,324,205 422,172 - - 52,306 - - - - - - 2,627,408 - - _ _ _ _ _ _ - - 88,718 169,410 - - - - - - - - 677,640 902,266 662,494 445,545 1,324,205 553,414 2,627,408 - 141,024 $ 677,640 $ 1,459,331 $ 662,494 $ 455,114 $ 1,351,625 $ 565,579 $ 2,627,408 $ 1,558 $ 141,024 67 CITP OF ELK RIVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2009 Economic Total Nomnajor NSP/RDF YMCA Development EDA DIED Special Revenue Reserve Grant Authority Loan Funds ASSETS Cash and investments $ 514,441 $ 1,567,208 $ 1,187,146 $ 194,065 $ 11,189,637 Receivables: Interest 3,542 8,677 - - 55,316 Taxes - - 28,647 - 47,001 Accounts - - - - 526,590 Special assessments - - - - 10,661 Notes - - - 20,275 1,037,486 Due from other govermnents - - - _ 17 Due from other funds 125,268 - - - 349,420 Prepaid items - - - - 131,242 Total assets $ 643,251 $ 1,575,885 $ 1,215,793 $ 214,340 $ 13,347,370 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ - $ - $ 16,853 $ - $ 99,087 Salaries payable - - 2,764 - 15,150 Due to other goveimnents - - - - 106,696 Due to other funds - - 8,752 - 275,149 Deferred revenue - - 19,861 - 955,749 Total liabilities - - 48,230 - 1,451,831 Fund balances: Reserved for: Capital projects - - - 194,065 1,744,224 Landfill mitigation - - - - 1,695,115 Notes - - - 20,275 480,421 Prepaid items - - - - 131,242 Unreserved: Designated for: Working capital - - 111,340 - 2,319,346 Development projects - - 1,056,223 - 1,056,223 Future debt requirements 643,251 1,575,885 - - 4,846,544 Other postemployment benefits obligation - - - - 88,718 Undesignated - - - - (466,294) Total fund balances 643,251 1,575,885 1,167,563 214,340 11,895,539 Total liabilities and fund balances $ 643,251 $ 1,575,885 $ 1,215,793 $ 214,340 $ 13,347,370 68 city E This page has been left blank intentionally Kiver CITY OF ELK RIVER, 114INNESOT.A SUBCOM BINING STATEMENT OF REVENUES, EXPENDITURES, , AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS YEAR ENDED DECEMBER 31, 2009 ' Senior Pinewood Citizen Park Library Ice Arena Golf Course Account Dedication Landfill , REVENUES Property taxes $ 67,455 $ - $ - $ - $ - $ - Intergovermnental revenue 2,446 - - - - - Charges for services - 671,165 201,924 8,108 17,004 - ' Fines and forfeits _ _ _ _ _ _ Special assessments - - - - - - Interest income 7,484 - - 205 - 23,488 1 Miscellaneous Landfill host fee - - - - - - Refunds and reimbursements Other - - - 21,944 23,966 - - 1,215 - 18,000 - - ' Total revenues 99,329 695,131 201,924 9,528 35,004 23,488 EXPENDITURES Current: ' General govermment - - - - - - Public safety _ _ _ _ _ _ Public works - - - - - 135,086 Culture and recreation 99,821 604,463 226,826 8,691 3 - ' Economic development - - - - - - Debt service: Principal - - 36,050 - 157,250 - ' Interest and service charges - - - - 116,075 - Capital outlay: General government Public works - - - - - - - - _ - _ - , Culture and recreation - - - - 1,349 - Total expenditures 99,821 604,463 262,876 8,691 274,677 135,086 Excess (deficiency) of revenues ' over (under)expenditures (492) 90,668 (60,952) 837 (239,673) (111,598) OTHER FINANCING SOURCES (USES) Transfers in 731 112,513 60,952 - 42,300 - ' Transfers out - (198,450) - - - (60,639) Total other financing sources (uses) 731 (85,937) 60,952 - 42,300 (60,639) Net chan e in fund balan e 239 4 , g c s ,731 - 837 (197,373) (172,237) Fund balances -January 1 409,084 34,686 - 8,980 (487,565) 1,359,122 ' Fund balances -December 31 $ 409,323 $ 39,417 $ - $ 9,817 $ (684,938) $ 1,186,885 69 ' Continued Landfill Capital Emergency/ Government Drug Severance Construction Revolving DTED Development Outlay Insurance Buildings Forfeiture Pay Debris Loan Grant/Loan Fund Reserve Reserve Reserve Reserve Reserve $ - $ - $ - $ 208,323 $ - $ - $ - $ - $ - - - - 7,727 160,500 - - - - - 200 14,327 - - - - - - _ _ _ _ _ - - 13,987 - - - - - 9,650 - - - - 12,820 15,964 3,491 12,084 26,631 9,535 51,194 102 2,668 - - - - - - 789,273 - - - - - - 57,599 35,598 - - - - 105,499 - 20,000 15,711 - - - - 12,820 121,663 17,818 248,134 270,091 45,133 840,467 14,089 2,668 - - - - 8,766 70,174 - - - - - - - 174,101 - - 28,579 - - - - - 72,759 - 24,361 - - - - - 420 3,579 - 9,449 - - - 23,226 - 235,528 - - - - - - - - - 56,009 - 25,656 - - - - - - - - 16,250 - - - - - 360 - - - - - - 23,226 - 236,308 315,214 70,174 75,716 28,579 - 12,820 98,437 17,818 11,826 (45,123) (25,041) 764,751 (14,490) 2,668 - - - - - - (415,400) - - - - - - - - (415,400) - - 12,820 98,437 17,818 11,826 (45,123) (25,041) 349,351 (14,490) 2,668 664,820 803,829 644,676 433,719 1,369,328 578,455 2,278,057 14,490 138,356 $ 677,640 $ 902,266 $ 662,494 $ 445,545 $ 1,324,205 $ 553,414 $ 2,627,408 $ - $ 141,024 70 CITY OF ELK RIVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS PEAR ENDED DECEMBER 31, 2009 Economic Total Nomnajor NSP/RDF YMCA Development EDA DTED Special Revenue Reserve Grant Authority Loan Funds REVENUES Property taxes $ - $ - $ 387,380 $ - $ 663,158 Intergovernmental revenue - - 10,497 - 181,170 Chazges for services - - 3,500 - 916,228 Fines and forfeits - - - - 13,987 Special assessments - - - - 9,650 Interest income 15,116 37,670 12,421 646 231,519 Miscellaneous Landfill host fee - - - - 789,273 Refunds and reimbursements - - - - 93,197 Other 301,366 - - - 507,701 Total revenues 316,482 37,670 413,798 646 3,405,883 EXPENDITURES Current: General govermnent - - - - 78,940 Public safety - - - - 202,680 Public works - - - - 232,206 Culture and recreation - - - - 953,252 Economic development - - 230,784 - 489,538 Debt service: Principal - - - - 193,300 Interest and service chazges - - - - 116,075 Capital outlay: General government - - - - 81,665 Public works - - - - 16,250 Culture and recreation - - - - 1,709 Total expenditures - - 230,784 - 2,365,615 Excess (deficiency) of revenues aver (under) expenditures 316,482 37,670 183,014 646 1,040,268 OTHER FINANCING SOURCES (USES) Transfers in - - - - 216,496 Transfers out (204,391) (250,000) (17,000) - (1,145,880) Total other financing sources (uses) (204,391) (250,000) (17,000) - (929,384) Net change in fund balances 112,091 (212,330) 166,014 646 110,884 Fund balances -January 1 531,160 1,788,215 1,001,549 213,694 11,784,655 Fund balances -December 31 $ 643,251 $ 1,575,885 $ 1,167,563 $ 214,340 $ 11,895,539 71 CITY OF ELK RIVER, MINNESOTA SPECIAL REVENUE FUND -LIBRARY MAINTENANCE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2009 REVENUES General property taxes Intergovernmental revenue Interest income Miscellaneous revenue Other Total revenues EXPENDITURES Culture and recreation: Current Deficiancy of revenues under expenditures OTHER FINANCING SOURCES Transfers in Net increase in fund balance Fund balance -January 1 Fund balance -December 31 Budget Variance with Original Final Actual Final Budget $ 70,900 $ 68,450 $ 67,455 $ (995) - 2,450 2,446 (4) 3,000 3,000 7,484 4,484 15,900 15,900 21,944 6,044 89,800 89,800 99,329 9,529 89,800 89,800 99,821 - - (492) - - 731 $ - $ - 239 409,084 $ 409,323 (10,021) (492) 731 $ 239 72 CITY OF ELK RIVER, MIn"l~TESOTA SPECIAL REVENUE FUND -ICE ARENA FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2009 REVENUES Charges for services Miscellaneous revenue Vending machines Other Total revenues EXPENDITURES Culture and recreation: Current Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance -January 1 Fund balance -December 31 Budget Variance with Original Final Actual Final Budget $ 733,300 $ 733,300 $ 671,165 $ (62,135) 22,000 22,000 14,215 (7,785) 2,000 2,000 9,751 7,751 757,300 757,300 695,131 (62,169) 685,400 671,150 604,463 66,687 100,000 93,050 - 93,050 785,400 764,200 604,463 159,737 (28,100) (6,900) 90,668 97,568 226,600 205,400 112,513 (92,887) (198,500) (198,500) (198,450) 50 28,100 6,900 (85,937) (92,837) $ - $ - 4,731 $ 4,731 34,686 $ 39,417 73 CITY OF ELK RIVER, MINNESOTA SPECIAL REVENUE FUND -PINEWOOD GOLF COURSE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2009 Budget Variance with Original Final Actual Final Budget REVENUES Charges for services $ 192,500 $ 192,500 $ 201,924 $ 9,424 EXPENDITURES Culture and recreation: Current 236,950 218,750 226,826 (8,076) Debt service: Principal 36,050 36,050 36,050 - Total expenditures 273,000 254,800 262,876 (8,076) Excess (deficiency) of revenues over (under) expenditures (80,500) (62,300) (60,952) 1,348 OTHER FINANCING SOURCES Transfers in 80,500 62,300 60,952 (1,348) Net change in fund balance $ - $ - - $ - Fund balance -January 1 - Fund balance -December 31 $ - 74 CITY OF ELK RIVER, MINNESOTA SPECIAL REVENUE FUND -LANDFILL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2009 REVENUES Interest income Budget Original Final $ 50,000 $ 50,000 Variance with Actual Final Budget $ 23,488 $ (26,512) EXPENTDITURES Public works: Current Deficiency of revenues under expenditures OTHER FINANCING USES Transfers out Net change in fund balance Fund balance -January 1 Fund balance -December 31 113,400 113,400 135,086 (21,686) (63,400) (63,400) (111,598) (48,198) $ (128,400) $ (128,400) (172,237) $ (43,837) 1,359,122 $ 1,186,885 75 CITY OF ELK RIVER, MINNESOTA SPECTAT, REVENUE FUND -ECONOMIC DEVELOPMENT AUTHORITY FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL YEAR ENDED DECEMBER 31, 2009 Budget Variance with Original Final Actual Final Budget REVENUES Property taxes $ 407,000 $ 398,000 $ 387,380 $ (10;620) Intergovernmental revenue - 9,000 10,497 1,497 Charges for services 3,500 3,500 3,500 - Interest income 22,000 22,000 12,421 (9,579) Total revenues 432,500 432,500 413,798 (18,702) EXPENDITURES Current: Economic development 266,100 266,100 230,784 35,316 Excess of revenues over expenditures 166,400 166,400 183,014 16,614 OTHER FINANCING USES Transfers out (17,000) (17,000) (17,000) - Net change in fund balance $ 149,400 $ 149,400 166,014 $ 16,614 Fund balance -January 1 1,001,549 Fund balance -December 31 $ 1,167,563 76 ii C i~ u 0 ' - - // city of Elk . 1 River 1 This page has been left blank intentionally 0 J fl n 0 i~ ii 0 fl 0 NONMAJOR DEBT SERVICE FUNDS Improvement Bonds -This fund is used to account for the accumulation of resources and payment of principal and interest on long-term general obligation special assessment debt used to finance various street, water, sewer and storm sewer improvements. Government Building Bonds -This fund is used to account for the accumulation of resources and payment of principal and interest to finance the construction of city facilities. Equipment Certificates -This fund is used to account for the accumulation of resources and payment of principal and interest to finance the purchase of public safety, streets, and parks equipment as authorized by Minnesota Statutes. MPFA Loan -This fund is used to account for the accumulation of resources and payment of principal and interest to finance Municipal State Aid eligible road improvements. Tax Increment Financing Bonds -This fund is used to account for the accumulation of resources and payment of principal and interest to finance administrative and development costs within the various TIF districts. Storm Sewer Revenue Bonds -This fund is used to account for the accumulation of resources and payment of principal and interest to finance repair and construction of various storm drainage projects. YMCA Bonds -This fund is used to account for the accumulation of resources and payment of principal and interest to finance the construction of a recreation facility which is leased to the YMCA. CITY OF ELK RIVER, MINNESOTA 5UBCOMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS DECEMBER 31, 2009 Government ASSETS Cash and investments Cash with fiscal agent Receivables: Interest Taxes Special assessments Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deferred revenue Total liabilities Fund balances: Reserved for debt service Total liabilities and fund balances Improvement Building Equipment Bonds Bonds Certificates $ 952,307 $ 633,590 $ 342,750 - 71,655 - MPFA Loan $ - 5,273 3,508 1,898 - 14,491 43,612 25,422 - 1,426,324 - - - $ 2,398,395 $ 752,365 $ 370,070 $ - $ - $ 2,775 $ - $ - 1,433,206 30,459 17,759 - 1,433,206 33,234 17,759 - 965,189 719,131 352,311 - $ 2,398,395 $ 752,365 $ 370,070 $ - 77 1 Storm Sewer Revenue Total Nonmajor Debt Service TIF Bonds Bonds YMCA Bonds Funds ' $ - $ - $ 442,360 $ 2,371,007 - - - 71,655 ' - - - 10,679 - - 16,896 100,421 - - - 1,426,324 ' $ - $ - $ 459;256 $ 3,980,086 ' $ $ $ - $ 2,775 = _ 11,684 1,493,108 ' - - 11,684 1,495,883 ' - - 447,572 2,484,203 $ - $ - $ 459,256 $ 3,980,086 1 78 CITY OF ELK RIVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS PEAR ENDED DECEMBER 31, 2009 REVENUES Property taxes Intergovernmental revenue Special assessments Interest income Contributions Total revenues EXPENDITURES Debt service: Principal Interest and service charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other finance sources (uses) Net change in fund balances Fund balances -January 1 Fund balances -December 31 Government Improvement Building Equipment MPFA Bonds Bonds Certificates Loan $ 199,147 $ 572,554 $ 334,421 $ - 7,301 20,929 12,232 477,843 421,724 - - - 9,752 4,100 97 - 637,924 597,583 346,750 477,843 510,000 1,255,000 334,317 474,500 168,335 471,677 24,700 3,343 678,335 1,726,677 359,017 477,843 (40,411) (1,129,094) (12,267) - 35,000 840,610 - - (35,000) - - - - 840,610 - - (40,411) (288,484) (12,267) - 1,005,600 1,007,615 364,578 - $ 965,189 $ 719,131 $ 352,311 $ - 79 Storni Sewer Total Nonmajor Revenue Debt Ser~rice TIF Bonds Bonds YMCA Bonds Funds $ - $ 107,987 $ 231,330 $ 1,445,439 - 4,038 5,187 527,530 - - - 421,724 - 961 448 15,358 - - 233,034 233,034 - 112,986 469,999 2,643,085 65,000 105,000 225,000 2,968,817 23,903 6,090 474,964 1,173,012 88,903 111,090 699,964 4,141,829 (88,903) 1,896 (229,965) (1,498,744) 88,903 - 339,606 1,304,119 - (78,786) - (113,786) 88,903 (78,786) 339,606 1,190,333 - (76,890) 109,641 (308,411) - 76,890 337,931 2,792,614 $ - $ - $ 447,572 $ 2,484,203 80 i ii 0 ii Thi , s page has been left blank intentionally n 7 u J ' NONMAJOR CAPITAL PROJECTS FUNDS Equipment Replacement -This fund is used to account for the purchase of capital equipment. Park Improvements This fund was established to account for the replacement and maintenance of park equipment and for the beautification of city parks. Tax Increment Financing Districts -This fund is used to account for administrative and development costs associated with the various tax increment financing projects. ' YMCA -This fund is used to account for the construction of a new recreation facility which will be leased by the YMCA. 0 0 l 7 ii This page has been left blank intentionally 1 ii J u ii fl n ii CITY OF ELK RIVER, MINNESOTA SUBCOMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECTS FUNDS DECEMBER 31, 2009 Totat Nonmajor Equipment Park Capital Projects Replacement Improvements TIF Districts YMCA Funds ASSETS Cash and investments $ 1,086,082 $ 16,898 $ 541,472 $ - $ 1,644,452 Receivables: Interest 6,014 441 2,995 - 9,450 Taxes - - 3,119 - 3,119 Due from other funds 44,031 103,969 - - 148,000 Total assets $ 1,136,127 $ 121,308 $ 547,586 $ - $ 1,805,021 LIABILITIES AND FU1~TD BALANCES Liabilities: Accounts payable $ 75,740 $ 12,198 $ 508 $ - $ 88,446 Due to other funds - - 646,046 - 646,046 Due to component unit - - 309,745 - 309,745 Total liabilities 75,740 12,198 956,299 - 1,044,237 Fund balances: Unreserved: Designated for capital projects 1,060,387 109,110 - - 1,169,497 Undesignated - - (408,713) - (408,713) Total fund balances 1,060,387 109,110 (408,713) - 760,784 Total liabilities and fund balances $ 1,136,127 $ 121,308 $ 547,586 $ - $ 1,805,021 81 CITY OF ELK RIVER, MINNESOTA SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECTS FUNDS PEAR ENDED DECEMBER 31, 2009 Total Nonmajor Equipment Park Capital Projects Replacement Improvements TIF Districts YMCA Funds REVENUES Property taxes $ - $ - $ 1,080,142 $ - $ 1,080,142 Intergovernmental revenue - 246,659 535 - 247,194 Charges for sen~ices - 9,405 - - 9,405 Interest income 20,038 689 11,489 587 32,803 Miscellaneous - 700 - - 700 Tota] revenues 20,038 257,453 1,092,166 587 1,370,244 EXPENDITURES Current: Culture and recreation - 96,182 - - 96,182 Economic development - - 1,099,926 - 1,099,926 Capital: Public safety 120,002 - - - 120,002 Public works 251,468 - - - 251,468 Culture and recreation 150,648 220,743 - 38,628 410,019 Total expenditures 522,118 316,925 1,099,926 38,628 1,977,597 Deficiency of revenues under expenditures (502,080) (59,472) (7,760) (38,041) (607,353) OTHER FINANCING SOURCES (USES} Transfers in 535,141 106,639 - - 641,780 Transfers out - - (88,903) (89,606) (178,509) Sale of capital assets 16,629 - - - 16,629 Total other financing sources (uses) 551,770 106,639 (88,903) (89,606) 479,900 Net change in fund balances 49,690 47,167 (96,663) (127,647) (127,453) Fund balances -January 1 1,010,697 61,943 (312,050) 127,647 888,237 Fund balances -December 31 $ 1,060,387 $ 109,110 $ (408,713) $ - $ 760,784 82 0 AGENCY FUNDS Agency Funds are used to account for assets held by the City as an agent for individuals, private ' organizations and/or other governmental units. The City of Elk River had the following Agency Fund during the year: ' Developer Fee Escrow -This fund is used to account for the collection and distribution of funds relating to private development projects. i_ 0 u i i n u CITY OF ELK RIFER, MIl~TNESOTA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES DEVELOPER ESCROW AGENCY FUND YEAR ENDED DECEMBER 31, 2009 ASSETS Cash Accounts receivable Total assets LIABILITIES Accounts payable Refundable deposits payable Total liabilities Beginning Ending Balance Additions Deductions Balance $ 104,019 $ 64,109 $ 124,613 $ 43,515 22,400 10,619 30,516 2,503 $ 126,419 $ 74,728 $ 155,129 $ 46,018 $ 4,243 $ 111,766 $ 114,775 $ 1,234 122,176 45,224 122,616 44,784 $ 126,419 $ 156,990 $ 237,391 $ 46,018 83 ' COMPONENT UNIT FINANCIAL STATEMENTS ' The Housing and Redeve]opment Authority of Elk River is a component unit of the City. Its operations are presented as a separate column on the combined financial statements. ' Governmental Fund Housine and Redevelopment Authori Fund -This fund is used to account for housing and redevelopment activities. Revenues are derived from the HRA property tax levy. ii r 0 HOUSING AND REDEVELOPMENT AUTHORITY OF ELK RIVER, MINNESOTA BALANCE SHEET GOVERNMENTAL FUND DECEMBER 31, 2009 ASSETS Cash and investments Receivables: Taxes Notes Due from primary government Due from other governments Property held for resale Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Salaries payable Deferred revenue Total liabilities Fund balances: Unreserved - Designated for working capital Designated for redevelopment projects Total fund balances Total liabilities and fund balances $ 704,311 22,210 400,000 304,679 6,042 823,146 $ 2,260,388 $ 1,785 1, 843 15,402 19,030 107,020 2,134,338 2,241,358 $ 2,260,388 84 ' HOUSING AND REDEVELOPMENT AUTHORITY OF ELK RIVER, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET ASSETS ' DECEMBER 31, 2009 ' FUND BALANCE -TOTAL GOVERNMENTAL FUNDS ' Amounts reported for governmental activities in the statement of net assets are different because: 1. Deferred revenue in governmental funds is susceptible to full accrual on the ' government-wide statements. 