6.4. SR 06-21-2004MEMORANDUM
Item 6.4.
TO:
FROM:
DATE:
SUBJECT:
Mayor and City Council
Lori Johnson, Finance Director
June 2 I, 2004
Presentation of Comprehensive Annual Financial Report for Period
Ended December 3 I, 2003
Steve McDonald of Abbo, Eick, and Meyers and I will be present on Monday night to review the
city's 2003 Comprehensive Annual Financial Report (CAFR). This is the first CAFR completed
under GASB 34 and, as you will notice, the report looks considerably different than in past years. It
may be best if you f~rst focus on both the transmittal letter, which is included in the introductory
section of the CAFR, and management's discussion and analysis, which is included in the financial
section, as these provide an overview of the financial highlights and summaries of the data in an easy
to read format. Also, Steve and I will be prepared to briefly review the 2003 Fire Relief audit at the
meeting.
Due to the length of the CAFR, it has not been distributed will all Council packets. If you did not
receive a copy and you would like one, please contact me and one will be provided to you.
Finally, as the Council knows, the Finance Department has been preparing for the implementation
of GASB 34 for several years. This was not a simple implementation. It required a huge time
commitment because a substantial amount of infrastructure information needed to be complied,
minor internal fund structure changes needed to be made, and essentially a whole new report had to
be created. Assistant Finance Director Lori Ziemer did much of the work and deserves a great deal
of credit in the preparation of this report. The f~rst year of implementation is always the most
difficult so we look forward to next year when we should be back on our regular audit schedule with
presentation of the report to the Council earlier in the year.
S:~Council\Lori~2004~cafr03.doc
ABDO
EICK &
Certified Public Accountants & Consultants
March 19, 2004
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
Honorable Mayor and City Council
City of Elk River
Elk River, Minnesota
We have audited the general purpose f'mancial statements of the City of Elk River for the year ended December 31, 2003 and have
issued our report thereon dated March 19, 2004. Professional standards require that we provide you with the following
information related to our audit.
Our Responsibility under Auditing Standards Generally Accepted in the United States of America and
OMB Circular A-133
As stated in our engagement letter, our responsibility, as described by professional standards, is to plan and perform our audit to
obtain reasonable, but not absolute, assurance about whether the financial statements are free of material misstatement. Because
an audit is designed to provide reasonable, but not absolute assurance and because we did not perform a detailed examination of
all transactions, there is a risk that material errors, fraud or other illegal acts may exist and not be detected by us.
In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our
auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal
control over £mancial reporting. We also considered internal control over compliance with requirements that could have a direct
and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our
opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133.
As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we
performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, non-compliance with which
could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit. Also, in accordance with OMB Circular A-133, we examined,
on a test basis, evidence about the City's compliance with the types of compliance requirements described in the U.S. Office of
Management and Budget (OMB) Circular A-133 Compliance Supplement applicable to each of its major federal programs for the
purpose of expressing an opinion on the City's compliance with those requirements. 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 one
instance of non-compliance.
Collateral Coverage
In accordance with Minnesota statute, section 118a.03, the Utility Commission is required to have pledged collateral equal to
110 percent of the deposits not covered with insurance. At December 31, 2003, the Utility Commission was $200,000 under
collateralized.
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City of Elk River
March 19, 2004
Page Two
Significant Accounting Policies
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 City are described in Note 1 to the fmancial statements. As described in Note 4G to the
financial statements, the City changed accounting policies related to financial reporting by adopting Statement of Governmental
Accounting Standards (GASB Statement) No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for
State and Local Governments, in 2003. Accordingly, the cumulative effect of the accounting change as of the beginning of the
year is reported in Note 4G. We noted no other transactions entered into by the City 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
Accounting estimates are an integral part of the combined £mancial 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 general purpose financial statements and because of the
possibility that future events affecting them may differ significantly from those expected. The most significant estimate affecting
the £mancial statements was depreciation on fixed assets.
Management's estimate of depreciation is based on estimated useful lives of the assets. We evaluated the key factors and
assumptions used to develop this estimate in determining that it is reasonable in relation to the financial statements taken as a
whole.
Audit Adjustments
For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements
that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment may or may not
indicate matters that could have a significant effect on the City's financial reporting process (that is, cause future financial
statements to be materially misstated). In our judgment, none of the adjustments we proposed, whether recorded or unrecorded by
the City, either individually in the aggregate, indicate matters that could have a significant effect on the City's financial reporting
process. We noted no uncorrected misstatements.
Disagreements with Management
For purposes of this letter, professional standards defme a disagreement with management as a matter, whether or not resolved to
our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the general-purpose
£mancial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our
audit.
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
general purpose 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.
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City of Elk River
March 19, 2004
Page Three
Issues Discussed Prior to Retention of Independent Auditors
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.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing our audit.
Governmental Accounting Standards Board (GASB) Statement No. 34
As mentioned previously, the City has implemented GASB Statement No. 34 for the December 31, 2003 financial statements. The
main change resulting from the implementation was issuing financial statements under a new reporting model. The main features
of this model are summarized below:
· Narrative analysis through the Management Discussion & Analysis (MD&A) letter.
· Government-wide f'mancial repotting that builds upon traditional fund based £mancial statements. The Government-wide
financial statement are intended to give a more concise view of the government as a single unified entity.
More long-term focus for governmental activities. The City now has fixed assets, bonds and compensated absences
payable on its Statement of Net Assets for Governmental Activities. The addition of this information should help direct
users to a long-term view of the £mancial data.
A distinction between major and non-major funds. More information is provided on individual funds that meet the
criteria to be included as major funds. The general fund, Improvement Bonds and Public Safety/City Hall Expansion are
considered major governmental funds. All enterprise funds are reported as major business-type activity.
· Budgeting analysis that considers both the adopted and final budget.
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City of Elk River
March 19, 2004
Page Four
The following are areas that came to our attention during the audit that we feel should be reviewed:
Financial Position and Results of Operations
Governmental funds
As mentioned above a feature of the new reporting model is a focus on major funds in the fund statements of the City. Major
funds are determined by whether the funds assets, liabilities, revenue or expenditures exceed 10 percent of the total for each
category in the governmental view and five percent of the total for each category on an entity basis. The City also has the
option of specifying a fund as major and the general fund is always considered major. The following graph gives an
indication of the fund balance for the major funds and the non-major funds by fund type:
Governmental Fund Balances 2002 and 2003
(percent of total)
'40% ~
20% ~
0% ~
-20%
2002 2003
· Non-maj or capital projects $3,266,591 $4,862,601
· Non-major debt service $1,689,854 $1,650,253
· Non-maj or special revenue $10,4g0,372 $10,236,174
[] Public Safety/City Hall Facility $5,221,063 $(277,051)
· Improvement Bonds $ 3,606,646 $4,106,149
· General I $3,190,589 $3,732,049
· Although the non-major special revenue fimds make up nearly 40 percent of the total fired balance, this balance is
comprised of sevenleen individual special revenue funds. The largest fund balance within this total is the Landfill fund
which has a fund bglance of just over $1.9 million.
/
· The ,six non-major ~ebt service funds along with the Improvement Bonds are established to provide for repayment of the
City s long term de~t of governmental activities which totals $22,600,450. All debt service funds have a positive fund
balance and appear to be generating sufficient resources to provide for their repayment.
/
· Although the Publi~
expenditure activit~
funds is the Capital
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Safety/City Hall Facility has a deficit at year end this fund was determined to be major because of its
· The non-major capital projects fimds are comprised of seven individual funds. The largest of these
Projects which has an ending fund balance of $2,833,067.
