6.2. SR 06-02-2014 City of
Elk Request for Action
River
To Item Number
Mayor and City Council 6.2
Agenda Section Meeting Date Prepared by
Presentation,Awards, June 2, 2014 Tim Simon, Finance Director
and Recognition
Item Description Reviewed by
Comprehensive Annual Financial Report for year Cal Portner, City Administrator
ended December 31, 2013 Reviewed by
Action Requested
Approve,by motion,the Comprehensive Annual Financial Report for the City of Elk River for the year
ended December 31, 2013.
Background/Discussion
Andrew Berg, Governmental Services Partner with Abdo,Eick, &Meyers will present a Powerpoint
presentation of the city's 2013 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 of 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 will be made at the quarterly
board meeting on June 4.
The CAFR will be available on the city's website shortly after this Council meeting.
Please let me know if you would like a hard copy of any of the reports.
Financial Impact
N/A
Attachments
• City of Elk River Management Letter
• Comprehensive Annual Financial Report for the year ended December 31, 2013
• Other Required Reports (Legal compliance)
• Elk River Fire Department Relief Management Letter
• Elk River Fire Department Relief Association Financial Statements and Supplementary
Information
P a w E A E U s r
Template Updated 4/14 INIM UREI
Management Letter
City of Elk River
Elk River,Minnesota
For the Year Ended
December 31,2013
ABDO
w o
;k EICK & le
+People
iR MEYER.S LLP Going
Certified Public Accountants & Consultants Be-'oIndthe
N rI bers
ABDO
EICK &
ME 1 E W LLP
Certified Public Accountants& Consultants May 13,2014
Management,Honorable Mayor and City 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)for the
year ended December 31,2013.Professional standards require that we provide you with information about our responsibilities under
generally accepted auditing standards as well as certain information related to the planned scope and timing of our audit.We have
communicated such information in our letter to you dated October 29,2013.Professional standards also require that we provide to you
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 opinions about whether the
financial 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.
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 over financial reporting(internal control)of the
City. 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 financial reporting process.However,we are not required to
design procedures specifically to identify such matters.
Significant Audit Findings
In planning and performing our audit of the financial statements,we considered the City's internal control to determine the audit
procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements,but not for
the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly,we do not express an opinion on
the effectiveness of the City's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees,in the
normal course of performing their assigned functions,to prevent,or detect and correct,misstatements on a timely basis.A material
weakness is a deficiency,or a combination of deficiencies,in internal control, such that there is a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented,or detected and corrected on a timely basis. A significant
deficiency is a deficiency,or a combination of deficiencies,in internal control that is less severe than a material weakness,yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed
to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies.Given these limitations,
during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses.However,material
weaknesses may exist that have not been identified.
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we performed tests
of compliance with certain provisions of Minnesota statutes.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.While our audit provides a reasonable basis for our
opinion,it does not provide a legal determination on the City's compliance with those requirements.We noted no instances of
noncompliance with Minnesota statues.
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 financial statements. The requirements of GASB statement No.61were adopted for the year
ended December 31,2013.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 financial statements in the proper period.
Accounting estimates are an integral part of the financial 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 financial statements and because of the possibility that future events affecting
them may differ significantly from those expected.The most sensitive estimates affecting the financial statements include depreciation
on capital assets,allocation of payroll and compensated absences,and the liability for other postemployment benefits.
• Management's estimate of depreciation is based on estimated useful lives of the assets.Depreciation is calculated using the
straight-line method.
• Allocations of gross wages and payroll benefits are approved by City Council within the City's budget and are derived from
each employee's estimated time to be spent servicing the respective functions of the City.These allocations are also used in
allocating accrued compensated absences payable.
• 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 these accounting estimates in determining that it is reasonable in
relation to the financial statements taken as a whole.The disclosures in the financial statements are neutral,consistent, and clear.
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users.
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. Management has corrected all such misstatements.
Disagreements with Management
For purposes of this letter,professional standards define a disagreement with management as a financial accounting,reporting,or
auditing matter,whether or not resolved to our satisfaction,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 13,2014. People
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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 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 Matters
With respect to the supplementary information accompanying the financial statements,we made certain inquiries of management and
evaluated the form,content,and methods of preparing the information to determine that the information complies with accounting
principles generally accepted in the United States of America,the method of preparing it has not changed from the prior period,and
the information is appropriate and complete in relation to our audit of the financial statements.We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements
themselves.
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 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.
Financial Position and Results of Operations
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 31,2013.
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 decreased$151,024 from 2012. The
fund balance of$6,054,290 is 47.0 percent of the 2014 budgeted expenditures. The total fund balance and percent of the 2013
budgeted expenditures is split between nonspendable$14,628(0.1 percent),committed$247,937(1.9 percent)and unassigned
$5,791,725(45.0 percent). In addition,the City's fund balance policy for the General fund identified a target minimum
unassigned fund balance of 40-45 percent of the following year's budgeted expenditures and transfers out. The City has
maintained this target level as illustrated on the following page. More information can be found starting on page 54 of the
comprehensive annual financial report.
Some of the purposes and benefits of a 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 finance 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 formula.An adequate fund balance will provide a temporary buffer against aid adjustments.
• Expenditures not anticipated at the time the annual budget was adopted may need immediate City Council action. These
would include capital outlay replacement,lawsuits,tax court refunds,and other items. An adequate fund balance will
provide the financing 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 issues or refunding opportunities.
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A table summarizing the General fund balance in relation to the following years'budget follows:
Percent of Percent of
Total Unassigned General Total Unassigned
Fund Balance Fund Balance Budget Fund Fund Balance Fund Balance
Year December 31 December 31 Year Budget to Budget to Budget
2010 $ 6,006,465 $ 5,187,520 2011 $ 12,590,050 47.7 % 41.2 %
2011 6,297,612 5,261,391 2012 12,546,850 50.2 41.9
2012 6,205,314 5,776,627 2013 12,857,550 48.3 44.9
2013 6,054,290 5,791,725 2014 12,870,500 47.0 45.0
Fund Balance as a Percent of Next Year's Budget
$14,000,000 -
$12,000,000
$12,590,050 $12,546,850 $12,857,550 $12,870,500
$10,000,000
$8,000,000
0.2% 0.2% 0.1%
$6,000,000 0.7% 1.2% 1.6% 1.9%
5.8% 6.9% 1-6% 45.0%
$4,000,000 41.2% 41.9% 44.9%
$2,000,000
$-
2010 2011 2012 2013 2014
Unassigned Fund Balance �Assigned Fund Balance Committed Fund Balance
�Nonspendable Fund Balance (Budget
The 2013 and prior budgets are the final amended budgets. The 2014 budget is the adopted original budget.
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The 2013 General fund operations are summarized as follows:
Final
Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues $ 11,438,350 $ 11,371,474 $ (66,876)
Expenditures 12,562,750 12,315,655 247,095
Deficiency of revenues under expenditures (1,124,400) (944,181) 180,219
Other financing sources(uses)
Transfers in 1,216,000 1,216,000 -
Transfers out (294,800) (422,843) (128,043)
Total other financing sources(uses) 921,200 793,157 (128,043)
Net change in fund balances (203,200) (151,024) 52,176
Fund balances,January 1 6,205,314 6,205,314 -
Fund balances,December 31 $ 6,002,114 $ 6,054,290 $ 52,176
The City amended the General fund budget during the year_ The amendment resulted in an increase of revenues($17,400)and
expenditures($20,600).The final budget called for a decrease of$203,200 of fund balance reserves. Actual change in fund
balance was a decrease of$151,024.
Some of the line items with significant variances are highlighted below:
• Each expenditure function was under budget except for public works which was$160,098 over budget due to change in
accounting for engineering salaries and additional snowplowing and contractual services in 2013.The largest current
expenditure variances were in general government and public safety under budget by$103,971 and$240,235,
respectively.
• Transfers out were$128,043 over budget related to transfers to the Capital Reserve fund and Improvement Projects fund
for future expenditures which Council approved on May 7,2014 as part of the annual financial management plan review.
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A comparison between 2011,2012 and 2013 revenues and transfers is presented below:
Percent of
Source 2011 2012 2013 Total Per Capita
Taxes $ 9,660,847 $ 9,309,881 $ 9,264,268 77.2 % $ 398
Licenses and permits 432,875 408,232 513,779 3.2 22
Intergovernmental 535,084 542,790 557,990 4.3 24
Charges for services 594,877 636,300 740,756 5.1 32
Fines and forfeitures 126,832 121,047 122,985 1.0 5
Interest 91,696 56,346 84,214 0.4 4
Miscellaneous 106,436 87,809 87,482 0.7 4
Transfers in 769,500 1,024,500 1,216,000 8.1 52
Total revenues and transfers $ 12,318,147 $ 12,186,905 $ 12,587,474 100.0 % $ 541
A graphical presentation of 2011,2012,and 2013 revenues and transfers follows:
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
2011 2012 2013
■ Taxes ■ Intergovernmental ■ Charges for services ■Other
Some of the line items with significant changes are highlighted below:
• Within revenues from taxes,the decrease from 2011 to 2012 was largely a combination of the following:
• A decrease in the net tax levy of$9,393,977($9,758,513 certified less unallotted market value homestead credit
of$364,536)to $9,142,170.
• In 2011,nearly $285,000 was collected from delinquent balances compared to roughly$154,000 uncollected of
the 2011 levy(i.e.a net of$131,000 more in revenues than the levy).
• Charges for services have increased$145,879 from 2011 to 2013.This is primarily a combination of an increase of
roughly$75,000 in plan check fees and approximately $47,000 from internal reimbursement of engineering services_
• The increase for transfers in over the past three years is the result of increased amounts transferred from the Liquor and
Electric enterprise funds.
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A comparison between 2011,2012 and 2013 expenditures and transfers is presented below:
Percent of Per
Program 2011 2012 2013 Total Capita
General government $ 2,536,399 $ 2,490,127 $ 2,846,579 22.3 % $ 122
Public safety 5,255,608 5,304,063 5,468,765 43.0 235
Public works 2,062,508 2,039,644 2,279,059 17.9 98
Culture and recreation 1,655,757 1,739,797 1,619,679 12.7 70
Capital outlay 119,562 100,786 101,573 0.8 4
Transfers out 397,166 604,786 422,843 3.3 18
Total expenditures
and transfers $ 12,027,000 $ 12,279,203 $ 12,738,498 100.0 % $ 547
A graphical presentation of 2011,2012 and 2013 expenditures and transfers follows:
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
2011 2012 2013
■ General government ■ Public safety ■ Public works ■Other
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Special Revenue Funds
Special revenue funds receive revenue from specific sources and expenditures are for specific purposes_The following funds,
with fund balances included,comprise the special revenue fund type:
Fund Balances
December 31, Increase
Fund 2012 2013 (Decrease)
Nonmaj or
Library $ 454,571 $ 448,680 $ (5,891)
Ice Arena 169,970 245,124 75,154
Pinewood Golf Course - - -
Senior Citizen Account 11,270 - (11,270)
Landfill 1,461,367 1,315,177 (146,190)
Revolving Loan 959,695 805,554 (154,141)
Federal DEED 706,617 311,155 (395,462)
State DEED 402,063 385,837 (16,226)
Development Fund 612,776 1,491,350 878,574
Insurance Reserve 372,565 317,991 (54,574)
Drug Forfeiture Reserve 23,664 46,663 22,999
YMCA Grant 870,714 630,360 (240,354)
Economic Development Authority 1,133,516 1,222,806 89,290
Total $ 7,178,788 $ 7,220,697 $ 41,909
The above fund balance classification in total is as follows:
Fund balances-nonmajor special revenue funds
Nonspendable $ 99,703
Restricted 3,065,982
Committed 3,186,146
Assigned 868,866
Total $ 7,220,697
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Debt Service Funds
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:
• Property taxes-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 may be 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
All Debt Service funds with the total assets and debt remaining to be paid are shown below:
Cash and Final
Temporary Total Bonds Maturity
Debt Service Fund Investments Assets Outstanding Date
Improvement Bonds $ 447,936 $ 1,027,100
2003A G.O.Improvement Bonds $ 60,000 02/01/14
2012B G.O.Improvement Refunding Bonds 1,525,000 02/01/18
Government Building Bonds 695,029 717,865
2006C G.O.Capital Improvement Bonds 2,535,000 02/01/27
2010A G.O.Capital Improvement Bonds 4,835,000 02/01/23
2012A G.O.Capital Improvement Bonds 6,975,000 02/01/33
YMCA Bonds 10,123,977 10,135,947
2007D EDA G.O.Bonds 10,000,000 02/01/17
2008A EDA G.O.Bonds 645,000 02/01/15
2013A EDA G.O.Refunding Bonds 9,685,000 02/01/33
Total Debt Service Funds $ 11,266,942 $ 11,880,912 $ 36,260,000
As a result of the 13A Refunding Bonds issued within the YMCA Bonds fund, $9,712,875 of cash is held in escrow which will be
used to pay principal and interest on a portion of the debt until$9,225,000 is called on the 07D Bonds in 2017.
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The annual debt service requirements for the next 10 years for the debt detailed on the previous page are as follows:
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
■Principal ■Interest ■P&I Paid by Escrow
Capital Projects Funds
The fund balances of all capital projects funds are summarized below:
Fund Balances
December 31, Increase
Capital Projects Fund 2012 2013 (Decrease)
Major
Tax Increment Financing Districts $ (92,950) $ (1,039,866) $ (946,916)
Nonmaj or
Capital Reserve 1,573,895 1,526,857 (47,038)
Equipment Replacement 929,132 836,471 (92,661)
Park Dedication (843,369) (839,659) 3,710
Park Improvements 225,812 177,157 (48,655)
Government Buildings 4,526,365 3,864,325 (662,040)
GRE Reserve 1,673,347 2,110,729 437,382
Pavement Management - 1,207,543 1,207,543
Street Improvements 5,091,471 1,794,744 (3,296,727)
Improvement Projects 4,307,296 4,276,522 (30,774)
Total nonmajor 17,483,949 14,954,689 (2,529,260)
Total $ 17,390,999 $ 13,914,823 $ (3,476,176)
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 and Park Dedication fund have deficit fund balances at the end of
the year. The deficits will be eliminated by future tax increment revenues and park dedication fees. City Council should continue
to review planned project sources for these funds and consider whether they will be available within a sufficient timeframe to
cover current activity.
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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 financial statements since City 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:
2011 2012 2013
Total Percent Total Percent Total Percent
Sales $ 6,139,096 100.0 % $ 6,516,386 100.0 % $ 6,753,521 100.0 %
Cost of sales (4,385,452) (71.4) (4,638,550) (71.2) (4,705,979) (69.7)
Gross profit 1,753,644 28.6 1,877,836 28.8 2,047,542 30.3
Operating revenues 6,596 0.1 8,848 0.1 3,060 -
Operating expenses (947,692) (15-4) (970,330) (14-9) (1,000,781) (14-8)
Operating income 812,548 13.3 916,354 14.0 1,049,821 15.5
Nonoperating
revenues(expenses) 12,031 0.2 (68,740) (1.1) (87,003) (1.3)
Transfers out (3,115,592) (50.8) (468,667) (7.2) (672,289) (10.0)
Change in net position $ (2,291,013) 37.3L% $ 378,947 5.7 % $ 290,529 4.2 %
Bonds payable $ 730,000 $ - $ -
Municipal Liquor Fund Cash Balance
$2,500,000
$1,797,477 $1,992,380
$2,000,000
$1,555,676
$1,500,000
$1,000,000
$500,000
$-
2011 2012 2013
Unrestricted (Minimum target balance(one year of operating expenses)
The 2011 change in net position decreased significantly due to a transfer out to provide funding for the public works facility
project.The change in net position for 2013 is comparable to prior year.
Cash continues to remain strong in relation to operations. The decrease in cash in 2012 was a result of$570,000 People
debt prepaid. The increase in cash for 2013 was a result of net cash provided by operations($1,198,752) P
exceeding transfers out of$672,289. Also,the net cash from operations was roughly$200,000 more than the +Process®
net cash from operations in 2012 of$996,396. GoiN
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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 31,2012. The statewide averages for all operations are
summarized below.
Off Sale
2010 2011 2012
Percent Percent Percent
of Sales of Sales of Sales
Sales 100.0 % 100.0 % 100.0 %
Cost of sales 74.8 74.6 74.2
Gross profit 25.2 25.4 25.8
Operating expenses 17.1 17.1 16.5
Operating income 8.1 8.3 9.3
Nonoperating revenue(expense) (0.1) 0.1 (02)
Income before transfers 8.0 % 8.4 % 9.1 %
Source:Analysis of Municipal Liquor Store Operations,for the year ended December 31,2012.
Published by the Minnesota Office of the State Auditor
Municipal Liquor Fund Operations Summary
$8,000,000
$7,000,000 Sales, $6,516,386 Sales, $6,753,521
Sales, $6,139,096 i
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000 GP 28.6/o o GP 28.8% GP 30.3%
$1,000,000
13.5% 12.9% 14.2%
$-
2011 2012 2013
Gross profit Cost of sales ♦ Sales (Operating expenses -I-Income before transfers
Sales,gross profit and operating income increased consecutively the past two years.The gross profit percent of the City of 28.6-
30.3 percent remains above the state-wide average.Also,the City's percentage of income before transfers of 13.5, 12.9,and 14.2
for 2011,2012,and 2013,respectively,is significantly above the statewide averages.
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The results of the operations within the remaining enterprise funds in terms of cash flow and the breakdown of the cash balances
for the past four years are as follows:
Garbage Fund Cash Flow
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
$(200,000)
2010 2010 Receipts 2011 2011 Receipts 2012 2012 Receipts 2013 2013 Receipts
Disbursements Disbursements Disbursements Disbursements
■Operating costs ■Other(interfund) ■Operating receipts ■Other(interfund,interest)
Garbage Fund Cash Balance
$700,000 $591,503 $606,857
$600,000 $540,516
$
$500,000 467,670
$400,000
$300,000
$200,000
$100,000
$-
2010 2011 2012 2013
Unrestricted (Minimum target balance(6 months of operating expenses)
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. Some of the items with significant changes are highlighted below:
• Operating receipts(blue)were sufficient to cover operating costs(grey)in each of the four years presented.
• The current cash balance is approximately $19,000 less than the minimum target balance the City has set through the
adoption of their financial management policy.
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Sewer Fund Cash Flow
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
2010 2010 Receipts 2011 2011 Receipts 2012 2012 Receipts 2013 2013 Receipts
Disbursements Disbursements Disbursements Disbursements
■Operating costs ■Debt payments(including related transfers) ■Other(capital,interfund) ■Operating receipts ■Other(connection fees,interest)
Sewer Fund Cash Balance
$6,000,000 $5,446,672
$5,000,000 $4,550,144
$5,007,654 $5,287,842
$4,000,000
$3,000,000
$2,000,000
$1,000,000
2010 2011 2012 2013
Unrestricted (Minimum target balance(following year debt service plus 6 months of operating expenses)
2010 2011 2012 2013
Bonds payable,net of premium $ 1,065,000 $ 905,000 $ 735,000 $ 560,000
Some of the items with significant changes are highlighted below:
• Except for 2013,operating receipts(blue)have been sufficient to cover operating costs(grey)and debt payments(green)for
all four years shown above.
• Contributing to the significant increase in operating costs in 2013 is timing of payments related to year-end accounts
payable.Aside from the change in accounts payable,the net increase in operating costs from 2012 to 2013 would be
roughly$100,000_
• Operating revenues(full accrual)increased$77,336 in 2013 compared to 2012;however,accounts receivable at
year-end increased$110,361.In regards to operating receipts,the result is less cash received from users_
• Within other operating receipts,connection fees increased approximately $310,000 from 2012 to 2013.These fees ultimately
provide for current debt service and future expansion of the system. In addition there was a market value adjustment on
investments.
• The minimum target cash balance in 2013 includes an additional$380,000 of bond principal to be prepaid People
in 2014 on the 2005B G.O.Sewer Revenue Refunding bonds. Pe0
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We recommend that the rates be reviewed annually to ensure that they are sufficient to cover operating costs,
annual scheduled debt payments,and planned project costs_ Be-vg
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Water Fund Cash Flow
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
2010 2010 Receipts 2011 2011 Receipts 2012 2012 Receipts 2013 2013 Receipts
Disbursements Disbursements Disbursements Disbursements
■Operating costs ■Debt payments ■Other(capital,interfund,etc.) ■Operating receipts ■Other(interest,connection fees,etc.)
Water Fund Cash Balance
$4,000,000
$3,500,000 $3,254,530 $3,390,879
$3,000,000 $2,793,142
$2,619,574
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
2010 2011 2012 2013
Unrestricted (Unrestricted designated reserve*
*Unrestricted Designated Reserve: This reserve is established to address the short-term financial variability inherent in operating
a Water Utility_Potential sources of this variability include but are not limited to:risks associated with natural disasters,reduction
in overall customer usage,changes in total system usage resulting from the actions of large customers,failure to achieve budgeted
levels of net income,changes in interest income,and general operational exposures.
The target level for this reserve,included as the red line in the chart above,is 6 months operating expenditures less depreciation
plus the sum of next year's total principal and interest payments.The balance above this target level shall be unrestricted.
For more information, see separately issued Elk River Municipal Utilities report.
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Electric Fund Cash Flow
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
2010 2010 Receipts 2011 2011 Receipts 2012 2012 Receipts 2013 2013 Receipts
Disbursements Disbursements Disbursements Disbursements
■Operating costs ED ebt payments ■Other(capital,interfund,etc.) ■Operating receipts ■Other(interest,interfund,
Electric Fund Cash Balance
$14,000,000
$12,000,000 $11,370,664 $12,057,293
$10,000,000 $9,104,896
$8,000,000 $7,311,517
$6,000,000
$4,000,000
$2,000,000
2010 2011 2012 2013
Unrestricted �Restricted for debt service (bond covenents) (Unrestricted designated reserve*
*Unrestricted designated reserve: established to address the short-term financial variability inherent in operations.Potential
sources of this variability include risks associated with natural disasters,reduction in overall customer usage,changes in total
system usage resulting from the actions of large customers,failure to achieve budgeted levels of net income,changes in interest
income,and general operational exposures.
The target level for this reserve,included as the red line in the chart above,is the sum of six months operating expenditures less
depreciation and less purchase power costs,plus the sum of next year's total principal and interest payments,plus one month
budgeted average purchase power cost.The balance above this target level shall be unrestricted.
For more information, see separately issued Elk River Municipal Utilities report.
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Future Accounting Standard Changes
The following Governmental Accounting Standards Board(GASB)Statements have been issued and may have an impact on future
City financial statements: (1)
GASB Statement No.67- The Financial Reporting for Pension Plans-an Amendment to GASB Statement No. 25
Summary
The objective of this Statement is to improve financial reporting by state and local governmental pension plans_This Statement
results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions
with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity,and
creating additional transparency.
This Statement replaces the requirements of Statements No.25,Financial Reporting for Defined Benefit Pension Plans and Note
Disclosures for Defined Contribution Plans,and No. 50,Pension Disclosures,as they relate to pension plans that are
administered through trusts or equivalent arrangements(hereafter jointly referred to as trusts)that meet certain criteria.
The requirements of Statements No.25 and No. 50 remain applicable to pension plans that are not administered through trusts
covered by the scope of this Statement and to defined contribution plans that provide postemployment benefits other than
pensions.
This Statement is effective for financial statements for fiscal years beginning after June 15,2013.Earlier application is
encouraged.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve financial reporting primarily through enhanced note disclosures and schedules of
required supplementary information that will be presented by the pension plans that are within its scope.The new information
will enhance the decision-usefulness of the financial reports of these pension plans,their value for assessing accountability,and
their transparency by providing information about measures of net pension liabilities and explanations of how and why those
liabilities changed from year to year.The net pension liability information,including ratios,will offer an up-to-date indication of
the extent to which the total pension liability is covered by the fiduciary net position of the pension plan.The comparability of the
reported information for similar types of pension plans will be improved by the changes related to the attribution method used to
determine the total pension liability.
The contribution schedule will provide measures to evaluate decisions related to the assessment of contribution rates in
comparison to actuarially determined rates,when such rates are determined. In that circumstance,it also will provide information
about whether employers and nonemployer contributing entities,if applicable,are keeping pace with actuarially determined
contribution measures. In addition,new information about rates of return on pension plan investments will inform financial report
users about the effects of market conditions on the pension plan's assets over time and provide information for users to assess the
relative success of the pension plan's investment strategy and the relative contribution that investment earnings provide to the
pension plan's ability to pay benefits to plan members when they come due.
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Future Accounting Standard Changes-Continued
GASB Statement No.68- The Accounting and Financial Reporting of Pensions-an Amendment of GASB Statement No. 27
The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for
pensions.It also improves information provided by state and local governmental employers about financial support for pensions
that is provided by other entities.This Statement results from a comprehensive review of the effectiveness of existing standards of
accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of
accountability and interperiod equity,and creating additional transparency_
This Statement replaces the requirements of Statement No_27,Accounting for Pensions by State and Local Governmental
Employers,as well as the requirements of Statement No. 50,Pension Disclosures,as they relate to pensions that are provided
through pension plans administered as trusts or equivalent arrangements(hereafter jointly referred to as trusts)that meet certain
criteria.The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this
Statement.
This Statement is effective for fiscal years beginning after June 15,2014.Earlier application is encouraged.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve the decision-usefulness of information in employer and governmental
nonemployer contributing entity financial reports and will enhance its value for assessing accountability and interperiod equity by
requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense.Decision-
usefulness and accountability also will be enhanced through new note disclosures and required supplementary information.
GASB Statement No.69-Government Combinations and Disposals of Government Operations
Summary
This Statement establishes accounting and financial reporting standards related to government combinations and disposals of
government operations.As used in this Statement,the term government combinations include a variety of transactions referred to
as mergers,acquisitions,and transfers of operations.
The distinction between a government merger and a government acquisition is based upon whether an exchange of significant
consideration is present within the combination transaction. Government mergers include combinations of legally separate entities
without the exchange of significant consideration.This Statement requires the use of carrying values to measure the assets and
liabilities in a government merger.Conversely,government acquisitions are transactions in which a government acquires another
entity,or its operations,in exchange for significant consideration.This Statement requires measurements of assets acquired and
liabilities assumed generally to be based upon their acquisition values.This Statement also provides guidance for transfers of
operations that do not constitute entire legally separate entities and in which no significant consideration is exchanged.This
Statement defines the term operations for purposes of determining the applicability of this Statement and requires the use of
carrying values to measure the assets and liabilities in a transfer of operations.
A disposal of a government's operations results in the removal of specific activities of a government.This Statement provides
accounting and financial reporting guidance for disposals of government operations that have been transferred or sold.
This Statement requires disclosures to be made about government combinations and disposals of government operations to enable
financial statement users to evaluate the nature and financial effects of those transactions_
The requirements of this Statement are effective for government combinations and disposals of government operations occurring
in financial reporting periods beginning after December 15,2013,and should be applied on a prospective basis.Earlier
application is encouraged.
How the Changes in This Statement Will Improve Financial Reporting
Until now,governments have accounted for mergers,acquisitions,and transfers of operations by analogizing to accounting and
financial reporting guidance intended for the business environment,generally APB Opinion No. 16,Business
Combinations.This Statement provides specific accounting and financial reporting guidance for combinations
in the governmental environment.This Statement also improves the decision usefulness of financial reporting People
by requiring that disclosures be made by governments about combination arrangements in which they engage +process®
and for disposals of government operations.