2. Long-term liabilities are not payable with current fmancial resources and are ' therefore not reported in the governmental funds: Contract for deed Accrued interest payable t NET ASSETS OF GOVERNMENTAL ACTIVITIES t ' 85 $ 2,241,358 15,402 (270,588) (7,441) $ 1,978,731 HOUSING AND REDEVELOPMENT AUTHORITY OF ELK RIVER, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE GOVERNMENTAL FUND DECEMBER 31, 2009 REVENUES Property taxes Intergovernmental revenue Charges for services Interest income Total revenues EXPENDITURES Current: Economic development Debt service: Principal Interest Total expenditures Net change in fund balance Fund balance -January 1 Fund balance -December 31 $ 300,315 146,155 3,396 8,073 457,939 113,092 97,523 20,645 231,260 226,679 2,014,679 $ 2,241,358 86 HOUSING AND REDEVELOPMENT AUTHORITY OF ELK RIVER, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE OF GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2009 NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS $ 226,679 Amounts reported for governmental activities in the statement of activities are different because: 1. Revenues in the statement of activities that do not provide current fmancial resources are not reported as revenues in the governmental funds. Property taxes 5,029 2. The issuance of long-term debt provides current fmancial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. Repayment of principal of long-term debt 97,523 3. Some expenses reported in the statement of activities do not require use of current fmancial resources and, therefore, are not reported as expenditures in governmental funds. Accrued interest payable 2,682 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 331,913 87 cty E This page has been left blank intentionally u i 7 ii ii 0 C~ i] 1 n ~I 0 ~i u giver STATISTICAL SECTION ' (UNAUDITED) ' This part of the City of Elk River's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Page ' Financial Trends 88 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 98 ' These schedules contain information to help the reader assess the city's most significant local revenue sources; electric sales and property taxes. Debt Capacity -105 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. Demographic and Economic Information 113 ' 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 115 These schedules contain service and infrastructure 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. i Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. n 0 CITY OF ELK RIVER, MINNESOTA NET ASSETS BY COMPONENT LAST SEVEN FISCAL YEARS (accrual basis of accounting) Governmental activities Invested in capital assets, net of related debt Restricted Unrestricted Total governmental activities net assets Fiscal Year 2003 2004 2005 $ 56,003,997 $ 67,061,167 $ 73,150,041 8,383,884 10,963,518 12,410,832 22,441,594 19,452,247 21,267,772 $ 86,829,475 $ 97,476,932 $ 106,828,645 Business-type activities Invested in capital assets, net of related debt Restricted Unrestricted Total business-type activities net assets Primary government Invested in capital assets, net of related debt Restricted Unrestricted Total primary government net assets $ 46,341,983 $ 52,377,687 $ 54,577,074 1,947,067 2,197,066 2,256,419 11,224,115 10,480,815 11,956,851 $ 59;513,165 $ 65,055,568 $ 68,790,344 $ 102,345,980 $ 119,438,854 $ 127,727,115 10,330,951 13,160,584 14,667,251 33,665,709 29,933,062 33,224,623 $ 146,342,640 $ 162,532,500 $ 175,618,989 Note: Net assets are not available for years prior to 2003. 88 Fiscal Year 2006 2007 2008 2009 $ 82,663,610 $ 85,293,459 $ 85,390,968 $ 86,149,417 4,802,808 6,189,063 5;569,773 4,723,030 27,998,543 25,641,836 27,628,733 28,588,304 $ 115,464,961 $ 117,124,358 $ 118,589,474 $ 119,460,751 $ 59,410,729 $ 59,942;345 $ 60,750,900 $ 59,601,861 445,900 733,400 724,500 724,500 14,059,048 17,272,262 17,971,074 20,040,168 $ 73,915,677 $ 77,948,007 $ 79,446,474 $ 80,366,529 $ 142,074,339 $ 145,235,804 $ 146,141,868 $ 145,751,278 5,248,708 6,922,463 6,294,273 5,447,530 42,057,591 42,914,098 45,599,807 48,628,472 $ 189,380,638 $ 195,072,365 $ 198,035,948 $ 199,827,280 89 CIT Y OF ELK RIVER, MINNESOTA CHANGES IN NET ASSETS ' LAST SEVEN FISCAL YEARS (accrual basis of accounting) Fiscal Year 2003 2004 2005 ' Expenses Governmental activities: General government $ 3,290,711 $ 2,440,200 $ 2,503,826 Public safety 4,229,109 4,988,424 5,255,974 ' Public works 3,737,678 4,277,071 4,281,725 Culture and recreation 1,747,322 2,058,882 2,535,955 Economic development 549,149 912,698 938,164 Interest on long-term debt 1,050,823 936,515 881,001 Total governmental activities expenses 14,604,792 15,613,790 16,396,645 Business-type activities: ' II Municipal Liquor 3,621,087 3,760,156 4,344,915 Garbage 884,532 953,432 1,047,479 Sewer 1,406,713 1,464,409 1,629,353 Water 1,713,217 1,809,128 2,099,428 ' Electric 11,929,596 13,338,580 14,880,337 Total business-type activities expenses 19,555,145 21,325,705 24,001,512 Total primary government expenses $ 34 159 937 $ 36 939 495 $ 40 157 398 ' , , , , , , Program Revenues Governmental activities: Charges for services: ' General government $ 194,246 $ 308,781 $ 288,032 Public safety 1,897,883 1,956,967 2,050,437 Public works 148,904 226,907 280,583 ' Culture and recreation 729,932 812,401 877,789 Economic development 71,379 96,396 379,002 Operating grants and contributions 487,560 427,513 480,649 Capital grants and contributions 6,064,491 11,879,536 7,573,752 ' Total governmental activities program revenues 9,594,395 15,708,501 11,930,244 Business-type activities: ' Charges for services: Municipal Liquor 4,156,276 4,345,702 4,806,061 Garbage 820,278 973,176 1,055,753 Sewer 1,808,817 2,365,262 1,261,853 ' Water 1,807,334 2,095,018 1,365,136 Electric 13,774,777 14,765,479 15,955,440 Operating grants and contributions 10,530 8,615 9,255 Capital grants and contributions 1,053,994 3,028,454 3,654,383 ' Total business-type activities program revenues 23,432,006 27,581,706 28,107,881 Total primary government program revenues $ 33,026,401 $ 43,290,207 $ 40,038,125 ' Net (expense)/revenue Governmental activities $ (5,010,397) $ 94,711 $ (4,466,401) Business-type activities 3,876,861 6,256,001 4,106,369 Total primary government net expense $ (1,133,536) $ 6,350,712 $ (360,032) ' J 90 ' n 7 i 0 u ii II 0 L Fiscal Year 2006 _ 2007 2008 2009 $ 2,560,213 $ 2,732,697 $ 3,286,350 $ 2,777,568 5,606,438 5,924,093 6,715,607 6,106,181 6,169,030 6,527,565 5,875,992 5,397,058 2,859,058 3,598,695 3,549,637 3,767,312 631,437 1,001,829 1,893,707 I ,569,432 764,725 952,082 1,315,275 1,252,493 18,590,901 20,736,961 22,636,568 20,870,044 5,202,500 5,302,012 5,465,233 5,374,867 1,094,788 1,114,133 1,166,709 1,256,177 1,724,147 1,788,890 1,851,655 1,784,428 2,112,477 2,344,158 2,452,717 2,348,707 16,081,812 18,574,266 21,939,223 23,269,553 26,215,724 29,123,459 32,875,537 34,033,732 $ 44,806,625 $ 49,860,420 $ 55,512,105 $ 54,903,776 $ 246;541 $ 283,003 $ 371,911 $ 334,100 2,403,601 1,533,699 962,275 634,242 617,099 76,117 159,664 47,860 1,065,218 1,083,081 1,084,067 1,074,266 178,217 92,486 65,999 60,335 387,584 362,313 977,411 758,958 8,117,032 4,174,427 4,302,760 2,599,593 13,015,292 7,605,126 7,924,087 5,509,354 5,906,768 6,043,088 6,213,657 6,094,058 1,106,268 1,139,763 1,160,774 1,194,937 1,352,647 1,454,219 1, 511,165 1,504,785 1,770,819 2,144,622 2,139,046 2,218,816 17,143,485 19,895,323 22,941,903 24,258,120 504,168 295,081 149,327 92,957 4,297,666 1,996,636 888,925 267,233 32,081,821 32,968,732 35,004,797 35,630,906 $ 45,097,113 $ 40,573,858 $ 42,928,884 $ 41,140,260 $ (5,575,609) $(13,131,835) $(14,712,481) $(15,360,690) 5,866,097 3,845,273 2,129,260 1,597,174 $ 290,488 $ (9,286,562) $(12,583,221) $(13,763,516) 91 General Revenues and Other Changes in Net Assets Governmental activities: Property taxes Tax increment Other taxes Unrestricted grants and contributions Investment earnings Miscellaneous Transfers of capital assets Transfers Total governmental activities Business-type activities: Investment earnings Miscellaneous Transfers of capital assets Transfers Total business-type activities Total primary government Change in Net Assets Governmental activities Business-type activities Total primary government Fiscal Year 2003 2004 2005 $ 5,830,468 $ 6,425,933 $ 7,569,131 682,855 734,115 768,397 2,237,750 2,141,152 2,427,605 304,237 375,550 758,612 - 9,180 326,853 639,924 866,816 677,516 9,695,234 10,552,746 12,528,114 155,802 153,218 305,923 (639,924) (866,816) (677,516) (484,122) (713,598) (371,593) $ 9,211,112 $ 9,839,148 $ 12,156,521 $ 4,684,837 $ 10,647,457 $ 8,061,713 3,392,739 5,542,403 3,734,776 $ 8,077,576 $ 16,189,860 $ 11,796,489 Note: Changes in net assets are not available for years prior to 2003. 92 Fiscal Year 2006 2007 2008 2009 ' $ 8,754,923 $ 9,744,930 $ 11,095,407 $ 11,440,991 790,882 894,595 1,041,300 1,080,142 - - - 156,894 ' 2,577,700 2,395,665 1,775,536 1,940,274 1,151,144 1,465,401 1,215,053 548,651 28,450 23,213 - 20,013 - (511,412) - - ' 908,826 778,840 1,050,301 1,045,002 14,211,925 14,791,232 16,177,597 16,231,967 ' 589;210 640,876 534,485 367,883 2,108 - 2,000 - ' - (908,826) 511,412 (778,840) (1,050,301) - (1,045,002) (317,508) 373,448 (513,816) (677,119) $ 13,894,417 $ 15,164,680 $ 15,663,781 $ 15,554,848 $ 8,636,316 $ 1,659,397 $ 1,465,116 $ 871,277 5,548,589 $ 14,184,905 4,218,721 $ 5,878,118 1,615,444 $ 3,080,560 920,055 $ 1,791,332 t ' 93 CITY OF ELK RIVER, MIl~TNESOTA FUl~'D BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) Fiscal Year 2000 2001 2002 2003 General fund Reserved $ - $ 1,268 $ 1,268 $ 348,026 Unreserved 2,695,612 3,060,907 3,189,321 3,384,023 Total General fund $ 2,695,612 $ 3,062,175 $ 3,190,589 $ 3,732,049 All other governmental funds Reserved $ 8,527,474 $ 7,046,474 $ 14,272,266 $ 12,598,358 Unreserved, reported in: Special revenue funds 6,439,607 8,772,346 2,219,157 3,742,244 Capital projects funds 480,466 (29,358) 8,133,831 4,585,550 Total all other governmental funds $ 15,447,547 $ 15,789,462 $ 24,625,254 $ 20,926,152 94 Fiscal Year ' 2004 2005 2006 2007 2008 2009 ' $ 115,746 $ 210,298 $ - $ 5,938 $ - $ - 3,851,634 4,391,083 4,816,386 5,346,066 5,190,662 5,699,575 ' $ 3,967,380 $ 4,601,381 $ 4,816,386 $ 5,352,004 $ 5,190,662 $ 5,699,575 ' $11,570,003 $ 11,475,837 $ 9,979,026 $ 14,453,663 $ 6,953,630 $ 6,535,205 ' 4,597,195 5,401,112 5,453,061 8,382,625 5,070,764 8,091,573 3,849,815 9,179,236 7,751,286 9,574,268 7,844,537 10,101,066 $ 21,568,310 $ 25,311,523 $ 23,141,363 $ 27,482,714 $ 24,279,184 $ 24,480,808 95 CITY OF ELK RIVER, MINNESOTA CHANGES IN FUND BALANCES OF GOVERNMENT AL FUNDS ' LAST TEN FISCAL YEARS (modified accrual basis of accounting) ' Fiscal Year ' 2000 2001 2002 2003 Revenues Property taxes $ 4,232,545 $ 5;067,317 $ 5,462,585 $ 6,507,578 Other taxes _ _ _ _ ' Licenses and permits 749,888 989,052 715,852 1,143,612 Intergovernmental revenue 4,969,056 1,687,430 3,978,999 2,141,277 Charges for services 1,129,834 1,503,350 1,743,948 2,042,391 , Fines and forfeits 119,421 89,221 134,840 190,911 Special assessments 2,395,473 2,598,484 2,049,519 2,433,939 Interest 1,007,444 766,599 612,224 304,237 ' Miscellaneous 3,657,258 3,018,207 2,409,430 2,159,373 Total revenues 18,260,919 15,719,660 17,107,397 16,923,318 ' Expenditures General government 1,337,745 1,592,027 2,200,458 2,265,779 Public safety 3,129,669 3,389,370 3,583,232 4,145,996 Public works 935,650 1,427,274 1,429,018 1,814,818 ' Culture and recreation 1,102,577 1,133,090 1,325,118 1,635,806 Economic development 357,299 339,660 312,387 649,463 Capital outlay 8,152,240 3,103,306 6,704,948 8,389,740 , Debt service Principal Interest and service charges 1,669,624 1,048,545 2,203,112 949,235 1,948,275 794,511 2,355,800 1,102,548 , Total expenditures 17,733,349 14,137,074 18,297,947 22,359,950 Excess (deficiency) of revenues ' over (under) expenditures 527,570 1,582,586 (1,190,550) (5,436,632) Other financing sources (uses) Transfers in 1,291,949 2,250,518 2,578,131 4,654,396 ' Transfers out (830,378) (1,556,626) (2,119,863) (4,003,800) Proceeds of long-term debt 3,647,233 202,000 9,696,488 1,612,100 Payment to refunded bond escrow agent (1,554,828) (1,770,000) - - ' Premium on long-term debt issued - _ _ _ Discount on long-term debt issued - - - (5,566) Capital leases issued _ _ _ _ ' Sale of capital assets - - - 34,562 Total other fmancing sources (uses) 2,553,976 (874,108) 10,154,756 2,291,692 N t h i f d b l e c ange n un a ances $ 3,081,546 $ 708,478 $ 8,964,206 $ (3,144,940) Debt service as a percentage of noncapital expenditures) 25.3% ' I Debt service percentages are not available prior to 2003. 96 2005 2006 2007 2008 2009 $ 7,118,568 $ 8,283,983 $ 9,529,773 $ 10,571,695 $ 12,037,076 $ 12,329,194 ' 156,894 1,249,844 1,240,336 1,207,368 987,708 460,108 322,338 ' 1,544,485 2,381,670 1,979,405 2,571,767 4,142,937 2,485,464 2,973,505 1,786,094 4,134,779 1,849,307 3,117,997 1,465,898 164;800 190,062 175,155 156,407 150,086 141,629 2,375,902 3,414,090 1,566,880 1,909,595 1,712,551 1,464,348 ' 375,548 758,612 1,151,144 1,465,401 1,215,053 548,651 1,799,736 2,004,286 2,555,842 1,545,181 1,628,567 1,853,966 17,010,553 20,442,541 22,814,563 21,395,586 23,187,527 21,400,915 2,161,356 2,204,626 2,251,111 2,450,722 2,480,208 2,458,879 4,163,345 4,649,010 4,941,706 5,109,371 5,565,474 5,377,208 ' 1,850,281 2,192,336 2,538,658 4,170,119 3,246,436 2,656,097 1,655,298 2,088,505 2,605,861 3,386,681 2,890,683 2,666,146 ' 703,591 2 997 696 785,584 4 191 817 627,467 729 10 882 573,446 12 023 803 2,216,617 381 10 359 1,589,464 4 627 322 , , , , , , , , , , , , 2,494,483 2,174,266 7,051,836 1,767,617 2,022,616 3,162,117 965,984 881,305 909,904 902,415 1,198,174 1,289,087 16,992,034 19,167,449 31,656,425 31,163,394 30,001,567 23,826,320 ' 18 519 275 092 1 841 862 8 767 808 9 040) 814 (6 405) (2 425 , , , ( , ) , ( , ) , , , , , ' 4,666,581 2,888,975 5,923,474 4,785,257 3,868,359 2,887,624 (3,799,765) (2,211,459) (5,014,648) (4,006,417) (2,818,058) (1,842,622) ' 331,000 1,715,000 3,657,000 13,390,500 2,277,946 2,074,311 - - - - 36,542 - - (8,560) (29,252) (50,477) - - ' - - 2,332,694 325,000 - - 9,180 718,166 17,439 200,914 84,379 16,629 1,206,996 3,102,122 6,886,707 14,644,777 3,449,168 3,135,942 ' $ 1 225 515 $ 4 214 377 $ 1 955 155 $ 4 876 969 872) 3 364 $ $ 710 537 , , , , ( , , ) , , , , ( , ' 23 7% 24.1% 21.0% 37.1% 15.1% 16.9% . u Fiscal Year ' 97 CITY OF ELK RIVER, MINNESOTA ELECTRIC SALES ' LAST TEN FISCAL YEARS Fiscal Number of Total , Year Customers KWh's Sold Billings 2000 2001 6,152 124,098,851 $ 6 547 137 617 611 8,525,161 341 9 330 , , , , , 2002 6,750 149,787,670 10,629,091 2003 7 376 161 852 054 11 679 055 ' , , , , , 2004 7,907 165,595,414 12,736,439 2005 8,306 182;515,644 14,219,289 ' 2006 8,562 194,975,530 15,494,068 2007 8,945 211;298,886 17,704,210 , 2008 9,203 224,226,048 19,999,652 2009 9,170 232,772,722 21,776,837 , Source: Elk River Municipal Utilities 98 ' i CITY OF ELK RIVER, MINNESOTA PRINCIPAL ELECTRIC CUSTOMERS DECEMBER 31, 2009 2009 Customer Data Center 2 Data Center 1 Faribault Foods W almart Jerry's Enterprises E & O Tool Menards Target Sherburne Co. Govt. Center Tescom Coborns All Tool Elk River Senior High Vanderberg Jr High Shiely TOTAL Percentage Total KWh Total of Total Sold Billings Billings 25,780,800 $ 1,821,216 8.36% 14,673,600 1,123,959 5.16% 5,032,000 405,868 1.86% 5,038,500 376,613 1.73% 4,876,080 351,402 1.61% 3,869,600 314,703 1.45% 3,986,400 309,242 1.42% 3,567,500 279,928 1.29% 3,123,840 259,532 1.19% 2,731,700 247,597 1.14% 72,680,020 $ 5,490,060 25.21% Source: Elk River Municipal Utilities 2000 Percentage Total KWh Total of Total Sold Billings Billings $ - - 4,097,880 148,014 1.74% 3,45 7,200 124, 795 1.46 3,077,160 111,114 1.30% 2,153,280 69,950 0.82% 2,698,380 97,478 1.14% 3,528,720 127,370 1.49% 2,422,560 87,548 1.03% 1,319,880 47,852 0.56% 1,244,800 45,149 0.53% 1,959,780 70,888 0.83% 25,959,640 $ 930,157 10.90% 99 CITY OF ELK RIVER, MINNESOTA TAR CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Tax capacity Real property Personal property Total tax capacity Tax increment Taxable tax capacity Total tax capacity rate Taxable market value Real property Personal property Taxable market value Estimated actual value of taxable property Taxable market value as a percentage of estimated actual value 2000 2001 2002 2003 $ 13,088,886 $ 14,650,775 $ 11,961,965 $ 13,734,734 261,248 255,557 203,919 258,501 13,350,134 14,906,332 12,165, 884 13,993,235 (141,898) (338,069) (426,854) (588,732) $ 13,208,236 $ 14,568,263 $ 11,739,030 $ 13,404,503 30.248% 30.596% 43.600% 44.614% $ 769,547,599 $ 859,562,078 $ 986,560,400 $1,141,917,000 7,870,100 7,628,000 10,347,400 13,112,800 $ 777,417,699 $ 867,190,078 $ 996,907,800 $ 1,155,029,800 $ 883,478,872 $ 985,576,523 $ 1,145,691,994 $ 1,382,785,926 88.00% 87.99% 87.01% 83.53% Source: Sherburne County Assessor Note: Property in the county is reassessed annually. The county assesses property at approximately 87 percent of actual value for all types of real and personal property. 