City of Elk River
March 19, 2004
Page Five
A more detailed discussion on the general fund follows:
General Fund I
The general fund is use4 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. Total revenue of $7,851,182 was 104 percent of the
budget which totaled $7,561,900. A summary of its revenue and operating transfers in compared with budget follows:
2003 Revenue and Operating Transfers In Compared to Budget
$4,500,000 --
$4,000,000 --
$3,500,000 --
$3,000,000 --
$2,500,000 --
$2,000,000 -
$1,500,000 -
Sl,OOO,OOO - ~l~----,.,.;~
$500,000 -
GeneJ al Licenses and Inter- Charges for Fines Interest Misc. Operating
prope: ty permits governmental service income ~ans~rs in
taxe
I~1 Actual $4,336 568 $1,143,612 $901,421 $8~6,233 $177,242 $37,477 $17,529 $341,000
"'"~"Budget $4,290,500 $1,069,950 $851,150 $796,100 $156,000 $40,000 $17,200 $341,000
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Total expenditures and
which totaled $7,318,7(
2003 E:
$4,000,000
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
City of Elk River
March 19, 2004
Page Six
)perating transfers out in the general fund were $7,309,722 and this was 99 percent of the budget
0. A graph of expenditures and operating transfers out compared to budget follows:
:penditures and Operating Transfers Out Compared to Budget
General
Public Safety Public Works
Culture and
Recreation
Operating
transfers out
the State Auditor has classified cities' unreserved fund balance levels relative to expenditures as
Under 20%
21-34
35-50
51-64
65-100
101-150
Above 150
,,roup all general and special revenue funds of the city when making this calculation where our
on the general fund. If we use expenditures and transfers in these funds as a basis for calculation the
;e in both general and special revenue funds of approximately 120 percent. Although there is no
~d balance, it is a good policy to designate intended use of fund balance. This helps address citizen
fund balance and tax levels.
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The State Auditor does
calculation is based onl,
City would have a reser
legislation regulating fu
concerns as to the use o
Extremely low
Low
Acceptable
Moderately high
High
Very high
Extremely high
The Minnesota Office
follows:
approximately 40 to 50
emergency needs. At ~
percent of planned expenditures and transfers out is adequate to meet working capital and small
current level, the fund balance is Within the range of what is generally recommended as a minimum.
~ Acmal 1,537,682 $3,526,140 $1,188,209 $864,361 $193,330
'~'"Budget 1,625,600 $3,507,200 $1,232,600 $815,100 $138,200
/
The general fund balanCe increased $541,460 from 2002. The total fimd balance is $3,732,049 and the unreserved portion of
fund balance is $3,384,023 which is 43 percent of the 2004 budgeted expenditures. We recommend the fund balance be
maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of
Fund balance should be
· Expenditures a
revenues are n~
required to fm~
· The City is vul
2001 legislativ
and local gove:
legislative sess
levy limits.
· Expenditures n
would include
financing need
· A strong fund
better interest
A table summarizing th
Year
2OO3
2002
2001
2000
1999
$9,000,000
$8,000,OO0
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
City of Elk River
March 19, 2004
Page Seven
maimained for the following reasons:
Purposes and Benefits
re incurred somewhat evenly throUghout the year. However, currently, property tax and state aid
~t received until the second half of the year. An adequate fund balance will provide the cash flow
.nce the general fund expenditures Until these revenue sources are received.
aerable to legislative actions at the State and Federal level. The State eliminated HACA aid with the
: session and has since in the 2003 legislative session imposed reductions of market value credit aid
xunent aid for some cities. Levy limits have also been implemented for municipalities in past
tons. An adequate fund balance will provide a temporary buffer against those aid adjustments and
ot anticipated at the time the annuall budget was adopted may need immediate Council action. These
:apital outlay replacement, lawsuits and other items. An adequate fund balance will provide the
:d for such expenditures.
~alance will assist the City in obtaining, maintaining or improving its bond rating. The result will be
ates in future bond sales.
· ·
general fund balance In relation to ibudget follows:
Fund
Following Balance
Fund Year as a Percent
Balance Budget of Budget
3,732,049 $ 7,875,400 47%
3,190,589 7,687,900 42
3,062,175 7,215,500 42
2,695,612 6,470,000 42
2,312,880 5,862,500 39
Fund Balance as a PerCent of Next Year's Budget
$5,862,500 $6,450,000
$7,215,500 $7,687,900 $7,87,5,400
42% 47%
42%
1999 2000 200, 1 2002
I ~ Fund Balance --1-- Budget I
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2003 2004
Enterprise Funds
The activities of the En~
electric and water opera
Council has the ultimat~
Garbage Collecti¢
A comparison of th
City of Elk River
March 19, 2004
Page Eight
erprise funds include the electric, ~ ater, sewer, garbage services and the off-sale liquor store. The
tions, under the direction of the Uti ities Commission, are included in the financial statements since
oversight responsibility for their o ~erations.
n Fund
past four year's garbage collectio9 fund operations is as follows:
Garbage COllection Fund
800,000 -
600,000
200'005,0
200,000) 2000 i 2001 2002 2003
"'~"'Operating levenue $686,815 i $706,626 $746,392 $830,808
'-ffi~Operating lxpense $791,043 ,! $807,572 $847,380 $884,532
'"~"Loss from~perations $(104,228) i $(100,946) $(100,988) $(53,724)
~Cash and investments $255,671 i $175,759 $98,962 $42,436
The expenses of th
users. As a result,
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fund are mainly contracted servic&s that are generally fixed in amount and relate to the number of
is not necessary to carry a large cash reserve. The current level appears adequate.
Municipal Liquor
A comparison of th
Fund
s past four year's municipal liquor and operations is as follows:
Municipal LiquOr Fund Summary
2000
U-'--q Sales
[4,500,000
~4,000,000
~3,500,000
~3,000,000
~2,500,000
~2,000,000
H,500,000
H,000,000
$500,000
$-
$3,788,048
'~"~q~== Gross pre fit $941,722
Income b~ :fore transfer $496,502
Cash bala ace $1,416,935
2001
$3,981,509
$1,018,542
$519,370
$1,805,708
Sales have increase
transfers has remai~
City of Elk River
March 19, 2004
Page Nine
2002 2003
$4,072,018
$1,074,171
$534,279
$2,039,051
$4,152,235
$1,111,949
$559,421
$2,350,361
d annually about 3 percent, the grols profit percentage has increased each year and the income before
led consistent for the four years prelented. At the end of 2003, $635,000 in bonds remain to be paid.
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Sewage Disposal
A comparison of I/
~nd
past four year's sewage disposal
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
Sewage Di
md operations is as follows:
~osal Fund
2000 2001 2002
Operating revenue $877,655
Operating expense $756,869
~*~'~Non-operz ting revenue $637,878
Income be fore transfers $758,664
'"')IC""Cash and
City of Elk River
March 19, 2004
Page Ten
The cash balance
This has been a lax
$2,635,000.
i nvestmems
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$3,428,124
$962,902
$786,197
$377,375
$554,080
$3,805,246
2003
$1,026,879 $1,066,202
$930,751 $1,255,434
$244,280 $654,795
$340,408 $465,563
$4,262,952 $4,924,950
..mains strong relative to operations. The non-operating revenue is made up mainly of connection fees.
e factor in the increase in cash oler the last several years. The bonds outstanding at year end total
Water Fund
The results of the ¥
$1,!
$1,(
$~
$~
$:
$~
$:
$:
$:
,m~Revenue
~Operting
'")'O"Income
~l~'-Transfers to ci
tater fund are as follows:
2000
$755,462
$615,042
$478,O29
$618,449
$56,621
City of Elk River
March 19, 2004
Page Eleven
Water Opertions
Summary
2001 2002 2003
$844,982 $834,562 $1,056,900
$715,638 $853,598 $1,435,031
$582,259 $328,876 $495,184
$711,603 $309,840 $117,053
$19,206 $23,893 $106,926
The following tabk
Year
2003
2002
2001
2000
The Water fund ca~
amount of capital
outstanding of $7,
good practice to en
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gives an indication of the sources
Beginning
Cash Operating
Balance Activities
$ 1,995,495 $ 1,128,351
4,484,859 587,505
1,393,254 1,127,432
1,499,657 827,979
nd uses of cash for the past four years:
Cash Provided (Used) By
Non-capital Capital
Financing Financing
Activities Activities
Ending
Investing Cash
Activities Balance
(107,431
682,857
(145,625
(191,303
$ 210,930 $ 6,129$ 3,233,474
(3,869,730) 110,004 1,995,495
2,012,042 97,756 4,484,859
(826,454) 83,375 1,393,254
.h from operations has been consistdntly high but has not been sufficient to cover the significant
:tivities over the last four years. AS a result the bonds payable have increased to the current amount
88,750. The Utilities does monitor results of operations and furore cash flow needs closely. This is a
ure that rates are sufficient to meet the needs of the operations.