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Future Accounting Standard Changes-Continued
GASB Statement No. 70-Accounting and Financial Reporting for Nonexchange Financial Guarantees
Summary
Some governments extend financial guarantees for the obligations of another government, a not-for-profit organization,a private
entity,or individual without directly receiving equal or approximately equal value in exchange(a nonexchange transaction).As a
part of this nonexchange financial guarantee,a government commits to indemnify the holder of the obligation if the entity or
individual that issued the obligation does not fulfill its payment requirements.Also, some governments issue obligations that are
guaranteed by other entities in a nonexchange transaction.The objective of this Statement is to improve accounting and financial
reporting by state and local governments that extend and receive nonexchange financial guarantees.
This Statement requires a government that extends a nonexchange financial guarantee to recognize a liability when qualitative
factors and historical data,if any,indicate that it is more likely than not that the government will be required to make a payment
on the guarantee.The amount of the liability to be recognized should be the discounted present value of the best estimate of the
future outflows expected to be incurred as a result of the guarantee.When there is no best estimate but a range of the estimated
future outflows can be established,the amount of the liability to be recognized should be the discounted present value of the
minimum amount within the range_
This Statement requires a government that has issued an obligation guaranteed in a nonexchange transaction to report the
obligation until legally released as an obligor.This Statement also requires a government that is required to repay a guarantor for
making a payment on a guaranteed obligation or legally assuming the guaranteed obligation to continue to recognize a liability
until legally released as an obligor.When a government is released as an obligor,the government should recognize revenue as a
result of being relieved of the obligation.This Statement also provides additional guidance for intra-entity nonexchange financial
guarantees involving blended component units_
This Statement specifies the information required to be disclosed by governments that extend nonexchange financial guarantees.
In addition,this Statement requires new information to be disclosed by governments that receive nonexchange financial
guarantees.
The provisions of this Statement are effective for reporting periods beginning after June 15,2013.Earlier application is
encouraged. Except for disclosures related to cumulative amounts paid or received in relation to a nonexchange financial
guarantee,the provisions of this Statement are required to be applied retroactively.Disclosures related to cumulative amounts
paid or received in relation to a nonexchange financial guarantee may be applied prospectively.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will enhance comparability of financial statements among governments by requiring
consistent reporting by those governments that extend nonexchange financial guarantees and by those governments that receive
nonexchange financial guarantees.This Statement also will enhance the information disclosed about a government's obligations
and risk exposure from extending nonexchange financial guarantees.This Statement also will augment the ability of financial
statement users to assess the probability that governments will repay obligation holders by requiring disclosures about obligations
that are issued with this type of financial guarantee.
GASB Statement No.71-Pension Transition for Contributions Made Subsequent to the Measure Date-an Amendment of
GASB Statement No. 68
Summary
The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No.68,
Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions,if any,made by a
state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement
date of the government's beginning net pension liability_
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Future Accounting Standard Changes-Continued
Statement No.68 requires a state or local government employer(or nonemployer contributing entity in a special funding
situation)to recognize a net pension liability measured as of a date(the measurement date)no earlier than the end of its prior
fiscal year.If a state or local government employer or nonemployer contributing entity makes a contribution to a defined benefit
pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period,
Statement No.68 requires that the government recognize its contribution as a deferred outflow of resources.In addition,
Statement No.68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net
pension liability of a state or local government employer or nonemployer contributing entity that arise from other types of events.
At transition to Statement No.68,if it is not practical for an employer or nonemployer contributing entity to determine the
amounts of all deferred outflows of resources and deferred inflows of resources related to pensions,paragraph 137 of Statement
No.68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported.
Consequently,if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of
resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have
been reported as deferred outflows of resources at transition.This could have resulted in a significant understatement of an
employer or nonemployer contributing entity's beginning net position and expense in the initial period of implementation.
This Statement amends paragraph 137 of Statement No.68 to require that,at transition,a government recognize a beginning
deferred outflow of resources for its pension contributions,if any,made subsequent to the measurement date of the beginning net
pension liability. Statement No.68,as amended,continues to require that beginning balances for other deferred outflows of
resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such
amounts.
The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No.68.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net
position and expense in the first year of implementation of Statement No. 68 in the accrual-basis financial statements of
employers and nonemployer contributing entities.This benefit will be achieved without the imposition of significant additional
costs.
1 Note.From GASB Pronouncements Summaries.Copyright 2014 by the Financial Accounting Foundation,401 Merritt 7,Norwalk,
CT 06856,USA,and is reproduced with permission.
x
This communication is intended solely for the information and use of City 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
OL&&�,4 7
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ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
May 13,2014
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CITY OF ELK RIVER, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the Year Ended December 31, 2013
PREPARED BY THE FINANCE DEPARTMENT
Member of Government Finance Officers Association
of the United States and Canada
J�
City Lk.E e
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CITY OF ELK RIVER,MINNESOTA
TABLE OF CONTENTS
DECEMBER 31,2013
Page No.
L INTRODUCTORY SECTION
Letter of Transmittal ......................................................................................... 1
Certificate of Achievement .................................................................................. 4
Organizational Chart ......................................................................................... 5
Elected and Appointed Officials ........................................................................... 6
I1. FINANCIAL SECTION
Independent Auditor's Report .............................................................................. 7
Management's Discussion and Analysis .................................................................. 9
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position ............................................................................. 19
Statement of Activities ................................................................................. 20
Fund Financial Statements:
Balance Sheet-Governmental Funds ............................................................... 22
Reconciliation of the Governmental Funds Balance Sheet to
the Statement of Net Position ...................................................................... 23
Statement of Revenues,Expenditures,and Changes in
Fund Balances-Governmental Funds ............................................................ 24
Reconciliation of the Statement of Revenues,Expenditures,and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities .............................................................................. 25
Statement of Revenues,Expenditures,and Changes in
Fund Balance-Budget and Actual-General Fund ............................................. 26
Statements of Net Position-Proprietary Funds .....................................................27
Statements of Revenues,Expenses,and Changes in
Fund Net Position-Proprietary Funds ............................................................ 29
Statements of Cash Flows-Proprietary Funds ......................................................31
Statement of Fiduciary Net Position-Developer
Escrow Agency Fund ................................................................................ 35
Notes to Financial Statements ........................................................................... 36
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 ............................................. 68
Special Revenue Funds:
Schedules of Revenues,Expenditures,and Changes in
Fund Balance-Budget and Actual:
Library ................................................. ..... 70
........................................
CITY OF ELK RIVER,MINNESOTA
TABLE OF CONTENTS
DECEMBER 31,2013
Page No.
Ice Arena .............................................................. ........ 71
.....................
PinewoodGolf Course ........................................................................... 72
Landfill ............................................................................... .. 73
............
Economic Development Authority ............................................................. 74
Nonmajor Debt Service Funds:
Subcombining Balance Sheet-Nonmajor Debt Service Funds .................................. 75
Subcombining Statement of Revenues,Expenditures,and Changes in
Fund Balances-Nonmajor Debt Service Funds ................................................ 76
Nonmajor Capital Projects Funds:
Subcombining Balance Sheet—Nonmajor Capital Projects Funds .............................. 77
Subcombining Statement of Revenues,Expenditures,and Changes in
Fund Balances—Nonmajor Capital Projects Funds ............................................ 79
Statement of Changes in Assets and Liabilities-
Developer Escrow Agency Fund ..................................................................... 81
Component Unit Financial Statements:
Housing and Redevelopment Authority:
Fund Financial Statements:
BalanceSheet ..................................................................................... 82
Reconciliation of the Governmental Fund Balance Sheet
to the Statement of Net Position .............................................................. 83
Statement of Revenues,Expenditures,and Change in Fund Balance ..................... 84
Reconciliation of the Statement of Revenues,Expenditures,
and Change in Fund Balance of Governmental Fund to the
Statement of Activities ......................................................................... 85
1II. STATISTICAL SECTION(UNAUDITED)
Net Position by Component ............................................................................... 86
Changes in Net Position .................................................................................... 88
Fund Balances of Governmental Funds .................................................................. 92
Changes in Fund Balances of Governmental Funds .................................................... 94
ElectricSales ................................................................................................ 96
Principal Electric Customers .............................................................................. 97
Tax Capacity,Market Value and Estimated Actual Value of Taxable Property ................... 98
PropertyTax Rates ......................................................................................... 100
PrincipalTaxpayers ........................................................................................ 101
Property Tax Levies and Collections .................................................................... 102
Ratios of Outstanding Debt by Type ..................................................................... 103
Ratios of General Bonded Debt Outstanding ........................................................... 105
Direct and Overlapping Governmental Activities Debt ............................................... 106
Legal Debt Margin Information .......................................................................... 107
Pledged-Revenue Coverage ............................................................................... 109
Demographic and Economic Statistics .................................................................. 111
PrincipalEmployers ....................................................................................... 112
Full-Time Equivalent Employees by Function ......................................................... 113
Operating Indicators by Function ........................................................................ 114
Capital Asset Statistics by Function ..................................................................... 115
INTRODUCTORY SECTION
City of
Elk '
River
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i \
Elk- 1 F--
River
June 2,2014
Honorable Mayor,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,
2013,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 unmodified opinion has been included in this report. The
independent auditor's report is included in the financial section of this report.
This report was prepared by the City's Finance Department 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 a Management's Discussion and Analysis
(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 immediately follows the independent auditor's report and provides a narrative
introduction,overview,and analysis of the basic financial statements.
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 23,273.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 also provides municipal water,sewer,garbage,and electric services and operates two
off-sale liquor stores.
EF�XVORli
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 July for consideration. Following Council discussion and public input,the final tax levy
and budget are approved in December. The City's Financial Management Policies allow 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 fluid for which an appropriated annual budget has been
adopted. For the general fund this comparison is presented on page 26 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 showed some evidence of growth by the increase in building permits with a construction value
of$38,440,128 being issued in 2013. This is a 50 percent increase from 2012. New additions and remodels
accounted for$21,784,319 of new value,and an additional$15,182,066 in residential construction with miscellaneous
permits making up the balance.The number of new housing units increased from 36 in 2012 to 82 in 2013. The
average value of new homes increased to$185,147. Single family homes accounted for all 82 of the new housing units
in 2013.
Many of Elk River's largest employers reported stable or growing employment levels between 2013 and 2014.This is
Iargely due to the upward trend in manufacturing activity in the region.Many larger Elk River employers are
experiencing modest growth.There has been continual interest in both affordable and market rate multi-family housing
projects.
Several Elk River companies made significant new improvements including Preferred Powder Coating with the
construction of a new 100,000 sq. ft. facility;Alliance Machine expanded their manufacturing facility by 17,250 sq. ft.,
while several other businesses completed expansions and upgraded their facilities. The outlook in this region looks
promising with anticipation of several additional upgrades and expansions in 2014.
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 a long-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 City Council has adopted several Financial Management Policies and continually monitors and updates the
policies. The Financial Management Policies include:revenues,property taxes,investments,purchasing,financial
reporting,reserves,fund balance,capital investment,and debt policies. The City's policy on fund balance states that
the City will maintain an unassigned fund balance of not less than 40-45%of budgeted general fund operating
expenditures. The percentage of unassigned fund balance at December 31,2013 is 45%. Since property tax payments
are received by the City in two installments in July and December,the City needs adequate cash reserves for cash flow
in order to avoid short-term borrowing to finance operations.
Changes in state law over the past several years have resulted in funding changes for both schools and local
governments. Replacements of Market Value Homestead Credits(MVHC)with the Market Value Exclusion(MVE)
program and Local Government Aids(LGA)program 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 2014 General
2
Fund budget. The City does not expect in the short-term to see LGA and MVHC amounts restored to previous year's
levels.
Major Initiatives
In 2013,the city completed construction of phase I of the 171'Avenue Focus Area Study,opening Natures Edge
Business Center. The project involved extending municipal streets and utilities to serve a new 28-acre business park.
The city also initiated an update to our comprehensive and parks master plans,these strategic initiatives will provide
direction about future growth of the city. The city also implemented a long-term funding plan for our pavement
management program to ensure funding exists for scalcoating,overlay and reconstruction maintenance projects. In
addition,Elk River's Northstar Station continues to have the largest ridership numbers along the rail line that runs
from Minneapolis to Big Lake.
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 Comprehensive Annual Financial
Report for the fiscal year ended December 31,2012. This was the 24th consecutive year that the City has received this
prestigious award. In order to be awarded a Certificate of Achievement,a 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 Comprehensive
Annual Financial Report continues to meet the Certificate of Achievement Program's requirements and we are
submitting it to the GFOA to determine its eligibility for another certificate.
The City received the GFOA Award for the Distinguished Budget Presentation for the City budget for the fiscal year
beginning January 1,2013. It was the 5t'consecutive year the City received the award for the document.
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
3
City of
i
Elk
River
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Elk River
Minnesota
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
December 31, 2012
Executive Director/CEO
4
City of
i
Elk -_
River
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5
CITY OF ELK RIVER,MINNESOTA
ELECTED AND APPOINTED OFFICIALS
YEAR ENDED DECEMBER 31, 2013
Term Expires
CITY COUNCIL December 31,
John Dietz Mayor 2014
Barbara Burandt Council member 2016
Paul Motin Council member 2014
Matthew Westgaard Council member 2016
Stewart Wilson Council member 2014
APPOINTED PERSONNEL
Calvin Fortner City Administrator
Timothy Simon Finance Director
Bradley Rolfe Police Chief
T. John Cunningham Fire Chief
Michael Hecker Parks&Recreation Director
Justin Femrite City Engineer
Suzanne Fischer Community Operations&Development Director
6
FINANCIAL SECTION
City of
Elk .
River
This page has been left blank intentionally
�ABDO
EICK8r
MM1 W LLP
CertEfwd Public Accountants R Consultants
INDEPENDENT AUDITOR'S REPORT
Honorable Mayor and City Council
City of Elk River,Minnesota
Report on the Financial Statements
We have audited the accompanying 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 31,2013,and the related notes to the financial statements,which collectively comprise
the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America;this includes the design, implementation,and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,whether due
to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. The prior year comparative information has
been derived from the City's 2012 financial statements and,in our report dated May 17,2013 we expressed unmodified opinions on
the respective proprietary fund financial statements. We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment,including the assessment of the risks of material misstatement of the financial
statements,whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the
City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances,but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly,we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management,as well as evaluating the overall financial statement presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion,the financial statements referred to above present fairly,in all material respects,the respective financial 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 31,2013,and the respective changes in financial position and,where
applicable,cash flows thereof and the respective budgetary comparison for the General fund for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261
7
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis
starting on page 9 and the Schedule of Funding Progress on page 63 be presented to supplement the basic financial statements. Such
information,although not a part of the basic financial statements,is required by the Governmental Accounting Standards Board who
considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic,or historical context.We have applied certain limited procedures to the required supplementary information in accordance
with auditing standards generally accepted in the United States of America,which consisted of inquiries of management about the
methods of preparing the information and comparing the information for consistency with management's responses to our inquiries,
the hagic financial statements, and other knowledge we obtained during our audit of the basic financial statements.We do not express
an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic
financial statements.The introductory section,combining and individual fund financial statements and schedules,and statistical
section are presented for the purpose of additional analysis and are not a required part of the basic financial statements.
The combining and individual fund financial statements and schedules are the responsibility of management and were derived from
and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures,
including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the
basic financial statements or to the basic financial statements themselves,and other additional procedures in accordance with auditing
standards generally accepted in the United States of America.In our opinion,the combining and individual fund financial statements
and schedules are fairly stated,in all material respects,in relation to the basic financial statements as a whole.
The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic
financial statements and,accordingly,we do not express an opinion or provide any assurance on them.
y
ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
May 13,2014
People
+Process,
Going
Bevond thf>
`u117 bers
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 31,2013. 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 -3 of this report.
Financial Highlights
The assets and deferred outflows of resources of the City of Elk River exceeded its liabilities at the close of the most recent
fiscal year by$199,320,162(net position). Of this amount,$47,027,216(unrestricted net position)may be used to meet the
City's ongoing obligations to citizens and creditors.
The City's total net position decreased by$1,949,704,attributable to over$1 million in expenses within economic
development related to TIF that will be reimbursed with future TIF revenues and the decrease in market value of the city's
investments at year end.
As of the close of the current fiscal year,the City of Elk River's governmental funds reported combined ending fund
balances of$38,479,671.
Special Debt Capital
General Revenue Service Projects Total
Nonspendable $ 14,628 $ 99,703 $ - $ - $ 114,331
Restricted - 3,065,982 11,289,861 445,025 14,800,868
Committed 247,937 3,186,146 - 1,207,543 4,641,626
Assigned - 868,866 - 14,586,805 15,455,671
Unassigned 5,791,725 - - (2,324,5 3,467,175
$ 6,054,290 $ 7,220,697 $ 11,289,861 $ 13,914,823 $ 38,479,671
The City of Elk River's total long-term liabilities increased$4,685,370 during the current fiscal year,from$45,966,899 to
$50,652,269.
Beginning Ending
Balance Additions Reductions Balance
Governmental activities:
Bonds payable $ 30,614,972 $ 10,026,700 $ (3,785,072) $ 36,856,600
Contracts for deeds 1,410,000 - - 1,410,000
Compensated absences 1,395,326 653,660 (605,990) 1,442,996
Net OPEB obligation 208,486 86,785 (47,334) 247,937
Total governmental activities 33,628,784 10,767,145 (4,438,396) 39,957,533
Business-type activities:
Bonds payable 9,876,567 (1,509,089) 8,367,478
Notes payable 1,975,812 (186,588) 1,789,224
Compensated absences 418,317 306,374 (267,023) 457,668
Net OPEB obligation 67,419 14,416 (1,469) 80,366
Total business-type activities 12,338,115 320,790 (1,964,169) 10,694,736
Total City long-term liabilities $ 45,966,899 $ 11,087,935 $ (6,402,565} $ 50,652,269
9
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 financial statements,2)fund
financial statements,and 3)notes to the financial 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 a private-sector business.
The statement of position presents information on all of the City of Elk River's assets and deferred outflows of resources,
and liabilities and deferred inflows of resources,with the difference between the two reported as net position. Over time,
increases or decreases in net position 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 position changed during the most recent fiscal
year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs,regardless
of the timing of related cash flows. Thus,revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods(e.g.,uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the City 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 financial 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 financial 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 19-21 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 governments,
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 financial statements. However,unlike the government-wide financial
statements,governmental fund financial statements focus on near-term inflows and outflows of spendable resources,as
well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating a government's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements,it is useful to
compare the information presented for governmental funds with similar information presented for governmental activities
in the government-wide financial statements. By doing so,readers may better understand the long-term impact 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.
10
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,YMCA Bonds,and TIF Districts funds. 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 22 -26 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 way that all activities are reported in the statement of net position and the statement of
revenues,expenses,and changes in net position. 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.
The basic proprietary fund financial statements can be found on pages 27-34 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 35 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 36-62 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 64-85 of this report.
Government-wide Financial Analysis
As noted earlier,net position may serve over time as a useful indicator of a government's financial position. In the case of
the City of Elk River,assets and deferred outflows of resources exceeded liabilities by$199,320,162 at the close of the
most recent fiscal year.
By far,the largest portion of the City of Elk River's net position(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.
11
City of Elk River Net Position
Governmental Business-type
Activities Activities Total
2013 2012 2013 2012 2013 2012
Current and other assets $43,006,847 $40,048,326 $28,382,679 $26,864,729 $71,389,526 $66,913,055
Capital assets 112,604,539 114,193,629 72,116,614 72,120,598 184,721,153 186,314,227
Total assets 155,611,386 154,241,955 100,499,293 98,985,327 256,110,679 253,227,282
Total deferred outflows
ofresources 330,846 367,111 75,525 83,765 406,371 450,876
Long-term liabilities
outstanding 39,957,533 33,628,784 10,694,736 12,338,115 50,652,269 45,966,899
Other liabilities 2,304,480 3,079,644 4,240,139 3,361,749 6,544,619 6,441,393
Total liabilities 42,262,013 36,708,428 14,934,875 15,699,864 57,196,888 52,408,292
Net investment
in capital assets 84,353,785 84,060,768 62,035,437 60,351,984 146,389,222 144,412,752
Restricted 5,256,724 6,391,182 647,000 724,500 5,903,724 7,115,682
Unrestricted 24,069,710 27,448,688 22,957,506 22,292,744 47,027,216 49,741,432
Total net position $113,680,219 $117,900,638 $85,639,943 $83,369,228 $199,320,162 $201,269,866
An additional portion of the City of Elk River's net position(3 percent)represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrestricted net position($47,027,216)may be 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
position,both for the City as a whole,as well as for its separate governmental and business-type activities.
12
City of Elk River Changes in Net Position
Governmental Business-type
Activities Activities Total
2013 2012 2013 2012 2013 2012
Revenues:
Program revenues:
Charges for services $ 2,856,556 $ 2,378,009 $ 43,065,945 $ 42,109,355 $ 45,922,501 $ 44,487,364
Operating grants and contributions 954,164 1,018,519 23,440 954,164 1,041,959
Capital grants and contributions 807,208 1,007,794 924,641 490,916 1,731,849 1,498,710
General revenues:
Property taxes 10,830,218 11,684,445 - 10,830,218 11,684,445
Othertaxes 829,112 125,623 829,112 125,623
Grants and contributions not
restricted to specific programs 1,436,135 1,307,662 - - 1,436,135 1,307,662
Unrestricted investment earnings (663,762) 319,654 (243,047) 219,950 (906,809) 539,604
Gain on disposal ofcapital assets 629,177 49,470 1,572 1,260 630,749 50,730
Total revenues 17,678,808 17,891,176 43,749,111 42,844,921 61,427,919 60,736,097
Expenses:
General government 3,344,317 2,994,342 - 3,344,317 2,994,342
Public safety 6,173,244 6,187,246 6,173,244 6,187,246
Public works 6,535,616 6,037,000 6,535,616 6,037,000
Culture and recreation 3,914,000 4,013,098 3,914,000 4,013,098
Economic development 2,088,064 1,059,058 - 2,088,064 1,059,058
Interest on long-term debt 1,288,020 1,163,352 1,288,020 1,163,352
Municipal liquor - 5,706,760 5,622,305 5,706,760 5,622,305
Garbage 1,251,420 1,276,887 1,251,420 1,276,887
Sewer 2,320,743 2,239,914 2,320,743 2,239,914
Water 2,332,680 2,264,814 2,332,680 2,264,814
Electric - - 28,422,759 27,586,573 28,422,759 27,586,573
Total expenses 23,343,261 21,454,096 40,034,362 38,990,493 63,377,623 60,444,589
Increase(decrease)in net
position before transfers (5,664,453) (3,562,920) 3,714,749 3,854,428 (1,949,704) 291,508
Transferofcapitalassets (121,172) (348,259) 121,172 348,259
Transfers 1,565,206 1,504,263 (1,565,206) (1,504,263) -
Change in net position (4,220,419) (2,406,916) 2,270,715 2,698,424 (1,949,704) 291,508
Net position-beginning 117,900,638 120,307,554 83,369,228 80,670,804 201,269,866 200,978,358
Netposition-ending $ 113,680,219 $ 117,900,638 $ 85,639,943 $ 83,369,228 $ 199,320,162 $ 201,269,866
Governmental activities. Governmental activities account for 57%of the City of Elk River's net position.
Governmental activities decreased the City's net position by$4,220,419. Key elements of the relevant changes are as
follows:
• In mid-2013 the City approved and collected franchise taxes of $71 5,000 on electric and gas utilities to
provide a funding source for the ongoing maintenance and repair of the city street system;no longer utilizing
special assessments and property taxes.
Tax increment revenues decreased$742,000 due to the decertification of two tax increment financing districts
in 2012.
• The decrease in investment earnings reflects the market value adjustment of the city's investment portfolio.
The improving economy brought an uptick in new home building and economic development activity. The
city sold a lot in its recently opened business/industrial park and approved several other development and
expansion projects.
13
Expenses and Program Revenues-Governmental Activities
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000 ■ & M
$2,000,000
$1,000,000
I
�WL ,
General Public safety Public works Culture and Economic Interest on long-
government recreation development term debt
Revenue Expense
Revenues by Source- Governmental Activities
Other Net transfers
Unrestricted 3.3% 7.6% Charges for services
investment earnings
14 9% Operating grants and
-3.4% contributions
5.0%
Other taxes
4.3% .� Capital grants and
contributions
4.2%
Grants and
contributions
unrestricted
7.5%
Property taxes J
56.6%
14
Business-type activities. Business-type activities increased the City of Elk River's net position by$2,270,715. Key
elements of this increase are as follows:
• Charges for services for business-type activities increased$956,590 due largely to increased liquor sales and an
increase in electric usage. The electric utility accounts for 72%of the total charges for services.
• The increase in connection fees was largely impacted by the resurgence in building activity as the economy has
begun rebounding.
• The decrease in investment earnings reflects the market value adjustment of the city's investment portfolio.
Expenses and Program Revenues-Business-type Activities
$35,000,000
$30,000,000
$25,000,000 —
$20,000,000 — —
$15,000,000 — — - —
$10,000,000
$5,000,000 + —
Municipal liquor Garbage Sewer Water Electric
■Revenue ■Expense
Revenues by Source-Business-type Activities
Unrestricted
investment earnings Cain on disposalof
Capital grants and 0.5% capital assets
contributions 0.0%
2.1%
iu.T/V
15
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,unassigned 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
$38,479,671. Approximately 9%of this total amount($3,467,175)constitutes unassigned fund balance. The remainder of
fund balance($35,012,496) is not available for new spending because it is either 1)nonspendable($114,331) ,2)restricted
($14,800,868),3)committed($4,641,626)or 4)assigned($15,455,671)for other purposes.
The General fund is the chief operating fund of the City of Elk River. The total fund balance of the General fund decreased
$151,024 during the current year,resulting primarily from the intended use of fund balance and less than anticipated
expenditures.
The YMCA Bonds fund increased$9,730,259 due to the issuance of refunding bonds.
The TIF Districts fund decreased$946,916 due to TIF development expenses that will be reimbursed with future TIF
revenues.
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 position in the respective proprietary funds are Municipal Liquor-$2,535,831,Garbage-$615,475,
Sewer-$5,795,594,Water-$3,233,364,and Electric-$10,777,242. The Garbage fund net position decreased$3,198 due
mainly to the market value adjustment of investments and the Sewer fund net position decreased$426,346 due mainly to
system repairs and maintenance. All other proprietary funds had increases in net position.
General Fund Budgetary Highlights
Differences between the original budget and the final budget for the General tuna amounted to$3,200. The expenditure
budgets were amended to reflect the increase in expenditures related to park maintenance. Key factors are as follows:
Total revenue collections were 99%of budget. Property tax collections were$52,961 under budget due to
delinquent taxes and other taxes were$30,129 over due to increased gravel tax collections.
• Expenditures were under budget by$247,095 due mainly to several vacant positions and sound fiscal control by
city departments.
• Transfers out were over budget due to Council approved transfers to the capital outlay reserve fund for capital
equipment and to the storm water management fund.