100 2004 2005 2006 2007 2008 2009 $ 15,387,792 $ 17,838,528 $ 20,514,092 $ 23,166,911 $ 25,790,055 $ 26,550,210 215,581 237,262 246,741 281,606 279,154 302,166 15,603,373 18,075,790 20,760,833 23,448,517 26,069,209 26,852,376 (608,609) (654,325) (675,049) (786,795) (744,597) (899,835) $ 14,994,764 $ 17,421,465 $ 20,085,784 $ 22,661,722 $ 25,324,612 $ 25,952,541 43.782% 43.763% 43.929% 43.056% 42.494% 43.280% $ 1,299,691,938 $ 1,528,254,150 $ 1,773,917,600 $ 1,998,598,900 $ 2,186,595,580 $ 2,235,538,000 10,934,000 12,020, 800 12,494,300 14,318,500 14,221,560 15,363,900 $ 1,310,625,938 $ 1,540,274,950 $ 1,786,411,900 $ 2,012,917,400 $ 2,200,817,140 $ 2,250,901,900 $ 1,567,581,017 $ 1,805,774,228 $ 2,109,366,764 $ 2,262,479,345 $ 2,457,361,368 $ 2,429,563,505 83.61% 85.30% 84.69% 88.97% 89.56% 92.65% 101 CITY OF ELK RIVER, MINNESOTA PROPERTY TAX RATES DIRECT AND OVERLAPPING` GOVERNMENTS LAST TEN FISCAL YEARS City of Elk River Overlap ping Rates Total Schoo l District Direct & Fiscal Debt Referendum Special Overlapping Year Operating Service Total County Operating Mkt. Value Districts Rates 2000 27.710 2.538 30.248 31.468 56.027 0.111 1.705 119.559 2001 28.929 1.667 30.596 32.341 63.870 0.203 1.737 128.747 2002' 39.214 4.386 43.600 47.577 45.969 0.082 s 2.653 142.881 2003 37.223 7.391 44.614 46.277 41.352 0.076 2.696 135.015 2004 35.861 7.921 43.782 44.405 30.853 0.154 3.574 122.768 2005 36.713 7.050 43.763 42.028 32.848 0.148 5.349 124.136 2006 37.179 6.750 43.929 41.555 35.950 0.155 4.056 125.645 2007 37.743 5.313 43.056 40.720 33.208 0.144 3.905 121.033 2008 37.249 5.245 42.494 40.675 32.344 0.161 3.988 119.662 2009 38.319 4.961 43.280 41.999 36.215 0.164 4.040 125.698 Source: Sherburne County Auditor/Treasurer ' Overlapping rates are those of local and county governments that apply to property owners within the City of Elk River. Not all overlapping rates apply to all City of Elk River properly owners (e.g., the rates for special districts apply only to the proportion of the city's property owners whose property is located within the geographic boundaries of the special district. Z In 2002 tax rates for cities and counties increased significantly due to reductions in state aids and in class rates used to calculate net tax capacity values. j As a result of property tax reform measures enacted in 2001, tax rates for school districts for 2002 are substantially less than the comparable figures from prior years. 102 C ~i 7 u n CITY OF ELK RIVER, MINNESOTA PRINCIPAL TA?1PAYERS DECEMBER 31, 2009 2009 2000 Percentage Percentage Net Tax of Total Net Net Tax of Total Net Taxpayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity Great River Energy $ 698,478 1 2.60% $ 769,400 1 6.22% Target Corp. 405,240 2 1.51 165,406 5 1.34 Resource Recovery Technology 312,078 3 1.16 411,719 3 3.33 Walmart Stores 295,786 4 1.10 - - - JPM Capital Corporation 270,060 5 1.01 - - - Bradley Operating L.P. 194,666 6 0.72 416,831 2 3.37 Menards, Inc 191,466 7 0.71 187,693 4 1.52 Phoenix Enterprises 170,952 8 0.64 - - - Minn West Bank 162,560 9 0.61 - - - Home Depot 145,284 10 0.54 - - - Tescom Corporation - - - 153,247 6 1.24 Hickman Land Investments - - - 109,306 7 0.88 B & G Realty, Inc. - - - 108,276 8 0.87 Alltool Manufacturing - - - 103,332 9 0.84 Fairview Healthcare - - - 101,054 10 0.82 TOTAL $ 2,846,570 10.60% $ 2,526,264 20.43% Source: Sherburne County Assessor 103 C ~'! n u This page has been left blank intentionally i J u CITY OF ELK RIVER, MINNESOTA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Collected within the Fiscal Year of the Levy Collections in Total Collections to Date Fiscal Total Year's Percentage Subsequent Percentage Year Tax Levyl Amount of Levy Years Amount of Levy 2000 $ 3,995,469 $ 3,922,043 98.16% $ 70,985 $ 3,993,028 99.94°/a 2001 4,457,247 4,402,150 98.76 53,781 4,455,931 99.97 2002 4,754,431 4,690,876 98.66 54,156 4,745,032 99.80 2003 5,594,944 5,513,105 98.54 65,396 5,578,501 99.71 2004 6,160,102 6,051,358 98.23 100,312 6,151,670 99.86 2005 7,224,669 7,078,832 97.98 134,281 7,213,113 99.84 2006 8,429,836 8,249,039 97.86 161,262 8,410,301 99.77 2007 9,354,375 9,133,690 97.64 175,589 9,309,279 99.52 2008 10,360,068 10,075,018 97.25 145,552 10,220,570 98.65 2009 10,802,209 10,424,835 96.51 - 10,424,835 96.51 I Total tax levy for years 2002-2009 does not include Market Value Homestead Credit received from the State. 104 CITY OF ELK RIVER, MINNESOTA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities General Permanent Fiscal General Obligation Lease Special Improvement Tax Year Obligation Revenue Revenue Assessment Revoh~ing Increment 2000 $ - $ 4,860,000 $ 2,295,000 $ 11,625,000 $ 2;015,000 $ 1,636,500 2001 - 4,530,000 2,125,000 8,535,000 1,840,000 1,560,000 2002 - 2,230,000 9,950,000 7,450,000 1,575,000 1,477,500 2003 - 2,045,000 9,765,000 7,520,000 1,305,000 1,352,500 2004 - 1,850,000 9,285,000 6,460,000 1,020,000 1,116,000 2005 - 1,645,000 8;785,000 6,605,000 935,000 972,500 2006 3,220,000 1,430,000 8,265,000 2,130,000 - 827,500 2007 13,220,000 1,200,000 7,730,000 4,825,000 - 675,000 2008 15,412,946 955,000 7,170,000 4,480,000 - 505,000 2009 16,677,757 700,000 6,175,000 3,970,000 - 440,000 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. ' See the Schedule of Demographic and Economic Statistics on page 113 for personal income and population data. 105 Governmental Activities Business-Type Activities Total Percentage Certificates of Revenue Certificates of Notes Primary of Personal Per Indebtedness Other Bonds Indebtedness Payable Government Income' Capita' $ 612,450 $ 376,478 $ 6,872,500 $ - $ - $ 30,292,928 7.20% 1,842 559,925 242,935 9,945,000 - - 29,337,860 6.42% 1,688 661,650 148,808 11,050,000 500,000 2,854,536 37,897,494 8.06% 2,096 612,950 47,976 12,430,000 500,000 2,775,424 38,353,850 7.84% 2,045 705,967 - 11,050,000 375,000 2,663,145 34,525,112 6.27% 1,706 1,035,201 - 12,885,000 250,000 2,538,226 35,650,927 6.00% 1,654 1,134,334 1,908,725 14,200,000 125,000 3,066,820 36,307,379 5.74% 1,610 1,090,350 2,123,092 16,155,000 - 2,879,054 49,897,496 7.29% 2,152 756,033 1,839,792 17,910,000 - 2,701,994 51,730,765 6.96% 2,166 421,716 1,646,492 16,910,000 - 2,524,646 49,465,611 na 2,066 106 CITY OF ELK RIFER, MINNESOTA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Less Amount Percentage Net General in Debt Net of Net Bonded Bonded Fiscal Bonded Service Bonded Debt to Tax Debt per Year Debtl Funds Debt Capacity' Capita] 2000 $ 612,450 $ 328,605 $ 283,845 2.15% $ 17.26 2001 559,925 199,967 359,958 2.47% 20.71 2002 8,661,650 584,853 8,076,797 66.39% 446.68 2003 8,612,950 704,885 7,908,065 56.51% 421.58 2004 8,420,967 791,375 7,629,592 48.90% 376.96 2005 8,455,201 813,832 7,641,369 43.86% 354.62 2006 11,474,334 860,393 10,613,941 52.84% 470.68 2007 17,792,017 861,726 16,930,291 74.71% 730.16 2008 18,391,033 1;318,186 17,072,847 67.42% 714.70 2009 17,471,716 1,418,700 16,053,016 61.86% 670.41 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. ' Only includes debt supported by tax levy. ~ See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable Property on page 100-101 for property value data. 3 Population data can be found in the Schedule of Demographic and Economic Statistics on page 113. 107 n CITY OF ELK RIVER, MINNESOTA COMPUTATION OF DIItECT AND OVERLAPPING DEBT DECEMBER 31, 2009 Percent ' of Debt City's Outstanding Applicable Share Debt to Cityi of Debt Direct Debt: ' City of Elk River $ 49,465,611 100.00% $ 49,465,611 Overlapping Debt: ' Sherburne County 31,355,000 26.67 8,362,379 School District #728 206,836,238 35.73 73,902,588 ' Total overlapping debt 238,191,238 82,264,967 Total direct and overlapping debt $ 287,656,849 $ 131,730,578 n Debt Ratios: Ratio of debt per capita (23,945 population) Ratios of debt to estimated taxable market value of $2,429,563,505 $5,501 5.42% ' .Source: Sherburne County and School District #728 Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and business of the City of Elk River. This process recognizes that, when considering the city's ability to issue and repay ' long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. ' 'The percentage of overlapping debt applicable is estimated using taxable market property values. Applicable percentages were estimated by deterniining the portion of the county's and school ' district's taxable market value that is within the city's boundaries and dividing it by the county's and school district's total taxable market value. u ' 108 CITY OF ELK RIVER, MINNESOTA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Debt limit Bonds Reserves Total net debt applicable to limit Legal debt margin Total net debt applicable to the limit as a percentage of debt limit 2000 2001 2002 2003 $ 15,548,354 $ 17,343,802 $ 19,938,156 $ 23,100,596 612,450 559,925 10,356,650 10,307,950 328,605 199,967 717,180 837,754 283,845 359,958 9,639,470 9,470,196 $ 15,264,509 $ 16,983,844 $ 10,298,686 $ 13,630,400 1.83% 2.08% 48.35% 41.00% Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed 3 percent of the market value of taxable property. Bylaw, the general obligation debt subject to the limitation maybe offset by amounts set aside for the extinguishment of those obligations. I Only 2/3 of the $10,000,000 GO EDA Bonds, Series 2007 and the $1,775,000 GO EDA Bonds, Series 2008A are subject to the debt limit. The Remaining 1/3 will be paid by the YMCA. 109 2004 2005 2006 2007 2008 2009 $ 26,212,519 $ 30,805,499 $ 35,728,238 $ 40,258,348 $ 66,024,514 $ 67,527,057 10,060,967 10,040,201 13,124,334 17,792,017 18,391,033 17,471,716 925,148 950,793 1,003,315 861,726 1,318,186 1,418,700 9,135,819 9,089,408 12,121,019 16,930,291 17,072,847 16,OS3,016 $ 17,076,700 $ 21,716,091 $ 23,607,219 $ 23,328,057 $ 48,951,667 $ 51,474,041 34.85% 29.51% 33.93% 42.05% 25.86% 23.77% Legal Debt Margin Calculation for Fiscal Year 2009 Estimated taxable market value $ 2,250,901,900 Debt limit (3% of market value) $ 67,527,057 Debt applicable to limit: G.O. equipment certificates 20021ease revenue bonds G.O. capital improvement bonds G.O. EDA bonds' Less: Cash and investments in related debt service funds Total net debt applicable to limit Legal debt margin 421,716 6,175,000 3,025,000 7,850,000 (1,418,700) 16,053,016 $ 51,474,041 110 CITY OF ELK RIVER, MINNESOTA PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Revenue Bonds 1 Net Fiscal Gross Operating Revenue Debt Service Year Revenue ' Expenses j Available Principal Interest Coverage 2000 $ 13,579,218 $ 8,699,897 $ 4,879,321 $ 490,000 $ 395,299 5.51 2001 14,455,781 9,562,295 4,893,486 517,500 368,819 5.52 2002 15,434,083 10,904,432 4,529;651 590,000 463,726 4.30 2003 16,432,764 12,708,022 3,724,742 615,000 486,296 3.38 2004 17,656,784 13,760,051 3,896,733 2,445,000 513,878 1.32 2005 19,791,626 15,615,453 4,176,173 1,150,000 485,777 2.55 2006 21,940,299 16,970,625 4,969,674 2,405,000 573,345 1.67 2007 25,212,616 19,212,200 6,000,416 1,045,000 595,642 3.66 2008 28,380,372 22,562,437 5,817,935 1,330,000 669,406 2.91 2009 29,660,605 23,654,659 6,005,946 1,000,000 681,124 3.57 Note: Details regarding the government's outstanding debt can be found in the notes to the financial statements. 1 Includes Liquor, Sewer, Water and Electric revenue bonds ' Gross revenue excludes interest income, connection fees and miscellaneous revenues 3 Expenses exclude depreciation, interest on bonds and miscellaneous expenses 111 Special Assessment Bonds Special Assessment Debt Service Collections Principal Interest $ 1,803,081 $ 865,000 $ 607,361 1,757,048 1,320,000 488,592 1,607,767 1,085,000 370,770 1,705,463 1,185,000 321,911 1,901,427 1,060,000 297,840 1,123,407 925,000 264,999 999,232 4,475,000 198,650 231,839 395,000 64,339 611,290 345,000 192,553 421,724 510,000 168,335 Coverage 1.22 0.97 1.10 1.13 1.40 0.94 0.21 0.50 1.14 0.62 112 CITY OF ELK RIVER, MINNESOTA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Personal Fiscal Income Per Capita Year Population) (in thousands) Income2 2000 16,447 $ 420,994 $ 25,597 2001 17,380 456,677 26,276 2002 18,082 470,096 25,998 2003 18,758 489,284 26,084 2004 20,240 550,852 27,216 2005 21,548 593,906 27,562 2006 22,550 632,911 28,067 2007 23,187 684,689 29,529 2008 23,888 742,439 31,080 2009 23,945 * na na Data Sources: ~ State Demographer, * -City of Elk River estimate ' Bureau of Economic Analysis s US Census Bureau a School District 5 MN Dept. of Employment and Economic Development na -not available Median School Age3 Enrollment4 32 10,002 32 10,587 32 11,100 32 11,257 32 11,749 32 12,259 32 12,735 32 13,058 33 13,031 33 13,073 Unemployment Rates 3.2% 3.9% 5.1% 5.8% 5.0% 4.7% 4.4% 5.6% 8.2% 9.0% 113 CITY OF ELK RIVER, MINNESOTA PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2009 2000 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Independent School District 728 1,544 1 14.96% 1,106 1 12.48% Sherburne County 632 2 6.12% 461 2 5.20% Walmart 435 3 4.21% - - - Guardian Angels of Elk River 315 4 3.05% 345 3 3.89% City of Elk River 200 5 1.94% - - - Great River Energy 193 6 1.87% 311 4 3.51% Tescom Corporation 153 7 1.48% 292 5 3.29% Menards 141 8 1.37% 195 8 2.20% Coborn's Foods 134 9 1.30% 163 10 1.84% Cub Foods 120 10 1.16% 200 7 2.26% Target - - - 250 6 2.82% Alltool Manufacturing - - - 171 9 1.93% Source: Minnesota Department of Employment and Economic Development 114 CITY OF ELK RIVER, MINNESOTA FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION LAST TEN I+ISCAL YEARS Function 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 General govermnent I5.0 15.0 18.5 16.5 21.5 25.0 25.0 24.3 23.8 23.3 Public safety Police Officers 26.0 26.0 26.0 27.0 28.0 29.0 29.0 30.0 31.0 31.0 Civilians 7.0 7.0 7.0 7.0 8.0 8.0 9.0 9.0 9.0 8.0 Fire Fire administration 2.0 2.0 2.0 2.0 2.0 3.0 3.0 3.5 3.5 3.5 Paid on-call volunteers 34.0 .34.0 35.0 35.0 35.0 38.0 39.0 39.0 39.0 39.0 Building 8.0 9.0 9.0 9.0 10.0 9.5 9.5 9.5 8.5 5.6 Environmental 1.0 2.0 2.0 2.0 2.0 2.0 Public works 14.0 15.5 16.5 16.5 12.5 ~ 13.5 13.5 I5.0 I5.0 13. I Culture and recreation 5.5 5.5 9.0 9.3 13.8 ~ 16.8 20.8 20.8 21.4 20.9 Economic development 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Municipal liquor 7.7 7.7 8.0 8.0 8.0 8.0 I1.5 11.0 11.5 12.0 Sewer 4.0 4.0 4.0 4.0 4.0 5.0 5.0 6.0 6.0 6.0 Water 3.0 3.0 3.0 4.0 5.0 5.0 5.0 6.0 5.0 5.0 Electric 22.0 24.0 26.0 26.0 29.0 29.0 29.0 30.0 29.0 28.5 Total 150.2 154.7 166.0 166.3 179.8 193.8 203.3 208.1 206.7 199.9 Source: City of Elk River Finance Deparhnent ~ The Streets/Parks department was split in 2004 to the Street Maintenance and Park Maintenance departments. CITY OF ELK RIVEK, MINNESO'CA OPERATING INDICATORS BY FUNCTION LAST'CEN FISCAL YEARS Function Planning Land use applications Police Police calls Arrests Fire Fire calls Building/enviromnental Permits issued Valuation of permits (thousands of dollars) Public works ~ Street sweeping (hours) ~ Snowplowing (hours) Equipment repair (hours) Culture and recreation Recreation participants Ice arena usage (hours) Golf rounds Sewer Average daily treatfnent flow (thousands of gallons) Water Number of customers Average daily consumption (thousands of gallons) Electric Number of customers Average daily consumption (thousands of KWh's) Sources: Various city departments Note: The golf course was purchased in 2006. Fiscal Year !OOU 2001 2002 2003 2004 2005 2006 2007 2008 2009 132 131 141 123 147 142 104 85 88 64 20,055 17,440 18,349 18,250 18,129 19,431 18,494 19,277 21,997 22,231 1,155 1,075 1,035 888 916 990 955 682 969 940 384 347 406 426 450 486 451 436 453 364 2,710 2,867 2,667 4,476 4,068 3,845 4,388 2,382 2,021 1,369 72,064 $91,222 $58,893 $97,101 $120,729 $147,413 $ 95,844 $ 67,309 $ 41,006 $ 14,265 $ 1,168 1,611 1,008 2,776 3,474 2,560 3,768 3,168 4,932 8,390 9,106 8,164 3,390 3,965 4,162 834 947 1,041 2,830 3,009 3,207 1,583 1,864 1,758 6,371 6,799 7,002 347 379 410 1,096 1,312 1,144 1,192 627 1,085 1,287 2,808 2,610 2,640 1,648 4,380 2,737 2,305 5,448 5,600 5,700 5,660 6,440 5,038 6,482 7,557 10,232 10,537 10,633 14,104 2Q631 29,124 3,683 3,784 4,187 4,266 4,193 4,386 4,684 10,000 10,971 l 1,533 11,079 1,082 1,114 1,180 1,163 1,190 1,230 1,300 3,513 3,824 4,074 4,317 4,413 4,508 4,467 1,936 1,784 1,934 2,226 2,394 1,992 1,941 7,376 7,907 8,306 8,562 8,945 9,203 9,(70 443 454 500 534 579 614 638 CITY OF ELK RIVER, MINNESOTA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS Fiscal Year Function Public safety Police: Stations Patrol units Fire Stations Public works Streets (miles) Culture and recreation ~ Parks Parks acreage Sewer Sanitary sewers (miles) Lift stations Maximum daily treatment capacity (thousands of gallons) Water Maximum daily capacity (thousands of gallons) Electric Generatnlg facilities 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1 1 1 1 1 1 1 1 1 1 10 10 10 10 10 11 11 11 12 12 1 1 1 2 2 2 2 2 2 2 100 126 131 138 145 150 151 I51 151 151 30 31 37 39 40 40 44 44 44 44 740 769 847 872 883 898 927 964 964 964 49 53 61 (i3 67 70 73 75 78 80 16 16 19 19 19 20 21 21 21 21 1,600 1,600 1,600 1,600 1,600 2,200 2,200 2,200 2,200 2,200 6,696 6,696 6,69(1 6,696 6,696 6,900 8,100 8,100 8,100 8,100 4 4 5 5 5 5 (i 6 6 6 Sources: Various city departments Note: No capital asset indicators are available for the general government function. ~ ~ ~ ~ ~ ~ r r ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ D ^ CITY OF ELK RIVER ELK RIVER, MINNESOTA MANAGEMENT LETTER YEAR ENDED DECEMBER 31, 2009 ., II J~ ii ABDO EICK & 011 ~~ ~ ~~1 W LLP Certified Public Accountants & Consultants I~ ' ~ i ..