Electric Fund
The results of the 15
lectric fund are as follows:
Electric Oper:ttions Summary
$12,20 ,000
$9,201,000 -
$8,20q,000 ~
$7,20~,000
$6,201,000
$5,20(~,000
$4,201,000
$3,20(~,000
$2,201,000
S l,20~,000 )1( )1( )1(__ )1~_
o ,ooo i i :
$(80,~,000)n 2000 2001 2002 2003
/
~Revenue / $9,389,846 $ 9,972,183 $11,171,286 $13,193,672
~Operting expens~ $8,279,060 $ 9,016,406 $10,202,526 $11,881,943
'""~Non-operating income $606,494 ~790,147 $917,373 $588,159
~l~Income before tramfers $1,717,280 $1,745,924 $1,841,211 $1,899,888
'~l~Transfers to city/ $230,914 ,~252'497 $289,264 $317,918
Other balances at E
Operating cash
Designated cas
Remaining r,
By Commiss
City of Elk River
March 19, 2004
Page Twelve
Total cash and
Notes payable
Bonds payable
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ecember 31, 2003 and 2002 are listld below:
/
and investments
h and investments:
~'striction from paid bond
ion for construction
2003 2002
569,904 $ 1,220,063
85,000 85,000
1,065,908 945,908
investmems $ 1,720,812 $ 2,250,.971
$ 2,775,424 $ 2,854,536
$ 1,771,250 $ 500,000
The following tabl
Year
2003
2002
2001
2000
The cash provided
amount of cash ne{
capital activities fc
Other Items
Fund Deficits
Each individual fund st
end. It appears that pre
Ful
Special revenue
Ice Arena
Capital projects
Improvement pr,
Tax Increment
This report is intended sole]
the report are purely constn
Our audit would not necess~
records and related data.
If you have any questions o:
convenience. We wish to tt
to us by your staff.
March 19, 2004
Minneapolis, Minnesota
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CityofElkRiver
March 19, 2004
Page Thirteen
gives an indication of the sources ~nd uses of cash for the past four years:
Cash Provided (Used) By
Beginning Non-capital Capital
Cash Operating Financing Financing
Balance Activities Activities Activities
Investing
Activities
2,250,971 $ 2,488,280 $ (277,407) $ (2,778,559) $ 37,527
1,708,447 2,761,579 703,979 (3,029,277) 106,243
1,407,906 2,795,337 (382,380) (2,207,544) 95,128
1,315,004 2,226,373 (382,249) (1,846,478) 95,256
>y operating activities has remainec
'.ded each year for the capital activit
r most of the last four years.
Ending
Cash
Balance
$ 1,720,812
2,250,971
1,708,447
1,407,906
relatively strong. The summary above highlights the significant
es of the Utilities. The operations have been able to finance the
.ould have sufficient resources to prbvide for its operations. The following funds have deficits at year
~er monitoring is in place to ensurei that these deficits will eventually be eliminated.
~j ects
inancing Districts
2003
$ 18,295
281,371
41,701
y for the information and use ofrna~gement and Council. The comments and recommendations in
Lctive in nature, and should be read ~n this context.
Lrily disclose all weaknesses in the s~stem because it was based on selected tests of the accounting
wish to discuss any of the items contained in this letter, please feel free to contact us at your
~ank you for the continued opportunity to be of service and for the courtesy and cooperation extended
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
CITY
MEMBER
OF ELK RIVER, MINNESOTA
COMPREHENIIVE ANNUAI~
FINANCIAL REPORT
FOR THE Y~AR ENDED
DECEMBER 31, 2003
Patrick Klaers, City Administrator
Prepared by the Finance Department
!
)F THE GOVERNMENT FINANCE OFFICERS ASSOCIATION
--
OF THE UNITED ST~kTES AND CANADA
INTRODUC7
Letter of Tran
Certificate of,
Organizationa
Elected and A
FINANCIAL
Independent ,a
CITY OF ELK RIMER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2003
/
0RY SECTION
;mittal
[chievement
Chart
>ointed Officials
;ECTION
uditor's Report
Management'~; Discussion and Analysis
Basic Financial Statements:
Governmenl-wide Financial Statements:
Statemen~ of Net Assets
Statemen~ of Activities
Fund FinanCial Statements:
Balance ~ heet - Governmental Funds /
Reconciliation of the Governmental Funds Bglance Sheet to
the Stal ement of Net Assets /
Statemen] of Revenues, Expenditures, and Cl~anges in
Fund Balances - Governmental Funds /
Reconcili
Change
Statem,
Statemen
Fund B
Statemen
Statemen'
Fund lX
Statemen
Statemen
Escrox~
Statemen
Develo
Notes to Fh
ation of the Statement of Revenues4Expenditures, and
s in Fund Balances of Governmental Funds to the
mt of Activities ·
of Revenues, Expenditures, and C1 ranges in
alances - Budget and Actual - Gene ral Fund
of Net Assets - Proprietary Funds
of Revenues, Expenses, and Chan :es in
et Assets - Proprietary Funds
: of Cash Flows - Proprietary Fund
: of Fiduciary Net Assets - Developer
Agency Fund
/
: of Changes in Assets and Liabilitiqs -
~er Escrow Agency Fund
/
Combining ~nd
Nonmajo~ G(~
Combiging
Combiging ;tatement of Revenues, Expen~
in FrOnd ~ fiances - Nonmajor Governme
!
Nonmajo: Special Revenue Funds:
Subcor lbin~ng Balance Sheet - Nonmajor
Sche& te of Revenues, Expenditures, and ~
Func Bahnces - Nonmajor Special Reve
ancial Statements
Individual Fund Statements anti Schedules:
vemmental Funds:
Balance Sheet- Nonmajor Gm ernmental Funds
litures, and Changes
ntal Funds
;pecial Revenue Funds
~'hanges in
nue Funds
Page No.
8
10
19
20
21
22
23
24
25
26
28
30
34
35
36
56
57
58
62
CITY OF ELK RIVER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2003
Special Revenue Funds:
Schedules of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual:
Library Maintenance
Ice Arena
Landfill
Economic Development Authority
Nonmajor Debt Service Funds:
Subcombining Balance Sheet - Nonmajor Debt Service Funds
Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Debt Service Funds
Nonmajor Capital Projects Funds:
Subcombining Balance Sheet - Nonmajor Capital Projects Funds
Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Capital Projects Funds
Page No.
66
67
68
69
70
72
74
76
III. STATISTICAL SECTION (UNAUDITED)
General Governmental Expenditures by Function
General Fund Expenditures by Function
General Governmental Revenues by Source
General Fund Revenues by Source
Property Tax Levies and Collections
Taxable Property, Tax Levies and Tax Capacity Rates
Property Tax Rates - Direct and Overlapping Governments
Principal Taxpayers
Special Assessment Levies and Collections
Computation of Legal Debt Margin
Ratio of Net Bonded Debt to Tax Capacity and Net Bonded Debt per Capita
Ratio of Annual Debt Service Expenditures for General
Bonded Debt to Total General Expenditures
Computation of Direct and Overlapping Debt
Revenue Bond Coverage
Property Value, Construction and Bank Deposits
Miscellaneous Statistics
78
79
80
81
82
83
85
86
87
88
89
90
91
92
93
94
Rdver
June 21, 2004
Honorable Mayor
and Citizens
The Comprehensive
December 31, 2003
annual audit of the
accountants. The
unq
financial section
This report was prep~
and accuracy of this
the City. To
and are recorded in a
of the various funds
management of the
both protect the City'
for the preparation of
principles (GAAP).
assurance regarding
adequate financial
accountability for
and judgments by
City of Elk River's
exceed the benefits.