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 31,2013,amounts to$184,721,153 (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$1,593,074 or less than 1 percent(a 1.4 percent decrease for governmental activities
and a.006 percent decrease for business-type activities).
Major capital asset events during the current fiscal year included the following:
• $209,000 in public safety equipment, $195,000 in public works equipment and$503,000 in parks equipment
• Infrastructure improvements for the street improvement project totaled$2.6 million.
• Completed the public works facility expansion adding an additional$636,630 in construction costs and
capitalizing$8.7 million to buildings and$800,000 to improvements.
• System improvements for water and electric resulted in$2.2 million assets being added and an additional$2.2
million in projects carried over to the next fiscal year.
16
City of Elk River Capital Assets
(Net of Depreciation)
Governmental Business-type
Activities Activities Total
2013 2012 2013 2012 2013 2012
Land $ 37,806,871 $ 37,864,101 S 1,526,008 $ 1,486,693 $ 39,332,879 $ 39,350,794
Construction in progress - 8,861,930 2,265,169 285,001 2,265,169 9,146,931
Buildings 31,023,746 23,780,074 10,644,146 11,167,594 41,667,892 34,947,668
Other improvements 2,412,772 2,062,487 2,412,772 2,062,487
Equipment 3,660,988 3,530,374 1,402,605 1,336,055 5,063,593 4,866,429
Infrastructure 37,700,162 38,094,663 56,278,686 57,845,255 93,978,848 95,939,918
Total $112,604,539 $114,193,629 $ 72,116,614 S 72,120,598 $184,721,153 $186,314,227
Additional information on the City's capital assets can be found in Note 3C on pages 48-49 of this report.
Long-term debt. At the end of the current fiscal year,the City had total long-term debt outstanding of$50,652,269,an
increase of$4,685,370 from 2012. General obligation improvement bonds($34,675,000)were issued to finance the
construction of a library,a recreation facility,a public safety/city hall facility and a public works facility. General
obligation revenue bonds($3,990,000)were used to finance sewer and water systems. Revenue bonds($4,340,000)were
used to finance electric system improvements. Special assessment bonds($1,585,000)financed improvement projects
within the City and are assessed to the benefiting properties.
City of Elk River Outstanding Debt
Governmental Business-type
Activities Activities Total
2013 2012 20I3 2012 2013 2012
Bonds payable:
G.O.bonds $ 34,675,000 $ 26,334,000 $ - $ $ 34,675,000 S 26,334,000
G.O.revenue bonds 3,990,000 4,750,000 3,990,000 4,750,000
Revenue bonds 4,340,000 5,085,000 4,340,000 5,085,000
Special assessment bonds 1,585,000 3,975,000 - 1,585,000 3,975,000
Issuance premium 596,600 305,972 37,478 41,567 634,078 347,539
Total bonds payable,net 36,856,600 30,614,972 8,367,478 9,876,567 45,224,078 40,491,539
Contracts for deeds 1,410,000 1,410,000 1,410,000 1,410,000
Notes payable - 1,789,224 1,975,812 1,789,224 1,975,812
Compensated absences 1,442,996 1,395,326 457,668 418,317 1,900,664 1,813,643
Net OPEB obligation 247,937 208,486 80,366 67,419 328,303 275,905
Total $ 39,957,533 S 33,628,784 $ 10,694,736 $ 12,338,115 $ 50,652,269 $ 45,966,899
Additional long-term debt in the amount of$1,410,000 is for a contract for deed,$1,789,224 is for notes payable,
$1,900,664 is for compensated absences,and$328,303 is for other postemployment benefits obligations.
The City maintains a bond rating of AA+from Standard&Poor'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$48,527,082. $21,322,661 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 3E on pages 51 -53 of this report.
17
Economic Factors and Next Year's Budget
The City of Elk River estimates that the demand for city services will begin to grow at increased Ievels as compared to the
prior years due to the improved economy and recent building activity. This was taken into consideration in preparation of
the City's 2014 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 levy 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.
18
BASIC FINANCIAL STATEMENTS
City of
i
Elk
River
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CITY OF ELK RIVER,MINNESOTA
STATEMENT OF NET POSITION
DECEMBER 31,2013
Primary Government
Governmental Business-type - Component
Activities Activities Total Unit-HRA
ASSETS
Cash and investments $ 29,007,322 $ 22,847,081 $ 51,854,403 $ 1,043,777
Restricted cash and investments 647,000 647,000 -
Cash with fiscal agent 9,712,875 - 9,712,875
Receivables(net):
Interest 101,812 46,326 148,138 -
Taxes 549,307 - 549,307 13,607
Accounts 656,974 2,817,718 3,474,692 750
Special assessments 2,121,102 2,121,102
Notes,net 435,902 - 435,902 400,000
Due from other governments 38,156 12,209 50,365 -
Due from primary government - - - 230,623
Internal balances 269,066 (269,066) - -
Inventories 2,062,965 2,062,965
Prepaid items 114,331 218,446 332,777 -
Capital assets:
Nondepreciable 37,806,871 3,791,177 41,598,048 257,100
Depreciable(net) 74,797,668 68,325,437 143,123,105 161,703
Total assets 155,611,386 100,499,293 256,110,679 2,107,560
DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding 330,846 75,525 406,371
LIABILITIES
Accounts payable 584,427 3,808,477 4,392,904 7,717
Salaries payable 347,302 193,250 540,552 1,326
Due to other governments 63,665 65,666 129,331 -
Due to component unit 230,623 230,623
Accrued interest payable 543,353 127,443 670,796
Unearned revenue 535,110 45,303 580,413 -
Non-current liabilities:
Due within one year 3,533,619 1,988,701 5,522,320
Due in more than one year 36,423,914 8,706,035 45,129,949 -
Total liabilities 42,262,013 14,934,875 57,196,888 9,043
NET POSITION
Net investment in capital assets 84,353,785 62,035,437 146,389,222 418,803
Restricted for:
Debt service 2,329,723 647,000 2,976,723
Landfill mitigation 660,000 660,000
Economic development 2,194,964 - 2,194,964
Insurance benefits 22,850 22,850 -
Law enforcement 45,671 45,671
Park improvements 3,516 3,516
Housing and redevelopment - - 1,679,714
Unrestricted 24,069,710 22,957,506 47,027,216 -
Total net position $ 113,680,219 $ 85,639,943 $ 199,320,162 $ 2,098,517
The notes to the financial statements are an integral part of this statement.
19
CITY OF ELK RIVER,MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31,2013
Program Revenues
Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions-
Functions/Programs
Primary Government:
Governmental Activities:
General government $ 3,344,317 $ 338,469 $ - $ 63,680
Public safety 6,173,244 961,072 270,238
Public works 6,535,616 206,606 327,018 724,748
Culture and recreation 3,914,000 1,075,576 302,608 18,780
Economic development 2,088,064 274,833 54,300 -
Interest on long-term debt 1,288,020 - - -
Total governmental activities 23,343,261 2,856,556 954,164 807,208
Business-type Activities:
Municipal liquor 5,706,760 6,756,581 -
Garbage 1,251,420 1,285,138 - -
Sewer 2,320,743 1,613,276 629,092
Water 2,332,680 2,381,651 - 295,549
Electric 28,422,759 31,029,299
Total business-type activities 40,034,362 43,065,945 - 924,641
Total primary government $ 63,377,623 $ 45,922,501 $ 954,164 $ 1,731,849
Component Unit:
Housing and Redevelopment Authority $ 96,722 $ - $ - $ -
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 of capital assets
Transfers
Total general revenues and transfers
Change in net position
Net position-beginning
Net position-ending
The notes to the financial statements are an integral part of this statement.
20
Net(Expense)Revenue and Changes in Net Position
Primary Government
Governmental Business-Type Component
Activities Activities Total Unit-HRA
$ (2,942,168) $ $ (2,942,168) $ -
(4,941,934) (4,941,934)
(5,277,244) (5,277,244) -
(2,517,036) - (2,517,036)
(1,758,931) (1,758,931)
(1,288,020) - (1,288,020)
(18,725,333) - (18,725,333)
1,049,821 1,049,821
33,718 33,718
(78,375) (78,375)
- 344,520 344,520
- 2,606,540 2,606,540 -
- 3,956,224 3,956,224 -
(18,725,333) 3,956,224 (14,769,109)
- _ - (96,722)
9,909,285 9,909,285 251,589
833,085 833,085
87,848 - 87,848
829,112 829,112 -
1,436,135 - 1,436,135 105
(663,762) (243,047) (906,809) 4,274
629,177 1,572 630,749
(121,172) 121,172 -
1,565,206 _ 1,565,206) -
14,504,914 (1,685,509) 12,819,405 255,968
(4,220,419) 2,270,715 (1,949,704) 159,246
117,900,638 83,369,228 201,269,866 1,939,271
$ 113,680,219 $ 85,639,943 $ 199,320,162 $ 2,098,517
21
CITY OF ELK RIVER,MINNESOTA
GOVERNMENTAL FUNDS
BALANCESHEET
DECEMBER 31,2013
Other Total
General YMCA Governmental Governmental
Fund Bonds T1F Districts Funds Funds
ASSETS
Cash and investments $ 6,207,285 $ 411,102 $ 366,979 $ 22,021,956 $ 29,007,322
Cash with fiscal agent - 9,712,875 - 9,712,875
Receivables:
Interest 25,311 - 1,283 75,218 101,812
Taxes 468,299 11,970 69,038 549,307
Accounts 51,312 63,665 541,997 656,974
Special assessments 2,121,102 2,121,102
Notes,net 73,247 362,655 435,902
Due from other governments 35,125 3,031 38,156
Due from other funds 79,759 1,768,989 1,848,748
Due from component unit 2,766 2,766
Prepaid items 14,628 - 99,703 114,331
Total assets $ 6,884,485 $ 10,135,947 $ 505,174 $ 27,063,689 $ 44,589,295
LIABILITIES
Accounts payable $ 242,501 $ $ $ 341,926 $ 584,427
Salaries payable 327,506 19,796 347,302
Due to other governments 63,665 63,665
Due to other funds - 1,247,986 331,696 1,579,682
Due to component unit - - 233,389 - 233,389
Unearned revenue 14,040 - 521,070 535,110
Total liabilities 584,047 1,545,040 1,214,488 3,343,575
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes 246,148 7,322 - 38,357 291,827
Unavailable revenue-special assessments - 2,111,567 2,111,567
Unavailable revenue-notes 362,655 362,655
Total deferred inflows of resources 246,148 7,322 2,512,579 2,766,049
FUND BALANCES
Nonspendable 14,628 - 99,703 114,331
Restricted - 10,128,625 441,509 4,230,734 14,800,868
Committed 247,937 4,393,689 4,641,626
Assigned - - 15,455,671 15,455,671
Unassigned 5,791,725 - (1,481,375) (843,175) 3,467,175
Total fund balances 6,054,290 10,128,625 (1,039,866) 23,336,622 38,479,671
Total liabilities,deferred inflows of
resources,and fund balances $ 6,884,485 $ 10,135,947 $ 505,174 $ 27,063,689 $ 44,589,295
The notes to the financial statements are an integral part of this statement,
22
CITY OF ELK RIVER,MINNESOTA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET POSITION
DECEMBER 31,2013
FUND BALANCE-TOTAL GOVERNMENTAL FUNDS $ 38,479,671
Amounts reported for governmental activities in the statement of net position
are different because:
1. Capital assets used in governmental activities are not financial resources
and,therefore,are not reported in the governmental funds:
Governmental capital assets $178,576,578
Less accumulated depreciation (65,972,039) 112,604,539
2. Unavailable revenue in governmental funds is susceptible to full accrual
on the government-wide statements. 2,766,049
3. Long-term liabilities are not due and payable in the current period and,
therefore,are not reported in the governmental funds:
Bonds payable (36,260,000)
Deferred charge on refunding 330,846
Issuance premium (596,600)
Contracts for deeds (1,410,000)
Accrued interest payable (543,353)
Compensated absences (1,442,996)
Net OPEB obligation (247,937) (40,170,040)
NET POSITION OF GOVERNMENTAL ACTIVITIES $113,680,219
The notes to the financial statements are an integral part of this statement.
23
CITY OF ELK RIVER,MINNESOTA
STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES
GOVERNMENTALFUNDS
FOR THE YEAR ENDED DECEMBER 31,2013
Other Total
General YMCA Governmental Governmental
Fund Bonds TIF Districts Funds Funds
REVENUES
Taxes:
Property taxes $ 9,150,139 $ 258,300 $ 87,848 $ 1,433,842 $ 10,930,129
Other taxes 114,129 - - 714,983 829,112
Licenses and permits 513,779 513,779
Intergovernmental revenue 557,990 603,468 1,161,458
Charges for services 740,756 1,590 1,184,560 1,926,906
Fines and forfeits 122,985 40,496 163,481
Special assessments 764,006 764,006
Interest income 84,214 (52,673) 1,191 (696,495) (663,763)
Miscellaneous:
Landfill expansion fee - 807,851 807,851
Refunds and reimbursements 65,053 - 112,893 177,946
Contributions 14,667 245,743 - 673,381 933,791
Other 7,762 266,221 273,983
Total revenues 11,371,474 451,370 90,629 5,905,206 17,818,679
EXPENDITURES
Current:
General government 2,846,579 - 109,921 2,956,500
Public safety 5,468,765 28,728 5,497,493
Public works 2,279,059 520,953 2,800,012
Culture and recreation 1,619,679 1,033,138 2,652,817
Economic development - 356,850 1,300,072 1,656,922
Debt service:
Principal 300,000 1,894,000 2,194,000
Interest and service charges 544,016 585,556 I,129,572
Bond issuance costs 153,795 153,795
Capital outlay:
General government 41,310 109,438 150,748
Public safety 27,674 343,574 371,248
Public works 32,589 - 3,442,439 3,475,028
Culture and recreation 565,470 565,470
Economic development 680,695 - 680,695
Total expenditures 12,315,655 997,811 1,037,545 9,933,289 24,284,300
Excess(deficiency)of revenues
over expenditures (944,181) (546,441) (946,916) (4,028,083) (6,465,621)
OTHER FINANCING SOURCES(USES)
Transfers in 1,216,000 250,000 4,991,233 6,457,233
Transfers out (422,843) - (4,469,184) (4,892,027)
Refunding bonds issued 9,685,000 9,685,000
Premium on debt issued 341,700 341,700
Principal paid on refunded bonds (1,540,000) (1,540,000)
Sale of capital assets 686,407 686,407
Total other financing sources(uses) 793,157 10,276,700 (331,544) 10,738,313
Net change in fund balances (151,024) 9,730,259 (946,916) (4,359,627) 4,272,692
Fund balances-January 1 6,205,314 398,366 (92,950) 27,696,249 34,206,979
Fund balances-December 31 $ 6,054,290 $ 10,128,625 $ (1,039,866) $ 23,336,622 $ 38,479,671
The notes to the financial statements are an integral part of this statement.
24
CITY OF ELK RIVER,MINNESOTA
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31,2013
NET CHANGE IN FUND BALANCES-TOTAL GOVERNMENTAL FUNDS $ 4,272,692
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 these assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by
which depreciation expense exceeded capital outlays in the current period.
Capital outlay $ 4,592,851
Depreciation expense (5,715,906) (1,123,055)
2. The net effect of various miscellaneous transactions involving capital assets
including transfers and disposals,which decrease net position.
Transfers of capital assets (121,172)
Disposals (1,729,953)
Depreciation on disposals 1,385,090 (466,035)
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 (99,912)
Special assessments (528,917)
Notes 109,281 (519,548)
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 financial resources of governmental funds. Neither
transaction,however,has any effect on net position. Also,governmental
funds report the effect of premiums,discounts and similar items when debt
is first issued,whereas these amounts are deferred and amortized in the
statement of activities. The amounts below are the effects of these differences
in the treatment of long-term debt and related items.
Issuance of long-term debt (9,685,000)
Repayment of principal of long-tern debt 3,734,000
Bond premium (341,700) (6,292,700)
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 (19,459)
Amortization of issuance premium 51,072
Amortization of deferred charge from refunding (36,265)
Compensated absences (47,670)
Net OPEB obligation (39,451) (91,773)
CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $(4,220,419)
The notes to the financial statements are an integral part of this statement.
25
City of
Elk
River
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CITY OF ELK RIVER,MINNESOTA
GENERAL FUND
STATEMENT OF REVENUES,EXPENDITURES,
AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Taxes:
Property taxes $ 9,203,100 $ 9,203,100 $ 9,150,139 $ (52,961)
Other taxes 84,000 84,000 114,129 30,129
Licenses and permits 558,400 558,400 513,779 (44,621)
Intergovernmental revenue 545,600 545,600 557,990 12,390
Charges for services 705,150 730,150 740,756 10,606
Fines and forfeits 127,200 127,200 122,985 (4,215)
Interest income 100,000 100,000 84,214 (15,786)
Miscellaneous revenue:
Refunds and reimbursements 66,500 66,500 65,053 (I,447)
Contributions 25,000 17,400 14,667 (2,733)
Other 6,000 6,000 7,762 1,762
Total revenues 11,420,950 11,438,350 11,371,474 (66,876)
EXPENDITURES
Current:
General government 2,950,550 2,950,550 2,846,579 103,971
Public safety 5,709,000 5,709,000 5,468,765 240,235
Public works 2,131,550 2,131,550 2,279,059 (147,509)
Culture and recreation 1,658,150 1,678,750 1,619,679 59,071
Capital outlay:
General government 44,900 44,900 41,310 3,590
Public safety 28,000 28,000 27,674 326
Public works 20,000 20,000 32,589 (12,589)
Total expenditures 12,542,150 12,562,750 12,315,655 247,095
Deficiency of revenues over expenditures (1,121,200) (1,124,400) (44,181) 180,219
OTHER FINANCING SOURCES(USES)
Transfers in 1,216,000 1,216,000 1,216,000 -
Transfers out (294,800) (294,800) (422,843) (128,043)
Total other financing sources(uses) 921,200 921,200 793,157 (128,043)
Net change in fund balance (200,000) (203,200) (151,024) 52,176
Fund balance-January 1 6,205,314 6,205,314 6,205,314
Fund balance-December 31 $ 6,005,314 $ 6,002,114 $ 6,054,290 S 52,176
The notes to the financial statements are an integral part of this statement.
26
CITY OF ELK RIVER,MINNESOTA
STATEMENTS OF NET POSITION
PROPRIETARY FUNDS
DECEMBER 31,2013 AND 2012
Municipal Liquor Garbage
Current Year Prior Year Current Year Prior Year
ASSETS
Current assets:
Cash and investments $ 1,992,380 S 1,555,676 S 606,857 $ 591,503
Restricted cash and investments -
Receivables(net):
Interest 7,391 4,635 2,207 1,637
Accounts - 13,313 14,281
Due from other governments -
Due from other funds - - 92,162 104,952
Inventories 1,084,352 1,032,803 -
Prepaid items - - -
Total current assets 3,084,123 2,593,114 714,539 712,373
Noncurrent assets:
Capital assets:
Nondepreciable 753,961 753,961
Depreciable 3,084,328 3,084,328
Accumulated depreciation (1,596,785) (1,472,028) -
Total noncurrent assets 2,241,504 2,366,261 - -
Total assets 5,325,627 4,959,375 714,539 712,373
DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding - - -
LIABILITIES
Current liabilities:
Accounts payable 333,588 268,789 99,064 92,912
Salaries payable 24,320 22,217 788
Due to other governments 65,564 66,933
Due to other funds -
Unearned revenue 2,112 1,987
Accrued interest
Compensated absences payable-current 44,800 44,498 -
Notes payable-current -
Bonds payable-current - - - -
Total current liabilities 470,384 404,424 99,064 93,700
Noncurrent liabilities:
Compensated absences payable 60,277 54,815
Net other postemployment benefits obligation 17,631 13,330
Notes payable
Bonds payable
Total noncurrent liabilities 77,908 68,145
Total liabilities 548,292 472,569 99,064 93,700
NET POSITION
Net investment in capital assets 2,241,504 2,366,261
Restricted for debt service - - - _
Unrestricted 2,535,831 2,120,545 615,475 618,673
Total net position $ 4,777,335 $ 4,486,806 $ 615,475 $ 618,673
The notes to the financial statements are an integral part of this statement.
27
Sewer Water Electric Total
Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year
$ 5,446,672 $ 5,287,842 $ 3,390,879 $ 3,254,530 $ 11,410,293 $ 10,646,164 $ 22,847,081
- 647,000 724,500 647,000
20,197 15,359 3,306 2,322 13,225 9,286 46,326
155,215 44,854 160,618 152,945 2,488,572 2,318,928 2,817,718
- - 12,209 12,209
303,385 303,851 87,211 - 395,547
15,005 16,920 963,608 928,800 2,062,965
- - 40,418 34,572 178,028 187,839 218,446
5,925,469 5,651,906 3,610,226 3,548,500 15,712,935 14,815,517 29,047,292
411,095 411,095 807,911 92,242 1,818,210 514,396 3,791,177
37,200,800 37,200,800 33,954,031 33,539,230 54,095,276 53,494,906 128,334,435
(16,616,444) (15,638,513) (13,008,780) (11,976,338) (28,786,989) (27,883,481) (60,008,998)
20,995,451 21,973,382 21,753,162 21,655,134 27,126,497 26,125,821 72,116,614
26,920,920 27,625,288 25,363,388 25,203,634 42,839,432 40,941,338 101,163,906
- - 15,106 16,754 60,419 67,011 75,525
66,056 172,734 76,261 39,519 3,233,508 2,246,876 3,808,477
17,226 159121 17,310 8,065 134,394 81,732 193,250
102 - 155,225 65,666
114,397 550,216 456,681 664,613
- 43,191 31,095 - 8,262 45,303
9,049 11,693 36,368 43,005 82,026 94,796 127,443
12,699 9,792 45,779 449229 106,070 101,094 209,348
- - - 189,353 186,588 189,353
560,000 175,000 527,000 517,000 503,000 588,000 1,590,000
665,030 384,340 860,408 682,913 4,798,567 3,919,254 6,893,453
7,152 9,828 43,454 38,088 137,437 115,973 248,320
I7,693 13,729 - 45,042 40,360 80,366
- 1,599,871 1,789,224 1,599,871
- 560,000 2,098,495 2,626,313 4,678,983 5,410,254 6,777,478
24,845 583,557 2,141,949 2,664,401 6,461,333 7,355,811 8,7069035
689,875 967,897 3,002,357 3,347,314 11,259,900 11,275,065 15,599,488
20,435,451 21,238,382 19,142,773 18,528,575 20,215,709 18,218,766 62,035,437
- 647,000 724,500 647,000
5,795,594 5,419,009 3,233,364 3,344,499 10,777,242 10,790,018 22,957,506
$ 26,231,045 $ 26,657,391 $ 22,376,137 $ 219873,074 $ 31,639,951 $ 29,733,284 $ 85,639,943
28
CITY OF ELK RIVER,MINNESOTA
STATEMENTS OF REVENUES,EXPENSES,AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012
Municipal Liquor Garbage
Current Year Prior Year Current Year Prior Year
Sales and cost of sales:
Sales $ 6,753,521 $ 6,516,386 5 a
Cost of sales (4,705,979) (4,638,550)
Gross profit 2,047,542 1,877,836 -
Operating revenues:
User charges - 1,272,297 1,279,607
Delinquency collections - 10,034 11,540
Other 3,060 8,848 2,807 35,213
Total operating revenues 3,060 8,848 1,285,138 1,326,360
Operating expenses:
Personal services 628,933 607,500 19,811 54,678
Supplies 26,507 16,887 7,077 4,262
Purchased power
Other service charges 220,584 221,593 1,224,532 1,217,947
Depreciation 124,757 124,350
Total operating expenses 1,000,781 970,330 1,251,420 1,276,887
Operating income(loss) 1,049,821 916,354 33,718 49,473
Nonoperating revenues(expenses):
Interest income (87,003) 14,485 (25,161) 5,730
Miscellaneous revenue
Interest expense (13,425)
Gain(loss)on disposal of capital assets -
Capital asset transfer (69,800)
Total nonoperating revenues(expenses) (87,003) (68,740) 25,161 5,730
Income before contributions and transfers 962,818 847,614 8,557 55,203
Contributions-connection fees - -
Capital contributions -
Transfers in
Transfers out (672,289) (468,667) (11,755) (4,120)
Change in net position 290,529 378,947 (3,198) 51,083
Net position-beginning 4,486,806 4,107,859 618,673 567,590
Net position-ending $ 4,777,335 $ 4,486,806 $ 615,475 $ 618,673
The notes to the financial statements are an integral part of this statement.
29
Sewer Water Electric Total
Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year
$ - $ $ $ 6,753,521
- - - (4,705,979)
- - 2,047,542
1,604,673 1,527,337 2,214,697 2,219,145 31,261,292 30,365,645 36,352,959
1,279 2,389 24,328 20,610 254,542 238,314 290,183
7,324 4,125 39,099 25,387 (669,455) (345,269) (617,165)
1,613,276 1,533,851 2,278,124 2,265,142 30,846,379 30,258,690 36,025,977
500,867 477,598 421,753 392,768 1,815,680 1,707,401 3,387,044
130,128 115,607 270,141 273,183 129,967 135,161 563,820
- 21,254,950 20,499,773 21,254,950
689,168 623,453 518,903 465,014 2,897,799 2,908,383 5,550,986
977,931 994,295 1,032,442 1,028,593 2,029,496 2,099,594 4,164,626
2,298,094 2,210,953 2,243,239 2,159,558 28,127,892 27,350,312 34,921,426
(684,818) (677,102) 34,885 105,584 2,718,487 2,908,378 3,152,093
(232,971) 51,112 20,799 30,870 81,289 117,753 (243,047)
- 103,527 78,739 182,920 144,779 286,447
(22,649) (28,961) (89,441) (105,256) (211,429) (236,261) (323,519)
1,572 (1,000) (83,438) 2,260 (81,866)
(255,620) 22,151 36,457 3,353 (30,658) 28,531 (361,985)
(940,438) (654,951) 71,342 108,937 2,687,829 2,936,909 2,790,108
629,092 316,309 295,549 174,607 - 924,641
199,214 121,172 218,845 - 121,172
- - 15,000 15,000
(115,000) (175,156) (39,456) (781,162) (816,864) (1,580,206)
(426,346) (314,584) 503,063 462,933 1,906,667 2,120,045 2,270,715
26,657,391 26,971,975 21,873,074 21,410,141 29,733,284 27,613,239 .83,369,228
$ 26,231,045 $ 26,657,391 $ 22,376,137 $ 21,873,074 $ 31,639,951 $ 29,733,284 $ 85,639,943
30
CITY OF ELK RIVER,MINNESOTA
STATEMENTS OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012
_ _Municipal Liquor Garbage
Current Year Prior Year Current Year Prior Year
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users $ 6,753,646 $ 6,516,537 $ 1,296,089 $ 1,292,638
Other operating cash receipts 3,060 8,848 2,807 35,213
Payments to suppliers (4,941,189) (4,940,851) (I,225,457) (1,224,957)
Payments to employees (616,765) (588,138) (20,599) (54,839)
Net cash provided by operating activities 1,198,752 996,396 52,840 48,055
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers from other funds -
Transfers to other funds (672,289) (468,667) (11,755) (4,120)
Decrease(increase)in due from other funds
Increase(decrease)in due to other funds
Net cash provided(used)by
noncapital financing activities (672,289) (468,66 (11,755) (4,120)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Acquisition of capital assets (32,541)
Proceeds from sale of capital assets
Contributions from developers and residents -
Principal paid on capital debt - (730,000)
Interest paid on capital debt - (27,113)
Principal paid on promissory note
Net cash used by capital
and related financing activities (789,654)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received (89,759) 20,124 (25,731) 7,052
Net increase(decrease)in cash and cash equivalents 436,704 (241,801) 15,354 50,987
Cash and cash equivalents,January 1 1,555,676 1,797,477 591,503 540,516
Cash and cash equivalents,December 31 $ 1,992,380 $ 1,555,676 $ 606,857 $ 591,503
Reconciliation of cash and cash equivalents
to the statement of net position:
Cash and investments $ 1,992,380 $ 1,555,676 $ 606,857 $ 591,503
Restricted cash and investments - -
Total cash and cash equivalents $ 1,992,380 $ 1,555,676 $ 606,857 $ 591,503
The notes to the financial statements are an integral part of this statement.