~~~ ~ w~;. ~~~1~ ~ ~ ~ ~~ ~ ~VJ~~.1 L11,J t.t.i~ Gi~rtijied Yulilic ~rcoittitalrts K• Go~sultsxnts May 13, 2010 0~?1~] Gden Av~•ou~~ ' ~~iil{r 30 Management, Honorable Mayor and Council City of Elk River, Minnesota ' We have audited the fmancial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City) for the year ended December 31, 2009 and have issued our report thereon dated May 13, 2010. Professional standards require that we provide you with the following information related to our audit. ' Our Responsibility Under Auditing Standards Generally Accepted in the United States of America and OMB Circular A-133 ' As stated in our engagement letter, our responsibility, as described by professional standards, is to express opinions about whether the fmancial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not ' relieve you or management of your responsibilities. In planning and performing our audit, we considered the City's internal control over fmancial reporting as a basis for designing ' our auditing procedures for the purpose of expressing our opinions on the fmancial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over fmancial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over fmancial 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 fmancial statements will not be prevented, or detected and corrected on a timely basis. t Our consideration of internal control over fmancial 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 fmancial reporting that might be deficiencies, ' significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over fmancial reporting that we consider to be material weaknesses, as defined above. C 902.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 2 Compliance We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to fmancial 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. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program 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. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the fmancial reporting process. However, we are not required to design procedures specifically to identify such matters. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the fmancial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the fmancial statements in the proper period. Accounting estimates are an integral part of the fmancial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the fmancial statements and because of the possibility that future events affecting them may differ significantly from those expected. Significant estimates affecting the fmancial statements include depreciation on capital assets as well as the liability for the City's Other Post Employment Benefits (OPEB). Management's estimate of depreciation is based on estimated useful lives of the assets. Management's estimate of its OPEB liability is based on several factors including, but not limited to, anticipated retirement age for active employees, life expectancy, turnover, and healthcare cost trend rate. We evaluated the key factors and assumptions used to develop depreciation and the OPEB liability in determining that it is reasonable in relation to the fmancial statements taken as a whole. The disclosures in the fmancial statements are neutral, consistent, and clear. Certain fmancial statement disclosures are particularly sensitive because of their significance to fmancial statement users. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 3 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. We proposed two journal entries that we consider to be audit entries or corrections of management decisions. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representations letter dated May 13, 2010. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that maybe expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. 9:12.835.9090 Fax 952.835.3261 www.aemcpas.com n i~ u u C C 0 n L r Financial Position and Results of Operations City of Elk River May 13, 2010 Page 4 Our principal observations and recommendations are summarized on the following pages. These recommendations resulted from our observations made in connection with our audit of the City's financial statements for the year ended December 31, 2009. General Fund The General fund is used to account for resources traditionally associated with government, which are not required legally or by sound principal management to be accounted for in another fund. The General fund balance increased $508,913 from 2008. The fund balance of $5,699,575 is 47.3 percent of the 2010 budgeted expenditures. We recommend the fund balance be maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of approximately 40 to 50 percent of planned expenditures and transfers out is adequate to meet working capital and small emergency needs. The Office of the State Auditor (the OSA) has issued a Statement of Position relating to fund balance stating "a local government should identify fund balance separately between reserved and unreserved fund balance. The local government may assign and report some or all of the fund balance as designated and undesignated." We recommend local governments adopt a formal policy on the level of unreserved fund balance that should be maintained in the general and special revenue funds. This helps address citizen concerns as to the use of fund balance and tax levels. The purposes and benefits of a General fund balance are as follows: • Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not received until the second half of the year. An adequate fund balance will provide the cash flow required to fmance the General fund expenditures until these revenue sources are received. The City is vulnerable to legislative actions at the State and Federal level. The State continually adjusts the local government aid and property tax credit formulas. We also have seen the State mandate levy limits for cities over 2,500 in population. The State of Minnesota has proposed unallotments calculated as a percent of the total pay 2009 revenue base. For cities, the revenue base is equal to the certified levy plus certified local government aid (LGA) plus taconite aid. Cities with populations under 1,000 are exempt if their adjusted net tax capacity per capita is below the statewide average. The proposed unallotments for cities has been limited to $22 per capita in pay 2009 and $55 per capita in pay 2010. The proposed unallotment percentages for 2010 are equal to 7.644 percent of the 2009 revenue base for cities. An adequate fund balance will provide a temporary buffer against those aid adjustments and levy limits. Expenditures not anticipated at the time the annual budget was adopted may need immediate Council action. These would include capital outlay replacement, lawsuits and other items. An adequate fund balance will provide the fmancing needed for such expenditures. • A strong fund balance will assist the City in obtaining, maintaining or improving its bond rating. The result will be better interest rates in future bond sales. ' 952.835.9090 Fax 952.835.3261 www.aemepas.com A table summarizing the General fund balance in relation to the following years' budget follows: Fund General Balance Budget Fund Year December 31 Year Budget 2004 $ 3,967,380 2005 $ 9,366,600 2005 4,601,381 2006 10,596,550 2006 4,816,386 2007 11,648,000 2007 5,352,004 2008 12,572,000 2008 5,190,662 2009 11,975,550 2009 5,699,575 2010 12,044,800 Fund Balance as a Percent of Next Year's Budget $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- 2004 2005 2006 2007 2008 2009 -~-Actual Fund Balances --~-Budget The 2009 and prior budgets are the fmal amended budgets. The 2010 budget is the adopted original budget. City of Elk River May 13, 2010 Page 5 Percent of Fund Balance to Budget 42.4 43.4 41.3 42.6 43.3 47.3 $12,572,000 $11,648,000 $11,975,550 $12,044,800 $10,596,550 $9,366,600 47.3% 42.6% 43.3% 43.4% 41.3% 42.4°io 2010 I' 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 6 The 2009 operations are summarized as follows: Revenues Expenditures Excess of revenues over expenditures Other fmancing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Variance with Final Final Budget - Budgeted Actual Positive Amounts Amounts (Negative) $ 11,745,500 $ 11,321,409 $ (424,091) 11,596,250 11,019,492 576,758 149,250 301,917 152,667 590,100 590,100 - (379,300) (383,104) (3,804) 210,800 206,996 (3,804) 360,050 508,913 148,863 Fund balances, January 1 5,190,662 5,190,662 - Fund balances, December 31 $ 5,550,712 $ 5,699,575 $ 148,863 The City amended the General fund budget during the year. The amendment resulted in a decrease of revenues ($300,500), a decrease of expenditures ($521,150) and a decrease in transfers out $139,400. The fmal budget called for an increase of $360,050 of fund balance reserves. Actual change in fund balance was an increase of $508,913. Some of the line items with significant variances from the fmal budget are highlighted below: • The City received $143,535 less than anticipated from property taxes. • The current general government deparhnent expenditures were $231,311 under budget. • The current public safety department expenditures were $206,672 under budget. I' 9;12.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 7 A comparison between 2007, 2008 and 2009 revenues and transfers is presented below: Source General property taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Interest Miscellaneous Transfers in Total revenues and transfers Percent of 2007 2008 2009 't'otal $ 7,900,185 $ 8,751,019 $ 9,229,859 77.4 987,708 460,108 322,338 2.7 1,369,707 897,492 922,988 7.7 749,698 692,374 537,674 4.5 148,904 129, 504 127,642 1.1 234,780 172,239 90,730 0.8 83,932 136,194 90,178 0.8 441,803 463,500 590,100 5.0 $ 11,916,717 $ 11,702,430 $ 11,911,509 100.0 A graphical presentation of 2007, 2008, and 2009 revenues and transfers follows: $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- Per Capita $ 385 13 39 22 5 4 4 $ 497 2007 2008 2009 -~- General property taxes ~- Intergovernmental Charges for services -1"E-C+ther 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 8 A comparison between 2007, 2008 and 2009 expenditures and transfers is presented below: Percent of Per Program 2007 2008 2009 Total Capita General government $ 2,377,897 $ 2,372,748 $ 2,379,939 20.7 % $ 99 Public safety 5,084,372 5,511,829 5,174,528 45.5 216 Public works 1,750,821 1,800,494 1,743,227 15.3 73 Culture and recreation 1,496,202 1,640,489 1,616,712 14.2 68 Capital outlay 401,278 218,083 105,086 0.9 4 Transfers out 270,529 320,129 383,104 3.4 16 Total expenditures and transfers $ 11,381,099 $ 11,863,772 $ 11,402,596 100.0 % $ 476 A graphical presentation of 2007, 2008 and 2009 expenditures and transfers follows: $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- 2007 2008 2009 ~- General govemment t Public safety Public works •-~~Other 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 9 Special Revenue Funds A summary of the special revenue fund balances (deficits) is shown below: Fund Balances (Deficits) December 31, Increase Fund 2009 2008 (Decrease) $ 409,323 $ 409,084 39,417 34,686 9,817 8,980 (684,938) (487,565) 1,186,885 1,359,122 677,640 664,820 902,266 803,829 662,494 644,676 445,545 433,719 1,324,205 1,369,328 553,414 578,455 2,627,408 2,278,057 - 14,490 141,024 138,356 643,251 531,160 1,575,885 1,788,215 1,167,563 1,001,549 214,340 213,694 239 4,731 Nonmaj or Library Ice Arena Pinewood Golf Course Senior Citizen Account Park Dedication Landfill Landfill Construction Debris Revolving Loan DTED Grant/Loan Development Fund Capital Outlay Reserve Emergency/Insurance Reserve Government Buildings Reserve Drug Forfeiture Reserve Severance Pay Reserve NSP/RDF Reserve YMCA Grant Economic Development Authority EDA DTED Loan Total 837 (197,373) (172,237) 12,820 98,437 17,818 11,826 (45,123) (25,041) 349,351 (14,490) 2,668 112,091 (212,330) 166,014 646 $ 11,895,539 $ 11,784,655 $ 110,884 Following are the main reasons for some of the change in ending fund balances: • Consistent with 2008, the Park Dedication fund decreased mainly due to contract for deed payments and deferred park dedication credits. The City will eliminate this deficit fund balance with future park dedication revenues. • The Government Building Reserve fund increased mainly due to host fees. • The YMCA Grant fund decreased as a result of transfers out to pay the YMCA debt service. I' 92.835.9090 Fax 962.835.3261 www.aemcpas.com ' , ~ ~ City of Elk River May 13, 2010 ~ Page 10 ~tJ t• ' Debt Service Funds t Debt service funds are a type of governmental fund to account for the accumulation of resources for the payment of interest and principal on debt (other than enterprise fund debt). Debt service funds may have one or a combination of the following revenue sources pledged to retire debt as follows: • Propert_ ty axes -Primarily for general City benefit projects such as parks and municipal buildings. Property taxes may also be used to fund special assessment bonds which are not fully assessed. ' Tax increments -Pledged exclusively for tax increment/economic development districts. ' Capitalized interest portion of bond proceeds -After the sale of bonds, the project may not produce revenue (tax increments or special assessments) for a period of one to two years. Bonds are issued with this timing difference considered in the form of capitalized interest. ' • Special assessments -Charges to benefited properties for various improvements. In addition to the above pledged assets, other funding sources maybe received by Debt Service funds as follows: ' Residual project proceeds from the related capital projects fund • Investment earnings • State or federal grants • Transfers from other funds r D i~ i~ r i~ i~ i~ ' 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 11 All debt service funds with the total assets and debt remaining to be paid are shown below: Cash and Temporary Total Bonds Debt Service Fund Investments Assets Outstanding Improvement Bonds $ 952,307 $ 2,398,395 2003A G.O. Improvement Bonds $ 425,000 2005A G.O. Improvement Bonds 765,000 2007C G.O. Improvement Bonds 2,780,000 State-Aid Road Bonds 1,877,757 Government Building Bonds 633,590 752,365 2002A Public Safety Building Lease Revenue Bonds 6,175,000 1996C G.O. Ice Arena Bonds 700,000 2006C G.O. Capital Improvement Bonds 3,025,000 Equipment Certificates 342,750 370,070 2005D G.O. Equipment Certificates 146,750 2006B G.O. Equipment Certificates 174,800 2007B G.O. Equipment Certificates 100,166 TIF Bonds - - 2000A G.O. Tax Increment Bonds 440,000 YMCA Bonds 442,360 459,256 2007D EDA G.O. Bonds 10,000,000 2008A EDA G.O. Bonds 1,775,000 Total Debt Service Funds $ 2,371,007 $ 3,980,086 $ 28,384,473 A summary ofnon-enterprise fund bonds outstanding relative to market value and population follows: Bonds Final Maturity 02/01 / 14 02/01/16 02/01 / 18 08/20/13 02/01 /23 12/01/13 02/01/27 02/01/10 02/01 / 11 02/01/10 02/01/15 02/01/33 02/01/15 Taxable Payable in Less Ratio of Market Debt Service Amount Net Debt Fiscal Population Value Funds Available Net to Market Net Debt Year (1) (2) (3) (4) Debt Value per Capita 2009 23,945 $2,250,901,900 $ 28,384,473 $ 2,484,203 $ 25,900,270 1.2 % $ 1,082 2008 23,888 2,200,817,140 29,278,979 2,792,614 26,486,365 1.2 1,109 2007 23,187 2,012,917,400 28,740,350 2,212,639 26,527,711 1.3 1,144 2006 22,550 1,786,411,900 13,786,834 2,262,414 11,524,420 0.6 511 2005 21 548 1 540 274 950 19 977 701 6 595 667 13 382 034 0.9 621 (1) Provided by City (2) Provided by County (3) Bonds reported in Debt Service funds (4) Available fund balance in the Debt Service funds 952.835.9090 Fax 952.835.3261 www.aemcpas.com ' ~ ~ ~ City of Elk River May 13, 2010 ~ Page 12 1 ~i~ C• Capital Projects Funds The fund balances of all capital projects funds are summarized below: Capital Projects Fund Major Street Improvement Improvement Projects Total major Fund Balances December 31, Increase 2009 2008 (Decrease) $ 5,220,214 $ 4,976,353 $ 243,861 4,120,068 3,837,325 282,743 9,340,282 8,813,678 526,604 Nonmaj or Equipment Replacement 1,060,387 1,010,697 49,690 Park Improvements 109,110 61,943 47,167 Tax Increment Financing Districts (408,713) (312,050) (96,663) YMCA - 127,647 (127,647) Total nonmajor 760,784 888,237 (127,453) Total $ 10,101,066 $ 9701,915 $ 399,151 The City has multiple individual projects that make up the funds presented above. The City should continue to monitor each individual project. The Tax Increment Financing Districts fund has a deficit fund balance at the end of the year. Council should review planned project sources for these funds and consider whether they will be available within a sufficient timeframe to cover current activity. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 13 Enterprise Funds The activities of the Enterprise funds include the municipal liquor, garbage, sewer, water and electric. The electric and water operations, under the direction of the Utilities Commission, are included in the fmancial statements since Council has the ultimate oversight responsibility for their operations. Municipal Liquor Fund The following is a summary of operations in the Municipal Liquor fund for the past three years: 2007 2008 2009 Total Percent Total Percent Total Percent Sales $ 6,036,756 100.0 % $ 6,209,322 100.0 % $ 6,076,245 100.0 Cost of sales (4,318,304) 71.5 (4,421,064) 71.2 (4,354,597) 71.7 Gross profit 1,718,452 28.5 1,788,258 28.8 1,721,648 28.3 Operating revenues 6,332 0.1 4,335 0.1 4,727 0.1 Operating expenses (931,356) 15.4 (995,100) (16.0) (975,400) 16.1 Operating income 793,428 13.2 797,493 12.9 750,975 12.3 Nonoperating revenues 80,814 1.3 76,277 1.2 37,148 0.6 Transfers out (267,700) (4.4) (471,548) (7.6) (400,500) (6.6) Change in net assets $ 606,542 10.1 % $ 402.222 6.5 % $ 387,623 6.3 Cash and investments $ 2.977,703 $ 3,400.274 $ 3,826,409 Bonds payable $ 1,150,000 $ 1.075,000 $ 980,000 Municipal Liquor Fund Operations Summary $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- 2007 2008 2009 D Sales -»-Gross profit Operating income ~'E-Change in net assets , " Cash and investmen Sales, gross profit and operating income all decreased for the first year since 2006. Change in net assets was less than previous years as a result of the decrease of operating income and nonoperating revenues. 952.835.9090 Fax 952.835.3261 www.aemcpas.com ~~ City of Ells River May 13, 2010 Page 14 The Office of the State Auditor annually publishes a report analyzing the operation of municipal liquor stores in the State. The most recent year of published information is for the year ended December 31, 2008. The statewide averages for all operations are summarized below. Off Sale of Sales of Sales of Sales Sales 100.0 % 100.0 % 100.0 Cost of sales 75.3 74.9 75.2 Gross profit 24.7 25.1 24.8 Operating expenses 17.2 17.2 17.2 Operating income 7.5 7.9 7.6 Nonoperating revenue 0.5 0.8 0.3 Income before transfers 8.0 % 8.7 % 7.9 Source: Analysis of Municipal Liquor Store Operations, for the year ended December 31, 2008 Published by the Minnesota Office of the State Auditor The gross profit percent of the City remains above the state-wide average by approximately 3.5 percent. Also, the City's operating income percent is above the statewide averages. 9.12.835.9090 Fax 952.835.3261 www.aemcpas.corn City of Elk River May 13, 2010 Page 15 Garbage Fund The following is a summary of operations in the Garbage fund for the past three years: 2007 2008 2009 Total Percent Total Percent Total Percent Operating revenues $ 1,146,973 100.0 % $ 1,183,132 100.0 % $ 1,287,894 100.0 Operating expenses 1,114,133 97.1 1,166,709 98.6 1,256,177 97.5 Operating income 32,840 2.9 16,423 1.4 31,717 2.5 Nonoperating revenues 9,872 0.9 11,055 0.9 6,783 0.5 Transfers in 26,860 2.3 37,883 3.2 25,639 2.0 Change in net assets $ 69,572 6.1 % $ 65,361 5.5 % $ 64,139 5.0 Cash and investments $ 242,528 $ 308,640 $ 363,322 Garbage Fund Operations Summary $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- 2007 2008 2009 ^ Operating revenues ^ Operating expenses ~~ Operating income s Change in net assets ~' Cash and investments The expenses of this fund are mainly contracted services that are generally fixed in amount and relate to the number of users. As a result, it is not necessary to carry a large cash reserve. The current level appears adequate. Cash has increased each of the last three years. 952.837.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 16 Sewer Fund The following is a summary of operations in the Sewer fund for the past three years: 2007 2008 2009 Total Percent Total Percent Total Percent Operating revenues $ 1,454,219 100.0 % $ 1,511,165 100.0 % $ 1,504,785 100.0 Operating expenses 1,731,676 119.1 1,798,778 119.0 1,736,383 115.4 Operating loss (277,457) (19.1) (287,613) (19.0) (231,598) (15.4) Nonoperating revenues 1,248,210 85.8 491,357 32.5 129,461 8.6 Capital contributions 229,715 15.8 - - - - Transfers out (35,000) 2.4 (56,000) 3.7 (65,000) (4.3) Change in net assets $ 1,165,468 80.1 % $ 147,744 9.8 % $ (167,137) 11.1 Cash and investments $ 6,638,091 $ 3,837,262 $ 3,954,869 Bonds payable $ 1,520,000 $ 1,375,000 $ 1,225,000 Sewer Fund Operations Summary $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- $(1,000,000) 2008 2009 ^ Operating revenues ^ Operating expenses Operating loss ®Change in net assets Cash and investments 2007 The cash balance remains strong relative to operations. The nonoperating revenue is made up mainly of connection fees. These connection fees ultimately provide for current debt service and future expansion of the system. There have been operating losses for the past six years. Depreciation expense was $833,135 in 2009, which is included in the operating expenses. We recommend the City annually evaluate rates to insure revenues are covering costs. I' 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 17 Water Fund The following is a summary of operations in the Water fund for the past three years: 2007 2008 2009 Total Percent Total Percent Total Percent Operating revenues $ 2,144,622 100.0 % $ 2,139,046 100.0 % $ 2,206,429 100.0 Operating expenses 2,112,796 98.5 2,160,261 101.0 2,059,430 93.3 Operating income (loss) 31,826 1.5 (21,215) (1.0) 146,999 6.7 Nonoperating revenues (expenses) 440,752 20.6 (4,047) (0.2) (61,060) (2.8) Capital contributions 292,965 13.7 - - - - Transfers out (20,000) (0.9) (20,000) (0.9) (20,000) (0.9) Change in net assets $ 745,543 34.9 % $ (45,262) 2.1 % $ 65,939 3.0 Cash and investments $ 2,394,387 $ 1,935,458 $ 2,500,960 Bonds payable $ 5,311,250 $ 5,031,250 * $ 4,605,000 * Net of $2,575,000 advance refunding of 2001A bonds. Refer to note 3G of the fmancial statements for additional information Water Fund Operations Summary $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- $(500,000) 2008 2009 ^ Operating revenues ^ Operating expenses Operating loss ®Change in net assets Cash and investments 2007 For more information, see separately issued Elk River Municipal Utilities report. I' 952.835.9090 Fax 952.835.3261 www.aemcpas.com ' • I City of Elk River ~ May 13, 2010 ~ ~w~ ~• Page 18 Electric Fund A comparison of the past three year's Electric fund operations is as follows: 2007 2008 Total Percent Total 2009 Percent Total Percent 0 Operating revenues $ 19,895,323 100.0 % $ 22,941,903 100.0 % $ 24,227,743 100.0 /o Operating expenses 18,264,135 91.8 21,604,910 94.2 22,926,759 94.6 Operating income 1,631,188 8.2 1,336,993 5.8 1,300,984 5.4 Nonoperating revenues (expenses) 483,408 2.4 249,022 1.1 (146,352) (0.6) Transfers out (483,000) (2.4) (540,636) (2.4) (585,141) (2.4) Change in net assets $ 1,631,596 8.2 % $ 1,045,379 4.5 % $ 569,491 2.4 Cash and investments $ 3,539,677 $ 4,633,052 $ 6,091,320 Bonds payable $ 11,052,804 $ 10,555,744 $ 10,049,646 Electric Fund Operations Summary $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 2007 2008 2009 ^ Operating revenues ^ Operating expenses ~ Operating income ®Change in net assets 'Cash and investments For more information, see separately issued Ells River Municipal Utilities report. 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 19 The following table gives an indication of the sources and uses of cash for the past five years: Cash Provided ( Used) By Beginning Non-capital Capital Cash Operating Financing Financing Investing Year Balance Activities Activities Activities Activities 2009 $ 4,633,052 $ 4,001,073 $ (604,905) $ (2,027,224) $ 89,324 2008 3,539,677 4,394,357 (513,536) (2,933,272) 145,826 2007 2,041,306 4,083,884 (485,851) (2,238,249) 138,587 2006 2,016,433 3,053,162 (385,051) (2,804,163) 160,925 2005 2,361,856 3,059,049 (375,627) (3,063,265) 34,420 $ 6,091,320 4,633,052 3,539,677 2,041,306 2,016,433 'The cash provided by operating activities has remained relatively strong and was enough to keep up with the amount of capital and debt needs in 2009. The summary above highlights the significant amount of cash needed each year for the capital activities of the Utilities. The operations have been able to fmance the capital activities for most of the last five years. Ending Cash Balance I' 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 20 L i~ i~ Ratio Analysis The following captures a few ratios from the City's fmancial statements that give some additional information for trend and peer group analysis. The peer group average is derived from information available on the website of the Office of the State Auditor. Different peer group averages are used for Cities of the 2nd class (population 20,000 - 100,000). The majority of these ratios facilitate the use of economic resources focus and accrual basis of accounting at the government-wide level. A combination of liquidity (ability to pay its most immediate obligations), solvency (ability to pay its long-term obligations), funding (comparison of fmancial amounts and economic indicators to measure changes in fmancial capacity over time) and common-size (comparison of financial data with other cities regardless of size) ratios are shown below. Comparative data for the peer group is unavailable for 2009. Ratio Calculation Debt to assets Total liabilities/total assets Debt service coverage Net cash provided by operations/ enterprise fund debt payments Debt per capita Bonded debt/population Taxes per capita Tax revenues/population Current expenditures per capita Governmental fund current Capital expenditures per capita Capita] assets % left to depreciate -Governmental Capital assets % left to depreciate -Business-type Represents the City of Elk Ri Peer Group ratio expenditures/population Governmental fund capital outlay/population Net capital assets/ gross capital assets Net capital assets/ gross capital assets aer Source 2006 2007 2008 2009 Government-wide 18.0% 23.1% 22.9% 22.0% 23.8% 23.4% 23.5% N/A Enterprise funds 226.5% 433.4% 338.6% 372.4% 240.8% 247.2% 218.1% N/A Government-wide S 1,610 S 2,152 $ 2,190 $ 2,066 $ 1,389 $ 1,485 $ 1,464 N/A Government-wide S 423 $ 459 $ 514 $ 523 $ 381 $ 408 $ 430 N/A Governmental funds S 575 S 677 $ 686 $ 616 N/A S 620 $ 593 N/A Governmental funds S 476 $ 552 $ 435 $ 193 N/A $ 435 $ 304 N/A Government-wide 75.0% 74.2% 73.5% 71.1% 69.7% 68.7% 68.3% N/A Government-wide 69.9% 6Z9% 66.4% 63.8% 64.9% 64.0% 63.3% N/A I , 952.835.9090 Fax 952.835.3261 www.aemcpas.com ' , ~ ~ City of Elk River May 13, 2010 ~ Page 21 ~tJ t~ Debt-to-Assets Leverage Ratio (Solvency Ratio) The debt-to-assets leverage ratio is a comparison of a city's total liabilities to its total assets or the percentage of total assets that are provided by creditors. It indicates the degree to which the City's assets are fmanced through borrowings and other long-term obligations (i.e. a ratio of 50 percent would indicate half of the assets are fmancing with outstanding debt). Debt Service Coverage Ratio (Solvency Ratio) The debt coverage ratio is a comparison of cash generated by operations to total debt service payments (principal and interest) of ' enterprise funds. This ratio indicates if there are sufficient cash flows from operations to meet debt service obligations. Except in cases where other nonoperating revenues (i.e. taxes, assessments, transfers from other funds, etc.) are used to fund debt service payments, an acceptable ratio would be above 100 percent. Bonded Debt per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total bonded debt by the population of the city and represents the amount of bonded debt obligation for each citizen of the city at the end of the year. The higher the amount, the more resources are needed in the future to retire these obligations through taxes, assessments or user fees. Taxes per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total tax revenues by the population of the city and represents the amount of taxes for each citizen of the city for the year. The higher this amount is, the more reliant the city is on taxes to fund its operations. Current Expenditures per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total current governmental expenditures by the population of the City and represents the amount of governmental expenditures for each citizen of the City during the year. Since this is generally based on ongoing expenditures, we would expect consistent annual per capita results. Capital Expenditures per Capita (Funding Ratio) This dollar amount is arrived at by dividing the total governmental capital outlay expenditures by the population of the City and represents the amount of capital expenditures for each citizen of the City during the year. Since projects are not always recurring, the per capita amount will fluctuate from year to year. Capital Assets Percentage (Common-size Ratio) This percentage represents the percent of governmental or business-type capital assets that are left to be depreciated. The lower this percentage, the older the city's capital assets are and may need major repairs or replacements in the near future. A higher percentage may indicate newer assets being constructed or purchased and may coincide with higher debt ratios or bonded debt per capita. I' 952.835.9090 Fax 952.835.3261 www.aemcpas.com ' , ~ ~ City of Elk River May 13, 2010 ~ Page 22 ~ ~~~ ~• ' Future Accounting Standard Changes ' GASB Statement No. 51 -Accounting and Financial Reporting for Intangible Assets This statement was issued in June 2007 and is effective for periods beginning after June 15, 2009. ' The new standard characterizes an intangible asset as an asset that lacks physical substance, is nonfmancial in nature, and has an initial useful life extending beyond a single reporting period. Examples of intangible assets include easements, computer software, water rights, timber rights, patents, and trademarks. ' This statement requires that intangible assets be classified as capital assets (except for those explicitly excluded from the scope of the new standard, such as capital leases). Relevant authoritative guidance for capital assets should be applied to these intangible assets. The statement provides additional guidance that specifically addresses the unique nature of intangible ~'~i ~ assets, including: • Requiring that an intangible asset be recognized in the statement of net assets only if it is considered identifiable • Establishing aspecified-conditions approach to recognizing intangible assets that are internally generated (for example, patents and copyrights) ' • Providing guidance on recognizing internally generated computer software • Establishing specific guidance for the amortization of intangible assets. ' GASB Statement No. 54 -Fund Balance ' This statement was issued in March of 2009 and is effective for periods beginning after June 15, 2010. This new standard is intended to improve the usefulness of information provided to fmancial report users about fund balance by providing clearer, more structured fund balance classifications, and clarifying the defmitions of existing governmental ' fund types. GASB No. 54 distinguishes fund balance between amounts that are considered non-spendable, such as fund balance associated with inventories, and other amounts that are classified based on the relative strength of the constraints that control ' the purposes for which specific amounts can be spent. The following classifications and defmitions will be used: • Restricted -amounts constrained by external parties, constitutional provision, or enabling legislation ' Committed -amounts constrained by a government using its highest level ofdecision-making authority • Assigned - amounts a government intends to use for a particular purpose • Unassigned -amounts that are not constrained at all will be reported in the general fund. In addition to the classifications of fund balance, the standard clarified the defmitions of individual governmental fund types, for example, special revenue funds, debt service funds, and capital project funds. ' 952.835.9090 Fax 952.835.3261 www.aemcpas.com City of Elk River May 13, 2010 Page 23 ,~ * * ~ ~ This report is intended solely for the information and use of Council, management, and the Minnesota Office of the State Auditor and is not intended and should not be used by anyone other than those specified parties. Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting records and related data. The comments and recommendations in the report are purely constructive in nature, and should be read in this context. If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your convenience. We wish to thank you for the continued opportunity to be of service and for the courtesy and cooperation extended to us by your staff. ' May 13, 2010 Minneapolis, Minnesota ~~,}rllw~~lL~ ABDO, EICK & MEYERS, LLP Certified Public Accountants I' 92.835.9090 Fax 952.83.3261 www.aemcpas.com ® CITY OF ELK RIVER ELK RIVER, MINNESOTA FEDERAL FINANCIAL AWARD PROGRAMS AND OTHER REPORTS YEAR ENDED DECEMBER 31, 2009 /1 i , ,gBpp f •/ _ .. EICK & r ~ ~ ~, ~ 1VLL~ 1 Jul l,J LLP ~ ~~~ti.~~d Public ~1crr>un(~anf.e ~ ('emslrlfrrr~ts t CITY OF ELK RIVER, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2009 Page No. I. FEDERAL FINANCIAL AWARD PROGRAMS Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 1 - 2 Schedule of Expenditures of Federal Awards 3 Notes to Schedule of Expenditures of Federal Awards 4 Schedule of Findings and Questioned Costs 5 II. OTHER REPORTS Report on Minnesota Legal Compliance 6 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 ~ - 8 FEDERAL FINANCIAL ' AWARD PROGRAMS CITY OF ELK RIVER ' ELK RIVER, MINNESOTA YEAR ENDED ' DECEMBER 31, 2009 ABDO E[CK & Certified l~xbi#~ ~~ou~~tunts & Ccrosultants 5201 Eiden i1F~enne Sidte 370 E:<lina, i411~ x5#36 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Honorable Mayor and Council City of Elk River, Minnesota Compliance We have audited the compliance of the City of Elk River, Minnesota (the City), with the types of compliance requirements described in the U.S. Oj~ce of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2009. The City's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs 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 fmancial 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. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program 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 each of its major federal programs for the year ended December 31, 2009. J -1- ' 9~i2.83~.~3{190 Fax 9i3.83;i.3~61 w~+~w.~e,ne~as.~zrm Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. 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 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, 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 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 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. We have audited the fmancial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City, as of and for the year ended December 31, 2009, and have issued our report thereon dated May 13, 2010. Our audit was performed for the purpose of forming our opinions of the fmancial statements that collectively comprise the City's basic fmancial statements. The accompanying Schedule of Federal Awards is presented for purpose of additional analysis as required by OMB Circular A-133 and is not a required part of the basic fmancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic fmancial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic fmancial statements taken as a whole. This report is intended solely for the information and use of the Council, management, others within the City, the Minnesota Office of the State Auditor, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ~~,'~tlV~,e~l(,~P May 13, 2010 Minneapolis, Minnesota -2- ABDO, SICK & MEYERS, LLP Certified Public Accountants I' 952.835.9{190 Fax 952.&35.3261 w~nv.aemcpas.cottt CITY OF ELK RIVER, MINNESOTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2009 Federal Domestic Assistance Program Funding Source/Program Name Number Pass-Through Agency/Grant Number Expenditures U.S. Department of Transportation Minimum Penalties for Repeat Offenders for Driving While Intoxicated U.S. Department of Transportation Highway Planning and Construction U.S. Department of Transportation Alcohol Impaired Driving Countermeasures Incentive Grants U.S. Department of Homeland Security Assistance to Firefighters Grant U.S. Department of Housing and Urban Development Community Development Block Grant/ State Program U.S. Department of Justice Enforcing Underage Drinking Laws Program U.S. Department of Transportation State and Community Highway Safety Total Office of Traffic Safety 20.608 9200-2637/9200-2637F MN Dept. of Transportation 20.205 84231/93359 MN State Patrol 20.601 50000006114 97.044 Not applicable -direct Minnesota Housing Finance Agency 14.228 B-08-DN-27-00001 Alcohol & Gambling Enforcement 16.727 9100-1063 Office of Traffic Safety 20.600 9200-2637/9200-2637F -3- $ 32,255 1,163,765 13,325 112,500 135,159 1,440 19,982 $ 1,478,426 CITY OF ELK RIVER, MINNESOTA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER 31, 2009 1. General The accompanying Schedule of Expenditures of Federal Awards presents the activity of major federal award programs of the City of Elk River, Minnesota (the City). The City's reporting entity is defined in Note lA to the City's fmancial statements. All federal fmancial assistance received directly from federal agencies as well as federal fmancial assistance passed through other government agencies is included on the schedule. 2. Basis of Accountins The accompanying Schedule of Expenditures of Federal Awards is presented using the modified accrual basis of accounting, which is described below. Under 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 revenue 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. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. -4- CITY OF ELK RIVER, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS DECEMBER 31, 2009 A. Summary of Auditors Results Financial Statements 1. The auditor's report expresses an unqualified opinion on the fmancial statements of the City. 2. No significant deficiencies were disclosed in the audit of the fmancial statements. 3. There were no instances ofnon-compliance material to the fmancial statements. Federal Awards 1. The auditor's report on compliance for major federal award programs for the City expresses an unqualified opinion on all major federal award programs. 2. There are no audit fmdings to be reported under Section 510(a) of OMB Circular A-133. 3. The programs tested as major programs include: CFDA Highway Planning and Construction 20.205 4. The threshold for distinguishing between types A and B programs was $300,000. 5. The City was determined not to be a low-risk auditee, under section 530 of Circular A-133 and therefore, the auditors have not reduced the extent of substantive tests. B. Findings Related to the Financial Statements None. C. Findings and Questioned Costs -Major Federal Awards Program None. -5- OTHER REPORTS CITY OF ELK RIVER ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2009 J 1 a r u n u u C' r 0 ~ • '.~D~J w, ;~~~ ~~ nr ~ 1 ~~ _ ~~L~~~~ LLP ~xrtif~e~l hulilir Acx~otttzturts c4 Cc~nsult«nt~, 5201 Eden r'leenue ~s~~te era E~~nt~.4t~ 5~~3fa REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and Council City of Elk River, Minnesota We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City), as of and for the year ended December 31, 2009 which collectively comprise the City's basic financial statements as listed in the table of contents and have issued our report thereon dated May 13, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the State Auditor pursuant to Minnesota statute 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, tax increment financing, and miscellaneous provisions. Our study included all of the listed categories. ' The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable legal provisions. ' This report is intended solely for the information and use of the Council, management and the Minnesota Office of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. L ' May 13, 2010 Minneapolis, Minnesota ~~' C 0 J -6- 952.835.9090 Fix 952.835 3261 w~vw.aemepus.cam QU~~uh,~m~ro~1.~~P ABDO, SICK & MEYERS, LLP Certified Public Accountants I n L r C n 7 ~' 'ABD(J ~~ ; EI~~ ~ ~# _ ~~~~ lz.~~ Cert~i~n' l~zblic Accozzntants ~: Cansultaazts 5241 Cden avenue Suite 3~ 0 Edina, h1N SS~.~~ 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 Council City of Elk River, Minnesota We have audited the fmancial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota (the City), as of and for the year ended December 31, 2009, which collectively comprise the City's basic fmancial statements and have issued our report thereon dated May 13, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fmancial 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 fmancial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the fmancial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over fmancial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over fmancial 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 fmancial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over fmancial 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 fmancial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over fmancial reporting that we consider to be material weaknesses, as defined above. L ' 9a2.$3a.~fl~3p ut 952.$;5.3261 fvw~.tt~mc~a~.com -7- Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the City, in a separate letter dated May 13, 2010. This report is intended solely for the information and use of the Council, management, others within the City, the Minnesota Office of the State Auditor, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. ~,~mQ,~,,~,u~ May 13, 2010 Minneapolis, Minnesota ABDO, EICK & MEYERS, LLP Certified Public Accountants -8- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA FINANCIAL STATEMENTS AND REQUIRED SUPPLEMENTARY INFORMATION YEARS ENDED DECEMBER 31, 2009 AND 2008 THIS PAGE IS LEFT BLANK INTENTIONALLY ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA TABLE OF CONTENTS DECEMBER 31, 2009 Pa eg_No_ INTRODUCTORY SECTION Organization 5 FINANCIAL SECTION Independent Auditor's Report 9 Management's Discussion and Analysis (Unaudited) 11 Basic Financial Statements Governmental Fund General Fund Balance Sheets 18 Statements of Revenues, Expenditures and Changes in Fund Balances 19 Fiduciary Funds Special Pension Trust Fund Statements of Fiduciary Net Assets 20 Statements of Changes in Fiduciary Net Assets 21 Notes to Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress 33 Schedule of Employer Contribution 33 Notes to Required Supplementary Information 33 COMPLIANCE SECTION Report on Minnesota Legal Compliance 37 -1- 11 u r THIS PAGE IS LEFT BLANK ' INTENTIONALLY ' n n ii i i r u ii 7 J r 0 1 INTRODUCTORY SECTION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEARS ENDED DECEMBER 31, 2009 AND 2008 -3- L THIS PAGE IS LEFT BLANK INTENTIONALLY -4- f r u n r 7 J n r ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA ORGANIZATION DECEMBER 31, 2009 Board of Trustees Name Title Scott Schmitt Chad Peterson Robert Pearson Rich Niemela Rich Czech Keith Thorson President Vice President Secretary Treasurer Trustee Trustee Ex-Officio Trustees Name Title Stephanie Klinzing Tim Simon T. John Cunningham Mayor Finance Director Fire Chief -5- n J l THIS PAGE IS LEFT BLANK ' INTENTIONALLY ' u fl n L L 1 ,. ~ L r C L ' FINANCIAL SECTION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ' ELK RIVER, MINNESOTA YEARS ENDED t DECEMBER 31, 2009 AND 2008 i ~i L ii n 7 ~ ,. 11 ii n THIS PAGE IS LEFT BLANK ' INTENTIONALLY ' n L i i .. ~ C i_ u ~' ' A1~0 1 ~~ _ ~.vl~~~~ LLB Certified i"ublic rlccountarrtz & C~asrrlizrnts 52b1 Lden lvenue ~UISY 3r8 F,+~lina, ~1~ 5.`x136 INDEPENDENT AUDITOR' S REPORT Board of Trustees Elk River Fire Relief Association Elk River, Minnesota We have audited the accompanying financial statements of the governmental and fiduciary activities of the Elk River Fire Relief Association (the Association) as of and for the years December 31, 2009 and 2008, which collectively comprise the Association's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on the financial statements based on our audits. ' We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion. ' In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental and fiduciary activities of the Association as of December 31, 2009 and 2008, and the results of its operations for the years then ended in conformity with accounting principles generally accepted in the United States of America. ~~! The Management's Discussion and Analysis on pages 11 through 15 is not a required part of the basic financial statements but is 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 supplementary information. However we did not audit the information and express no opinion on it. Our audits were conducted for the purpose of forming opinions on the financial statements that comprise the Association's basic financial statements. The introductory section is presented for purposes of additional analysis and is not a required part of the financial statements. The supplementary information listed in the table of contents is presented for the purposes of additional analysis but is a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. ' Apri129, 2010 Minneapolis, Minnesota ' 952.835.9fl9o Fax 952.835.3261 www.aemcpus.corn -9- QUA [~.'u7c,'~tmo~bl l(,~ ABDO, EICK & MEYERS, LLP Certified Public Accountants ~i 0 ii ~i C THIS PAGE IS LEFT BLANK ' INTENTIONALLY ' fl n -io- ' i~ C! L Management's Discussion and Analysis (Unaudited) The discussion and analysis of the Elk River Fire Relief Association's (the Association) financial performance provides an overview of the financial activities and funding conditions for the fiscal years ended December 31, 2009 and 2008. ' Using the Annual Report The financial statements, which reflect the activities of the Special Pension Trust (the Plan), are reported in the Statements of ' Fiduciary Net Assets (see page 20) and the Statements of Changes in Fiduciary Net Assets (see page 21). These statements are presented on a full accrual basis and reflect all trust activities as incurred. The financial statements also include activities of the General Fund, which is primarily used to account for the fund raising activities of the Association. Financial Highlights • The Plan's net assets increased by $528,074 (or 31 percent) as a result of the fiscal year's activities. • The contributions from the State decreased $16,975. ' • The average rate of return increased from (33.08) to 22.47 percent. • Pension payments decreased $149,316 due to two retirements in 2008 and one in 2009. ' • The General Fund balance decreased $4,984 to $214. Plan Highlights The Plan's investment income was higher than last year and contributions from the State decreased and the City remained consistent. The Plan's funding level increased from 70.9 percent to 87.2 percent. ' Plan Net Assets ' December 31, 2009 2008 Change Cash and cash equivalents $ 175,801 $ 74,642 $ 101,159 ' Investments 2,047,629 1,619,714 427,915 Receivables State of Minnesota 1,000 2,000 (1,000) ' 430 $ 1 696 356 $ 2 224 074 $ 528 Total restricted net assets , , , , , For the current fiscal year 2009 there is a net increase of $528,074 from the previous fiscal year 2008. The prev ious fiscal year ' 2008 had a net decrease of $724,386 from fiscal year 2007. [. i~ -11- Management Discussion and Analysis -Continued Apri129, 2010 ' Changes in Plan Net Assets ' The following comparative summary of the changes in net assets reflects the activities of the Plan: December 31 ' 2009 2008 Change Revenues Contributions $ 127,024 $ 143,999 $ (16,975) ' Net investment (loss) income 440,479 (680,911) 1,121,390 Total revenues 567,503 (536,912) 1,104,415 ' Expenditures 39,429 187,474 (148,045) Change in net assets 528,074 (724,386) 1,252,460 , Net assets -January 1 1,696,356 2,420,742 (724,386) ' Net assets - December 31 $ 2,224,430 $ 1,696,356 $ 528,074 The Association's funding policy provided for contributions from the State of Minnesota (the State) and the City of Elk River in ' amounts sufficient to accumulate assets to pay benefits when due. The annual contributions are the sum of the n ormal cost, the State contribution payment and the provision for administrative expenses. Plan Membership ' The following table reflects the Association's Plan membership as of the beginning and ending of the year: ' December 31, Increase 2009 2008 (Decrease) Active participants Vested ' Fully 12 10 2 Partially Non-vested (less than 5 years of service) 22 22 5 8 - (3) ' Deferred Members 4 4 - Total Membership 43 44 (1) ' ~i n 0 ~i ~i Management Discussion and Analysis -Continued Apri129, 2010 Funding Status The amount of the total accrued pension liability is based on a standardized measurement established by the Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations for financial statement presentations. This standardized measurement is based on Minnesota statute 69.772. This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members of the Association. A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief association financial statements to (a) assess the relief association's funding status on agoing-concern basis, (b) assess progress being made in accumulating sufficient assets to pay benefits when due, and (c) make comparisons among relief associations. Because the standardized measure is used only for disclosure purposes by the Association, the measurement is independent of an actuarial computation made to determine contributions to the Association. The following represents the percentage funded trend for the last six years. Year 2004 2005 2006 2007 2008 2009 Assets Liabilities $ 1,646,533 1,886,585 2,092,351 2,420,742 1,696,356 2,224,430 Prior Six Years Funding Process $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- $ 1,664,129 1,781,082 