The Comprehensive
Financial, and
organizational chart
Auditors' Report,
statements, notes to
statements. The
generally presented
Generally
overview and analysi:
Discussion and Anal'
Members of the City Cou
Financial Report (CAFR
submitted. Minnesota
accounts by the State Audit
Abdo, Eick, and Meyers wa
ncil,
l~for the City of Elk River for the fiscal year ended
tate Statutes and the City's ordinance require an
>r's office or by independent certified public
s selected to perform the City's: audit and their
included in this report. Fhe independent auditor's report is included in the
by the City's Finance Department and responsibility for both the completeness
as well as the fairness of thls presentation including all enclosures, rests with
t knowledge and belief, th{ enclosed data are accurate in all material respects
.er designed to present fairly the financial position and the results of operations
City. To provide a reasonable basis for making these representations,
established a comprehensive internal control framework that is designed to
:s from loss, theft, or misuse, and to compile sufficient reliable information
financial statements in ac~,ordance with generally accepted accounting
accounting controls are designed to provide reasonable but not absolute
of the City's ass ets against loss, theft, or misuse, and ensuring that
are maintained for prepari~
development of an app:
ensure that the cost
control structure is desigr
Financial Report (CAFR
The Introductory section in
list of City officials. The
Discussion and Ant
tg financial statements, and maintaining
· opriate internal control system:requires estimates
~ do not exceed the benefits of the system. The
ed so that the estimated costs of control do not
i is presented in three sections: Introductory,
cludes this transmittal letter, the City's
:inancial section includes the Independent
[ysis (MD&A), government wide and fund financial
statements, and the Combining statements and individual fund
section includes selected financial, economic, and demographic information
principles require that management provide a narratiVe introduction
'the basic financial statements in the form of Management's
;is.! This letter of transmittal is designed to compliment the MD&A and should be
read in conjunction with it. The City of Elk River's MD&A can be found immediately following the
report of the independent auditors.
Profile of the Government
The City of Elk River was originally incorporated in 1880 and consolidated with Elk River Township in
1978 to form a City of 44 square miles. The current population is 18,758. 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 is still growing and full development is not anticipated in the near future. Urban
services are available to approximately one-third of the City, and it is highly unlikely that the entire City
will be served by municipal water and sewer in the foreseeable future.
The City of Elk River operates under a statutory form of government consisting of a four member City
Council and a Mayor who is also a voting member. Council members are elected by ward to a four year
term with two Council seats up for election each even year. The Mayor is also elected to a four year
term. The City Council is responsible for adopting the City's budget and tax levy, passing resolutions
and ordinances, all hiring and firing decisions, policy making, development and growth planning, and
overall direction of the City.
In addition to providing general government services, the City of Elk River provides a full range of other
services including police and fire protection, building and other safety inspections, planning and zoning,
economic development, environmental services, parks and recreation, library, street, snow removal,
infrastructure maintenance and repair, and others. The City provides municipal water, sewer, garbage,
and electric services and operates an off sale liquor store.
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 June. The Finance
Department compiles these requests into a proposed budget. The Finance Department and City
Administrator review the information and present a draft budget to the Council in August for
consideration. Following Council discussion and public input, the final tax levy and budget are approved
in December. The City's Financial Management Plan allows department heads to make administrative
budget amendments (excluding personal service and capital outlay) throughout the year as long as the
total department budget does not change and the amendment is approved by the City Administrator and
Finance Director. The Council approves additional budget amendments in December of each year.
Budget-to actual comparisons are provided in this report for each individual governmental fund for which
an appropriated annual budget has been adopted. For the general fund, this comparison is presented on
page 25 as part of the basic financial statements for the governmental funds. For governmental funds,
other than the general fund, with appropriated annual budgets, this comparison is presented in the
governmental fund subsection of this report.
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when it is considered
from the broader perspective of the specific environment within which the City of Elk River operates.
Local economy. The City of Elk River's economy has remained strong and that is expected to continue.
Recent census data indicate that income levels have increased and unemployment remains low. Two of
the City's main employers are the school district and county government, both of which continue to
experience growth.
complementing the
commercial/retail am
residential growth in
fifty residential dwel
to the City's tax base
continues to see
commercial area,
are also being
federal prisoners, is
The Elk River Hous
revitalization project
construction may
housing and commer
Long-term financia
development related
is underway that will
study is nearin
and the
growth patterns of th
financial needs so th~
greatly in ensuring
tools will also help p
along with the popul~
Cash management
demand deposits,
commercial paper as
investment pool on a
pool. The Economic
investment pool.
more important than
State Statutes
Risk management.
areas and has been st
by continually
property and el
initiate programs to
purpose of funding
providing
self insure at
responsible for traini
work related injuries
through the relativel'
insurance.
ob base is diversified with many small and medium size industrial employers
service, and public employers. Moderate job growth has occurred in the
~strial/rr anu !acturiltg sectors. The City again experienced significant
and anticipates that the trend will continue in the next year. Five hundred and
tnits were constructed in 2003 adding approximately $90,900,000 in valuation
addition $7,100,000 of commercial/industrial value was added. The City
development in commercial and industrial areas. A new 97,000 square foot
Center, is proposed for d
in 2004. A major expansi{
constructed in 2004.
Redevelopment Authorir
last several years. It is a
late 2004 or early 2005. Th
units, some adjacent to rive~
,nning. The City of Elk Riv
s, including the comprehens
develop and preserve greei
evelopment in 2004. Two new industrial buildings
~n of the Sherburne County Jail, which houses
/ (HRA) has been working on a major downtown
nticipated that the first stage of redevelopment
construction will consist of a combination of
frontage.
er also continues to work on updating many of its
ive plan and transportation plan. In addition a study
~ways within the City. A major sewer capacity
The study will help to determine the ultimate capacity of the treatment plant
ilities available. A combination of these studies will help determine the future
With these plans in place, staff will be better able to dellermine long range
~re is adequate time to plan./ This long term financial planaing will assist
te City's infrastructure, facility, park, and other capital needs can be met. These
operational needs as many of the program and service needs increase
growth, i
ies and practices. Cash temporarily idled during the year was invested in
ates of deposits, United Stat ~d government and agency securities, and
by the City's investn
basis where all fund.,
~ment Authority, water,
investment policy states
on investment. The C
investment of municipal
tent policy. All idled cash is maintained in an
with a cash balance participate in the investment
and electric funds do not participate in the
that the safety and liquidity of the portfolio are
ity's policy closely follows all of the Minnesota
funds.
City of Elk River strives to limit both its liability risk and insurance costs in all
~sful in both limiting risk an keeping premium costs reasonable. This is done
safety programs, maintaini~ adequate deductibles, maintaining correct
zhedules, and working withl the City's insurance agent and Underwriters to
I o
',ye those goals. The City mmntmns an emergency/insurance reserve fund for the
deductibles, promotingisafety programs through our Safety Committee, and
to all employees. However~ the City does not self insure and does not intend to
the future. The City' --s Safety Coordinator and the Safety COmmittee are
11 employees in the City's s~fety policies to protect the citY's employees from
to help reduce work related insurance claims. The results of this can be seen
experience modification factor applied to our worker's compensation
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 (CAFR) for the fiscal year ended December 31, 2002. This was
the fourteenth consecutive year that the City has received this prestigious award. In order to be awarded
a Certificate of Achievement the government must publish an easily readable and efficiently organized
comprehensive annual financial report. This report must satisfy both generally accepted accounting
principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
Comprehensive Annual Financial Report continues to meet the Certificate of Achievement program
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
The preparation of this report is made possible by the dedicated efforts of the entire Finance Department
staff. However, special recognition goes to the Assistant Finance Director, Lori Ziemer, for her expertise
and diligence in completing this report. I would also like to acknowledge the Mayor and City Council for
their continued support. The Council's understanding of the benefits of financial planning along with
their efforts to maintain sound financial management practices and high financial standards will benefit
the City for years to come.
Respectfully submitted,
Lori Johnson
Finance Director
CertifiCate of
Achievlement
for Excellence
in Financial
Reporting
Presented to
City of Elk River,
Minnesota
For its Comprehensive Annual
Financiali Report
for the Fiscal Near Ended
December ~ 1, 2002
A Certificate of Achievement ifor Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and pub!lc employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and f'mancial!reporting.