31
Continued
Sewer Water Electric Total
Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year
$ 1,496,057 $ 1,488,609 $ 2,310,937 $ 2,231,224 $ 30,744,006 $ 30,481,587 $ 42,600,735
7,324 4,125 105,809 87,822 134,209 125,965 253,209
(925,974) (621,835) (822,255) (836,986) (24,329,126) (23,771,526) (32,244,001)
(494,567) (473,992) (370,140) (351,049) (1,518,107) (1,460,301) (3,020,178)
82,840 396,907 1,224,351 1,131,011 5,030,982 5,375,725 7,589,765
- - 15,000 - - 15,000
(115,000) (175,157) (39,456) (781,162) (816,864) (1,580,206)
55,260
201,608 - 93,535 84,127 295,143
(115,000) (175,157) 216,608 15,804 (687,627) (732,737) (1,270,063)
(120,818) (1,010,051) (114,709) (2,540,610) (1,517,549) (3,550,661)
2,325 27,000 14,458 29,325
629,092 316,309 295,549 174,607 924,641
(175,000) (170,000) (517,000) (491,000) (813,000) (559,000) (1,505,000)
(25,293) (31,440) (95,248) (110,492) (220,878) (241,275) (341,419)
- - - (186,588) I87,070 (186,588)
428,799 (5,949) (1,324,425) (541,594) (3,734,076) (2,490,436) (4,629,702)
(237,809) 64,387 19,815 29,735 77,350 113,216 (256,134
158,830 280,188 136,349 634,956 686,629 2,265,768 1,433,866
5,287,842 5,007,654 3,254,530 2,619,574 11,370,664 9,104,896 22,060,215
$ 5,446,672 $ 5,287,842 $ 3,390,879 $ 3,254,530 $ 12,057,293 $ 11,370,664 $ 23,494,081
$ 5,446,672 $ 5,287,842 $ 3,390,879 $ 3,254,530 $ 11,410,293 $ 10,646,164 $ 22,847,081
- - - - 647,000 724,500 647,000
$ 5,446,672 $ 5,287,842 $ 3,390,879 $ 3,254,530 $ 12,057,293 $ 11,370,664 $ 23,494,081
32
CITY OF ELK RIVER,MINNESOTA
STATEMENTS OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012
Municipal Liquor Garbage
Current Year Prior Year Current Year Prior Year
Reconciliation of operating income(loss)to net cash
provided by operating activities:
Operating income(loss) $ 1,049,821 $ 916,354 $ 33,718 $ 49,473
Adjustments to reconcile operating income(loss)to
net cash provided by operating activities:
Other revenue related to operations - - -
Depreciation expense 124,757 124,350 - -
(Increase)decrease in assets:
Accounts receivable 968 (1,280)
Due from other funds 12,790 2,771
Due from other goverments
Inventories (51,549) (31,067)
Prepaid items -
Increase(decrease)in:
Accounts payable 64,799 (36,820) 6,152 (2,748)
Salaries payable 2,103 2,728 (788) (161)
Due to other governments (1,369) 4,066
Unearned revenue 125 151
OPEB liability 4,301 4,500
Compensated absences payable 5,764 12,134 - -
Net cash provided by operating activities $ 1,198,752 $ 996,396 $ 52,840 $ 48,055
Noncash capital and related financing activities:
Amortization of bond premium $ $ $ $
Amortization of deferred charges on refunding
Contribution of capital assets from(to)municipality (69,800)
Assets purchased on account -
Disposal of capital assets,net -
The notes to the financial statements are an integral part of this statement.
33
Sewer Water Electric Total
Current Year Prior Year Current Year Prior Year Current Year Prior Year Current Year
$ (684,818) $ (677,102) $ 34,885 $ 105,584 $ 2,718,487 $ 2,908,378 $ 3,152,093
- 103,527 78,739 182,920 144,779 286,447
977,931 994,295 1,032,442 1,028,593 2,029,496 2,099,594 4,164,626
(110,361) (34,071) (7,673) (25,844) (169,644) 184,681 (286,710)
466 (7,045) 13,256
- (12,209) 1,627 (12,209)
1,915 8,989 (34,808) 68,325 (84,442)
(5,846) (15,887) 9,811 (65,773) 3,965
(106,678) 117,225 36,742 (51,854) 386,632 50,178 387,647
2,105 (332) 9,245 1,602 52,662 7,233 65,327
- 102 (918) (155,225) (38,183) (156,492)
12,096 1,195 (8,262) 8,262 3,959
3,964 4,246 4,682 4,601 12,947
231 (309) 6,916 812 26,440 2,023 39,351
$ 82,840 $ 396,907 $ 1,224,351 $ 1,131,011 $ 5,030,982 $ 5,375,725 $ 7,589,765
$ $ $ 818 $ 818 $ 3,271 $ 3,271 $ 4,089
1,648 1,648 6,592 6,592 8,240
199,214 121,172 218,845 - - 121,172
- 600,000 600,000
753 1,000 110,438 9,211 111,191
34
CITY OF ELK RIVER,MINNESOTA
STATEMENT OF FIDUCIARY NET POSITION
DEVELOPER ESCROW AGENCY FUND
DECEMBER 31,2013
Agency
Fund
ASSETS
Cash $ 41,738
Accounts receivable 2,377
Total assets $ 44,115
LIABILITIES
Refundable deposits payable $ 44,115
The notes to the financial statements are an integral part of this statement.
35
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Description of Government-Wide Financial Statements
The government-wide financial statements(i.e.,the statement of net position and the statement of activities)report
information on all of the nonfiduciary activities of the primary government and its component units. All fiduciary
activities are reported only in the fund financial 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 to external customers for support. Likewise,the primary government is reported separately
from certain legally separate component units for which the primary government is financially accountable.
B. Reporting Entity
The City of Elk River operates under the"Optional Plan A" form of government as defined m 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 may be 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 fmancial 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.Based upon the application of these criteria,the City has the following component units:
Blended Component Unit
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 City has operational responsibility and that
it is this criterion that results in the EDA being reported as a blended component unit.The EDA is reported as a special
revenue fund and does not issue separate financial statements.
Discretely Presented Component Unit
The Housing and Redevelopment Authority(HRA)is a legally separate entity created to carry out community
development consistent with policies established by the City Council. The HRA is governed by five council appointed
members,one of which is a Council Member;however,the City does not have a financial benefit or burden relationship
and does not have operational responsibility. It is this criterion that results in the HRA being reported as a discretely
presented component unit. The HRA does not issue separate financial statements and are included in the financial
section of this report.
36
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
C. Basis of Presentation—Government-Wide Financial Statements
While separate government-wide and fund financial statements are presented,they are interrelated. The governmental
activities column incorporates data from governmental funds,while business-type activities incorporate data from the
City's enterprise funds. 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.
As discussed earlier,the City has one discretely presented component unit. While the HRA is not considered to be a
major component unit,it is nevertheless shown in a separate column in the government-wide financial statements.
As a general rule,the effect of interfund activity has been eliminated from government-wide financial statements.
Exceptions to this general rule are charges between the City's sewer, water and electric functions and various other
functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the
various functions concerned.
D. Basis of Presentation--Fund Financial Statements
The fund financial statements provide information about the City's funds,including its fiduciary funds and blended
component units. Separate statements for each fund category—governmental,proprietary,and fiduciary—are presented.
The emphasis of fund financial statements is on major governmental and enterprise funds,each displayed in a separate
column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Major
individual governmental and enterprise funds are reported as separate columns in the fund financial statements.
The government reports the following major governmental funds:
The General fund is the City's primary operating fund. It accounts for all financial resources of the general
government,except those required to be accounted for in another fund.
The YMCA bonds debt service fund is used to account for the accumulation of resources and payment of principal
and interest on bonds used to finance the construction of a recreation facility which is leased to the YMCA.
The TIF districts capital projects fund is used to account for administrative and development costs associated with
the various tax increment financing projects.
The government reports the following major enterprise 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 and recycling collection programs.
The Sewer fund accounts for the activities of the City's sanitary sewer treatment system.
The Water 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:
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.
During the course of operations the government has activity between funds for various purposes. Any residual balances
outstanding at year end are reported as due from/to other funds. While these balances are reported in fund financial
statements,certain eliminations are made in the preparation of the government-wide financial statements. Balances
37
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
between the funds included in governmental activities(i.e.,the governmental funds)are eliminated so that only the net
amount is included as internal balances in the governmental activities column. Similarly,balances between the funds
included in business-type activities(i.e.,the enterprise funds)are eliminated so that only the net amount is included as
internal balances in the business-type activities column.
Further,certain activity occurs during the year involving transfers of resources between funds. In fund financial
statements these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements,
certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the
funds included in governmental activities are eliminated so that only the net amount is included as transfers in
governmental activities column. Similarly,balances between the funds included in business-type activities are
eliminated so that only the net amount is included as transfers in the business-type activities column.
E. Measurement Focus,Basis of Accounting, and Financial Statement Presentation
The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of
accounting. Measurement focus indicates the type of resources being measured such as current financial resources or
economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the
financial statements.
The government-wide 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. 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.
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,other postemployment benefits,and claims and judgments,are recorded only when payment is
due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt
and acquisitions under capital leases are reported as other financing sources
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. Entitlements are recorded as
revenues when all eligibility requirements are met,including any time requirements,and the amount is received during
the period or within the availability period for this revenue source(within 60 days of year end). Expenditure-driven
grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility
requirements have been met,and the amount is received during the period or within the availability period for this
revenue source(within 60 days of year end). 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.
The proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting.
The agency fund has no measurement focus but utilizes the accrual basis of accounting for reporting its assets and
liabilities.
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.
38
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
F. Budgetary Information
1. Budgetary Basis of Accounting
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 financial plans are adopted for
all capital projects funds. All annual appropriations lapse at fiscal yearend.
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 may be 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 increased$3,200 due mainly to park maintenance.
2. Excess of Expenditures Over Appropriations
For the year ended December 31,2013,expenditures exceeded appropriations in the Library fund by$2,990,which
was funded by available fund balance.
G. Assets,Liabilities,Deferred Outflows/Inflows of Resources,and Net Position/Fund Balance
1. Cash 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
2. Receivables and Payables
Property 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. Property tax levies are based
on property values assessed on January 2 of the preceding year. The County spreads all levies over all taxable
property. 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.
39
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
In the fund financial statements,taxes that remain unpaid at December 31 are classified as delinquent taxes and are
offset by a deferred inflow of resources for delinquent taxes not received within 60 days after year end. Deferred
inflow of resources for taxes 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,
2013 and December 31,2012 is as follows:
Increase
2013 2012 (Decrease)
Electric $ 109,845 $ 109,845 $
Water _26,250 26,250
Total $ 105.000 $ 105,000 $
Special Assessments
Special assessments receivable include the following components:
• Delinquent-includes amounts billed to property owners but not paid.
• Unavailable-includes assessment installments that will be billed to property owners in future
years.
Special assessments represent the financing for public improvements paid for by benefiting property owners. These
assessments are recorded as receivables upon certification to the County. In governmental fund financial statements,
special assessments are recognized as revenue when they are received in cash or within 60 days after year end. All
governmental special assessments receivable not received within 60 days after year end are offset by a deferred
inflow of resources in the governmental fund financial statements. At December 31,2013,the total delinquent
special assessment receivable balance was$69,609.
Notes Receivable
The City received grant proceeds from the State of Minnesota to iimd economic development projects. These funds
have been loaned to several businesses and the terms of repayment vary with each loan. Notes receivable in the
Revolving Loan fund is offset by a deferred inflow of resources. Deferred inflow of resources 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. The cost of prepaid items is recorded as expenditures/expenses
when consumed rather than when purchased.
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.
40
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
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 financial statements. Capital assets are defined by the government as assets with an initial,individual cost of
more than$10,000 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.
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
6. Deferred Outflows/Inflows of Resources
In additions to assets,the statement of financial position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element,deferred outflows of resources,represents a
consumption of net position that applies to a future period(s)and so will not be recognized as an outflow of resources
(expense/expenditure)until then. The City only has one item that qualifies for reporting in this category. It is the
deferred charge on refunding reported in the government-wide and proprietary funds statement of net position. A
deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition
price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt.
In addition to liabilities,the statement of financial position and fund financial statements will sometimes report a
separate section for deferred inflows of resources. This separate financial statement element,deferred inflows of
resources,represents an acquisition of net position that applies to a future period(s)and so will not be recognized as
an inflow of resources(revenue)until that time. The City has only one type of item,which arises only under a
modified accrual basis of accounting that qualifies for reporting in this category. Accordingly,the item,unavailable
revenue,is reported only in the governmental funds balance sheet. The governmental funds report unavailable
revenues from three sources:property taxes,special assessments and notes receivable. These amounts are deferred
and recognized as an inflow of resources in the period that the amounts become available.
7. Unearned Revenue
Unearned 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 unearned revenue. At
December 31,2013,the balance reported in the governmental fund financial statements consists of$517,935 from
unearned park dedication credits and$17,175 from other unearned miscellaneous fees and contributions.
41
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED
8. 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 position. The recognition of bond premiums and discounts are
delayed and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of
the applicable bond premium or discount. Bond issuance costs are reported as an expense in the period incurred.
In the fund financial statements,governmental fund types recognize bond premiums and discounts,as well as bond
issuance costs,during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are
reported as other financing uses. Issuance costs,whether or not withheld from the actual debt proceeds received,are
reported as debt service expenditures.
4. Compensated Absences
It is the City'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 192 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.
10. Fund Balance
In the fund financial statements,fund balance is divided into five classifications based primarily on the extent to
which the City is bound to observe constraints imposed upon the use of resources reported in governmental funds.
These classifications are as follows:
Nonspendable-consists of amounts that cannot be spent because it is not in spendable form,such as prepaid
items.
Restricted-consists of amounts related to externally imposed constraints established by creditors,grantors or
contributors; or constraints imposed by state statutory provisions.
Committed-consists of amounts that are constrained for specific purposes that are internally imposed by formal
action(resolution)of the City Council. Those committed amounts cannot be used for any other purpose unless
City Council removes or changes the specified use by taking the same type of action it employed to previously
commit those amounts.
-4ssigned-consists of amounts intended to be used by the City for specific purposes but do not meet the criteria
to be classified as restricted or committed. In governmental funds other than the general fund,assigned fund
balance represents the remaining amount that is not restricted or committed. In the general fund,assigned
amounts represent intended uses established by the governing body itself or by an official to which the governing
body delegates the authority. Pursuant to City Council Resolution,the City's Finance Director and/or City
Administrator is authorized to establish assignments of fund balance.
Unassigned-is the residual classification for the general fund and also reflects negative residual amounts in
other funds.
42
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED
The City uses restricted amounts to be spent first when both restricted and unrestricted fund balance is available.
Additionally,the City would first use committed,then assigned,and lastly unassigned amounts of unrestricted fund
balance when expenditures are made.
The City Council has formally adopted a fund balance policy for the General Fund. The City's policy is to maintain a
minimum unassigned fund balance of 40-45%of budgeted operating expenditures for cash-flow timing needs.
11. Net Position
Net position represents the difference between assets and deferred outflows and liabilities. Net position is displayed
in three components:
a. Net investment in capital assets-Consists of capital assets,net of accumulated depreciation reduced by any
outstanding debt attributable to acquire capital assets.
b. Restricted net position-Consist of net position balances restricted when there are limitations imposed on
their use through external restrictions imposed by creditors,grantors,laws or regulations of other
governments.
c. Unrestricted net position-All other net position balances that does not meet the definition of"restricted"or
"net investment in capital assets".
When both restricted and unrestricted resources are available for use,it is the City's policy to use restricted
resources first,then unrestricted resources as they are needed.
12. Revenues and Expenditures/Expenses
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.
13. 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.
43
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 2: STEWARDSHIP,COMPLIANCE,AND ACCOUNTABILITY
A. Deficit Fund Equity
The following funds had deficit fund balances at December 31,2013:
Primary Government:
TIF Districts-major capital projects fund $ 1,039,866
Park Dedication-capital projects fund $ 839,659
The City plans to eliminate these deficits through future park dedication and tax increment fund revenues.
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
famishing the collateral.
At year end,the City's carrying amount of deposits was$13,545,562 and the bank balance was$13,456,471. The bank
balance was covered by federal depository insurance totaling$1,130,472 and the remaining balance was covered by
securities held by the pledging financial institution's agent in the City's name.
The carrying amount of deposits for the HRA,a discretely presented component unit,was$1,043,777 and the bank
balance was$1,043,777. The bank balance was covered by federal depository insurance and securities held by the
pledging financial institution's agent in the HRH'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.
44
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS-CONTINUED
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 31,2013 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.
• Concentration risk-Concentration risk is the risk of loss that may be 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 31,2013,more than 5%of the City's investments were held in the following U.S.Agencies:
Federal National Mortgage Association(33.4%),Federal Home Loan Bank(18.2%),Federal Farm Credit Bank
(6.2%),and Federal Home Loan Mortgage Corporation(2.9%).
• 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 RBC Global Asset Management at 100 South Fifth Street Suite 2300,Minneapolis,MN 55402-1240.
45
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS-CONTINUED
As of December 31,2013,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 $ 5,286,418
Broker Money Markets N/A Less than 6 months 568,761
Total pooled investments 5,855,179
Non-pooled investments:
U.S.Government Securities AA 1 to 5 years 476,936
AAA 1 to 5 years 972,652
AA More than 5 years 461,605
AAA More than 5 years 26,317,018__
Total U.S.Government Securities 28,228,211
U.S.Treasury Securities AAA Less than 6 months 107,691
AAA 1 to 5 years 239,549
Total U.S.Treasury Securities 347,240
Municipal Securities A 1 to 5 years 263,490
AA 6 to 12 months 250,728
AA 1 to 5 years 1,514,830
AA More than 5 years 1,419,520
AAA 1 to 5 years 1,022,718
AAA More than 5 years 2,081,266
Total Municipal Securities 6,552,552
Negotiable CD's NIA Less than 6 months 1,094,951
6 to 12 months 1,953,541
1 to 5 years 3,762,855
More than 5 years 911,270
Total negotiable CD's 7,722,617
Total non-pooled investments 42,850,620
Total investments 48,705,799
Deposits 13,545,562
Cash on hand 4,655
Total cash and investments $ 62,256,016
(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.
46
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
Cash and investments are presented in the financial statements as follows:
Primary Component
Government Unit-HRA
Statement of Net Position
Cash and investments $ 51,854,403 $ 1,043,777
Restricted cash and investments 647,000 -
Cash with fiscal agent 4,712,875
Statement of Fiduciary Net Assets
Cash and investments 41,738 -
Total $ 62,256,016 $ 1,043,777__
B. Notes Receivable
The City has made several business subsidy loans to local businesses, some of which were tunded 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,the City retains the grant repayments. Notes receivable of
$73,247 in the TIF Districts fund and$362,655 in the Revolving Loan fund are outstanding at December 31,2013.
In 2013,the Federal DEED fund loaned$400,000 to several businesses through the Forgivable Loan Program targeting
manufacturing,industrial,and high-tech businesses to stimulate private sector investment. The note is deferred until the
businesses have complied with the note agreements for a minimum of one year,at which time the note is then forgiven.
In 2006,the HRA issued a loan to a developer to assist in the financing 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. Notes receivable of$400,000 in the HRA is
outstanding at December 31,2013.
47
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2,013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
C. 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 position. Capital asset activity for the year ended December 31,2013 was as follows:
Beginning Ending
Primary Government Balance Additions Deletions Balance
Governmental activities:
Capital assets not being depreciated:
Land $ 37,864,101 $ - $ (57,230) $ 37,806,871
Construction in progress 8,861,930 636,630 (9,498,560)
Total capital assets
not being depreciated 46,726,031 636,630 (9,555,790) 37,806,871
Capital assets being depreciated:
Buildings 36,268,984 8,836,450 (117,000) 44,988,434
Other improvements 4,779,886 861,109 (394,162) 5,246,833
Equipment 10,717,298 970,925 (462,738) 11,225,485
Infrastructure _ 77,342,653 2,665,125 (698,823) 79,308,955
Total capital assets
being depreciated 129,108,821 13,333,609 (1,672,723) 140,769,707
Less accumulated depreciation for:
Buildings 12,488,910 1,583,678 (107,900) 13,964,688
Other improvements 2,717,399 306,559 (189,897) 2,834,061
Equipment 7,186,924 800,516 (422,943) 7,564,497
Infrastructure 39,247,990 3,025,153 (664,350) 41,608,793
Total accumulated depreciation 61,641,223 5,715,906 (1,385,090) 65,972,039
Total capital assets
being depreciated,net 67,467,598 7,617,703 (287,633) 74,797,668
Governmental activities
capital assets,net $ 114,193 629 $ 8,254,333 $ (9.843,423) $ 112,604,539
Business-type activities:
Capital assets not being depreciated:
Land $ 1,486,693 $ 39,315 $ 1,526,008
Construction in progress _ 285,001 2,972_,484 (992,316) 2,265,169
Total capital assets
not being depreciated 1,771,694 3,011799 (992,316) 3,791,177
Capital assets being depreciated:
Buildings 19,507,731 122,872 19,630,603
Equipment 5,348,965 367,180 (145,696) 5,570,449
Collection and distribution 102,462,568 1,762,298 (1,091,483) 103,133,383
Total capital assets
being depreciated 127,319,264 2,252,350 1 128,334,435
Less accumulated depreciation for:
Buildings 8,340,137 646,320 8,986,457
Equipment 4,012,910 270,856 (115,922) 4,167,844
Collection and distribution 44,617,313 3,247,450 (1,010,066) 46,854,697
Total accumulated depreciation 56,970,360 4,164,626 (1,125,988) 60,008,998
Total capital assets
being depreciated,net 70,348,904_ (1,912,276) (111,191) 68,325,437
Business-type activities
capital assets,net $ 72,120,598 $ 1,099,523 $ (1,103,507) $ 72,116.614
48
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
Capital asset activity for the HRA component unit for the year ended December 31,2013 was as follows:
Beginning Ending
Component Unit Balance Additions Deletions Balance
Capital assets not being depreciated:
Land S 257,100 $ $ $ 257,100
Capital assets being depreciated:
Other improvements 174,290 174290
Less accumulated depreciation for:
Other improvements 968 11,619 - 12,587
Total capital assets
being depreciated,net 173,322 (11,619) 161,703
Component unit
capital assets,net $ 430,422 $ f 11,619) S $ 418,803
Depreciation expense was charged to functions/programs of the primary government as follows:
Govermnental activities:
General government $ 289,379
Public safety 608,510
Public works 3,629,254
Culture and recreation 1,188,763
Total depreciation expense-governmental activities $ 56
Business-type activities:
Municipal liquor $ 124,757
Sewer 977,931
Water 1,032,442
Electric 2,029,496
Total depreciation expense-business-type activities $ 4,164,626
D. Interfund Receivables,Payables,and Transfers
The composition of interfund balances as of December 31,2013 is as follows:
Due tolfrom other funds:
Receivable Fund Payable Fund Amount
General Electric $ 58,423
General Water 13,254
General Nonmajor governmental funds 8,082
Garbage Electric 92,162
Sewer Electric 131,585
Sewer Nonmajor governmental funds 171,800
Nonmajor govemmental funds TIF districts 1,247,986
Nonmajor governmental funds Water 101,143
Nonmajor governmental funds Electric 268,046
Nonmajor governmental funds Nonmajor governmental funds 151,814
Total $ 2,244,295
49
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
The interfund receivable/payable balances result from the distribution of utility collections and the lending/borrowing
arrangements between funds for operating or capital purposes.
Due to/from component unit:
Receivable Entity Payable Entity Amount
Primary government-General Fund Component unit-HRA $ 2,766
Component unit-HRA Primary government-TIF Districts 233,389
The outstanding balance between the primary government and the component unit represents the transfer for
administrative services and the lending/borrowing arrangement to finance construction costs. The$233,389 payable to
the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year.
Interfund transfers:
Governmental funds: Transfer In Transfer Out
Major funds-
General $ 1,216,000 $ 422,843
YMCA bonds 250,000 -
Nonmajor funds 4,991,233 4,469,184
Total governmental funds 6,457,233 4,892,027
Proprietary funds:
Municipal liquor - 672,289
Garbage 11,755
Sewer - 115,000
Water 15,000
Electric - 781,162
Total proprietary funds 15,000 1,580,206
Total $ 6,472,233 $ 6,472,233
Interfund transfers are used to allocate financial resources to the funds that receive benefit from services provided by
another fund,to provide additional capital funding,or to move revenues from the fund with collection authorization to
debt service funds as principal and interest payments come due. In addition,interfund transfers are occasionally
authorized to allow redistribution of resources between funds for the most efficient use of funds. In 2013,the Street
Improvements fund transferred$3,000,000 to provide startup funding for the creation of the Pavement Management fund
and financing for street improvements.