1,823,195 2,110,264 2,392,353 2,550,808 Funding Percentage 98.9 105.9 114.8 114.7 70.9 87.2 S2,392,353 $2,550,808 l 14.7°~0 8 7.2 °'o 114.8% 105.9% $1,664,129 $2,110,264 $1,781,082 $7,823,195 70.9% 989°'° 2004 2005 2006 2007 ~~Assets ^y~Liabilities 2008 2009 -13- Management Discussion and Analysis -Continued Apri129, 2010 ' Asset Allocation , The following table and graph indicates the asset allocation for December 31, 2009 and 2008. December 31, ' 2009 2008 Cash and CD's $ 175,801 7.9 % $ 74,642 4.4 % Broker money market 453 0.1 228,378 13.5 ' State Board of Investments 1,018,967 45.8 794,803 46.9 Mutual funds 1,028,209 46.2 596,533 35.2 , Total cash and investments $ 2,223,430 100.0 % $ 1,694,356 100.0 2009Asset Allocation Deposits MutualFunds 46.2% Brokermoney market .1% State Board of Investments 45.8% -14- Management Discussion and Analysis -Continued ' Apri129, 2010 ' Investment Activities Investment income is vital to the Plan's current and continued fmancial stability. Therefore, the Board of Trustees has a fiduciary responsibility to act prudently when making Plan investment decisions. Portfolio performance is reviewed quarterly by the Board of Trustees. The Association also has an active Investment Committee to broaden its attention to asset allocation and fund returns. Economic Factors ' The primary function of the pension trust is to (a) appropriately award and pay benefits and (b) manage investments. The opportunity available considering various investment choices is invaluable in the asset allocation and money manager oversight. ' Contacting the Plan's Financial Management The fmancial report is designed to provide citizens, taxpayers, plan participants and the marketplace's credit analysis with an ' overview of the Plan's fmances and the prudent exercise of the Board's oversight. If you have any questions regarding this report or need additional fmancial information, please contact the Elk River Fire Relief Association, 13065 Orono Parkway, Elk River, Minnesota 55330. -15- THIS PAGE IS LEFT BLANK INTENTIONALLY ., ~ i FINANCIAL STATEMENTS ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEARS ENDED DECEMBER 31, 2009 AND 2008 r i~ -17- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION, MINNESOTA ELK RIVER, MINNESOTA BALANCE SHEETS GOVERNMENTAL FUND DECEMBER 31, 2009 AND 2008 ASSETS Cash and cash equivalents FUND BALANCES Unreserved The notes to the fmancial statements are an integral part of this statement. General Fund 2009 2008 $ 214 $ 5.198 $ 214 $ 5,198 -18- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION, MINNESOTA ELK RIVER, MINNESOTA STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUND YEARS ENDED DECEMBER 31, 2009 AND 2008 REVENUES Donations Fundraising events Other TOTAL REVENUES EXPENDITURES Relief events Fundraising Other TOTAL EXPENDITURES NET CHANGE IN FUND BALANCES FUND BALANCES, JANUARY 1 FUND BALANCES, DECEMBER 31 The notes to the fmancial statements are an integral part of this statement. -19- General Fund 2009 2008 $ 9,500 4,570 9,497 10,539 - 88 18,997 15,197 16,039 9,351 7,662 6,000 280 1,253 23,981 16,604 (4,984) (1,407) 5,198 6,605 $ 214 $ 5,198 ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION STATEMENTS OF FIDUCIARY NET ASSETS FIDUCIARY FUND DECEMBER 31, 2009 AND 2008 ASSETS Cash and cash equivalents Investments Receivables State of Minnesota TOTAL ASSETS NET ASSETS Held in trust for pension benefits The notes to the fmancial statements are an integral part of this statement. Special Pension Trust Fund 2009 2008 $ 175,801 $ 74,642 2,047,629 1,619,714 1,000 2,000 $ 2,224,430 $ 1,696,356 $ 2,224,430 $ 1.696,356 -20- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUND YEARS ENDED DECEMBER 31, 2009 AND 2008 ADDITIONS Contributions State of Minnesota 10% supplemental reimbursement City of Elk River Interest income Net appreciation (depreciation) in investments TOTAL ADDITIONS DEDUCTIONS Pension benefits Salaries Professional fees Bond Miscellaneous TOTAL DEDUCTIONS CHANGE 1N NET ASSETS NET ASSETS, JANUARY 1 NET ASSETS, DECEMBER 31 ' The notes to the fmancial statements are an integral part of this statement. -21- Special Pension Trust Fund $ 96,024 $ 111,999 1,000 2,000 30,000 30,000 23,827 32,524 416,652 (713,435) 567,503 (536,912) 31,856 181,172 3,175 3,175 4,025 2,749 358 348 39,429 187,474 528,074 (724,386) 1,696,356 2,420,742 $ 2,224,430 $ 1,696,356 THIS PAGE IS LEFT BLANK INTENTIONALLY -22- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 ' Note 1: PLAN DESCRIPTION A. The Financial Reporting Entity ' Firefighters of the City of Elk River (the City) are members of the Elk River Fire Relief Association (the Association). The Association is the administrator of asingle-employer defined benefit pension plan (the Plan) available to firefighters. The Plan was established in 1922 under the provisions of Minnesota Laws 1965, ' chapter 446 as amended and Minnesota statute, chapters 69 and 424. It is governed by a Board of Trustees made up of six members elected by the members of the Association for three year terms, and the Mayor, Finance Director and Fire Chief, who serve as ex-officio voting members of the Board of Trustees. For financial reporting purposes, the Association's financial statements are not included with the City financial statements because the Association is not a component unit of the City. The Association does not have any component units. B. Membership Information As of December 31, 2009 and 2008, membership data related to the Association were: ' 2009 2008 Retirees and beneficiaries currently receiving ' benefits and terminated employees entitled to benefits but not yet receiving them 4 4 ' Active plan participants Vested Fully 12 10 Partially 22 22 ' Nonvested 5 8 Total 43 44 ' -23- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 Note 1: PLAN DESCRIPTION -CONTINUED C. Pension Benefits The Association operates under a defined benefit plan. The pension liability is calculated by the number of active service years multiplied by a set benefit level. The Association's current level is at $5,091per active year According to the bylaws of the Association and pursuant to Minnesota statute 424A.02, subdivisions 2 and 4, members who retire with less than 20 years of service and have reached the age of 50 years and have completed at least five years of active membership are entitled to a reduced service pension not to exceed the amount calculated by multiplying the member's service pension for the completed years of service times the applicable non-forfeitable percentage of pension as follows: Completed years of service 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 and thereafter Non-forfeitable percentage of pension amount 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100 If a member of the Association shall become totally and permanently disabled, with a service related disability (injured in the line of duty) to the extent that a physician or surgeon acceptable to the Board shall certify that such disability will permanently prevent said member from performing said member's duties in the Department, the Association shall pay to such member the sum of the current pension amount for each year and fractions of a year that the member has served as an active member of the Department, without regard to minimum or partial vesting requirements. If a member who has received such a disability pension should subsequently recover and return to active duty in the Department, any amount paid to said member as a disability pension shall be deducted from said member's service pension. Upon the death of any member of the Association who is in good standing at the time of said member's death, the Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to child or children, , if any, and if no child or children survive, to the estate of such deceased member, the credited sum of said member's pension. '~ u ~i -24- ~i ' ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 ' Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS A. Measurement Focus, Basis of Accounting and Basis of Presentation ' 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. Revenues susceptible to accrual include contributions from the State of Minnesota and the City of Elk River and investment revenue, including interest on deposits and dividends. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. ' The fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as ' soon as all eligibility requirements imposed by the provider have been met. 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. Estimates also affect the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. B. Description of Fund The resources of the Association are accounted for in two funds. Each fund is accounted for as an independent entity. Descriptions of the funds included in this report are: Major governmental funds: The General fund is a governmental fund that accounts for the resources not accounted for in other funds. It is used for the good and benefit of the Association as determined by Association bylaws. Its resources ' consist of fundraising proceeds, investment earnings, and miscellaneous sources. The Fiduciary fund accounts for assets held by the Association in a trustee capacity for its members. ' The Fiduciary fund is a special pension trust fund for the accumulation of resources to be used for retirement, dependency and disability annuity payments of appropriate amounts and at appropriate times in the future. Resources are contributed by the City at amounts determined by law (taxes), and from the two- , percent insurance premium tax and amortization aid from the State of Minnesota. C. Comparative Data ' Comparative data for the prior year have been presented in the accompanying financial statements to provide an understanding of changes in the Association's financial position and operations. ' -25- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 Note 3: DETAILED NOTES ON ACCOUNTS Deposits and Investments The Association's cash and cash equivalents are considered to be demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Deposits Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Association's deposits and investments may not be returned or the Association will not be able to recover collateral securities in the possession of an outside party. In accordance with Minnesota statutes and as authorized by the Board, the Association maintains deposits at those depository banks, all of which are members of the Federal Reserve System. Minnesota statutes require that all Association deposits be protected by insurance, surety bond or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds. Authorized collateral in lieu of a corporate surety bond includes: • United States government Treasury bills, Treasury notes, Treasury bonds; • Issues of United States government agencies and instrumentalities as quoted by a recognized industry quotation service available to the government entity; • General obligation securities of any state or local government with taxing powers which is rate "A" or better by a national bond rating service, or revenue obligation securities of any state or local government with taxing powers which is rated "AA" or better by a national bond rating service; • General obligation securities of a local government with taxing powers may be pledged as collateral against funds deposited by that same local government entity; • Irrevocable standby letters of credit issued by Federal Home Loan Banks to a municipality accompanied by written evidence that the bank's public debt is rated "AA" or better by Moody's Investors Service, Inc., or Standard & Poor's Corporation; and • Time deposits that are fully insured by any federal agency. Minnesota statutes require that all collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in an account at a trust department of a commercial bank or other fmancial institution that is not owned or controlled by the fmancial institution furnishing the collateral. The selection should be approved by the government entity. Following is a summary of the deposits covered by FDIC insurance at December 31, 2009: Fund General Special pension trust Total Book Bank $ 214 $ 214 175,801 175,801 $ 176.015 $ 176.015 -26- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 Note 3: DETAILED NOTES ON ACCOUNTS -CONTINUED Following is a summary of the deposits covered by FDIC insurance at December 31, 2008: Fund Book Bank General $ 5,198 $ 5,348 Special pension trust 74,642 74,642 Total $ 79,840 $ 79,990 Investments At year end, the Association had the following investments that are insured or registered, or securities held by the Association or its agent in the Association's name: Credit Concentration Segmented Fair Value and Quality/ of Time Carrying Amount Type of Investment Ratin s 1 Credit Risk Distribution (2) 2009 2008 Pooled investments State Board of Investments Common Stock Index N/A N/A less than 6 months $ 135,003 $ 105,308 Growth Share N/A N/A less than 6 months 87,134 67,067 International Share N/A N/A less than 6 months 115,774 193,827 Income Share N/A N/A less than 6 months 681,056 428,601 Total State Board of Investments 1,018,967 794,803 Broker money market N/A N/A N/A 453 228,378 Mutual Funds N/A N/A N/A 1,028,209 596,533 Total pooled investments $ 2,047,629 $ 1,619,714 1. Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk. 2. Interest rate risk is disclosed using the segmented time distribution method. N/A indicates not applicable or available. -27- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 Note 3: DETAILED NOTES ON ACCOUNTS -CONTINUED The Association's investments are subject to the following risks: Credit Risk. Is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota statutes, section 11A.24, contains a specific list of asset classes available for investment, including common stocks, bonds, short term securities, real estate, private equity, and resource funds. The statutes prescribe the maximum percentage of fund assets that maybe invested in various asset classes and contain specific restrictions to ensure the quality of the investments. • Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. • Concentration of Credit Risk. Is the risk of loss attributed to the magnitude of a government's investment in a single issuer. Interest rate risk. Is the risk that changes in interest rates will adversely affect the fair value of an investment. Investment policy. The Association has adopted an investment policy with regard to investing the fmancial assets of the Association. All assets will be invested in accordance with this policy, Minnesota statutes chapter 69.775 and written administrative procedures. It shall be the policy of the Association to invest the assets in accordance with the minimum and maximum range for each asset class as stated below: Asset Class Minimum Maximum Percentage Percentage Stocks Bonds Non-Fluctuating Share Value Cash Note 4: FUNDING STATUS AND PROGRESS 25% 75% 0% 50% 0% 10% 0% 10% The amount of the total accrued pension liability is based on a standardized measurement established by the Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations for fmancial statement presentation. This standardized measurement is based on Minnesota statute 69.772. This pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members of the Association. A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief association fmancial statements to (a) assess the relief association's funding status on agoing-concern basis, (b) assess progress being made in accumulating sufficient assets to pay benefits when due, and (c) make comparisons among relief associations. Because the standardized measure is used only for disclosure purposes by the Association, the measurement is independent of an actuarial computation made to determine contributions to the Association. -28- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 AND 2008 Note 5: CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE The Association's funding policy provided for contributions from the State and the City in amounts sufficient to accumulate sufficient assets to pay benefits when due. The annual contribution is the sum of the normal cost, the State contribution payment and the provision for administrative expenses. The Association is comprised of volunteers; therefore, there are no payroll expenditures or covered payroll percentage calculations. A required contribution of $96,024 plus an additional supplemental benefit amount of $1,000 was made by the State in accordance with Minnesota statute for the year ended December 31, 2009. A required contribution of $111,999 plus an additional supplemental benefit amount of $2,000 was made by the State in accordance with Minnesota statute for the year ended December 31, 2008. Voluntary contributions of $30,000 were made by the City for the years ended December 31, 2009 and 2008. . Note 6: RISK MANAGEMENT The Association is exposed to various risks of loss related to theft of assets for which the Association carried ' commercial insurance policies. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any part of the past three fiscal years. The Association invests in mutual funds that are subject to market value fluctuations. ' Note 7: SUBSEQUENT EVENT On January 8, 2010 the Association made a retirement payout of $170,275. -29- THIS PAGE IS LEFT BLANK INTENTIONALLY -30- REQUIRED SUPPLEMENTARY INFORMATION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -31- THIS PAGE IS LEFT BLANK INTENTIONALLY -32- ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2009 A. Schedule of Funding Progress Required Supplementary Information Assets in Excess of Actuarial Actuarial Actuarial (Unfunded) Benefit Valuation Value of Accrued Accrued Funded per Year Date Assets Liability Liability Rate of Service 12/31/09 $ 2,224,430 $ 2,550,808 $ (326,378) 87.2 % $ 5,091 12/31/08 1,696,356 2,392,353 (695,997) 70.9 5,091 12/31/07 2,420,742 2,110,264 310,478 114.7 4,450 12/31/06 2,092,351 1,823,195 269,156 114.8 4,175 12/31/05 1,886,585 1,781,082 105,503 105.9 4,000 12/31/04 1,646,533 1,664,129 (17,596) 98.9 4,000 B. Schedule of Employer Contributions Year Ending 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 12/31/04 C. Notes to Supplementary Information Valuation date Actuarial cost method Annual Pension Cost $ 127,024 143,999 159,023 177,405 164,529 173,389 Percentage of APC Amortization method Remaining amortization period Normal cost Prior service cost Asset valuation method Actuarial assumptions Investment rate of return Projected salary increases Inflation rate Cost of living adjustments 100.0 100.0 100.0 100.0 100.0 100.0 12/31 /09 Entry age normal Level dollar closed 20 years 5 years Market 5% N/A N/A None -33- THIS PAGE IS LEFT BLANK INTENTIONALLY -34- COMPLIANCE SECTION ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ELK RIVER, MINNESOTA YEAR ENDED DECEMBER 31, 2009 -35- THIS PAGE IS LEFT BLANK INTENTIONALLY -36- ABDO EICK & Certified 13rbltc Accot~ntiznts c'~ Consultants X201 Eden Avennc Sui1¢ 3itl Edina, ?41~i :i,~36 REPORT ON MINNESOTA LEGAL COMPLIANCE Board of Trustees Elk River Fire Relief Association Elk River, Minnesota We have audited the fmancial statements of the governmental and fiduciary funds of the Elk River Fire Relief Association (the Association) as of and for the years ended December 31, 2009 and 2008, and have issued our report thereon dated, Apri129, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the State Auditor pursuant to Minnesota statute 6.65. Accordingly, the audit included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Government covers three main categories of compliance to be tested in audits of relief associations: deposits and investments, conflicts of interest, and public relief associations. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the Association complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the Board of Trustees, City of Elk River, members, and the Minnesota Office of the State Auditor, and is not intended to be and should not be used by anyone other than these specified parties. p~~,}m~,,u~ Apri129, 2010 Minneapolis, Minnesota 952.8i5.9Q90 Fax 95?.835 3261 ivww.aemcpus.com -37- ABDO, SICK & MEYERS, LLP Certified Public Accountants V ~ . ;~~ ® ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION ~ a ELK RIVER, MINNESOTA MANAGEMENT LETTER YEAR ENDED DECEMBER 31, 2009 II f ~asno I. EICK o-I ~~ ~ ~ 1 1~1 W LLP Certified Publtic Accountants 8c Consultants l~ ~ ~ ~ ~ ABDO ~ ~~ ~ ~ ~~ ~~~ 1,L1' f~crtiJif~rl !'tthlir ,--~4~~coirntnnts ~~ Corrsult«rzts 521 Gd~n ~cenur tiill~E•.3 i(~ ) ' Board of Trustees and Plan Participants Ells River Fire Department Relief Association Elk River, Minnesota Apri129, 2010 We have audited the fmancial statements of the Elk River Fire Department Relief Association (the Association) for the years ended December 31, 2009 and 2008, and have issued our report thereon dated Apri129, 2010. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under Auditing Standards Generally Accepted in the United States of America As stated in our engagement letter, our responsibility, as described by professional standards, is to express an opinion about whether the fmancial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the fmancial statements does not relieve you or management of your responsibilities. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement. As part of our audit, we considered the internal control of the Association. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the fmancial reporting process. However, we are not required to design procedures specifically to identify such matters. Significant Audit Findings 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 fmancial 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 fmancial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over fmancial reporting that we consider to be material weaknesses, as defined above. I' ~7.i2.$:~:i.9t?~0 Fax 95?.835.;3'3fi1 !V'1411'.EI<'ITIf'E1a E.C4111 ' ~ ~ Elk River Fire Department Relief Association ~ Apri129, 2010 Page 2 ~~J i+ ' Compliance ' As part of obtaining reasonable assurance about whether the fmancial statements are free of material misstatement, we performed tests of compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. We noted no instances of noncompliance with ' Minnesota statutes. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing. Qualitative Aspects of Accounting Practices ' Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Association are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the Association ' during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. ' Accounting estimates are an integral part of the fmancial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the fmancial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the fmancial ' statements was the actuarial accrued liability. This is based on the funding formula prescribed by the State of Minnesota. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the fmancial statements taken as a whole. ' The disclosures in the financial statements are neutral, consistent, and clear. ' Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. ' Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than ' those that are trivial, and communicate them to the appropriate level of management. There were no misstatements noted during the audit Disagreements with Management ' For purposes of this letter, professional standards define a disagreement with management as a fmancial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the fmancial statements ' or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations ' We have requested certain representations from management that are included in the management representation letter dated Apri129, 2010. ~~sz.a:~s.~c~o • ~~~~ ~~zs:;.~.;;~F~i tia~sic.ae•mcpas.com Elk River Fire Department Relief Association April 29, 2010 Page 3 Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Association's fmancial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Association's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters Investment Return A summary of the investment rate of return is summarized below: Year 30.00% 20.00% 10.00% (10.00%) (20.00%) (30.00%) (40.00%) 2004 $ 2005 2006 2007 2008 2009 Interest 2,159 3,168 2,954 52,211 32,524 23,827 Net Assets Appreciation Total Held in (Depreciation) Investment Trust for of Income Pension Investments (loss) Benefits $ 119,871 $ 122,030 $ 1,646,533 75,276 78,444 1,886,585 201,347 204,301 2,092,351 120,572 172,783 2,420,742 (713,435) (680,911) 1,696,356 416,652 440,479 2,224,430 Investment Rate of Return Investment Rate of 8.13 4.44 10.27 7.66 (33.08) 22.47 22.47% 8.13% 4.44% 10.27% o 7.66 /o 33.08% 2004 2005 2006 2007 2008 2009 ~:i2.83i.9090 Fier 9:12.835.3261 w+v~~.ae nu•pas.com Elk River Fire Department Relief Association Apri129, 2010 Page 4 Peer Group Comparisons The following are two comparisons of statistics that will provide information fln how your organization compares with other fire relief associations around the State. We used averages from approximately 40 fire relief associations with under $200,000 in assets to several million in assets. These averages include a 6-year trend of the rate of return and a 6-year trend of funding percentage as compared to averages of the other 40 relief associations. Year Averages Calculation 2004 2005 2006 2007 2008 2009 Average rate of returns Net investment income/ 8.1% 4.4% 10.3% 7.7% (33.1%) 22.5% average net assets 6.8% 4.8% 9.3% 5.9% (20.9%) N/A Percentage funded Net assets/accrued liability 98.9% 105.9% 114.8% 114.7% 70.9% 87.2% 108.1% 100.5% 109.7% 109.5% 84.9% N/A Elk River Fire Relief Association Peer Group Rate of Return The rate of return is calculated by taking the net investment income and dividing it by the beginning net assets. This will show a trend of your returns over a 6-year period and show your performance related to other relief associations. 30.0% 20.0% 10.0% (10.0%) (20.0%) (30.0%) (40.0%) 22.5% 8.1 % 4.4 % 10.3 °,/0 7.7 °/o 9.3% 5.9% 6.8% 4.8% (20.9%) (33.1 %) 2004 2005 2006 2007 2008 2009 -•-Fire relief rate ~-Peer group average 9.12.11350090 Far 932.8;3:1.3261 w~c~c.aemepas.eom ' ~ ~ Elk River Fire Department Relief Association ~ April 29, 2010 Page 5 t ~~~ ~~ ' Funding Percentage ' The funding percentage is calculated by taking the Special fund net assets and dividing it by the accrued pension liability. This graph will show your funding percentage fora 6-year period and compare your percentage to other relief associations. ' 170.0% ' 150.0% 130.0% ' 110.0% 90.0% ' 70.0% 50.0% 108.1% 114.8% 114.7% 105.9% 1.09.7% 109.5% 84.9°,/0 87.2°.'0 98.9°~0 100.5°'° 70.9% 2004 2005 2006 2007 2008 2009 Fire relief percent -FPeer group average This report is intended solely for the information and use of management, Board of Trustees and Plan Participants and the Minnesota Office of the State Auditor and is not intended to be and should not be used by anyone other than these specified parties. Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting records and related data. The comments and recommendations in the report are purely constructive in nature, and should be read in this context. If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your convenience. We wish to thank you for the opportunity to be of service and for the courtesy and cooperation extended to us by your staff. (~1„~ ~, ~n1tw~,b, l(,P Apri129, 2010 Minneapolis, Minnesota ABDO, EICK & MEYERS, LLP Certified Public Accountants 9S?.83;i.~091) Fax 952.831.3261 ~r+c~e.nenu~pus.com City of Elk River 2009 Audit Abdo, Eick & Meyers, LLP Presented by Andrew Berg ABDO EICK ~ MEYERS Certlfted Pidiltc Aavenlants K (:unsultwus 2009 Audit Results • Audit Opinion -unqualified or "clean" - Including Federal Single Audit • No audit findings • No Minnesota Legal compliance findings • No difficulties or disagreements ~, ABDO EICK & MEYERS (cvtlJterl HJdtc AmwManls & (:onarlkyus Accounting Standards GASB 54 -Fund Balance Reporting and Governmental Fund Type Definitions • Clearer, more structured fund balance classifications • Clarify definitions of existing governmental fund types - Early implementation planned for 2010 ABDO ~ EICK & MEYERS Catlfi«l w~,uc ArxvunUints & (ixewlGUUs General Fund Ending Fund Balance as a percent of Budget ~« ~~~~ #iaDao~oo ~a~~a *~~~ ~- #~~ ~i ~,~al,ao~u ~ ~ i,~nsssn ~ «~~~o r ~~~ ~s ~~ ~~ ~_~ ~~ ~~ ~~ ~o~rs ion ~oae ~ ~« a ABDO EICK & r~. nn ~~''INI~~IE~YERS ~`~ flyNµ' /~(Ip()1{71(Q/I(S ¢ ~AH4i71~UllILS 2009 General Fund Operations Revenues E~enditures Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total otherflnancing sources (uses) Net change in fund balances Fund balances, January 1 Fund balances, December 31 Variance with Final Final Budget - Budgeted Actual Positive Amounts Amounts (Negative) $ 11,745,500 $ 11,321,409 $ (424,091) 11,596,250 11,019,492 576,758 149,250 301,917 152,667 590,100 590,100 - (379,300) (383,104) (3,804) 210,800 206,996 (3,804) 360,050 508,913 148,863 5,190,662 5,190,662 $ 5,550,712 $ 5,699,575 $ 148,863 ABDO EICK & n~~M]'~YEvRS ~LlS(f~ (w1~4' ,q LLUIlIII~(411IS 0. ~.OILSH~I(YILS General Fund Revenue by Source $~~~~ ~~~ ~~~ *{. ~~~ ~~~~ ~- -+- a.n.e.i ~ao~..bjas.. t [~.Mma.ml c6.~.lfar.~e.+.« -»±-otl~rr ~; ABDO EI~C JK~&~(` 11'1L'~ 1 1'~l W LLP CtrtiJhxl Prdili. Aanunlnnr+ & Cauultmus General Fund Expenditures by Program ~~~ ~.~.~ ~~~ ~~~ ~~~ ~~~~ ~- ~~ ~ ABDO EICK & MEYERS Ciat(fled R~Gltc Aavi~nlantx & [:~xei~eluuus Special Revenue Fund Fund Fund Balances (Deficits) December 31, 2009 2008 Increase (Decrease) Nonmajor Library Ice Arena Pinewood Golf Course Senior Citizen Account Park Dedication Landtll Landfill Construction Debris Revolving Loan DTED Grant/Loan Development Fund Capital Outlay Reserve Emergency/Insurance Reserve Government Buildings Reserve Drug Forfeiture Reserve Severance Pay Reserve NSP/RDF Reserve YMCA Grant Economic Development Authority EDA DTED Loan Total $ 409,323 $ 409,084 $ 239 39,417 34,686 4,731 9,817 8,980 837 (684,938) (487,565) (197,373) 1,186,885 1,359,122 (172,237) 677,640 664,820 12,820 902,266 803,829 98,437 662,494 644,676 17,818 445,545 433,719 11,826 1,324,205 1,369,328 (45,123) 553,414 578,455 (25,041) 2,627,408 2,278,057 349,351 - 14,490 (14,490) 141,024 138,356 2,668 643,251 531,160 112,091 1,575,885 1,788,215 (212,330) 1,167,563 1,001,549 166,014 21.340 213,694 646 $ 11,895,539 $ 11,784,655 $ 110,884 ABDO EICK & MEYERS certfitrt Pulltc Arxn¢rua~us & Coruwltwrls Debt Service Fund Cash and Final Temporary Total Bonds Maturity Debt Service Fund Investments Assets Outstanding Date Improvement Bonds 2003A G.O. Improvement Bonds 2005A G.O.ImprovementBonds 2007C G.O. Improvement Bonds State-Aid Road Bonds Government Building Bonds 2002A Public Safety Building Lease Revenue Bonds 1996C G.O. Ice Arena Bonds 2006C G.O. Capital Improvement Bonds Equipment Certiticates 2005D G.O. Equipment Certificates 2006B G.O. Equipment Certificates 2007B G.O. Equipment Certificates TIF Bonds 2000A G.O. Taxlncrement Bonds YMCA Bonds 2007D EDA G.O. Bonds 2008A EDA G.O. Bonds Total Debt Service Funds $ 952,307 $ 2,398,395 $ 425,000 765,000 2,780,000 1,877,757 02/01/14 02/01/16 02/01/18 08/20/13 633,590 752,365 6,175,000 700,000 3,025,000 342,750 370,070 146,750 174,800 100,166 440,000 442,360 459,256 10,000,000 1,775,000 ''n 2,371,007 $ 3,980,086 $ 28,384,473 02/01/23 12/01/13 02/01/27 02/01/ 10 02/01/11 02/01/10 02/01/15 02/01/33 02/01/15 ABDO EICK & MEYERS t,1.1~ fcaYifkrl PuGlir Aavunlunls & (:orLSUlku~ts Capital Projects Fund Capital Projects Fund Major Street Improvement Improvement Projects Total major Nonmajor Fund Balances December 31, Increase 2009 2008 (Decrease) $ 5,220,214 $ 4,976,353 $ 4,120,068 3,837,325 9,340,282 8,813,678 243,861 ~u~ Paz s~~ Ana Equipment Replacement 1,060,387 1,010,697 49,690 Parklmprovements 109,110 61,943 47,167 Taxlncrement Financing Districts (408,713) (312,050) (96,663) YMCA - 127,647 (127,647) Total nonmajor 760,784 888,237 (127,453) Total $ 10,101,066 $ 9,701,915 $ 399,151 ABDO EICK & MEYERS r.H1~fCf1 PIII/J{(' ,q(,TT/LUIIO!!/5 to ~.0f6S(1~(OIIZS Liquor Fund Operations ~~~~~ ~~~~ ~~~~~ ~~~ ~. Os.M. -~-am~.~eol~ ., o~eaiia~~.-^'-ch~aq~iasrt.~. -•~-c.~sd~ ' ABDO EICK & SRS c~y~d wr,~ .a~,u,uu~, x c;~~~~ar,,,ws Garbage Fund ~~~~ #s x~. ~~ ~_ ~~ ~~ .~~de>t.e.s..a ~.a~.oa,a+ns,~ao~. ABDO ~° EICK & MEYERS Certifur! PuGlu :Iamin7ants & Consultaus Sewer Fund ~3aa ~~~ ^-~ .a~eafbsenra.~. .O~tlos~er~ O~ea+bs6aM ABDO EICK & M~~YERS Crrtified PuWis' -UsYiunrnnfs & (,or~sulkuN.s Water Fund ~i,~oa~aaa x~~oa~on ~~gooa ~ 9~ ~g ~~~~ ^oNeal~~strtaarw OIsM ~Chwe~~si...~. ~Ca~re,dberw~~ ~ ABDO EICK & MEYERS Ctrttfeed PoGG,' 4anuntarus & CAHwrltant4 ~L ~, u W ~ ~ ~ ~ ~~ ~~ ~~ ~~ Q ~ W City of Elk River Source Debt to assets Calculation Total liabilities/total assets Government-wide Debt service coverage Net cash provided by operations/ Enterprise funds enterprise fund debt payments Debt per capita Bonded debt/population Govemment-wide Taxes per capita Tax revenues/population Government-wide Current expenditures per capita Governmental fund current Capital expenditures per capita Capital assets % left to depreciate -Governmental Capital assets % left to depreciate -Business-type Represents the City of FJk Rig Peer Group ratio expenditures/population Governmental fund capital outlay/population Net capital assets/ gross capital assets Net capital assets/ gross capital assets mr Govemmental funds 2006 2007 18.0% 23.1% 23.8% 23.4% 226.5% 433.4% 240.8% 247.2% $ 1,610 $ 2,152 $ 1,389 $ 1,48_5 $ 423 $ 459 $ 381 $ 408 $ 575 $ G77 N/A $ 620 Governmental funds S 476 $ 552 N!A $ 435 Government-wide 75.0% 74.2% 69.7% 68.7% Government-wide 69.9°/~ 67.9% 64.9% 64.0% 2008 22.9 "/° 23.5% 338.6 218.1 $ 2,190 $ 1,464 $ 514 $ 430 $ 686 $ 593 $ 435 $ 304 73.5% 68.3 % 66.4 63.3 % 2009 2 2.0 °/, N/A 372.4 N/A $ 2,066 N/A ~ 523 N/A $ 616 N/A $ 193 N/A 71.1 % N/A 63.8% N/.4 ABDO EICK & MEYERS t.1..P Cert~t~ P°LUc AccuunlaUs & Gxisidutn4t Elk River Fire Relief Association Year Averages Calculation 2004 2005 2006 2007 2008 2009 Average rate of returns Net investment income/ 8.1 % 4.4'%. 10.3`%, 7.7'% (33.1'%) 22.5°/~ average net assets G.8% 4.8 `% 9.3% 5.9% (20.9%) N/A Percentage funded Net assets/accrued liability 98.9% 105.9% 114.8% 114.7% 70.9% 87.2% 108.1 % 100.5% 109.7% 109.5% 84.9% N/A ©k Rimer Fire Relief Association Peer Group y ABDO EICK & MEYERS ~,1.P Cc+si~~! PrJdk• .Artinwua,u,, & (:onault¢rux Rate of Return ~~ ~~ ~~~ a~~ ~~ ~~ ~~ ~~ ~~ ~~ ~ c~.~~ coos ~cor ABDO EICK & MEYERS (ertiftal ArGltc ,~xYiunl+uus & (ixsudlants Fund Percentage ~~~ ~~~ ~~~ l l0A'!i ~A'!i ~A'!i LO:.L1~6 L0i91i «~~ ~ r~,. a. 109J'16 10916 ., ~,. 99916 t00~i 70.9'«6 ~~ ~ X007 9000 ~ ~~ wrt pwwt ••~l6~po~ ~~ ABDO EICK & NI~~YERS cenyr~t ~~ .a~~~w,ug ~ c;~z,~r~,us