President
E~:ecutive Director
CITY OF ELK RIVER
ORGANIZATIONAL CHART
CITY
COUNCIL
BOARDS &
COMMISSIONS
CITY
ADMINISTRATOR
CITY' CLERK
FINANCE
ECONOMIC
DEVELOPMENT
PLANNING
I BUILDING
& [__
POLICE
FIRE
REC REATI O N
ICE ARENA
LIQUOR
STORE
/ STREETS& ~ PUBLIC
PARKS UTILITIES
CITY OF ELK RIVER, MINNESOTA
ELECTED AND APPOINTED OFFICIALS
YEAR ENDED DECEMBER 31, 2003
CITY COUNCIL
Stephanie Klinzing
John Dietz
Louise Kuester
Paul Motin
Dan Tveite
Term Expires
December 31,
Mayor 2006
Council member 2006
Council member 2004
Council member 2006
Council member 2004
APPOINTED PERSONNEL
Patrick Klaers
Lori Johnson
Joan Schmidt
Jeff Beahen
Bruce West
Stephen Rohlf
Catherine Mehelich
Philip Hals
Gary Leirmoe
David Potvin
Bryan Adams
City Administrator
Finance Director
City Clerk
Police Chief
Fire Chief
Building/Zoning Administrator
Director of Economic Development
Street/Park Superintendent
Wastewater Treatment Plant Chief Operator
Liquor Store Manager
Utilities Manager
* ABD0
EICK &
ME~EPI. S LLP
Certified Pu~t~c Accountanzs & Consultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
INDEPENDENT AUDITOR'S REPORT
Honorable Mayor and City Council
City of Elk River, Minnesota
We have audited the accompanying f'mancial statements of the City of Elk River, Minnesota, as of and for the year ended
December 31, 2003 as listed in the table of contents. These financial statements are the responsibility of the City's management.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance w/th auditing standards generally accepted in the Un/ted States of America and the
standards applicable to £mancial audits contained in Government Auditing Standards, issued by the Comptroller General of the
Un/ted States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of mater/al misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all mater/al respects, the £mancial position of the City
as of December 31, 2003, and the results of its operations and cash flows of its proprietary fund type for the year then ended in
conformity .with accounting principles generally accepted in the Un/ted States of America.
In accordance with Government Auditing Standards, we have also issued our report dated March 19, 2004 on our consideration of
the City's internal control over financial reporting and out tests of its compliance with certain provisions of laws, regulations,
contracts and gants. That report is an integal part of an audit performed in accordance w/th Government Audin'ng Standards and
should be read in conjunction with this report in considering the results of our audit.
As descr/bed in Note 4G, the City has implemented a new financial reporting model, as required by the provisions of GASB
Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments,
as of December 31, 2003. The financial statements as of December 31, 2002 have been restated to reflect the changes required by
GASB Statement No. 34.
The Management's Discussion and Analysis is not a required part of the financial statements but is supplementary information
required by accounting principles generally accepted in the Un/ted States of Amer/ca. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of
the supplementary information. However, we did not audit the information and express no opinion on it.
952.335.9090 · Fax 952.835.3261
www.aemcpas.com
8
Our audit was performed for the purpose of forming an opinion on the general purpose £mancial statements taken as a whole. The
combining, individual fund financial statements, schedules and statistical information listed in the table of contents are presented
for the purpose of additional analysis and are not a required part of the general purpose financial statements of the City. Such
information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in
our opinion, except for the statistical data section marked "unaudited" on which we express no opinion, is fairly stated in all
material respects in relation to the general purpose financial statements taken as a whole.
March 19, 2004 A_BDO, EICK& MEYERS, LLP
Minneapolis, Minnesota Certified Public Accountants '
952.835.9090 · Fax 952.835.3261
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, 2003. We encourage readers to
consider the information presented here in conjunction with the additional information that we have furnished in our
letter of transmittal, which can be found on pages 1 - 4 of this report.
Financial Highlights
The assets of the City of Elk River exceeded its liabilities at the close of the most recent fiscal year by $146,342,640
(net assets). Of this amount, $35,612,776 (unrestricted net assets) may be used to meet the City's ongoing obligations
to citizens and creditors.
The City's total net assets increased by $8,077,576.
As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund
balances of $24,310,175.
Special Debt Capital
General Revenue Service Projects Total
Reserved $ 348,026 $ 6,493,930 $ 5,756,402 $ - $ t2,598,358
Designated 3,384,023 2,234,112 5,185,673 10,803,808
Undesignated - 1,508,132 (600,123) 908,009
$ 3.732.049 $10,236,174 $ 5.756.40~2 $ 4.585.55_______~0$ 24.310.17~5
The City of Elk River's total long-term liabilities increased by $499,640 during the current fiscal year, fxom
$38,527,412 to $39,027,052.
Governmental activities:
Bonds payable
Contract for deed
Compensated absences
Beginning Ending
Balance Additions Reductions Balance
$ 23,344,150 $ 1,612,100 $(2,355,800) $ 22,600,450
148,808 - (100,832) 47,976
394,399 270,396 (244,568) 420,227
Total governmental activities
23,887,357 1,882,496 (2,701,200) 23,068,653
Business-type activities:
Bonds payable 11,550,000 1,995,000 (615,000) 12,930,000
Notes payable 2,854,536 - (79,112) 2,775,424
Compensated absences 235,519 40,573 (23,117) 252,975
Total business-type activities
14,640,055 2,035,573 (717,229) 15,958,399
Total City long-term liabilities
$ 38.527.41___.~2 $ 3:918.069 $ (3.418.429__._~ $ 39.027.05.~2
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.
10
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 net assets presents information on all of the City of Elk River's assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful
indicator of whether the financial position of the City of Elk River is improving or deteriorating.
The statement of activities presents information showing how the City's net assets changed during the most recent
fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs,
regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
Both of the government-wide financial statements distinguish functions of the City of Elk River that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to
recover all or a significant portion of their costs through user fees and charges (business-type activities). The
governmental activities of the City of Elk River include general government, public safety, public works, culture and
recreation, and economic development. The business-type activities of the City of Elk River include municipa! liquor,
garbage, sewer, water and electric.
The government-wide financial statements can be found on pages 19 - 20 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
government, 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 f'mancial statements. However, unlike the government-wide financial
statements, governmental fund f'mancial, 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 f'mancial 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.
The City of Elk River maintains three individual major governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in
fund balances for the general fund, improvement bonds and public safety/city hall expansion. 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 21 - 25 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 assets and the statement of
11
revenues, expenses and changes in net assets. The enterprise funds are the same as the business-type activities
reported in the government-wide statements but provide more detail and additional information, such as cash flows,
for proprietary funds. The City of Elk River uses enterprise funds to account for its municipal liquor, garbage, sewer,
water and electric operations.
The basic proprietary fund financial statements can be found on pages 26 - 33 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 pages 34 - 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 - 55 of this report.
Other Information. The combining statements referred to earlier in connection with nonmajor governmental funds
and internal service funds are presented immediately following the notes to financial statements. Combining and
individual fund statements and schedules can be found on pages 56 - 77 of this report.
Government-wide Financial Analysis
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case
of the City of Elk River, assets exceeded liabilities by $146,342,640 at the close of the most recent fiscal year.
By far, the largest portion of the City of Elk River's net assets (70 percent) reflects its investment in capital assets
(e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that are 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.
Net Assets
Govern- Business-
mental type
Activities Activities
Total
Current and other assets
Capital assets
$ 33,614,992 $ 14,935,172 $ 48,550,164
78,652,423 62,047,407 140,699,830
Total assets 112,267,415 76,982,579 189,249,994
Long-term liabilities outstanding
Other liabilities
23,068,653 15,958,399 39,027,052
2,369,287 1,511,015 3,880,302
Total liabilities 25,437.940 17,469,414 42,907,354
Net assets
Invested in capital assets, net of related debt 56,003,997 46,341,983 102,345,980
Restricted 8,383,884 - 8,383,884
Unrestricted 22,441,594 13,171,182 35,612,776
Total net assets
$ 86.829.475 5; 59.513.165 $146.342.64~0
12
An additional portion of the City of Elk River's net assets (6 percent) represents resources that are subject to external
restrictions on how they may be used. The remaining balance of unrestricted net assets ($35,612,776) 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 assets, both for the City as a whole, as well as for its separate governmental and business-type activities.