50
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
E. Long-term Debt
Long-term debt obligations outstanding at year end are summarized as follows:
Issue Maturity Interest Authorized Payable
PRIMARY GOVERNMENT Date Date Rate and Issued 12/31/13
GOVERNMENTAL ACTIVITIES:
General Obligation Bonds:
2006C G.O.Capital Improvement Bonds 12/14/2006 2/1/2027 3.80-4.05% $ 3,220,000 $ 2,535,000
2007D EDA G.O.Bonds 11/8/2007 2/1/2017 3.80% 10,000,000 10,000,000
2008A EDA G.O.Bonds 2/20/2008 2/1/2015 3.38% 2,000,000 645,000
2010A G.O.Capital Improvement Bonds 4/21/2010 2/1/2023 2.00-4.00% 6,105,000 4,835,000
2012A G.O.Capital Improvement Bonds 3/15/2012 2/1/2033 1.00-2.50% 6,975,000 6,975,000
2013A EDA G.O.Refunding Bonds 2/12/2013 2/1/2033 2.00-3.00% 9,685,000 9,685,000
Total general obligation bonds 37,985,000 34,675,000
Special Assessment Bonds:
2003A G.O.Improvement Bonds 12/9/2003 2/1/2014 2.00-4.00% 1,255,000 60,000
2012B G.O.Improvement Refunding Bonds 3/15/2012 2/1/2018 2.00% 1,525,000 1,525,000
Total special assessment bonds 2,780,000 1,585,000
Total bonded indebtedness 40,765,000 36,260,000
Contracts for deeds 4/12/2008 4/6/2013 5.00-6.00% 1,800,000 1,410,000
Compensated absences payable 1,442,996
Net OPEB obligation - 247,937
Total governmental activities indebtedness $ 42,565,000 $ 39,360,933
BUSINESS-TYPE ACTIVITIES:
General Obligation Revenue Bonds:
2003E G.O.Water Revenue Bonds 12/9/2003 2/1/2014 2.00-3.70% $ 1,995,000 $ 235,000
2005B G.O.Sewer Revenue Refunding Bonds 6/14/2005 2/1/2016 3.00-4.00% 1,660,000 560,000
2008A G.O.Water Revenue Refunding Bonds 2/20/2008 2/1/2022 2.50-3.65% 3,085,000 2,180,000
2010A G.O.Capital Improvement Bonds 4/21/2010 8/1/2023 2.00-4,00% 1,265,000 1,015,000
Total general obligation revenue bonds 8,005,000 3,990,000
Revenue Bonds:
2006A Electric Revenue Bonds 3/2/2006 8/1/2021 3.15-4.00% 3,595,000 2,180,000
2007A Electric Revenue Bonds 3/28/2007 2/1/2022 4.00% 2,875,000 2,160,000
Total revenue bonds 6,470,000 4,340,000
Total bonded indebtedness 14,475,000 8,330,000
Promissory note 3/19/2002 12/31/2022 % 3,521,000 1,789,224
Compensated absences payable 457,668
Net OPEB obligation 80,366
Total business-type activities indebtedness $ 17,996,000 $ 10,657,258
Total City indebtedness $ 60,561,000 $ 50,018,191
51
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS-CONTINUED
Annual debt service requirements to maturity for long-term obligations are as follows:
Primary Government-Governmental Activities
G.O.Bonds Special Assessment Bonds Contract for deed
Principal Interest Principal Interest Principal Interest
2014 $ I,160,000 $ 1,054,579 S 375,000 $ 28,550 $ 1,410,000 S 84,600
2015 1,195,000 1,027,045 310,000 21,100 -
2016 1,275,000 995,159 305,000 14,950
2017 10,530,000 957,026 300,000 8,900
2018 1,440,000 535,338 295,000 2,950
2019-2023 7,870,000 2,020,971 - -
2024-2028 5,710,000 1,087,179
2029-2033 5,495,000 387,444 - - -
Total S 34,675,000 $ 8,064,741 $ 1,585,000 $ 76,450 1,410,000 84,600
Primary Government-Business-Type Activities
G.O.Revenue Bonds Revenue Bonds Notes Payable
Princi a-1 Interest Principal Interest Principal Interest
2014 $ 1,155,000 $ 116,866 $ 435,000 $ 165,023 S 189,353 $
2015 300,000 92,840 455,000 148,480 191,508
2016 305,000 84,333 470,000 131,160 194,292
2017 320,000 74,850 490,000 113,053 195,216
2018 335,000 63,948 515,000 93,815 198,252
2019-2023 1,575,000 132,484 1,975,000 160,964 820,603
Total $ 3,990,000 $ 565,321 $ 4,340,000 $ 812,495 $ 1,789,224 $
Long-term liability activity for the year ended December 31,2013 was as follows:
Beginning Ending Due Within
PRIMARY GOVERNMENT Balance Additions Reductions Balance One Year
GOVERNMENTAL ACTIVITIES:
Bonds payable:
General obligation bonds $ 26,334,000 $ 9,685,000 $ (1,344,000) $ 34,675,000 $ 1,160,000
Special assessment bonds 3,975,000 - (2,390,000) 1,585,000 375,000
Issuance premium 305,972 341,700 (51,072) 596,600 -
Total bonds payable 30,614,972 10,026,700 (3,785,072) 36,856,600 1,535,000
Contracts for deeds 1,410,000 - 1,410,000 1,410,000
Compensated absences 1,395,326 653,660 (605,990) 1,442,996 588,619
Net OPEB obligation 208,486 _ 86,785 (47,334) 247,937 -
Govermnental activity
long-term liabilites 33,628,784 10,767,145 (4,438,396) 39,957,533 3,533,619
BUSINESS-TYPE ACTIVITIES:
Bonds payable
G.O.revenue bonds 4,750,000 (760,000) 3,990,000 1,155,000
Revenue bonds 5,085,000 - (745,000) 4,340,000 435,000
Issuance premium 41,567_ - (4,089) 37,478 -
Total bonds payable 9,876,567 (1,509,089) 8,367,478 1,590,000
Notes payable 1,975,812 - (186,588) 1,789,224 189,353
Compensated absences 418,317 306,374 (267,023) 457,668 209,348
Net OPEB obligation 67,419 15,807 (2,860) 80,366 -
Business-type activity
long-term liabilities 12,338,115 322,181 (1,965,560) 10,694,736 1,988,701
Total primary government
long-term liabilities $ 45,966,899 $ 11,089,326 $ (6,403,956) $ 50,652,269 $5.522,320
52
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
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,a public safety facility,a public
works facility and finance a street improvement project. The recreation facility is leased to the YMCA,which has
pledged to pay one-third of the$10,645,000 bonds outstanding. The bonds are general obligations of the City and
are backed by its full faith and credit.
The special assessment bonds are used to finance 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.
For the governmental activities,the City also entered into a contract for deed to finance the acquisition of park
property. Compensated absences and other postemployment benefits are generally liquidated through the General
fund.
For the business-type activities,the general obligation revenue bonds were issued to finance capital improvements. The
bonds are payable from future revenues pledged from the Sewer and Water funds and are backed by the full faith and
credit of the City. Annual principal and interest payments on the bonds are expected to require about 12 and 27 percent
of revenues from the Sewer and Water funds,respectively. For 2013,principal and interest paid and total operating
revenues for the Sewer fund were$200,293 and$1,613,276,respectively. For 2013,principal and interest paid and total
operating revenues for the Water fund were$612,248 and$2,278,124,respectively.
The revenue bonds were issued to finance the acquisition and construction of major capital facilities and are to be repaid
from future revenues pledged from the Electric fund. Annual principal and interest payment on the bonds required about
3 percent of revenues from the Electric fund. For 2013,principal and interest paid and total customer revenues for the
Electric fund were$1,033,878 and$30,846,379,respectively.
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.
On February 12,2013 the EDA issued$9,685,000 G.O.Refunding Bonds, Series 2013A. The bonds bear an average
coupon rate of 2.2 percent and will be used to call$9,225,000 of the outstanding principal of the EDA G.O.Bonds,
Series 2007D on February 1,2017. As a result of the refunding issue,the EDA will save$1,001,112 in debt service
payments and achieve an economic gain(the present value of the difference between the old and the new debt service)of
$795,866.
53
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 3: DETAILED NOTES ON ALL FUNDS—CONTINUED
F. Fund Balance Classification
At December 31,2013,a summary of the governmental fund balance classifications are as follows:
Other
General YMCA Governmental
Fund Bonds TIF Districts Funds Total
Nonspendable:
Prepaid items $ 14,628 $ - $ $ 99,703 $ 114,331
Restricted for:
Debt service $ $ 10,128,625 $ $ 1,753,800 $ 11,882,425
Landfill mitigation 660,000 660,000
Economic development - 441,509 1,744,897 2,186,406
Insurance benefits - - 22,850 22,850
Law enforcement - 45,671 45,671
Park improvements - 3,516 3,516
Total restricted $ - $ 10,128,625 $ 441,509 $ 4,230,734 $ 14,800,868
Committed to:
Library operations $ $ - $ $ 448,680 $ 448,680
Ice arena = - 245,124 245,124
Economic development - - 2,296,904 2,296,904
Insurance reserve - - - 195,438 195,438
Street improvements - 1,207,543 1,207,543
OPEB obligation 247,937 - 247,937
Total committed $ 247,937 $ - $ $ 4,393,689 $ 4,641,626
Assigned to:
Landfill mitigation $ - $ $ $ 655,177 $ 655,177
Law enforcement - 992 992
Debt service - 37,796 37,796
Economic development - 174,901 174,901
Capital equipment - 2,363,328 2,363,328
Building construction/improvements = 3,864,325 3,864,325
Street improvements - 1,794,744 1,794,744
Other improvement projects - 6,387,251 6,387,251
Park improvements - - 177,157 177,157
Total assigned $ - $ - $ $ 15,455,671 $ 15,455,671
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(IBNRs). The City's
management is not aware of any incurred but not reported claims.
54
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION—CONTINUED
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 may be disallowed by the grantor cannot be determined at this
time,although the government expects such amounts,if any,to be immaterial.
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. 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.
The Utilities paid$1,023 and$3,948 in 2013 and 2012,respectively,for loss of revenues under this agreement. All
amounts paid are included in property and equipment.
D. 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 General Employees Retirement Fund(GERF)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.
GERF 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.
55
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
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 service. For all PEPFF and GERF 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 equal 90. 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 financial report that includes financial statements and required supplementary
information for GERF and PEPFF. That report may be obtained on the internet at www.mnpera.org,by writing
to PERA, 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. GERF Basic Plan members and Coordinated Plan members are
required to contribute 9.1%and 6.25%,respectively,of their annual covered salary in 2013. PEPFF members
were required to contribute 9.6%of their annual covered salary in 2013. In 2013,the City of Elk River was
required to contribute the following percentages of annual covered payroll: 11.78%for Basic Plan members,
7.25%for Coordinated Plan members,and 14.4%for PEPFF members. The City's contributions to the General
Employees Retirement Fund for the years ending December 31,2013,2012 and 2011 were$584,075,$553,395
and$528,696,respectively. The City's contributions to the Public Employees Police&Fire Fund for the years
ending December 31,2013,2012 and 2011 were$383,545,$369,421 and$355,670,respectively. The City's
contributions were equal to the contractually required contributions for each year as set by state statute.
c. Defined Contribution Plan
Three council members of the City of Elk River are covered by the Public Employees Defined Contribution
Plan(PEDCP),a multiple-employer deferred compensation plan administered by the Public Employees
Retirement Association of Minnesota(PERA). The PEDCP is a tax qualified plan under Section 401(a)of the
Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of
withdrawal.
56
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION—CONTINUED
Plan benefits depend solely on amounts contributed to the plan plus investment earnings,less administrative
expenses. Minnesota Statutes,Chapter 353D.03,specifies plan provisions,including the employee and
employer contribution rates for those qualified personnel who elect to participate. An eligible elected official
who decides to participate contributes 5 percent of salary which is matched by the elected official's employer.
For salaried employees,employer contributions are determined by the employer and must be a fixed percentage
of salary. Employees who are paid for their services may elect to make member contributions in an amount not
to exceed the employer share. Employer and employee contributions are combined and used to purcbase shares
in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the
plan,PERA receives 2 percent of employer contributions and twenty-five hundredths of one percent of the
assets in each member's account annually.
Total contributions made by the City of Elk River during fiscal year 2013 were:
Contribution Amount Percentage of Covered Payroll Required
EmRloyee Employer Employee Employer Rates
$940 $940 5.0% 5.0% 5.0%
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 financial 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 financial 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
$167,103 made by the State of Minnesota for the Fire Relief Association.
57
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION—CONTINUED
The following summarizes the City's annual pension cost and other related information for the current year:
Annual Pension Cost $197,103
Contributions Made:
City $30,000
State Aid $167,103
Actuarial Valuation Date 12/31/13
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
The City's annual pension cost,the percentage of annual pension cost contributed,and the net pension
obligation for the Relief Association for the year ended December 31,2013 and the preceding fiscal years was
as follows:
Three Year Trend Information
Annual Percentage
Year Pension of APC Net Pension
Ending Cost(APQ Contributed Obligation
12/31/11 $157,022 100% -
12/31/12 148,465 100%
12/31/13 197,103 100%
c. Funded Status and Funding Progress
As of December 31,2013,the actuarial accrued liability was$2,592,356. The schedule of funding progress,
presented as required supplementary information following the notes to the financial statements,presents multi-
year trend information about whether the actuarial value of plan assets is increasing or decreasing over time
relative to the actuarial accrued liabilities for benefits.
Assets in
Excess of
Actuarial Actuarial Actuarial (Unfunded)
Valuation Value of Accrued Accrued Percentage
Date Assets Liability Liability __ Funded
12/31/13 $ 2,880,579 $ 2,592,356 $ 288,223 111.i%
58
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION-CONTINUED
E. 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),a single-employer plan,and Utilities Retirees Health
Plan(URHP),a multi-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 financial 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 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.
The following table shows the components of the City's annual OPEB cost for the year,the amount actually
contributed to the plan,and changes in the City's net OPEB obligation:
Municipal Utility
Retiree Retiree
Health Plan Health Plan
Annual required contribution(ARC) $ 100,739 $ 6,793
Interest on net OPEB obligation 9,422 1,614
Adjustment to ARC (13,642) (2,334)
Annual OPEB cost 96,519 6,073
Contributions made (48,803) (1,391)
Increase in net OPEB obligation 47,716 4,682
Net OPEB obligation-beginning of year 235,545 40,360
Net OPEB obligation-end of year $ 283,261 $ 45,042
59
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION-CONTINUED
The City's annual OPEB cost,the percentage of annual OPEB cost contributed to the plan and the net OPEB
obligation for the last three years are as follows:
Percentage of
Annual Employer Annual OPEB Net Pension
Fiscal Year Ended OPEB Cost Contribution Cost Contributed Obligation
MRHP:
12/31/2011 $ 99,058 $ 25,001 25% $ 174,636
12/31/2012 97,719 36,810 38% 235,545
12/31/2013 96,519 48,803 51% 283,261
URHP:
12/31/2011 $ 5,663 $ -% $ 35,759
12/31/2012 4,601 - -% 40,360
12/31/2013 6,073 1,391 23% 45,042
d. Funded Status and Funding Progress
As of January 1,2011,the most recent actuarial valuation date,the funded status of the plan was as follows:
Municipal Utility
Retiree Retiree
Health Plan Health Plan
Actuarial accrued liability(a) $ 908,610 $ 42,681
Actuarial value of plan assets(b) - -
Unfunded actuarial accrued liability(a-b) SS 908,610 $ 42,681
Funded ratio(b/a) 0.00% 0.00%
Covered payroll (c) $ 6,901,671 $ 2,286,547
Unfunded actuarial accrued liability as a
percentage of covered payroll((a-b)/c) 13.17% 1.87%
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 financial 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.
e. Actuarial Methods and Assumptions
Projections of benefits for financial 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.
60
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION—CONTINUED
For the MRHP,in the January 1,2011 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 8%initially,reduced incrementally to an ultimate rate of 5%after six 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 a closed basis. The remaining amortization period
at December 31,2013 was thirty years.
For the URHP,the following simplifying assumptions were made:
Retirement 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 8.5%
initially,reduced to an ultimate rate of 5%after seven years,was used.
Health insurance premiums—2011 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.
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,the project unit credit 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 31,2013 was thirty years.
F. Segment Information
The City maintains five enterprise funds that account for the municipal liquor operations,garbage collections,and sewer,
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 position balance,this information has not been repeated in the notes to the basic financial statements.
61
CITY OF ELK RIVER,MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2013
Note 4: OTHER INFORMATION—CONTINUED
G. 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 31,2013,there were five series of revenue bonds outstanding,with an aggregate principal payable
amount of$13,948,532.
H. Commitments
The City has received notice from their power supplier regarding the existing all requirements power contract exercising
their right to give ten years notice to cancel the contract. The cancellation date would be effective September 30,2018.
On May 14,2013 the City signed a new agreement with Minnesota Municipal Power Agency(MMPA),
In 2007 the City entered into an agreement with Central Minnesota Municipal Power Agency(CMMPA)to acquire an
interest in the CAPX Initiative Brookings Project,a 250 mile new power transmission line between Brookings, South
Dakota,and the Twin Cities. In 2011 there was increased opportunity for investment,and subsequent agreements
provide an ownership share of$5.6 million or 18.9%. The return on this investment through CMMPA is designed to
provide approximately$124,000 annually over the 40 year project life.
I. Subsequent Events
The City will redeem the$560,000 outstanding principal of the U.U. Sewer Revenue Refunding Bond, Series 2005B on
February 1,2014. As a result of the early redemption of the bonds,the City will save$22,769 in debt service payments.
On February 12,2014,the City issued$2,030,000 of Electric Revenue Refunding Bonds, Series 2014A to provide
resources for the crossover refunding of$2,180,000 of the outstanding principal of the Electric Revenue Bonds,Series
2006A on August 1,2014. It is anticipated that the refunded maturities will be called and prepaid at a price of par plus
accrued interest on May 1,2014,which is within 90 days of settlement of the bonds.
62
CITY OF ELK RIVER,MINNESOTA
REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31,2013
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
12/31/11 $ 2,260,830 $ 2,540,365 $(279,535) 89.0% $ 5,091
12/31/12 2,456,311 2,551,430 (95,119) 96.3% 5,091
12/31/13 2,880,579 2,592,356 288,223 111.1% 5,091
Other Postemployment Benefits
Schedules of Funding Progress
Municipal 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)
O1/01/08 $ $ 88,718 $ 88,718 0.00% $ 4,095,000 2.17%
01/01111 908,610 908,610 0.00% 6,901,671 13.17%
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)/cL
01/01/08 $ $ 56,892 $ 56,892 0.00% $ 2,300,000 2,47%
O1/01/11 42,681 42,681 0.00% 2,286,547 1.87%
63
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,MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31,2013
Special Debt Capital Total Nonmajor
Revenue Service Projects Governmental
Funds Funds Funds Funds
ASSETS
Cash and investments $ 6,032,580 $ 1,142,965 $ 14,846,411 $ 22,021,956
Receivables:
Interest 16,435 3,798 54,985 75,218
Taxes 32,347 28,648 8,043 69,038
Accounts 251,567 290,430 541,997
Special assessments - 569,554 1,551,548 2,121,102
Notes,net 362,655 - - 362,655
Due from other governments 31 3,000 3,031
Due from other funds 949,576 819,413 1,768,989
Prepaid items 99,703 - 99,703
Total assets $ 7,744,894 $ 1,744,965 $ 17,573,830 $ 27,063,689
LIABILITIES
Accounts payable $ 110,061 $ - $ 231,865 $ 341,926
Salaries payable 19,796 19,796
Due to other funds 9,972 321,724 331,696
Unearned revenue 3,135 517,935 521,070
Total liabilities 142,964 - 1,071,524 1,214,488
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes 18,578 15,212 4,567 38,357
Unavailable revenue-special assessments - 568,517 1,543,050 2,111,567
Unavailable revenue-notes 362,655 - - 362,655
Total deferred inflows of resources 381,233 583,729 1,547,617 2,512,579
FUND BALANCES
Nonspendable 99,703 - - 99,703
Restricted 3,065,982 1,161,236 3,516 4,230,734
Committed 3,186,146 1,207,543 4,393,689
Assigned 868,866 14,586,805 15,455,671
Unassigned (843,175) (843,175)
Total fund balances 7,220,697 1,161,236 14,954,689 23,336,622
Total liabilities,deferred inflows
of resources,and fund balances $ 7,744,894 $ 1,744,965 $ 17,573,830 $ 27,063,689
64
CITY OF ELK RIVER,MINNESOTA
COMBINING STATEMENT OF REVENUES,EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31,2013
Special Debt Capital Total Nonmajor
Revenue Service Projects Governmental
Funds Funds Funds Funds
REVENUES
Taxes:
Property taxes $ 750,129 $ 584,642 $ 99,071 $ 1,433,842
Franchise tax 714,983 714,983
Intergovernmental revenue 12,255 502,271 88,942 603,468
Charges for services 1,154,510 - 30,050 1,184,560
Fines and forfeits 40,496 - 40,496
Special assessments 202,457 561,549 764,006
Interest income (103,881) 11,951 (604,565) (696,495)
Miscellaneous revenue:
Landfill expansion fee - 807,851 807,851
Refunds and reimbursements 112,393 500 - 112,893
Contributions 31,909 641,472 673,381
Other 200,315 - 65,906 266,221
Total revenues 2,198,126 1,301,821 2,405,259 5,905,206
EXPENDITURES
Current:
General government 105,434 - 4,487 109,921
Public safety 18,113 10,615 28,728
Public works 66,681 454,272 520,953
Culture and recreation 943,317 89,821 1,033,138
Economic development 1,300,072 - - 1,300,072
Debt service:
Principal - 1,894,000 1,894,000
Interest and service charges 570,292 15,264 585,556
Capital outlay:
General government - 109,438 109,438
Public safety 343,574 343,574
Public works - 3,442,439 3,442,439
Culture and recreation 76,168 - 489,302 565,470
Total expenditures 2,509,785 2,464,292 4,959,212 9,933,289
Excess(deficiency)of
revenues over expenditures (311,659) (1,162,471) (2,553,953) (4,028,083)
OTHER FINANCING SOURCES(USES)
Transfers in (3,882) 830,I95 4,164,920 4,991,233
Transfers out (323,245) (4,145,939) (4,469,184)
Principal paid on refunded bonds - (1,540,000) - (1,540,000)
Sale of capital assets 680,695 - 5,712 686,407
Total other financing sources(uses) 353,568 (709,805) 24,693 (331,544)
Net change in fund balances 41,909 (1,872,276) (2,529,260) (4,359,627)
Fund balances-January 1 7,178,788 3,033,512 17,483,949 27,696,249
Fund balances-December 31 $ 7,220,697 $ 1,161,236 $ 14,954,689 $ 23,336,622
65
City O
Elk ` .�
River
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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.
Landfill-This fund was established to segregate solid waste surcharge revenues to be used for landfill
abatement and other environmental issues.
Revolving Lan-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.
Federal DEED-This fund was established to account for the federal share of Department of Employment
and Economic Development grant repayments which are used to fund economic development projects.
State DEED—This fund was established to account for the state share of Department of Employment 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.
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.
Druiz 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.
YMCA Grant-This fund was established to account for grant revenues received from the County for the
YMCA building.
_Economic Development Authority-This fund was established to account for a special tax levy authorized
to help encourage development in the City.
CITY OF ELK RIVER,MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31,2013
Senior
Pinewood Citizen Revolving
Library Ice Arena Golf Course Account Landfill Loan
ASSETS
Cash and investments $ 447,254 $ 141,013 $ 5,488 $ $1,308,844 $ 753,780
Receivables:
Interest 1,565 500 4,901 2,797
Taxes 3,183 - - -
Accounts 179,142 3,725 50,000
Notes,net 362,655
Due from other governments - -
Due from other funds 2,240
Prepaid items
Total assets $ 452,002 $ 322,895 $ 5,488 $ $1,317,470 $1,169,232
LIABILITIES
,Accounts payable $ 1,336 $ 62,674 $ 658 $ $ 2,293 $ 1,023
Salaries payable 13,725 3,067 -
Due to other funds 290 - -Unearned revenue - 1,372 1,763
Total liabilities 1,626 77,771 5,488 - 2,293 1,023
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes 1,696 - - -
Unavailable revenue-notes _ - 362,655
Total deferred inflows of resources 1,696 _ 362,655
FUND BALANCES
Nonspendable - _ - -
Restricted - 660,000
Committed 448,680 245,124 805,554
Assigned - 655,177 -
Total fund balances 448,680 245,124 1,315,177 805,554
Total liabilities,deferred inflows
of resources,and fund balances $ 452,002 $ 322,895 $ 5,488 $ $1,317,470 $1,169,232
66
Drug Economic Total Nonmajor
Federal State Development Insurance Forfeiture YMCA Development Special Revenue
DEED DEED Fund Reserve Reserve Grant Authority Funds
$ 311,155 $ 384,413 $ 550,184 $ 224,277 $ 46,621 $ 628,153 $1,231,398 $ 6,032,580
1,424 2,040 834 167 2,207 16,435
- 13,547 - 15,617 32,347
- 16,088 2,612 - 251,567
362,655
- 31 31
- 947,336 - 949,576
99,703 99,703
$ 311,155 $ 385,837 $1,529,195 $ 327,426 $ 46,8I9 $ 630,360 $1,247,015 $ 7,744,894
$ $ $ 29,521 $ 9,435 $ 156 $ $ 2,965 $ 110,061
- - - 3,004 19,796
9,682 9,972
- 3,135
29,521 9,435 156 15,651 142,964
8,324 - 8,558 18,578
- 362,655
8,324 8,558 381,233
- - 99,703 - - - 99,703
311,155 385,837 - 22,850 45,671 592,564 1,047,905 3,065,982
1,491,350 195,438 3,186,146
- - 992 37,796 174,901 868,866
311,155 385,837 1,491,350 317,991 46,663 630,360 1,222,806 7,220,697
$ 311,155 $ 385,837 $1,529,195 $ 327,426 $ 46,819 $ 630,360 $1,247,015 $ 7,744,894
67
CITY OF ELK RIVER,MINNESOTA
SUBCOMBINING STATEMENT OF REVENUES,EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
FOR THE YEAR ENDED DECEMBER 31,2013
Senior
Pinewood Citizen Revolving
Library Ice Arena Golf Course Account Landfill Loan
REVENUES
Property taxes $ 62,200 $ $ $ - $ - $
Intergovernmental revenue - 10,986
Charges for services - 748,496 165,400 13,193 2,495
Fines and forfeits
Interest income 6,059 2,079 33 (55,443) (30,652)
Miscellaneous revenue:
Refunds and reimbursements
Contributions 25,340 6,569
Other 14,275 145,076
Total revenues 93,599 771,419 165,400 33 (31,264) 116,919
EXPENDITURES
Current:
General government -
Public safety - - -
Public works 66,681
Culture and recreation 99,490 620,097 212,427 11,303 - -
Economic development - 271,060
Capital outlay:
Culture and recreation - 76,168
Total expenditures 99,490 696,265 212,427 11,303 66,681 271,060
Excess(deficiency)of
revenues over expenditures (5,891) 75,I54 (47,027) (11,270) (97,945) (154,141)
OTHER FINANCING SOURCES(USES)
Transfers in - 47,027
Transfers out (48,245)
Sale of capital assets
Total other financing sources(uses) - 47,027 (48,245)
Net change in fund balances (5,891) 75,154 - (11,270) (146,190) (154,141)
Fund balances-January 1 454,571 169,970 11,270 1,461,367 959,695
Fund balances-December 31 $ 448,680 $ 245,124 $ $ - $1,315,177 $ 805,554
68
Drug Economic Total Nonmajor
Federal State Development Insurance Forfeiture YMCA Development Special Revenue
DEED DEED Fund Reserve Reserve Grant Authority Funds
$ $ $ 398,635 $ $ $ $ 289,294 $ 750,129
1,269 12,255
221,426 3,500 1,154,510
- 40,496 40,496
4,538 (16,226) (19,861) (8,383) 616 9,646 3,713 (103,881)
53,150 59,243 112,393
31,909
40,964 - - 200,315
4,538 (16,226) 694,314 50,860 41,112 9,646 297,776 2,198,126
105,434 105,434
18,113 18,113
66,681
- 943,317
400,000 445,526 183,486 1,300,072
76,168
400,000 445,526 105,434 18,113 183,486 2,509,785
(395,462) (16,226) 248,788 (54,574) 22,999 9,646 114,290 (311,659)
(50,909) - (3,882)
(250,000) (25,000) (323,245)
680,695 - 680,695
629,786 (250,000) (25,000) 353,568
(395,462) (16,226) 878,574 (54,574) 22,999 (240,354) 89,290 41,909
706,617 402,063 612,776 372,565 23,664 870,714 1,133,516 7,178,788
$ 311,155 $ 385,837 $1,491,350 $ 317,991 $ 46,663 $ 630,360 $1,222,806 $ 7,220,697
69
CITY OF ELK RIVER,MINNESOTA
SPECIAL REVENUE FUND-LIBRARY MAINTENANCE FUND
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Property taxes $ 63,100 $ 63,100 $ 62,200 $ (900)
Interest income 6,400 6,400 6,059 (341)
Miscellaneous revenue:
Contributions 27,000 27,000 25,340 (1,660)
Total revenues 96,500 96,500 93,599 (2,901)
EXPENDITURES
Culture and recreation:
Current 96,500 96,500 99,490 (2,990)
Net change in fund balance $ - $ - (5,891) $ (5,891)
Fund balance-January 1 454,571
Fund balance-December 31 $ 448,680
70
CITY OF ELK RIVER,MINNESOTA
SPECIAL REVENUE FUND-ICE ARENA FUND
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Charges for services $ 741,400 $ 741,400 $ 748,496 $ 7,096
Interest income - - 2,079 2,079
Miscellaneous revenue:
Vending machines 11,800 11,800 11,569 (231)
Contributions 7,300 7,300 6,569 (731)
Other 3,050 3,050 2,706 (344)
Total revenues 763,550 763,550 771,419 7,869
EXPENDITURES
Culture and recreation:
Current 632,700 632,700 620,097 12,603
Capital outlay 357,300 357,300 76,168 281,132
Total expenditures 990,000 990,000 696,265 293,735
Excess(deficiency)of revenues
over expenditures (226,450) (226,450) 75,154 301,604
OTHER FINANCING SOURCES
Transfers in 45,500 45,500 - (45,500)
Net change in fund balance $(180,950) $(180,950) 75,154 $ 256,104
Fund balance-January 1 169,970
Fund balance-December 31 $ 245,124
71
CITY OF ELK RIVER,MINNESOTA
SPECIAL REVENUE FUND-PINEWOOD GOLF COURSE FUND
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Charges for services $ 188,500 $ 188,500 $ 165,400 $ (23,100)
EXPENDITURES
Culture and recreation:
Current 233,300 233,300 212,427 20,873
Deficiency of revenues over expenditures (44,800) (44,800) (47,027) (2,227)
OTHER FINANCING SOURCES
Transfers in 44,800 44,800 47,027 2,227
Net change in fund balance $ - $ - - $
Fund balance-January 1
Fund balance-December 31 $ -
72
CITY OF ELK RIVER,MINNESOTA
SPECIAL REVENUE FUND-LANDFILL FUND
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Intergovernmental revenue $ 7,000 $ 7,000 S 10,986 $ 3,986
Charges for services 9,000 9,000 13,193 4,193
Interest income 9,500 9,500 (55,443) (64,943)
Total revenues 25,500 25,500 (31,264) (56,764)
EXPENDITURES
Public works:
Current 71,950 71,950 66,681 5,269
Deficiency of revenues over expenditures (46,450) (46,450) (97,945) (51,495)
OTHER FINANCING USES
Transfers out (60,000) (60,000) (48,245) 11,755
Net change in fund balance $ (106,450) $ (106,450) (146,190) $ (39,740}
Fund balance-January 1 1,461,367
Fund balance-December 31 $ 1,315,177
73
CITY OF ELK RIVER,MINNESOTA
SPECIAL REVENUE FUND-ECONOMIC DEVELOPMENT AUTHORITY FUND
SCHEDULE OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
FOR THE YEAR ENDED DECEMBER 31,2013
Budget Variance with
Original Final Actual Final Budget
REVENUES
Property taxes $ 292,500 $ 292,500 $ 289,294 $ (3,206)
Intergovernmental revenue - - 1,269 1,269
Charges for services 3,500 3,500 3,500 -
Interest income 7,000 7,000 3,713 (3,287)
Total revenues 303,000 303,000 297,776 (5,224)
EXPENDITURES
Current:
Economic development 249,800 249,800 183,486 66,314
Excess of revenues over expenditures 53,200 53,200 114,290 61,090
OTHER FINANCING USES
Transfers out (25,000) (25,000) (25,000)
Net change in fund balance $ 28,200 $ 28,200 89,290 $ 61,090
Fund balance-January 1 1,133,516
Fund balance-December 31 $ 1,222,806
74
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.
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.
CITY OF ELK RIVER,MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR DEBT SERVICE FUNDS
DECEMBER 31, 2013
Government Total Nonmajor
Improvement Building MPFA Debt Service
Bonds Bonds Loan Funds
ASSETS
Cash and investments $ 447,936 $ 695,029 $ $ 1,142,965
Receivables:
Interest 1,360 2,438 3,798
Taxes 8,250 20,398 28,648
Special assessments 569,554 - - 569,554
Total assets $ 1,027,100 $ 717,865 $ $ 1,744,965
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes $ 3,922 $ 11,290 $ - $ 15,212
Unavailable revenue-special assessments 568,517 - 568,517
Total deferred inflows of resources 572,439 11,290 583,729
FUND BALANCES
Restricted 454,661 706,575 - 1,161,236
Total deferred inflows of resources
and fund balances $ 1,027,100 $ 717,865 $ - $ 1,744,965
75
CITY OF ELK RIVER, MINNESOTA
SUBCOMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR DEBT SERVICE FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2013
Government Total Nonmajor
Improvement Building MPFA Debt Service
Bonds Bonds Loan Funds
REVENUES
Property taxes $ 225,828 $ 358,814 $ $ 584,642
Intergovernmental revenue - - 502,271 502,271
Special assessments 202,457 - 202,457
Interest income 5,316 6,635 11,951
Miscellaneous revenue:
Refunds and reimbursements 500 - 500
Total revenues 433,601 365,949 502,271 1,301,821
EXPENDITURES
Debt service:
Principal 850,000 545,000 499,000 1,894,000
Interest and service charges 87,268 476,482 6,542 570,292
Total expenditures 937,268 1,021,482 505,542 2,464,292
Deficiency of revenues over expenditures (503,667) (655,533) (3,271) (1,162,471)
OTHER FINANCING SOURCES(USES)
Transfers in 275,799 554,396 - 830,195
Principal paid on refunded bonds (1,540,000) - - (1,540,000)
Total other financing sources(uses) (1,264,201) 554,396 - (709,805)
Net change in farad balances (1,767,868) (101,137) (3,271) (1,872,276)
Fund balances-January 1 2,222,529 807,712 3,271 3,033,512
Fund balances-December 31 $ 454,661 $ 706,575 $ - $ 1,161,236
76
City of
El k
Riv76r
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NONMAJOR CAPITAL PROJECTS FUNDS
Capital Reserve-This fund was established to help build reserves for the purchase of capital equipment.
Equipment Replacement-This fund is used to account for the purchase of capital equipment.
Park Dedication-This fund accounts for park dedication fees from developers and expenditures for park
land acquisitions and park capital improvements.
Park Improvements-This fund was established to account for the replacement and maintenance of park
equipment and for the beautification of city parks.
Government Buildinjzs-This fund is used to account for resources and expenditures related to city facilities
projects. The major source of revenue is from landfill expansion fees.
GRE Reserve-This fund was established to account for revenues received from the license agreement
between the City and Great River Energy.
Pavement Management-This fund was established to account for franchise taxes collected to fund
expenditures for the ongoing maintenance and repair of the city streets.
Street Improvements-This fund is used to account for the construction of street improvement projects
throughout the city.
Improvement Projects—This fund is used to account for the construction of various improvements within
the city.
CITY OF ELK RIVER,MINNESOTA
SUBCOM13ININC BALANCE SHEET
NONMAJOR CAPITAL PROJECTS FUNDS
DECEMBER 31,2013
Capital Equipment Park Park Government
Reserve Replacement Dedication Improvements Buildings
ASSETS
Cash and investments $ 1,522,438 $ 830,973 $ - $ 101,331 $ 3,789,122
Receivables:
Interest 5,723 3,080 359 14,051
Taxes 605
Accounts 328 - 115,584
Special assessments 17,769
Due from other governments -
Due from other funds 56,821 79,761
Total assets 1,546,25$ 891,479 181,451 3,918,757
LIABILITIES
Accounts payable $ 2,322 $ 54,478 $ $ 4,294 $ 54,432
Due to other funds - 321,724
Unearned revenue 517,935
Total liabilities 2,322 54,478 839,659 4,294 54,432
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes 530 -
Unavailable revenue-special assessments 17,079 -
Total deferred inflows of resources 17,079 530
FUND BALANCES
Restricted 3,516 -
Committed -
Assigned 1,526,857 836,471 177,157 3,864,325
Unassigned (843,175) - -
Total fund balances 1,526,857 836,471 (839,659) 177,157 3,864,325
Total liabilities,deferred inflows
of resources,and fund balances $ 1,546,258 $ 891,479 $ - $ 181,451 $ 3,918,757
77
Total Nonmajor
Pavement Street Improvement Capital Projects
GRE Reserve Management Improvements Projects Funds
$ 1,858,875 $ 656,351 $ 1,819,525 $ 4,267,796 $ 14,846,411
6,891 1,899 7,276 15,706 54,985
- - 4,781 2,657 8,043
174,518 - 290,430
- - 691,738 842,041 1,551,548
3,000 - - 3,000
241,963 440,868 - 819,413
2,110,729 1,273,636 2,523,320 5,128,200 17,573,830
$ $ 66,093 $ 40,918 $ 9,328 $ 231,865
- - 321,724
- - 517,935
- 66,093 40,918 9,328 1,071,524
2,572 1,465 4,567
- 685,086 840,885 1,543,050
- 687,658 842,350 1,547,617
- 3,516
1,207,543 - 1,207,543
2,110,729 - 1,794,744 4,276,522 14,586,805
(843,175)
2,110,729 1,207,543 1,794,744 4,276,522 14,954,689
$ 2,110,729 $ 1,273,636 $ 2,523,320 $ 5,128,200 $ 17,573,830
78
CITY OF ELK RIVER,MINNESOTA
SUBCOMBINING STATEMENT OF REVENUES,EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR CAPITAL PROJECTS FUNDS
FOR THE YEAR ENDED DECEMBER 31,2013
Capital Equipment Park Park Government
Reserve Replacement Dedication Improvements Buildings
REVENUES
Taxes:
Property taxes $ - $ 208 $ $ - $ -
Franchise tax - -
Intergovernmental revenue 88,942
Charges for services - - 18,780 5,872
Special assessments 12,611 - -
Interest income (65,950) (34,494) 194 1,701 (157,962)
Miscellaneous revenue:
Landfill expansion fee - - - - 807,851
Contributions 73,220 - - 10,290 -
Other 11,228 154 - - 36,412
Total revenues 120,051 (34,132) 18,974 17,863 686,301
EXPENDITURES
Current:
General government 4,487 - - -
Public safety 3,112 - 7,503
Public works 28,944 73,867
Culture and recreation 88,701
Debt service:
Interest and service charges - 15,264 - -
Capital outlay:
General government 109,438 - - -
Public safety 233,024 - 110,550
Public works 193,183 - 602,025
Culture and recreation - 169,196 320,106 -
Total expenditures 145,981 595,403 15,264 408,807 793,945
Excess(deficiency)of
revenues over expenditures (25,930) (629,535) 3,710 (390,944) (107,644)
OTHER FINANCING SOURCES(USES)
Transfers in 91,792 531,162 - 342,289
Transfers out (112,900) - (554,396)
Sale of capital assets - 5,712 -
Total other financing sources(uses) (21,108) 536,874 - 342,289 (554,396)
Net change in fund balances (47,038) (92,661) 3,710 (48,655) (662,040)
Fund balances-January 1 1,573,895 929,132 (843,369) 225,812 4,526,365
Fund balances-December 31 $ 1,526,857 $ 836,471 $(839,659) $ 177,157 $ 3,864,325
79
Total Nonmajor
Pavement Street Improvement Capital Projects
GRE Reserve Management Improvements Projects Funds
$ - $ $ 49,290 $ 49,573 S 99,071
- 714,983 - 714,983
- 88,942
5,398 30,050
278,018 270,920 561,549
(79,960) (10,524) (81,607) (175,963) (604,565)
807,851
557,962 - - 641,472
- - 18,112 - 65,906
478,002 704,459 263,813 149,928 2,405,259
- - - - 4,487
- 10,615
153,328 106,751 91,382 454,272
1,120 - 89,821
- - 15,264
-
109,438
- - 343,574
2,464,760 182,471 3,442,439
- - 489,302
1,120 2,618,088 289,222 91,382 4,959,212
476,882 (1,913,629) (25,409) 58,546 (2,553,953)
- 3,121,172 4,481 74,024 4,164,920
(39,500) - (3,275,799) (163,344) (4,145,939)
- 5,712
(39,500) 3,121,172 (3,271,318) (89,320) 24,693
437,382 1,207,543 (3,296,727) (30,774) (2,529,260)
1,673,347 - 5,091,471 4,307,296 17,483,949
$ 2,110,729 $ 1,207,543 $ 1,794,744 $4,276,522 $ 14,954,689
80
City of
Elk .�.�
River
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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.
CITY OF ELK RIVER,MINNESOTA
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
DEVELOPER ESCROW AGENCY FUND
FOR THE YEAR ENDED DECEMBER 31,2013
Beginning Ending
Balance Additions Deductions Balance
ASSETS
Cash $ 51,752 $ 39,834 $ 49,848 $ 41,738
Accounts receivable 1,381 5,210 4,214 2,377
Total assets $ 53,133 $ 45,044 $ 54,062 $ 44,115
LIABILITIES
Refundable deposits payable $ 53,133 $ 42,564 $ 51,582 $ 44,115
81
COMPONENT UNIT FINANCIAL STATEMENTS
The Housing and Redevelopment 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
Housing and Redevelopment Authority Fund-This fund is used to account for housing and
redevelopment activities. Revenues are derived from the HRA property tax levy.
HOUSING AND REDEVELOPMENT AUTHORITY
OF ELK RIVER,MINNESOTA
BALANCESHEET
GOVERNMENTAL FUND
DECEMBER 31,2013
ASSETS
Cash and investments $ 1,043,777
Receivables:
Taxes 13,607
Accounts 750
Notes 400,000
Due from primary government 233,389
Total assets $ 1,691,523
LIABILITIES
Accounts payable $ 7,717
Salaries payable 1,326
Due to primary government 2,766
Total liabilities 11,809
DEFERRED INFLOWS OF RESOURCES
Unavailable revenue-taxes 7,451
FUND BALANCES
Nonspendable 400,000
Restricted 1,272,263
Total fund balances 1,672,263
Total liabilities,deferred inflows of resources and fund balances $ 1,691,523
82
HOUSING AND REDEVELOPMENT AUTHORITY
OF ELK RIVER,MINNESOTA
RECONCILIATION OF THE GOVERNMENTAL FUND
BALANCE SHEET TO THE STATEMENT OF NET POSITION
DECEMBER 31,2013
FUND BALANCE-HOUSING AND REDEVELOPMENT AUTHORITY $ 1,672,263
Amounts reported for governmental activities in the statement of net position
are different because:
1. Capital assets used in governmental activities are not current financial
resources and therefore are not reported in the governmental funds:
Governmental capital assets 431,390
Less accumulated depreciation (12,5 418,803
2. Unavailable revenue in governmental funds is susceptible to full accrual
on the government-wide statements. 7,451
NET POSITION OF HOUSING AND REDEVELOPMENT AUTHORITY $ 2,098,517
83
HOUSING AND REDEVELOPMENT AUTHORITY
OF ELK RIVER,MINNESOTA
STATEMENT OF REVENUES,EXPENDITURES,AND
CHANGE IN FUND BALANCE
GOVERNMENTAL FUND
FOR THE YEAR ENDED DECEMBER 31,2013
REVENUES
Property taxes $ 254,710
Intergovernmental revenue 105
Interest income 4,274
Total revenues 259,089
EXPENDITURES
Economic development:
Current 85,103
Net change in fund balance 173,986
Fund balance-January 1 1,498,277
Fund balance-December 31 $ 1,672,263
84
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
FOR THE YEAR ENDED DECEMBER 31,2013
NET CHANGE IN FUND BALANCES-HOUSING AND REDEVELOPMENT AUTHORITY $ 173,986
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 expense exceeded capital outlays in the current period.
Depreciation expense (11,619)
2. Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the governmental funds.
Property taxes (3,121)
CHANGE IN NET POSITION OF HOUSING AND REDEVELOPMENT AUTHORITY $ 159,246
85
City of
Elk i {
River
This page has been left blank intentionally
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 86
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 96
These schedules contain information to help the reader assess the city's most
significant local revenue sources; electric sales and property taxes.
Debt Capacity 103
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 111
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 113
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.
Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year.
CITY OF ELK RIVER,MINNESOTA
NET POSITION BY COMPONENT
LAST TEN FISCAL YEARS
(accrual basis of accounting)
Fiscal Year
2004 2045 2006 2007
Governmental activities
Net investment in capital assets $ 68,351,167 $ 73,150,041 $ 82,663,610 $ 85,293,459
Restricted 10,963,518 12,410,832 4,802,808 6,189,063
Unrestricted 19,452,247 21,267,772 27,998,543 25,641,836
Total governmental activities net position $ 98,766,932 $ 106,828,645 $ 115,464,961 $ 117,124,358
Business-type activities
Net investment in capital assets $ 52,377,687 $ 54,577,074 $ 59,410,729 $ 59,942,345
Restricted 2,197,066 2,256,419 445,900 733,400
Unrestricted 10,332,005 11,810,416 13,839,859 17,028,349
Total business-type activities net position $ 64,906,758 $ 68,643,909 $ 73,696,488 $ 77,704,094
Primary government
Net investment in capital assets $ 120,728,854 $ 127,727,115 $ 142,074,339 $ 145,235,804
Restricted 13,160,584 14,667,251 5,248,708 6,922,463
Unrestricted 29,784,252 33,078,188 41,838,402 42,670,185
Total primary government net position $ 163,673,690 $ 175,472,554 $ 189,161,449 $ 194,828,452
Note: The City implemented GASB Statement No.63 and GASB Statement No.65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
86
Fiscal Year
2008 2009 2010 2011 2012 2013
$ 85,390,968 $ 86,149,417 $ 84,629,091 $ 84,741,957 $ 84,060,768 $ 84,353,785
5,569,773 4,723,030 7,341,554 6,283,346 6,391,182 5,256,724
27,628,733 28,588,304 26,702,252 29,282,251 27,448,688 24,069,710
$ 118,589,474 $ 119,460,751 $ 118,672,897 $ 120,307,554 $ 117,900,638 $ 113,680,219
$ 60,750,900 $ 59,601,861 $ 60,972,838 $ 60,525,218 $ 60,268,219 $ 62,035,437
724,500 724,500 724,500 724,500 724,500 647,000
17,696,135 19,793,756 19,907,416 19,421,085 22,376,508 22,957,506
$ 79,171,535 $ 80,120,117 $ 81,604,754 $ 80,670,803 $ 83,369,227 $ 85,639,943
$ 146,141,868 $ 145,751,278 $ 145,601,929 $ 145,267,175 $ 144,328,987 $ 146,389,222
6,294,273 5,447,530 8,066,054 7,007,846 7,115,682 5,903,724
45,324,868 48,382,060 46,609,668 48,703,336 49,825,196 47,027,216
$ 197,761,009 $ 199,580,868 $ 200,277,651 $ 200,978,357 $ 201,269,865 $ 199,320,162
87
CITY OF ELK RIVER,MINNESOTA
CHANGES IN NET POSITION
LAST TEN FISCAL YEARS
(accrual basis of accounting)
Fiscal Year
2004 2005 2006 2007
Expenses
Governmental activities:
General government $ 2,440,200 $ 2,503,826 $ 2,560,213 $ 2,732,697
Public safety 4,988,424 5,255,974 5,606,438 5,924,093
Public works 4,277,071 4,281,725 6,169,030 6,527,565
Culture and recreation 2,058,882 2,535,955 2,859,058 3,598,695
Economic development 912,698 938,164 631,437 1,001,829
Interest on long-term debt 936,515 881,001 764,725 952,082
Total governmental activities expenses 15,613,790 16,396,645 18,590,901 20,736,961
Business-type activities:
Municipal Liquor 3,760,156 4,348,673 5,202,087 5,301,597
Garbage 953,432 1,047,479 1,094,788 1,114,133
Sewer 1,457,386 1,63 3,276 1,721,522 1,786,266
Water 1,783,081 2,091,723 2,104,827 2,413,942
Electric 13,362,081 14,877,986 16,588,510 18,718,636
Total business-type activities expenses 21,316,136 23,999,137 26,711,734 29,334,574
Total primary government expenses $ 36,929,926 $ 40,395,782 $ 45,302,635 $ 50,071,535
Program Revenues
Governmental activities:
Charges for services:
General government $ 308,781 $ 288,032 $ 246,541 $ 283,003
Public safety 1,956,967 2,050,437 2,403,601 1,533,699
Public works 226,907 280,583 617,099 76,117
Culture and recreation 812,401 877,789 1,065,218 1,083,081
Economic development 96,396 379,002 178,217 92,486
Operating grants and contributions 427,513 480,649 387,584 362,313
Capital grants and contributions 11,879,536 7,573,752 8,117,032 4,174,427
Total governmental activities program revenues 15,708,501 11,930,244 13,015,292 7,605,126
Business-type activities:
Charges for services:
Municipal Liquor 4,345,702 4,806,061 5,906,768 6,043,088
Garbage 973,176 1,055,753 1,106,268 1,139,763
Sewer 2,365,262 1,261,853 1,352,647 1,454,219
Water 2,095,018 1,365,136 1,770,819 2,144,622
Electric 14,765,479 15,955,440 17,143,485 19,895,323
Operating grants and contributions 8,615 9,255 504,168 295,081
Capital grants and contributions 3,028,454 3,654,383 4,297,666 1,996,636
Total business-type activities program revenues 27,581,706 28,107,881 32,081,821 32,968,732
Total primary government program revenues $ 43,290,207 $ 40,038,125 $ 45,097,113 $ 40,573,858
Net(expense)/revenue
Governmental activities $ 94,711 $ (4,466,401) $ (5,575,609) $(13,131,835)
Business-type activities 6,265,570 4,108,744 5,370,087 3,634,158
Total primary government net(expense)/revenue $ 6,360,281 $ (357,657) $ (205,522) $ (9,497,677)
Note: The City implemented GASB Statement No.63 and GASB Statement No.65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
88
Fiscal Year
2008 2009 2010 2011 2012 2013
$ 3,286,350 $ 2,777,568 $ 3,028,102 $ 3,495,458 $ 2,994,342 $ 3,344,317
6,715,607 6,106,181 6,011,477 6,238,611 6,187,246 6,173,244
5,875,992 5,397,058 5,447,282 5,720,759 6,037,000 6,535,616
3,549,637 3,767,312 3,702,671 3,851,181 4,013,098 3,914,000
1,893,707 1,569,432 1,438,742 1,451,109 1,059,058 2,088,064
1,315,275 1,252,493 1,138,414 1,045,905 1,163,352 1,288,020
22,636,568 20,870,044 20,766,688 21,803,023 21,454,096 23,343,261
5,464,819 5,374,453 5,267,041 5,366,557 5,622,305 5,706,760
1,166,709 1,256,177 1,331,514 1,304,238 1,276,887 1,251,420
1,849,031 1,781,804 1,962,431 2,130,287 2,239,914 2,320,743
2,506,510 2,334,388 2,089,889 2,108,499 2,264,814 2,332,680
22,036,471 23,258,383 25,452,567 26,726,349 27,586,573 28,422,759
33,023,540 34,005,205 36,103,442 37,635,930 38,990,493 40,034,362
$ 55,660,108 $ 54,875,249 $ 56,870,130 $ 59,438,953 $ 60,444,589 $ 63,377,623
$ 371,911 $ 334,100 $ 301,509 $ 425,954 $ 369,794 $ 338,469
962,275 634,242 722,073 787,884 789,728 961,072
159,664 47,860 61,605 79,073 82,173 206,606
1,084,067 1,074,266 1,089,058 1,102,630 1,128,070 1,075,576
65,999 60,335 125,759 70,976 8,244 274,833
977,411 758,958 763,551 954,831 1,018,519 954,164
4,302,760 2,599,593 1,318,660 1,750,824 1,007,794 807,208
7,924,087 5,509,354 4,382,215 5,172,172 4,404,322 4,617,928
6,213,657 6,094,058 5,953,626 6,145,692 6,525,234 6,756,581
1,160,774 1,194,937 1,282,013 1,310,014 1,302,920 1,285,138
1,511,165 1,504,785 1,483,120 1,491,460 1,533,851 1,613,276
2,139,046 2,218,816 1,961,760 1,917,384 2,343,881 2,381,651
22,941,903 24,258,120 26,840,983 28,657,698 30,403,469 31,029,299
149,327 92,957 103,324 38,550 23,440
888,925 267,233 397,989 482,319 490,916 924,641
35,004,797 35,630,906 38,022,815 40,043,117 42,623,711 43,990,586
$ 42,928,884 $ 41,140,260 $ 42,405,030 $ 45,215,289 $ 47,028,033 $ 48,608,514
$(14,712,481) $(15,360,690) $(16,384,473) $ (16,630,851) $ (17,049,774) $ (18,725,333)
1,981,257 1,625,701 1,919,373 2,407,187 3,633,218 3,956,224
$(12,731,224) $(13,734,989) $(14,465,100) $ (14,223,664) $ (13,416,556) $ (14,769,109)
89
Fiscal Year
2004 2005 2006 2007
General Revenues and Other Changes in Net Position
Governmental activities:
Property taxes $ 6,425,933 $ 7,569,131 $ 8,754,923 $ 9,744,930
Tax increment 734,115 768,397 790,882 894,595
Other taxes -
Unrestricted grants and contributions 2,141,152 2,427,605 2,577,700 2,395,665
Investment earnings 375,550 758,612 1,151,144 1,465,401
Miscellaneous 9,180 326,853 28,450 23,213
Transfers of capital assets - (511,412)
Transfers 866,816 677,516 908,826 778,840
Total governmental activities 10,552,746 12,528,114 14,211,925 14,791,232
Business-type activities:
Investment earnings 153,218 305,923 589,210 640,876
Miscellaneous - - 2,108
Transfers of capital assets - 511,412
Transfers (866,816) (677,516) (908,82 (778,840)
Total business-type activities (713,598) (371,593) (317,508) 373,448
Total primary government $ 9,839,148 $ 12,156,521 $ 13,894,417 $ 15,164,680
Change in Net Position
Governmental activities $ 10,647,457 $ 8,061,713 $ 8,636,316 $ 1,659,397
Business-type activities 5,551,972 3,737,151 5,052,579 4,007,606
Total primary government $ 16,199,429 $ 11,798,864 $ 13,688,895 $ 5,667,003
Note: The City implemented GASB Statement No.63 and GASB Statement No.65 in fiscal year 2012. Net position
information has been restated for 2011 for this accounting change. Years prior to 2011 have not been restated.