Governmental activities
Governmental activities increased the City of Elk River's net assets by $4,684,837. Key elements of this increase are
as follows:
Changes in Net Assets
Govern- Business-
mental type
Activities Activities
Total
Revenues:
Program revenues: Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues Property taxes
Grants and contributions not restricted to specific programs
Unrestricted investment earnings
3,042,344 $ 22,367,482 $ 25,409,826
487,560 10,530 498,090
6,064,491 1,053,994 7,118,485
6,513,323 6,513,323
2,237,750 2,237,750
304,237 155,802 460,039
Total revenues
18,649,705 23,587,808 42,237,513
Expenses
General government
Public safety
Public works
Culture and recreation
Economic development
Interest on long-term debt
Municipal liquor
Garbage
Sewer
Water
Electric
$ 3,290,711
4,229,109
3,737,678
1,747,322
549,149
1,050,823
3,621,087
884,532
1,406,713
1,713,217
11,929,596
$ 3,290,711
4,229,109
3,737,678
1,747,322
549,149
1,050,823
3,621,087
884,532
1,406,713
1,713,217
11,929,596
Total expenses
14,604,792 19,555,145 34,159,937
Increase in net assets before transfers
4,044,913 4,032,663 8,077,576
Transfers
639,924 (639,924)
Increase in net assets
4,684,837 3,392,739 8,077,576
Net assets, January 1, 2003
82,144,638 56,120,426 138,265,064
Net assets, December 31, 2003
$ 86.829.475 $ 59.513.16~5 $146:342,640
13
Below are specific graphs which provide comparisons of the governmental activities revenues and expenditures.
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
Expenses and Program Revenue - Governmental Activities
General government
Public safety Public works Culture and Economic Interest on long-term
recreation development debt
I1 Revenue · Expense
Revenue Sources - Governmental Activities
Transfers
Unrestricted investment 3%
earnings Charges for services
2% 16%
Operating grants and
Property taxes contributions
33% 3%
Grants and contributions
not restricted to specific
programs
12%
grants and
contributions
31%
Business-type activities
Business-type activities increased the City of Elk River's net assets by $3,392,739. Below are graphs showing the
business-type activities revenue and expense comparisons.
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Expenses and Program Revenue - Business-type Activities
Municipal liquor Garbage Sewer Water Electric
I ·
Revenue · Expense I
Revenue by Source - Business-type Activities
Capital grants and
contributions
4.50%
Operating grants and
contributions
0.04%
Charges for services
95.46%
15
Financial Analysis of the Government's Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows,
outflows and balances of spendable resources. Such information is useful in assessing the City's financing
requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources
available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of
$24,310,175. Approximately 48% of this total amount ($11,711,817) constitutes unreserved fund balance, which is
available for spending at the City's discretion. The remainder of fund balance ($12,598,358) is reserved to indicate that
it is not available for new spending because it has already been committed to provide for 1) debt service ($6,391,702),
2) capital projects ($3,376,718), 3) landfill mitigation ($2,280,724), or 4) a variety of other restricted purposes
($549,214).
The general fund is the chief operating fund of the City of Elk River. The general fund increased by $541,460 in 2003,
which was primarily due to the increase in building related permit revenues.
The improvement bonds increased by $499,503, which is primarily due to the prepayment of assessments on
improvement projects. The public safety/city hall expansion decreased by $5,498,114, which is attributable to timing
differences in project revenues and expenses.
Proprietary funds. The City of Elk River's proprietary funds provide the same type of information found in the
government-wide statements, but in more detail.
Unrestricted net assets in the respective proprietary funds are municipal liquor - $2,545,947, garbage - $50,885, sewer -
$4,961,544, water o $3,019,902, and electric - $2,592,904. All proprietary funds had increases in net assets, with the
exception of the garbage fund. The garbage fund net assets were intentionally decreased through a rate subsidy to
customers.
General Fund Budgetary Highlights
Differences between the original budget and the final budget for the general fund amounted to $243,200. The revenue
and expenditure budgets were amended for the loss of state-aid funds and higher than anticipated building related
revenues. While revenues exceeded budgetary estimates and expenditures were less than budgetary estimates, the fund
realized an increase in fund balance of $541,460.
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, 2003, amounts to $140,699,830 (net of accumulated depreciation). This investment in capital
assets includes land, buildings, improvements, equipment and in~astructure.
16
Capital Assets, Net of Depreciation
Govern- Business-
mental type
Activities Activities
Total
Land $ 24,804,495 $ 1,431,669 $ 26,236,164
Construction in progress 2,221,500 16,072 2,237,572
Buildings 12,647,294 10,621,675 23,268,969
Other improvements 1,209,053 - 1,209,053
Equipment 2,416,061 430,907 2,846,968
Infrastructure 35,354,020 49,547,084 84,901,104
Total $ 78.652.423 5; 62.047.407 $140.699.830
Additional information on the City's capital assets can be found in Note 3C on pages 43 - 45 of this report.
Long-term debt. At the end of the current fiscal year, the City had total bonded debt outstanding of $35,530,450, an
increase of $499,640 from 2002. Of the total outstanding, $1,495,000 was for general obligation bonds which were
used to finance the construction of an ice arena. $22,745,000 general obligation revenue bonds were used to finance
the construction of a public safety/city hall facility, a liquor store, and sewer and water systems. $7,520,000 special
assessment bonds financed improvement projects within the City and are assessed to the benefiting properties.
$1,305,000 permanent improvement revolving bonds financed improvement projects within the City are assessed to the
benefiting properties. $1,352,500 tax increment bonds financed the City's economic development program.
$1,112,950 certificates of indebtedness f'manced capital equipment purchases.
City of Elk River Outstanding Debt
Bonds payable:
General obligation bonds
General obligation revenue bonds
Special assessment bonds
Permanent improvement revolving bonds
Tax increment bonds
Certificates of indebtedness
Governmental Business-Type
Activities Activities Total
$ 1,495,000 $ $ 1,495,000
10,315,000 12,430,000 22,745,000
7,520,000 - 7,520,000
1,305,000 1,305,000
1,352,500 - 1,352,500
612,950 500,000 1,112,950
Total bonds payable
22,600,450 12,930,000 35,530,450
Contract for deed
Promissory note
Compensated absences
47,976 - 47,976
2,775,424 2,775,424
420,227 252,975 673,202
Total
23.068.653 5; 15.958.399 $39.027.052
The City maintained an A2 rating from Moody's for general obligation debt.
State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Taxable
Market Value. The current debt limitation for the City of Elk River is $23,100,596. $7,832,564 of the City's
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 46 - 50 of this
report.
17
Economic Factors and Next Year's Budget
The City of Elk River estimates that considerable development and building activity will continue in the upcoming year
or two. This was taken into consideration in preparation of the City's 2004 budget. The property tax levy is set
annually and is adjusted as necessary to fund additional program costs related to the City's growth and the addition of
new programs. Charges for services are evaluated and each year and adjusted if warranted. The City expects to keep
the tax rate consistent in upcoming years with only minor inflationary increases needed to fund ongoing programs and
services.