90
Fiscal Year
2008 2009 2010 2011 2012 2013
$ 11,095,407 $ 11,440,991 $ 11,254,752 $ 11,398,819 $ 10,854,241 $ 10,742,370
1,041,300 1,080,142 1,071,099 947,486 830,204 87,848
156,894 193,466 83,748 125,623 829,112
1,775,536 1,940,274 2,000,923 1,702,334 1,307,662 1,436,135
1,215,053 548,651 359,733 499,034 319,654 (663,762)
- 20,013 61,308 23,233 49,470 629,177
- (303,051) - (348,259) (121,172)
1,050,301 1,045,002 958,389 3,610,854 1,504,263 1,565,206
16,177,597 16,231,967 15,596,619 18,265,508 14,642,858 14,504,914
534,485 367,883 220,602 269,716 219,950 (243,047)
2,000 - - 1,260 1,572
- 303,051 - 348,259 121,172
(1,050,301) (1,045,002) (958,389) (3,610,854) (1,504,263) (1,565,206)
(513,816) (677,119) (434,736) (3,341,138) (934,794) (1,685,509)
$ 15,663,781 $ 15,554,848 $ 15,161,883 $ 14,924,370 $ 13,708,064 $ 12,819,405
$ 1,465,116 $ 871,277 $ (787,854) $ 1,634,657 $ (2,406,916) $ (4,220,419)
1,467,441 948,582 1,484,637 (933,951) 2,698,424 2,270,715
$ 2,932,557 $ 1,819,859 $ 696,783 $ 700,706 $ 291,508 $ (1,949,704)
91
CITY OF ELK RIVER,MINNESOTA
FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
Fiscal Year
2004 2005 2006 2007
General fund
Reserved $ 115,746 $ 210,298 $ - $ 5,938
Unreserved 3,851,634 4,391,083 4,816,386 5,346,066
Nonspendable -
Restricted
Committed - - -
Assigned - - -
Unassigned - - - -
Total General fund $ 3,967,380 $ 4,601,381 $ 4,816,386 $ 5,352,004
All other governmental funds
Reserved $ 11,570,003 $ 11,475,837 $ 9,979,026 $ 14,453,663
Unreserved,reported in:
Special revenue funds 4,597,195 5,453,061 5,070,764 3,849,815
Capital projects funds 5,401,112 8,382,625 8,091,573 9,179,236
Nonspendable - - -
Restricted
Committed - -
Assigned
Unassigned - - - -
Total all other governmental funds $ 21,568,310 $ 25,311,523 $ 23,141,363 $ 27,482,714
Note: The City implemented GASB 54 in fiscal year 2010,resulting in significant reclassification
of the components of fund balance. Years prior to 2010 have not been restated.
92
Fiscal Year
2008 2009 2010 2011 2012 2013
5,190,662 5,699,575 - -
- 20,201 14,628
- - 20,390 -
91,502 156,323 208,486 247,937
- 727,443 859,508 200,000
- 5,187,520 5,261,391 5,776,627 5,791,725
$ 5,190,662 $ 5,699,575 $ 6,006,465 $ 6,297,612 $ 6,205,314 $ 6,054,290
$ 6,953,630 $ 6,535,205 $ - $ $ $
7,751,286 7,844,537 -
9,574,268 10,101,066 - -
93,080 57,870 101,812 99,703
- 6,936,113 5,942,368 7,608,842 14,800,868
2,506,814 2,712,645 2,456,185 4,393,689
16,9 84,061 19,736,795 19,219,810 15,45 5,671
- - (1,011,820) (1,059,647) (1,384,984) (2,324,550)
$ 24,279,184 $ 24,480,808 $ 25,508,248 $ 27,390,031 $ 28,001,665 $ 32,425,381
93
CITY OF ELK RIVER,MINNESOTA
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
Fiscal Year
2004 2005 2006 2007
Revenues
Property taxes $ 7,118,568 $ 8,283,983 $ 9,529,773 $ 10,571,695
Other taxes - - -
Licenses and permits 1,249,844 1,240,336 1,207,368 987,708
Intergovernmental revenue 1,544,485 1,979,405 4,142,937 2,973,505
Charges for services 2,381,670 2,571,767 2,485,464 1,786,094
Fines and forfeits 164,800 190,062 175,155 156,407
Special assessments 2,375,902 3,414,090 1,566,880 1,909,595
Interest 375,548 758,612 1,151,144 1,465,401
Miscellaneous 1,799,736 2,004,286 2,555,842 1,545,181
Total revenues 17,010,553 20,442,541 22,814,563 21,395,586
Expenditures
General government 2,161,356 2,204,626 2,251,111 2,450,722
Public safety 4,163,345 4,649,010 4,941,706 5,109,371
Public works 1,850,281 2,192,336 2,538,658 4,170,119
Culture and recreation 1,655,298 2,088,505 2,605,861 3,386,681
Economic development 703,591 785,584 627,467 573,446
Capital outlay 2,997,696 4,191,817 10,729,882 12,803,023
Debt service
Principal 2,494,483 2,174,266 7,051,836 1,767,617
Interest and service charges 965,984 881,305 909,904 902,415
Bond issuance costs - - -
Total expenditures 16,992,034 19,167,449 31,656,425 31,163,394
Excess(deficiency)of revenues
over(under)expenditures 18,519 1,275,092 (8,841,862) (9,767,808)
Other financing sources(uses)
Transfers in 4,666,581 2,888,975 5,923,474 4,785,257
Transfers out (3,799,765) (2,211,459) (5,014,648) (4,006,417)
Proceeds of long-term debt 331,000 1,715,000 3,657,000 13,390,500
Premium on long-term debt issued - - -
Discount on long-term debt issued (8,560) (29,252) (50,477)
Payment to refunded bond escrow agent -
Principal paid on refunded bonds -
Capital leases issued - 2,332,694 325,000
Sale of capital assets 9,180 718,166 17,439 200,914
Total other financing sources(uses). 1,206,996 3,1021122 6,886,707 14,644,777
Net change in fund balances $ 1,225,515 $ 4,377,214 $ (1,955,155) $ 4,876,969
Debt service as a percentage of
noncapital expenditures' 24.1% 21.0% 37.1% 15.1%
94
Fiscal Year
2008 2009 2010 2011 2012 2013
$ 12,037,076 $ 12,329,194 $ 12,355,953 $ 12,461,403 $ 11,720,311 $ 10,930,129
- 156,894 193,466 83,748 125,623 829,112
460,108 322,338 402,076 432,875 408,232 513,779
4,134,779 3,117,997 1,135,060 1,678,555 1,436,613 1,161,458
1,849,307 1,465,898 1,727,276 1,573,367 1,659,986 1,926,906
150,086 141,629 161,074 149,102 137,819 163,481
1,712,551 1,464,348 999,633 989,101 845,112 764,006
1,215,053 548,651 359,731 499,034 319,654 (663,763)
1,628,567 1,853,966 2,587,771 2,568,159 1,980,207 2,193,571
23,187,527 21,400,915 19,922,040 20,435,344 18,633,557 17,818,679
2,480,208 2,458,879 2,629,731 3,157,307 2,615,582 2,956,500
5,565,474 5,377,208 5,266,803 5,291,617 5,352,249 5,497,493
3,246,436 2,656,097 2,291,196 2,752,469 2,931,726 2,800,012
2,890,683 2,666,146 2,569,464 2,663,806 2,839,466 2,652,817
2,216,617 1,589,464 1,512,138 1,479,140 1,087,467 1,656,922
10,381,359 4,627,322 1,879,604 2,874,212 10,264,274 5,243,189
2,022,616 3,162,117 2,411,062 2,618,146 2,127,000 2,194,000
1,198,174 1,289,087 1,126,789 1,059,804 996,454 1,129,572
- 56,204 - 68,900 153,795
30,001,567 23,826,320 19,742,991 21,896,501 28,283,118 24,284,300
(6,814,04 (2,425,405) 179,049 (1,461,157) (9,649,561) (6,465,621)
3,868,359 2,887,624 2,682,562 5,978,905 4,792,943 6,457,233
(2,818,058) (1,842,622) (1,724,173) (2,368,051) (3,288,680) (4,892,027)
2,277,946 2,074,311 6,184,243 - 8,500,000 9,685,000
36,542 - 255,238 115,164 341,700
- - (6,303,897)
- (1,540,000)
84,379 16,629 61,308 23,233 49,470 686,407
3,449,168 3,135,942 1,155,281 3,634,087 10,168,897 10,738,313
$ (3,364,872) $ 710,537 $ 1,334,330 $ 2,172,930 $ 519,336 $ 4,272,692
16.9% 23.7% 19.8% 19.6% 17.1% 16.9%
95
CITY OF ELK RIVER,MINNESOTA
ELECTRIC SALES
LAST TEN FISCAL YEARS
Fiscal Number of Total
Year Customers KWIfs Sold Billings
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 22,303,994
2009 9,170 232,772,722 23,591,485
2010 9,207 250,711,834 26,060,301
2011 9,227 261,235,297 27,894,341
2012 9,285 273,455,846 30,070,045
2013 9,358 273,945,354 30,983,220
Source: Elk River Municipal Utilities
96
CITY OF ELK RIVER,MINNESOTA
PRINCIPAL ELECTRIC CUSTOMERS
CURRENT YEAR AND NINE YEARS AGO
2013 2004
Percentage Percentage
Total KWh Total of Total Total KWh Total of Total
Customer Sold Billings Billings Sold _ Billings Billings
Customer 1 54,417,600 $4,386,691 14.16% $
Customer 2 21,369,600 1,873,674 6.05% - -
Customer 3 4,848,800 425,035 1.37% 4,660,800 275,240 2.16%
Customer 4 4,562,000 424,033 1.37% 4,897,200 360,177 2.83%
Customer 5 4,923,720 412,933 1.33% 4,968,480 264,266 2.07%
Customer 6 5,130,750 400,201 1.29% 2,760,480 166,246 1.31%
Customer 7 3,370,400 307,514 0.99% 2,918,270 130,307 1.02%
Customer 8 3,421,000 302,768 0.98% -
Customer 9 2,898,400 248,216 0.80% 3,497,400 245,271 1.93%
Customer 10 2,348,700 236,566 0.76% 4,683,520 320,474 2.52%
Customer 11 - - 3,073,400 257,698 2.02%
Customer 12 - - 2,334,720 153,787 1.21%
TOTAL 107,290,970 $ 9,017,631 29.10% 33,794,270 $ 2,173,466 17.07%
Source: Elk River Municipal Utilities
Minnesota Statute 13.685 considers data on customers of municipal electric utilities as private data
and will no longer be disclosing customer names.
97
CITY OF ELK RIVER,MINNESOTA
TAX CAPACITY,MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
2004 2005 2006 2007
Tax capacity
Real property $ 15,387,792 $ 17,838,528 $ 20,514,092 $ 23,166,911
Personal property 215,581 237,262 246,741 281,606
Total tax capacity 15,603,373 18,075,790 20,760,833 23,448,517
Tax increment (608,609D (654,325) (675,049) 786,795
Taxable net tax capacity $ 14,994,764 $ 17,421,465 $ 20,085,784 $ 22,661,722
Total tax capacity rate 43.782% 43.763% 43.929% 43.056%
Taxable market value
Real property $ 1,299,691,938 $ 1,528,254,150 $ 1,773,917,600 $ 1,998,598,900
Personal property 10,934,000 12,020,800 12,494,300 14,318,500
Taxable market value $ 1,310,625,938 $ 1,540,274,950 $ 1,786,411,900 $ 2,012,917,400
Estimated actual market value
of taxable property $ 1,567,581,017 $ 1,805,774,228 $ 2,109,366,764 $ 2,262,479,345
Taxable market value as a percentage
of estimated actual market value 83.61% 85.30% 84.69% 88.97%
Source: Sherburne County Assessor
Note: Property in the county is reassessed annually. The county assessor's market value of property is approximately 92 percent
of actual value for all types of real and personal property.
98
2008 2009 2010 2011 2012 2013
$ 25,790,055 $ 26,550,210 $ 25,611,065 $ 24,736,999 $ 21,946,865 $ 19,969,977
279,154 302,166 310,180 350,946 344,032 353,390
26,069,209 26,852,376 25,921,245 25,087,945 22,290,897 20,323,367
(744,597) (899,835) (888,285) (784,10a (698,130) (122,648)
$ 25,324,612 $ 25,952,541 $ 25,032,960 $ 24,303,844 $ 21,592,767 $ 20,200,719
42.494% 43.280% 44.560% 45.723% 47.588% 50.373%
$2,186,595,580 $ 2,235,538,000 $ 2,121,774,900 $ 2,035,543,052 $ 1,775,334,600 $ 1,599,513,500
14,221,560 15,3 63,900 15,764,700 17,75 8,600 17,412,900 18,05 5,900
$2,200,817,140 $ 2,250,901,900 $ 2,137,539,600 $ 2,053,301,652 $ 1,792,747,500 $ 1,617,569,400
$ 2,457,361,368 $2,429,563,505 $ 2,191,955,185 $ 2,403,906,238 $ 1,907,992,306 $ 1,758,428,600
89.56% 92.65% 97.52% 85.42% 93.96% 91.99%
99
CITY OF ELK RIVER,MINNESOTA
PROPERTY TAX RATES
DIRECT AND OVERLAPPING' GOVERNMENTS
LAST TEN FISCAL YEARS
City of Elk River Overlapping Rates Total
School District Direct&
Fiscal Debt Referendum Special Overlapping
Year Operating Service Total County Operating Mkt.Value Districts Rates
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
2010 40.940 3.620 44.560 44.519 40.050 0.183 4.703 134.015
2011 42.449 3.274 45.723 46.342 43.489 0.188 4.956 140.698
2012 44.925 2.663 47.588 52.014 45.548 0.187 5296 150.633
2013 47.222 3.151 50.373 54.420 50.058 0.190 5260 160.301
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 property 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.
100
CITY OF ELK RIVER,MINNESOTA
PRINCIPAL TAXPAYERS
CURRENT YEAR AND NINE YEARS AGO
2013 2004
Percentage Percentage
Net Tax of Total Net Net Tax of Total Net
Tm ayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity
Great River Energy $ 1,212,644 1 6.00% $ 564,062 1 3.62%
JPM Capital Corporation 392,850 2 1.94 - - -
BRE Retail Residual Owner,LLC 287,846 3 1.42 -
Walmart Stores 281,032 4 1.39 163,494 4 1.05
Target Corp. 270,230 5 1.34 103,308 8 0.66
Menards,Inc 181,902 6 0.90 123,548 5 0.79
Phoenix Enterprises 146,693 7 0.73 - - -
Minnegasco Property 138,902 8 0.69 81,752 10 0.52
Home Depot 138,090 9 0.68 121,734 6 0.78
7040 Lakeland Partners LLC 120,742 10 0.60 -
Resource Recovery Technology - - - 263,296 2 1.69
Bradley Operating LP - 255,424 3 1.64
B&G Realty,Inc - - 107,104 7 0.69
Medical Facilities - _ 100,050 9 0.64
TOTAL $ 3,170,931 16.00% $ 1,883,772 12,08%
Source: Sherburne County Assessor
101
City of
Elk -�-�
River
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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 Levy Amount of Levy Years Amount of Levy
2004 $ 6,375,630 $ 6,270,432 98.35 $ 104,201 $ 6,374,633 99.98
2005 7,482,681 7,338,126 98.07 143,484 7,481,610 99.99
2006 8,730,932 8,551,757 97.95 178,432 8,730,189 99.99
2007 9,694,925 9,475,220 97.73 217,355 9,692,575 99.98
2008 11,033,630 10,750,281 97.43 281,726 11,032,007 99.99
2009 11,433,704 11,074,590 96.86 351,404 11,425,994 99.93
2010 11,164,258 10,920,348 97.82 218,748 11,139,096 99.77
2011 11,164,679 11,052,081 98.99 64,726 11,116,807 99.57
2012 10,705,377 10,592,493 98.95 39,719 10,632,212 99.32
2013 10,707,154 10,574,080 98.76 - 10,574,080 98.76
102
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 Revolving Increment
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
2010 22,002,000 540,000 - 3,460,000 375,000
2011 20,897,939 - 2,955,000 305,000
2012 26,579,666 - 4,035,306
2013 35,223,141 - 1,633,459 -
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 for personal income and population data.
103
Governmental Activities Business-Type Activities
General Total Percentage
Certificates of Obligation Revenue Certificates of Notes Primary of Personal Per
Indebtedness Other Revenue Bonds Indebtedness Payable Government Income' Capita'
$ 705,967 $ $ 7,990,000 $ 3,060,000 $ 375,000 $ 2,663,145 $ 34,525,112 6.27% $ 1,706
1,035,201 9,160,000 3,725,000 250,000 2,538,226 35,650,927 6.00% 1,654
1,134,334 1,908,725 7,015,000 7,185,000 125,000 3,066,820 36,307,379 5.74% 1,610
1,090,350 2,123,092 6,465,000 9,690,000 2,879,054 49,897,496 7.29% 2,152
756,033 1,839,792 8,630,000 9,280,000 2,701,994 51,730,765 6.97% 2,166
421,716 1,646,492 8,070,000 8,840,000 2,524,646 49,465,611 7.14% 2,093
87,400 1,499,746 6,180,000 6,940,000 2,345,318 43,429,464 6.32% 1,890
- 1,410,000 5,520,656 6,310,000 2,162,882 39,561,477 5.81% 1,713
1,410,000 4,791,567 5,085,000 1,975,812 43,877,351 6.30% 1,890
1,410,000 4,027,478 4,340,000 1,789,224 48,423,302 na 2,081
104
CITY OF ELK RIVER,MINNESOTA
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Less
Amounts Percentage Net
General Restricted Net of Net Bonded Bonded
Fiscal Bonded for Debt Bonded Debt to Tax Debt per
Year Debt' Service Debt Capacity2 Capita
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 2,842,412 8,631,922 42.98% 382.79
2007 17,792,017 4,253,142 13,538,875 59.74% 583.90
2008 18,391,033 3,712,036 14,678,997 57.96% 614.49
2009 17,471,716 3,027,915 14,443,801 55.65% 611.17
2010 18,040,733 3,787,324 14,253,409 54.92% 620.41
2011 17,120,000 3,234,939 13,885,061 57.13% 601.06
2012 23,286,667 3,044,599 20,242,068 100.20% 871.75
2013 22,456,667 4 2,329,723 20,126,944 99.63% 864.82
Note: Details regarding the city's outstanding debt can be found in the notes to the financial
statements.
' Only includes debt supported by tax Ievy.
2 See the Schedule of Tax Capacity,Market Value and Estimated Actual Value of Taxable
Property for property value data.
3 Population data can be found in the Schedule of Demographic and Economic Statistics.
4 Excludes$9,685,000 refunding debt payable through cash with fiscal agent.
105
CITY OF ELK RIVER,MINNESOTA
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
DECEMBER 31,2013
Percent
of Debt City's
Outstanding Applicable Share
Debt to City` of Debt
Direct Debt:
City of Elk RivW $ 38,266,600 100.00% $ 38,266,600
Overlapping Debt.
Sherburne County 18,782,321 26.30 4,939,750
School District#728 210,690,000 34.10 71,845,290
Total overlapping debt 229,472,321 76,785,040
Total direct and overlapping debt $ 267,738,921 $ 115,051,640
Debt Ratios:
Ratio of debt per capita(23,273 population) $4,944
Ratios of debt to taxable market value of$1,617,569,400 7.11%
Source. Sherburne County and School District#728
' The percentage of overlapping debt applicable is estimated using taxable market property values.
Applicable percentages were estimated by determining 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.
2 Excludes debt payable from enterprise revenue.
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.
106
CITY OF ELK RIVER,MINNESOTA
LEGAL DEBT MARGIN INFORMATION
LAST TEN FISCAL YEARS
2004 2005 2006 2007
Debt limit $ 26,212,519 $ 30,805,499 $ 35,728,238 $ 40,258,348
Bonds 10,060,967 10,040,201 13,124,334 17,792,017
Reserves 925,148 950,793 1,003,315 861,726
Total net debt applicable to limit 9,135,819 9,089,408 12,121,019 16,930,291
Legal debt margin $ 17,076,700 $ 21,716,091 $ 23,607,219 $ 23,328,057
Total net debt applicable to the
limit as a percentage of debt limit 34.85% 29.51% 33.93% 42.05%
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. By law,the general obligation debt subject to the
limitation may be offset by amounts set aside for the extinguishment of those obligations.
r Only 213 of the$10,000,000 GO EDA Bonds, Series 2007 and the$645,000 GO EDA Bonds, Series 2008A
are subject to the debt limit. The Remaining 113 will be paid by the YMCA.
107
2008 2009 2010 2011 2012 2013
66,024,514 $ 67,527,057 $ 64,126,188 $ 61,599,050 $ 58,316,472 $ 48,527,082
18,391,033 17,471,716 18,040,733 17,120,000 23,286,667 32,141,667
1,318,186 1,418,700 1,164,060 1,030,418 1,202,093 10,819,006
17,072,847 16,053,016 16,876,673 16,089,582 22,084,574 21,322,661
$ 48,951,667 $ 51,474,041 $ 47,249,515 $ 45,509,468 $ 36,231,898 $ 27,204,421
25.86% 23.77% 26.32% 26.12% 37.87% 43.94%
Legal Debt Margin Calculation for Fiscal Year 2013
Estimated taxable market value $ 1,617,569,400
Debt limit(3%of market value) $ 48,527,082
Debt applicable to limit:
G.O.capital improvement bonds 15,360,000
G.O.EDA bonds[ 16,781,667
Less: Cash and investments in related
debt service funds _ (10,819,006)
Total net debt applicable to limit 21,322,661
Legal debt margin $ 27,204,421
108
CITY OF ELK RIVER,MINNESOTA
PLEDGED-REVENUE COVERAGE
LAST TEN FISCAL YEARS
Revenue Bonds'
Net
Fiscal Gross Operating Revenue Debt Service
Year Revenue Expenses' Available Principal Interest Coverage
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 29,665,332 23,654,659 6,010,673 1,000,000 681,124 3.58
2010 31,869,940 25,849,033 6,020,907 3,785,000 564,105 1.38
2011 33,672,393 27,326,836 6,345,557 1,335,000 458,888 3.54
2012 35,944,367 28,444,321 7,500,046 1,950,000 410,320 3.18
2013 34,737,779 28,629,356 6,108,423 1,505,000 341,419 3.3I
Note: Details regarding the government's outstanding debt can be found in the notes to the financial statements.
' Includes Liquor,Sewer,Water and Electric revenue bonds
2 Gross revenue excludes interest income,connection fees and miscellaneous revenues
3 Expenses exclude depreciation, interest on bonds and miscellaneous expenses
4 Excludes$1,540,000 refunded principal paid through cash with fiscal agent.
109
Special Assessment Bonds
Special
Assessment Debt Service
Collections Peal Interest Coverage
$ 1,901,427 $ 1,060,000 $ 297,840 1.40
1,123,407 925,000 264,999 0.94
999,232 4,475,000 198,650 0.21
231,839 395,000 64,339 0.50
611,290 345,000 192,553 1.14
421,724 510,000 168,335 0.62
368,936 510,000 148,276 0.56
327,975 505,000 124,185 0.52
287,759 505,000 122,209 0.46
202,457 850,000 ' 87,268 0.22
110
CITY OF ELK RIVER,MINNESOTA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
Personal
Fiscal Income Per Capita Median School Unemployment
Year Population' (in thousands) Income Age Enrollment4 Rate
2004 20,240 $ 550,852 $ 27,216 32 11,749 5.0%
2005 21,548 593,906 27,562 32 12,259 4.7%
2006 22,550 632,911 28,067 32 12,735 4.4%
2007 23,187 684,689 29,529 32 13,058 5.6%
2008 23,888 742,439 31,080 33 13,031 8.2%
2009 23,633 692,376 29,297 33 13,073 9.0%
2010 22,974 3 687,129 29,909 33 13,036 8.1%
2011 23,101 681,179 29,487 34 13,117 7.3%
2012 23,147 696,794 30,103 34 13,255 6.4%
2013 23,273 3 na na 35 13,367 5.5%
Data Sources:
1 State Demographer
2 Bureau of Economic Analysis
3 US Census Bureau
4 School District
5 Minnesota Department of Employment and Economic Development
na-not available
111
CITY OF ELK RIVER,MINNESOTA
PRINCIPAL EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
2013 2004
Percentage Percentage
of Total City of Total City
Employer Employees Rank Employment Employees Rank Employment
Independent School District 728 1 1,387 1 11.42% 1,000 I 9.59%
Sherburne County 632 2 5.20% 504 2 4.84%
Guardian Angels of Elk River 374 3 3.08% 368 4 3.53%
Walmart 350 4 2.88% 362 5 3.47%
City of Elk River 210 5 1.73% 180 8 1.73%
Great River Energy 207 6 1.70% 398 3 3.82%
Sportech,Inc. 185 7 1.52% - -
Menards 170 8 1.40% 179 9 1.72%
Tescom Corporation 161 9 1.33% 213 6 2.04%
Cornerstone Auto Resource 138 10 1.14% - - -
Cub Foods - 200 7 1.92%
Cobom's - - - 161 10 1.54%
Total 3,814 31.40% 3,565 34.20%
Total Employment z 12,150 10,423
Total District
2 Minnesota Department of Employment and Economic Development
112
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115
Other Required Reports
City of Elk River
Elk River,Minnesota
For the Year Ended
December 31,2013
ABDO
wPeople
iREICK & +Process
MEYER.S LLP (;Oillg
Certified Public Accountants & Consultants Beyondthe
Numbers
CITY OF ELK RIVER,MINNESOTA
OTHER REQUIRED REPORTS
TABLE OF CONTENTS
FOR THE YEAR ENDED DECEMBER 31,2013
Page No.
OTHER REQUIRED REPORTS
Independent Auditor's Report on Minnesota Legal Compliance 2
-1-
ABDO
EICK &
ME 1 E W LLP
Certified Public Accountants& Consultants
INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE
Honorable Mayor and City Council
City of Elk River,Minnesota
We have audited,in accordance with auditing standards generally accepted in the United States of America,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 31,2013,and the
related notes to the financial statements,and have issued our report thereon dated May 13,2014.
The Minnesota Legal Compliance Audit Guide for Political Subdivisions,promulgated by the State Auditor pursuant to Minnesota
Statute §6.65,contains seven categories of compliance to be tested: contracting and bidding,deposits and investments,conflicts of
interest,public indebtedness,claims and disbursements,miscellaneous provisions,and tax increment financing.Our audit considered
all of the listed categories.
In connection with our audit,nothing came to our attention that caused us to believe that the City failed to comply with the provisions
of the Minnesota Legal Compliance Audit Guide for Political Subdivisions.However,our audit was not directed primarily toward
obtaining knowledge of such noncompliance.Accordingly,had we performed additional procedures,other matters may have come to
our attention regarding the City's noncompliance with the above referenced provisions.
This report is intended solely for the information and use of those charged with governance and management of the City and the State
Auditor and is not intended to be and should not be used by anyone other than these specified parties.
OL&&�,4"
ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
May 13,2014
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261
2 4 4
13
/
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
MANAGEMENT LETTER
FOR THE YEAR ENDED
27 DECEMBER 31, 2013
8 14 J"A
I
2 4 5 4
4
IA
/
816
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
MANAGEMENT LETTER
FOR THE YEAR ENDED
DECEMBER 31, 2013
ABDO
EICK &
ME 1 E W LLP
Certified Public Accountants& Consultants April 14,2014
Board of Trustees and Plan Participants
Elk River Fire Department Relief Association
Elk River,Minnesota
We have audited the financial statements of the governmental and fiduciary activities of the Elk River Fire Department Relief
Association(the Association)for the years ended December 31,2013 and 2012,and have issued our report thereon dated
April 14,2014.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 financial 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.