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
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF NET ASSETS
DECEMBER 31, 2003
ASSETS
Cash and investments
Cash with fiscal agent
Receivables (net):
Interest
Taxes
Accounts
Special assessments
Notes
Due from other governments
Due from primary government
Internal balances
Inventories
Prepaid items
Deferred charges
Property held for resale
Capital assets:
Nondepreciable
Depreciable (net)
Total assets
LIABILITIES
Accounts payable
Salaries payable
Due to other governments
Due to component unit
Accrued interest payable
Unearned revenue
Non-current liabilities:
Due within one year
Due in more than one year
Governmental
Activities
$ 23,192,731
1,217,691
89,554
278,274
222,456
7,018,633
731,917
450,569
199,415
42,489
171,263
27,025,995
51,626,428
112,267,415
1,191,377
231,258
280,314
255,822
375,016
35,500
2,542,459
20,526,194
Primary Government
Business-type
Activities
$ 12,272,033
77,223
1,285,826
138,997
(199,415)
1,179,211
22,918
158,379
1,447,741
60,599,666
76,982,579
1,190,602
84,575
6,264
229,574
2,567,484
13,390,915
Total
$ 35,464,764
1,217,691
166,777
278,274
1,508,282
7,018,633
731,917
589,566
1,179,211
65,407
158,379
171,263
28,473,736
112,226,094
189,249,994
2,381,979
315,833
286,578
255,822
604,590
35,500
5,109,943
33,917,109
Total liabilities 25,437,940 17,469,414 42,907,354
NET ASSETS
Invested in capital assets,
net of related debt 56,003,997 46,341,983
Restricted for:
Debt service 5,756,402
Landfill mitigation 2,280,724 -
Other 346,758
Unrestricted 22,441,594 13,171,182
Totalnet assets $ 86,829,475 $ 59,513,165
The notes to the financial statements are an integral part of this statement.
102,345,980
5,756,402
2,280,724
346,758
35,612,776
$ 146,342,640
Component
Unit
$ 91,450
6,334
255,822
353,606
5,717
1,342
7,059
346,547
$ 346,547
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2003
Expenses
Operating Capital
Charges for Grants and Grants and
Services Contributions Contributions
Functions/Programs
Primary Government:
Governmental Activities:
General government $ 3,290,711 $ 194,246 $ 5,200 $
Public safety 4,229,109 1,897,883 202,563 26,038
Public works 3,737,678 148,904 47,031 5,101,124
Culture and recreation 1,747,322 729,932 22,766 937,329
Economic development 549,149 71,379 210,000
Interest on long-term debt 1,050,823
Total governmental activities 14,604,792 3,042,344 487,560 6,064,491
Business-type Activities:
Municipal Liquor
Garbage
Sewer
Water
Electric
Total business-type activities
Total primary government
Component Unit:
Housing and Redevelopment Authority
Net (Expense) Revenue and Chan~es in Net Assets
Primar~ Government
Governmental Business-Type Component
Activities Activities Total Unit
$ (3,091,265) $ $ (3,091,265)
(2,102,625) (2,102,625)
1,559,381 1,559,381
(57,295) (57,295)
(267,770) (267,770)
(1,050,823) (1,050,823)
(5,010,397) (5,010,397)
3,621,087 4,156,276
884,532 820,278 10,530
1,406,713 1,808,817 1,053,994
1,713,217 1,807,334
11,929,596 13,774,777
19,555,145 22,367,482 10,530 1,053,994
535,189 535,189
(53,724) (53,724)
1,456,098 1,456,098
94,117 94,117
1,845,181 1,845,181
3,876,861 3,876,861
$ 34,159,937
$ 131,526
$ 25,409,826 $ 498,090 $ 7,118,485
(5,010,397) 3,876,861 (1,133,536)
(131,526)
$ $ $
General revenues: Property taxes
Grants and contributions not restricted
Unrestricted investment earnings
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning, as restated
Net assets - ending
6,513,323 6,513,323 141,433
2,237,750 2,237,750 7,507
304,237 155,802 460,039 731
639,924 (639,924)
9,695,234. (484,122) 9,211,112 149,671
4,684,837 3,392,739 8,077,576 18,145
82,144,638 56,120,426 138,265,064 328,402
$ 86,829,475 $ 59,513,165 $ 146,342,640 $ 346,547
The notes to the financial statements are an integral part of this statement.
ASSETS
Cash and investments
Cash with fiscal agent
Receivables:
Interest
Taxes
Accounts
Special assessments
Notes
Due fi-om other governments
Due fi-om other funds
Due fi-om component unit
Prepaid items
Property held for resale
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Due to component unit
Deferred revenue
Total liabilities
Fund balances (deficit):
Reserved
Unreserved reported in:
Designated: General fund
Special revenue funds
Capital projects funds
Undesignated:
Special revenue funds
Capital projects funds
Total fund balances (deficit)
Total liabilities and fund balances
CITY OF ELK RIVER, MINNESOTA
GOVERNMENTAL FUNDS
BALANCE SHEET
DECEMBER 31, 2003
Public Safety/ Other Total
General Improvement City Hall Governmental Governmental
Fund Bonds Expansion Funds Funds
$ 3,949,163 $ 4,056,945 $ $ 15,186,623
718,659 499,032
14,963 14,707 59,884
198,613 1,660 78,001
3,512 218,944
5,055,459 1,963,174
731,917
40,531 10,000 400,038
1,228,716
64,718
1,268 41,221
171,263
$ 4.208.050 $ 9,128.771 $ 728.659 $ 2__~0.643,53~1
$ 160,584 $ $ 709,162
215,981
296,548
99,436 5,022,622
$ 321,631
15,277
280,314
732,753
320,540
2,223,988
23,192,731
1,217,691
89,554
278,274
222,456
7,018,633
731,917
450,569
1,228,716
64,718
42,489
171,263
$ 34.70%011
1,191,377
231,258
280,314
1,029,301
320,540
7,346,046
476,001 5,022,622 1,005,710 3,894,503 10,398,836
8,144,183
2,234,112
5,185,673
1,508,132
(323,072)
16,749,028
348,026 4,106,149
12,598,358
3,384,023
$ 20,643,53~1
(277 051)
3,732,049 4,106,149 (277,051)
$ 4,208,050 $ 9.128,771 $ 728,659
3,384,023
2,234,112
5,185,673
1,508,132
(600,123)
24,310,175
$ 34,709.011
The notes to the financial statements are an integral part of this statement.
21
CITY OF ELK RIVER, MINNESOTA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS
DECEMBER 31, 2003
FUND BALANCE - TOTAL GOVERNMENTAL FUNDS
Amounts reported for governmental activities in the statement of net assets are different because:
1. Capital assets used in governmental activities are not current financial resources
and therefore are not reported in the governmental funds:
Governmental capital assets
Less accumulated depreciation
2. Deferred revenue in governmental funds is susceptible to full accrual on the
government-wide statements.
3. Long-term liabilities are not payable with current financial resources and are
therefore not reported in the governmental funds:
Bonds payable
Contract for deed
Accrued interest payable
Compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
$100,891,856
(22,239,433)
(22,600,450)
(47,976)
(375,016)
(420,227)
24,310,175
78,652,423
7,310,546
(23,443,669)
86,829,475
The notes to the financial statements are an integral part of this statement.
22
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Licenses and permits
Intergovernmental revenue
Charges for services
Fines and forfeits
Special assessments
Interest
Miscellaneous
Landfill surcharge
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Debt service:
Principal
Interest and service charges
Capital outlay:
General government
Public safety
Public works
Culture and recreation
Infrastructure/development projects
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Proceeds of long-term debt
Discount on long-term debt issued
Sale of capital assets
Total other financing sources (uses)
Net change in fund balances
Fund balances - January 1, as previously stated
Prior period adjustments
Fund balances - January 1, as restated
Fund balances - December 31
Public Safety/ Other Total
General Improvement City Hall Governmental Governmental
Fund Bonds Expansion Funds Funds
$ 4,336,668 $ 23,778 $ $ 2,147,132
1,143,612
901,421 1,542 10,000 1,228,314
896,233 1,146,158
177,242 13,669
1,705,463 728,476
37,477 34,083 28,346 204,331
6,507,578
1,143,612
2,141,277
2,042,391
190,911
2,433,939
304,237
9,000 1,230,572 1,239,572
8,529 911,272 919,801
7,510,182 1,764,866 38,346 7,609,924 16,923,318
1,537,682 572,170 155,927 2,265,779
3,526,140 549,200 70,656 4,145,996
1,188,209 626,609 1,814,818
864,361 771,445 1,635,806
649,463 649,463
1,185,000 1,170,800 2,355,800
321,911 780,637 1,102,548
2,359,372 2,359,372
3,799,594 292,023 4,091,617
163,226 163,226
124,239 124,239
1,651,286 1,651,286
7,116,392 1,506,911 7,280.336 6,456,311 22,359,950
393,790 257,955 (7,241,990) ,1,153,613 (5,436,632)
339,500 241,548 1,743,876 2,318,800 4,643,724
1,500 9,172 10,672
(193,330) (3,810,470) (4,003,800)
- 1,612,100 1,612,100
(5,566) (5,566)
34,562 34,562
147,670 241,548 1,743,876 158,598 2,291,692
541,460 499,503
3,190,589 3,606,646
3,190,589 3,606,646 5,221,063
$ 3,732~049 $ 4,106,149 $ (277,051)
(5,498.114) 1,312,211 (3,144,940)
5,221,063 15,797,545 27,815,843
(360,728) (360,728)
15,436,817 27,455,115
$ 16,749,028 $ 24,310,175
The notes to the financial statements are an integral part of this statement.