Our responsibility is to plan and perform the audits to obtain reasonable,but not absolute,assurance that the financial statements are
free of material misstatement.As part of our audits,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.
Significant Audit Findings
In planning and performing our audits of the financial statements of the Association for the years ended December 31,2013 and 2012,
in accordance with auditing standards generally accepted in the United States of America,we consider the Association's internal
control over financial reporting(internal control)as a basis for designing our auditing procedures for the purpose of expressing our
opinion on the financial statements,but not for the purpose of expressing an opinion on the effectiveness of the Association's internal
control.Accordingly,we do not express an opinion on the effectiveness of the Association's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily
identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and therefore,there can be no
assurance that all such deficiencies have been identified.We did not identify any deficiencies in internal control that we consider to be
significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management,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 material misstatement of
the Association's financial statements will not be prevented,or detected and corrected on a timely basis.We did not identify any
deficiencies in internal control that we consider to be material weaknesses.
A significant deficiency is a deficiency,or combination of deficiencies,in internal control that is less severe than a material weakness,
yet important enough to merit attention by those charged with governance.We did not identify any deficiencies in internal control
over financial reporting that we consider to be material weaknesses,as defined above.
Compliance
As part of obtaining reasonable assurance about whether the financial 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.
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261 _1_
Planned Scope and Timing of the Audit
We performed the audit according to the planned scope and timing.
Qualitative Aspects of Accounting Practices
Management has the responsibility for selection and use of appropriate accounting policies.In accordance with the terms of our
engagement letter,we will advise management about the appropriateness of accounting policies and their application.The significant
accounting policies used by the fire relief are described in Note 2 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 that were both significant and unusual,and of which,under professional standards,we are required to
inform you,or transactions for which there is a lack of authoritative guidance or consensus.
Accounting estimates are an integral part of the financial 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 financial statements and because of the possibility that future events affecting
them may differ significantly from those expected.The most sensitive estimate affecting the financial 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 financial 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 financial accounting,reporting,or
auditing matter,whether or not resolved to our satisfaction,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 representation letter dated
April 14,2014.
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 financial
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.
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Other Matters
With respect to the supplementary information accompanying the financial statements,we made certain inquiries of management and
evaluated the form,content,and methods of preparing the information to determine that the information complies with accounting
principles generally accepted in the United States of America,the method of preparing it has not changed from the prior period,and
the information is appropriate and complete in relation to our audit of the financial statements.We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements
themselves.
Financial Position and Results of Operations
Our principal observations and recommendations are summarized below.These recommendations resulted from our observations
made in connection with our audit of the Association's financial statements for the year ended December 31,2013-
Investment Return
A summary of the investment rate of return is summarized below:
Assets
Total Held in
Investment Trust for Investment
Interest Investment Appreciation Income Pension Rate of
Year and Dividends Fees (Depreciation) (loss) Benefits Return
2009 $ 23,827 $ - $ 416,652 $ 440,479 $ 2,224,430 22.5 %
2010 51,384 16,484 142,240 177,140 2,189,448 8.0
2011 72,988 23,094 (91,141) (41,247) 2,260,830 (1.9)
2012 76,041 21,688 158,702 213,055 2,456,311 9.0
2013 84,687 27,198 304,699 362,188 2,880,579 13.6
Investment Rates of Return
40.00%
35.00%
30.00%
25.00% 22.5%
20.00%
15.00% 13.6%
10.00% 8.00/0 9.00/0
5.00%
- -IV)
(5.00%)
(L9%)
(10.00%)
2009 2010 2011 2012 2013
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Peer Group Comparisons
The following are two comparisons of statistics that will provide information on how your organization compares with other fire relief
associations around the State.We used averages from approximately 60 fire relief associations with under$200,000 in assets to
several million in assets.These averages include a 5-year trend of the rate of return and a 5-year trend of funding percentage as
compared to averages of the other 60 relief associations.
Averages Calculation 2009 2010 2011 2012 2013
Average rate of returns Net investment income/ 22.5% 8.0% (1.9%) 9.0% 13.6%
average assets 15.5% 8.3% (1.1%) 8.6% N/A
Percentage funded Assets/accrued liability 87.2% 91.3% 89.0% 96.3% 111.1%
91.9% 99.2% 98.1% 104.2% 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 assets.This will show a trend of
your returns over a 5-year period and show your performance related to other relief associations.
30.0%
22.5%
25.0%
20.0%
13.6%
15.0% EL
15.5% 8.3% 9.00/0
10.0%
5.0%
° 8.6%
(1.1%)
(5.0%)
(1.9%)
(10.0%)
2009 2010 2011 2012 2013
-*--Association rate (Peer group average
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Funding Percentage
The funding percentage is calculated by taking the Special fund assets and dividing it by the accrued pension liability_This graph will
show your funding percentage for a 5-year period and compare your percentage to other relief associations_
120.0%
115.0%
110.0%
104.2% 111.1%
105.0%
100.0% 99.2% 98.1%
9
95.0% 1.9%
9
90.0% 6.3%
85.0% 91.3% 89.0%
87.2%
80.0%
2009 2010 2011 2012 2013
Association percent (Peer group average
Future Accounting Standard Changes
The following Governmental Accounting Standards Board(GASB)Statements have been issued and may have an impact on future
financial statements: 1
GASB Statement No.67 - The Financial Reporting for Pension Plans-an Amendment to GASB Statement No. 25
Summary
The objective of this Statement is to improve financial reporting by state and local governmental pension plans. This Statement
results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions
with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity,and
creating additional transparency.
This Statement replaces the requirements of Statements No.25,Financial Reporting for Defined Benefit Pension Plans and Note
Disclosures for Defined Contribution Plans,and No. 50,Pension Disclosures,as they relate to pension plans that are
administered through trusts or equivalent arrangements(hereafter jointly referred to as trusts)that meet certain criteria.
The requirements of Statements No. 25 and No. 50 remain applicable to pension plans that are not administered through trusts
covered by the scope of this Statement and to define contribution plans that provide postemployment benefits other than pensions.
This Statement is effective for financial statements for fiscal years beginning after June 15,2013.Earlier application is
encouraged.
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Future Accounting Standard Changes-Continued
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve financial reporting primarily through enhanced note disclosures and schedules of
required supplementary information that will be presented by the pension plans that are within its scope.The new information
will enhance the decision-usefulness of the financial reports of these pension plans,their value for assessing accountability,and
their transparency by providing information about measures of net pension liabilities and explanations of how and why those
liabilities changed from year to year.The net pension liability information,including ratios,will offer an up-to-date indication of
the extent to which the total pension liability is covered by the fiduciary net position of the pension plan.The comparability of the
reported information for similar types of pension plans will be improved by the changes related to the attribution method used to
determine the total pension liability.The contribution schedule will provide measures to evaluate decisions related to the
assessment of contribution rates in comparison to actuarially determined rates,when such rates are determined.In that
circumstance,it also will provide information about whether employers and nonemployer contributing entities,if applicable,are
keeping pace with actuarially determined contribution measures.In addition,new information about rates of return on pension
plan investments will inform financial report users about the effects of market conditions on the pension plan's assets over time
and provide information for users to assess the relative success of the pension plan's investment strategy and the relative
contribution that investment earnings provide to the pension plan's ability to pay benefits to plan members when they come due.
GASB Statement No.68 - The Accounting and Financial Reporting of Pensions-an Amendment of GASB Statement No. 27
The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for
pensions.It also improves information provided by state and local governmental employers about financial support for pensions
that is provided by other entities.This Statement results from a comprehensive review of the effectiveness of existing standards of
accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of
accountability and interperiod equity,and creating additional transparency.
This Statement replaces the requirements of Statement No.27,Accounting for Pensions by State and Local Governmental
Employers,as well as the requirements of Statement No. 50,Pension Disclosures,as they relate to pensions that are provided
through pension plans administered as trusts or equivalent arrangements(hereafter jointly referred to as trusts)that meet certain
criteria.The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this
Statement.
This Statement is effective for fiscal years beginning after June 15,2014. Earlier application is encouraged.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will improve the decision-usefulness of information in employer and governmental
nonemployer contributing entity financial reports and will enhance its value for assessing accountability and interperiod equity by
requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense.Decision-
usefulness and accountability also will be enhanced through new note disclosures and required supplementary information.
GASB Statement No. 71 -Pension Transition for Contributions Made Subsequent to the Measure Date-an Amendment of
GASB Statement No. 68
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Future Accounting Standard Changes-Continued
Summary
The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No.68,
Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions,if any,made by a
state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement
date of the government's beginning net pension liability.
Statement No.68 requires a state or local government employer(or nonemployer contributing entity in a special funding
situation)to recognize a net pension liability measured as of a date(the measurement date)no earlier than the end of its prior
fiscal year.If a state or local government employer or nonemployer contributing entity makes a contribution to a defined benefit
pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period,
Statement No.68 requires that the government recognize its contribution as a deferred outflow of resources.In addition,
Statement No.68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net
pension liability of a state or local government employer or nonemployer contributing entity that arise from other types of events.
At transition to Statement No.68,if it is not practical for an employer or nonemployer contributing entity to determine the
amounts of all deferred outflows of resources and deferred inflows of resources related to pensions,paragraph 137 of Statement
No.68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported.
Consequently,if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of
resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have
been reported as deferred outflows of resources at transition.This could have resulted in a significant understatement of an
employer or nonemployer contributing entity's beginning net position and expense in the initial period of implementation.
This Statement amends paragraph 137 of Statement No.68 to require that,at transition,a government recognize a beginning
deferred outflow of resources for its pension contributions,if any,made subsequent to the measurement date of the beginning net
pension liability. Statement No.68,as amended,continues to require that beginning balances for other deferred outflows of
resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such
amounts.
The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No.68.
How the Changes in This Statement Will Improve Financial Reporting
The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net
position and expense in the first year of implementation of Statement No.68 in the accrual-basis financial statements of
employers and nonemployer contributing entities.This benefit will be achieved without the imposition of significant additional
costs.
1 Note.From GASB Pronouncements Summaries.Copyright 2014 by the Financial Accounting Foundation,401 Merritt 7,
Norwalk,CT 06856,USA,and is reproduced with permission.
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This report is intended solely for the information and use of the Board of Trustees,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.
The comments and recommendations in the report are purely constructive in nature,and should be read in this context.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.
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
0146&�'4",Ly
if
ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
April 14,2014
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ELK RIVER FIRE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FINANCIAL STATEMENTS AND
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEARS ENDED
DECEMBER 31,2013 AND 2012
THIS PAGE IS LEFT BLANK
INTENTIONALLY
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
TABLE OF CONTENTS
FOR THE YEARS ENDED
DECEMBER 31,2013 AND 2012
Page No.
INTRODUCTORY SECTION
Organization 5
FINANCIAL SECTION
Independent Auditor's Report 9
Management's Discussion and Analysis 11
Basic Financial Statements
Governmental Fund-General Fund
Balance Sheets 16
Statements of Revenues,Expenditures and Changes in Fund Balances 17
Fiduciary Funds-Special Pension Trust Fund
Statements of Fiduciary Net Position 18
Statements of Changes in Fiduciary Net Position 19
Notes to the Financial Statements 21
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress 30
Schedule of Employer Contribution 30
Notes to Required Supplementary Information 30
COMPLIANCE SECTION
Independent Auditor's Report on Minnesota Legal Compliance 33
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INTRODUCTORY SECTION
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FOR THE YEARS ENDED
DECEMBER 31, 2013 AND 2012
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ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
ORGANIZATION
FOR THE YEAR ENDED DECEMBER 31,2013
Board of Trustees
Name Title
Scott Schmitt President
Dave King Vice President
Robert Pearson Secretary
Joe Libor Treasurer
Rich Czech Trustee
Keith Thorson Trustee
Ex-Officio Trustees
Name Title
John Dietz Mayor
Tim Simon Finance Director
T.John Cunningham Fire Chief
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FINANCIAL SECTION
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FOR THE YEARS ENDED
DECEMBER 31, 2013 AND 2012
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ABDO
EICK &
ME 1 E W LLP
Certified Public Accountants& Consultants
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Elk River Fire Relief Association
Elk River,Minnesota
Report on the Financial Statements
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 ended December 31,2013 and 2012,and the related notes to the financial
statements,which collectively comprise the Association's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in the United States of America;this includes the design,implementation,and maintenance of internal
control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement,whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these 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
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The
procedures selected depend on the auditor's judgment,including,the assessment of the risks of material misstatement of the financial
statements,whether due to fraud or error.In making those risk assessments,the auditor considers internal control relevant to the
Association's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances,but not for the purpose of expressing an opinion on the effectiveness of the Association's internal control.
Accordingly,we express no such opinion.An audit also includes evaluating the appropriateness of accounting policies used and
significant accounting estimates made by management,as well as evaluating the overall financial statement presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion,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 31,2013 and 2012,and the results of its operations for the
years then ended in conformity with accounting principles generally accepted in the United States of America.
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261 _9_
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis
starting on page 11 and the Required Supplementary Information on page 30 be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements,is required by the Governmental Accounting
Standards Board,who considers it to be an essential part of financial reporting for placing the basic financial statements in an
appropriate operational,economic,or historical context.We have applied certain limited procedures,to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America which,consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries,the basic financial statements,and other knowledge we obtained during our audit of the basic financial
statements.We do not express an opinion or provide any assurance on the information because the limited procedures do not provide
us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Association's
basic financial statements as a whole.The introductory section listed in the table of contents is presented for the purposes of additional
analysis and is not a required part of the basic financial statements.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 or provide any assurance on
it.
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ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
April 14,2014
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Management's Discussion and Analysis
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 31,2013 and 2012.
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 Position(see page 18)and the Statements of Changes in Fiduciary Net Position(see page 19).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 position increased by$424,268(or 17.3 percent)as a result of the fiscal year's activities.
• The contributions from the State and the City increased$48,638.
• Net investment income increased$149,133 (or 70.0 percent).
• Accrued pension liability increased$40,926(or 1.6 percent).
• The General fund balance decreased$1,464(or 84.8 percent).The fund balance of the General fund is$263 at year end.
Plan Highlights
The Plan's funding level increased from 96.3 percent to 111.1 percent.
Plan Net Position
December 31,
2013 2012 Change
Cash and cash equivalents $ 66,144 $ 68,696 $ (2,552)
Investments 2,812,230 2,386,412 425,818
Receivables 2,205 1,203 1,002
Assets held in trust for pension benefits $ 2,880,579 $ 2,456,311 $ 424,268
For the current fiscal year 2013 there is a net increase of$424,268 from the previous fiscal year 2012.The previous fiscal year 2012
had a net increase of$195,481 from fiscal year 2011.
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Changes in Plan Net Position
The following comparative summary of the changes in net assets reflects the activities of the Plan:
December 31
2013 2012 Change
Revenues
Contributions $ 197,103 $ 148,465 $ 48,638
Miscellaneous income - 196 (196)
Net investment earnings 389,386 234,743 154,643
Less investment fees (27,198) (21,688) (5,510)
Total revenues 559,291 361,716 197,575
Expenditures 135,023 166,235 (31,212)
Change in net position 424,268 195,481 228,787
Net position-January 1 2,456,311 2,260,830 195,481
Net position- December 31 $ 2,880,579 $ 2,456,311 $ 424,268
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 normal 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
2013 2012 (Decrease)
Active participants
Vested
Fully 10 10 -
Partially 21 23 (2)
Non-vested(less than 5 years of service) 4 3 1
Deferred Members 3 3 -
Total Membership 38 39 (1)
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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 a going-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
Funding
Year Assets Liabilities Percentage
2008 $ 1,696,356 $ 2,392,353 70.9 %
2009 2,224,430 2,550,808 87.2
2010 2,189,448 2,398,067 91.3
2011 2,260,830 2,540,365 89.0
2012 2,456,311 2,551,430 96.3
2013 2,880,579 2,592,356 111.1
120.0%
110.0%
111.1%
100.0%
90.0% 96.3%
91 %
89.0
872% 3 %
80.0%
70.0%
70.9%
60.0%
2008 2009 2010 2011 2012 2013
Funding Percentage
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Asset Allocation
The following table and graph indicates the asset allocation for December 31,2013 and 2012.
December 31,
2013 2012
Cash and CD's $ 66,144 2.3 % $ 68,696 2.8 %
Broker money market 237,117 8.2 196,744 8.0
Domestic stock 1,395,037 48.5 1,172,719 47.8
Mutual funds 1,180,076 41.0 1,016,949 41.4
Total cash and investments $ 2,878,374 100.0 % $ 2,455,108 100.0 %
Cash and CD's Broker money market
2.3% 8.2%
Mutual funds
41.0%
Domestic stock
48.5%
Investment Activities
Investment income is vital to the Plan's current and continued financial 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 financial report is designed to provide citizens,taxpayers,plan participants and the marketplace's credit analysis with an
overview of the Plan's finances and the prudent exercise of the Board's oversight.If you have any questions regarding this report
or need additional financial information,please contact the Elk River Fire Relief Association, 13065 Orono Parkway,
Elk River,Minnesota 55330.
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FINANCIAL STATEMENTS
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FOR THE YEARS ENDED
DECEMBER 31, 2013 AND 2012
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ELK RIVER FIRE RELIEF ASSOCIATION,MINNESOTA
ELK RIVER,MINNESOTA
BALANCE SHEETS
GOVERNMENTAL FUND-GENERAL FUND
DECEMBER 31,2013 AND 2012
2013 2012
ASSETS
Cash and cash equivalents $ 263 $ 1,727
FUND BALANCES
Unassigned $ 263 $ 1,727
The notes to the financial statements are an integral part of this statement.
-16-
ELK RIVER FIRE RELIEF ASSOCIATION,MINNESOTA
ELK RIVER,MINNESOTA
STATEMENTS OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUND-GENERAL FUND
FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012
2013 2012
REVENUES
Donations $ 8,149 $ 6,565
EXPENDITURES
Conventions and meetings 460 603
Dues 259 22
Relief events 6,317 7,410
Scholarships 2,000 -
Other 577 708
TOTAL EXPENDITURES 9,613 8,743
NET CHANGE IN FUND BALANCES (1,464) (2,178)
FUND BALANCES,JANUARY 1 1,727 3,905
FUND BALANCES,DECEMBER 31 $ 263 $ 1,727
The notes to the financial statements are an integral part of this statement.
-17-
ELK RIVER FIRE RELIEF ASSOCIATION
STATEMENTS OF FIDUCIARY NET POSITION
FIDUCIARY FUND-SPECIAL PENSION TRUST FUND
DECEMBER 31,2013 AND 2012
2013 2012
ASSETS
Cash and cash equivalents $ 66,144 $ 68,696
Investments 2,812,230 2,386,412
Receivables
Interest 205 203
State of Minnesota 2,000 1,000
NET POSITION
Held in trust for pension benefits $ 2,880,579 $ 2,456,311
The notes to the financial statements are an integral part of this statement.
-18-
ELK RIVER FIRE RELIEF ASSOCIATION
STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUND-SPECIAL PENSION TRUST FUND
FOR THE YEARS ENDED DECEMBER 31,2013 AND 2012
2013 2012
ADDITIONS
Contributions
State of Minnesota $ 165,103 $ 117,465
10%supplemental reimbursement 2,000 1,000
City of Elk River 30,000 30,000
Total contributions 197,103 148,465
Investment earnings
Interest and dividends 84,687 76,041
Appreciation in investments 304,699 158,702
Less investment fees (27,198) (21,688)
Total investment earnings 362,188 213,055
Other income
Miscellaneous income - 196
TOTAL ADDITIONS 559,291 361,716
DEDUCTIONS
Benefits
Pension benefits 126,594 154,154
Administrative expenses
Salaries 3,255 3,255
Professional fees 4,880 6,850
Bond 269 315
Miscellaneous 25 1,661
TOTAL DEDUCTIONS 135,023 166,235
CHANGE IN NET POSITION 424,268 195,481
NET POSITION,JANUARY 1 2,456,311 2,260,830
NET POSITION,DECEMBER 31 $ 2,880,579 $ 2,456,311
The notes to the financial statements are an integral part of this statement.
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INTENTIONALLY
-20-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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 a single-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 31,2013 and 2012,membership data related to the Association were:
2013 2012
Retirees and beneficiaries currently receiving
benefits and terminated employees entitled to
benefits but not yet receiving them 3 3
Active plan participants
Vested
Fully 10 10
Partially 21 23
Nonvested 4 3
Total 38 39
-21-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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$5,091 per 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 Non-forfeitable percentage
of service of pension amount
5 40%
6 44
7 48
8 52
9 56
10 60
11 64
12 68
13 72
14 76
15 80
16 84
17 88
18 92
19 96
20 and thereafter 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.
-22-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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 funds
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 Special Pension Trust 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.
-23-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS-CONTINUED
C. Fund balance
In the fund financial statements,fund balance is divided into four classifications based primarily on the extent to which
the fire relief is bound to observe constraints imposed upon the use of resources reported in the governmental funds.
These classifications are defined as follows:
Nonspendable—Amounts that cannot be spent because they are not in spendable form such as prepaid items.
Restricted Amounts related to externally imposed constraints established by creditors,grantors or contributors;or
constraints imposed by state statutory provisions.
Committed Amounts constrained for specific purposes that are internally imposed by formal action(resolution)of the
Board of Directors(the Board),which is the fire relief s highest level of decision-making authority.Committed amounts
cannot be used for any other purpose unless the Board modifies or rescinds the commitment by resolution.
Assigned Amounts constrained for specific purposes that are internally imposed.In governmental funds other than the
General fund,assigned fund balance represents all remaining amounts that are not classified as nonspendable and are
neither restricted nor committed.In the General fund,assigned amounts represent intended uses established by the Board
itself or by an official to which the governing body delegates the authority.
Unassigned The residual classification for the General fund and also negative residual amounts in other funds.
The Association considers restricted amounts to be spent first when both restricted and unrestricted fund balance is
available.Additionally,the fire relief would first use committed,then assigned,and lastly unassigned amounts of
unrestricted fund balance when expenditures are made.
D. 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.
E. Income taxes
The Organization is a nonprofit organization described in Section 501(c)4 of the Internal Revenue Code and is exempt
from Federal and State income taxes.
The Organization has analyzed filing positions with the Internal Revenue Service and the State of Minnesota.The
Organization is subject to routine audits by these jurisdictions;however,the Organization is currently not under any
audits for any tax periods.The Organization does not anticipate that any of its income tax filing positions would result in
a material adverse effect on the Organization's financial condition,results of operations or cash flow.No liability has
been recorded for uncertain tax positions.
As allowed under accounting principles generally accepted in the United States of America,the Organization would
accrue,if applicable,income tax related interest and penalties in income tax expense in the Organization's statement of
revenues,expenditures and changes in fund balances.During the year ended December 31,2013,the Organization did
not recognize any interest or penalties.With few exceptions,the Organization is no longer subject to tax examinations by
tax authorities for years before 2010.
-24-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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 parry.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 rated"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"AX'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 financial institution that is not owned or
controlled by the financial institution furnishing the collateral.The selection should be approved by the Association.
-25-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
Note 3: DETAILED NOTES ON ACCOUNTS-CONTINUED
Following is a summary of the deposits covered by FDIC insurance at December 31,2013 and 2012:
2013
Fund Book Bank
General $ 263 $ 558
Special Pension Trust 66,144 66,144
Total $ 66,407 $ 66,702
2012
Fund Book Bank
General $ 1,727 $ 1,983
Special Pension Trust 68,696 68,696
Total $ 70,423 $ 70,679
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 Ratings(1) Credit Risk Distribution(2) 2013 2012
Pooled investments
Broker money market N/A 8% less than 6 mo. $ 237,117 $ 196,744
Mutual funds N/A 42% N/A 1,180,076 1,016,949
Total pooled investments 1,417,193 1,213,693
Non-pooled investments
Domestic stock N/A 50% N/A 1,395,037 1,172,719
Total investments $ 2,812,230 $ 2,386,412
(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.
-26-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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 I IA.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 may be 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 financial 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:
Minimum Maximum
Asset Class Percentage Percentage
Stocks 25% 75%
Bonds 0% 50%
Non-fluctuating share value 0% 10%
Cash 0% 10%
Note 4: FUNDING STATUS AND PROGRESS
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 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 financial statements to(a)assess the relief association's funding status on a going-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.
-27-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31,2013 AND 2012
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$165,103 and$117,465 plus an additional supplemental benefit amount of$2,000 and$1,000 was
made by the State in accordance with Minnesota statute for the years ended December 31,2013 and 2012,respectively.A
required contribution of$26,409 and$29,818 was made by the City for the years ended December 31,2013 and 2012,
respectively.There were also a voluntary contributions of$3,591 and$182 made by the City for the years ended
December 31,2013 and 2012,respectively.
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: EVALUATION OF SUBSEQUENT EVENTS
The Organization has evaluated subsequent events through April 14,2014,the date which the financial statements were
available to be issued.
-28-
REQUIRED SUPPLEMENTARY INFORMATION
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
-29-
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31,2013
A. Schedule of funding progress
Assets in
Excess of
(Unfunded) Benefit
Valuation Value of Accrued Accrued Funded per Year
Date Assets Liability Liability Rate of Service
12/31/13 $ 2,880,579 $ 2,592,356 $ 288,223 111.1 % $ 5,091
12/31/12 2,456,311 2,551,430 (95,119) 96.3 5,091
12/31/11 2,260,830 2,540,365 (279,535) 89.0 5,091
12/31/10 2,189,448 2,398,067 (208,619) 91.3 5,091
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
B. Schedule of employer contributions
Annual Percentage
Year Pension of APC
Ending Cost Contributed
12/31/13 $ 197,103 100.0 %
12/31/12 148,465 100.0
12/31/11 157,022 100.0
12/31/10 131,255 100.0
12/31/09 127,024 100.0
12/31/08 143,999 100.0
C. Notes to supplementary information
Valuation date 12/31/13
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
-30-
COMPLIANCE SECTION
ELK RIVER FIRE RELIEF ASSOCIATION
ELK RIVER,MINNESOTA
FOR THE YEAR ENDED
DECEMBER 31, 2013
-31-
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INTENTIONALLY
-32-
ABDO
EICK &
ME 1 E W LLP
Certified Public Accountants& Consultants
INDEPENDENT AUDITOR'S REPORT
ON MINNESOTA LEGAL COMPLIANCE
Board of Trustees
Elk River Fire Relief Association
Elk River,Minnesota
We have audited the financial statements of the governmental and fiduciary funds of the Elk River Fire Relief Association(the
Association)as of and for the years ended December 31,2013 and 2012,and the related notes to the financial statements,and have
issued our report thereon dated,April 14,2014.
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 Political Subdivisions,promulgated by 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 Political Subdivisions covers three 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,the 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.
LY
ABDO,EICK&MEYERS,LLP
Minneapolis,Minnesota
April 14,2014
5201 Eden Avenue,Suite 250
Edina,MN 55436
952.835.9090 1 Fax 952.835.3261 -33-