23
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
YEAR ENDED DECEMBER 31, 2003
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by
which capital outlays exceeded depreciation in the current period.
Capital outlay
Depreciation expense
2. The net effect of various miscellaneous transactions involving capital assets
including donations and disposals, which increase net assets.
Donations of capital assets
Disposals of capital assets
3. Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the governmental funds.
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 assets. This amount is the net effect of these differences in the
treatment of long-term debt and related items.
Issuance of long-term debt
Repayment of principal of long-term debt
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
Compensated absences
$ (3,144,940)
$ 8,711,480
(3,248,886) 5,462,594
2,850,250
(198,002) 2,652,248
(1,137,433)
(1,612,100)
2,456,632 844,532
33,664
(25,828) 7,836
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES
$ 4,684,837
The notes to the financial statements are an integral part of this statement.
24
CITY OF ELK RIVER, MINNESOTA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Licenses and permits
Intergovernmental revenue
Charges for services
Fines
Interest income
Miscellaneous revenue:
Landfill surcharge
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Capital outlay
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Total other financing sources (uses)
Net increase in fund balance
Fund balance - January 1
Fund balance - December 31
Bud~eet
Original
Final
$ 4,290,500 4,290,500
621,950 1,069,950
1,486,550 851,150
644,700 796,100
156,000 156,000
90,000 40,000
9,000 9,000
8,200 8,200
7,306,900 7,220,900
Actual
$ 4,336,668
1,143,612
901,421
896,233
177,242
37,477
9,000
8,529
7,5t0,182
Variance with
Final Budget -
Positive
(Negative)
$ 46,168
73,662
50,271
100,133
21,242
(2,523)
329
289,282
1,704,700 1,625,600 1,537,682 87,918
3,638,400 3,507,200 3,526,140 (18,940)
1,271,000 1,232,600 1,188,209 44,391
923,200 815,100 864,361 (49,261)
37,400
7,574,700 7,180,500 7,116,392 64,108
(267,800) 40,400 393,790 353,390
379,500 339,500 339,500
1,500 1,500 1,500
(113,200) /138,200) (193,330)
202,800 147,670
541,460
3,190,589
$ 3,732,049
243,200
3,190,589
$ 3,433,789
267,800
3,190,589
$ 3,190,589
(55,130)
(55,130)
298,260
$ 298,260
The notes to the financial statements are an integral part of this statement.
25
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
DECEMBER 31, 2003
ASSETS
Current assets:
Cash and investments
Receivables:
Interest
Accounts
Due from other governments
Due from other funds
Inventories
Prepaid items
Total current assets
Noncurrent assets:
Deferred charges
Capital assets:
Nondepreciable
Depreciable
Accumulated depreciation
Total capital assets
Total noncurrent assets
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Accrued interest
Notes payable, current portion
Bonds payable, current portion
Total current liabilities
Noncurrent liabilities:
Compensated absences
Notes payable, less current portion
Bonds payable, less current portion
Total noncurrent liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Unrestricted
Total net assets
Municipal
Liquor
Garbage
2,350,361 $ 42,436
8,901 153
1,304 6,676
1,684
76,896
438,401
4,105
2,804,756
126,161
126,161
823,761
1,519,218
(623,008)
1,719,971
1,719,971
4,524,727
200,244
15,400
16,801
155,000
387,445
75,069
207
75,276
26,364
480,000
506,364
893,809
1,084,971
2,545,947
$ 3,630,918
75,276
50,885
$ 50,885
Sewer
$ 4,924,950
18,653
89,750
5,033,353
29,561
411,095
26,081,257
(8,042,832)
18,449,520
18,479,081
23,512,434
16,725
9,306
61,096
770,000
857,127
14,243
1,865,000
1,879,243
2,736,370
15,814,520
4,961,544
$ 20,776,064
The notes to the financial statements are an integral part of this statement.
26
Water
Electric
Total
3,233,474
24,758
109,106
34,486
4,703
3,406,527
128,818
1,720,812
24,758
1,168,740
137,313
706,324
14,110
3,772,057
12,272,033
77,223
1,285,826
138,997
166,646
1,179,211
22,918
15,142,854
158,379
9,673
24,752,719
(3,803,343)
20,959,049
21,087,867
24,494,394
203,212
31,749,261
(11,033,606)
20,918,867
20,918,867
24,690,924
1,447,741
84,102,455
(23,502,789)
62,047,407
62,205,786
77,348,640
188,011
5,428
150,085
118,827
1,353,750
1,816,101
710,553
54,234
6,264
215,976
32,850
122,484
166,250
1,308,611
1,190,602
84,575
6,264
366,061
229,574
122,484
2,445,000
4,444,560
53,092
6,535,000
6,588,092
8,404,193
13,070,299
3,019,902
$ 16,090,201
159,276
2,652,940
1,605,000
4,417,216
5,725,827
16,372,193
2,592,904
$ 18,965.097
252,975
2,652,940
10,485,000
13,390,915
17,835,475
46,341,983
13,171,182
$ 59,513,165
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31, 2003
Sales and cost of sales:
Sales
Cost of sales
Gross profit
Operating revenues:
User charges
Delinquency collections
Other
Total operating revenues
Operating expenses:
Personal services
Supplies
Purchased power
Other service charges
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses):
Connection charges
Interest income
Interest expense
Amortization of bond discount
Total nonoperating revenues (expenses)
Income (loss) before contributions and transfers
Capital contributions
Transfers in (out)
Change in net assets
Total net assets - January 1, as previously stated
Prior period adjustment
Total net assets - January 1, as restated
Total net assets - December 31
Municipal
Liquor
$ 4,152,235
(3,040,286)
1,111,949
4,041
4,041
350,101
11,019
112,711
65,880
539,711
576,279
24,232
(41,090)
(16,858)
559,421
(183,300)
376,121
3,275,435
(20,638)
3,254,797
$ 3,630,918
Garbage
$
806,102
16,562
8,144
830,808
3,833
32
880,667
884,532
(53,724)
468
468
(53,256)
2,130
(51,126)
94,694
7,317
102,011
$ 50,885
Sewer
$
1,054,110
12,092
1,066,202
253,884
58,755
256,995
685,800
1,255,434
(189,232)
752,615
53,459
(148,264)
(3,015)
654,795
465,563
1,043,994
(33,910)
1,475,647
8,228,419
11,071,998
19,300,417
$ 20,776,064
The notes to the financial statements are an integral part of this statement.
28
Water
$
Electric
$
Total
$ 4,152,235
(3,040,286)
1,111,949
1,047,561
6,339
3,000
1,056,900
187,692
200,266
461,719
585,354
1,435,031
(378,131)
750,434
22,936
(268,835)
(9,351)
495,184
117,053
(106,926)
10,127
5,703,430
10,376,644
16,080,074
$ 16,090,201
12,704,786
131,953
356,933
13,193,672
998,947
119,714
7,786,921
1,909,298
1,067,063
11,881,943
1,311,729
581,105
54,707
(47,653)
588,159
1,899,888
(317,918)
1,581,970
17,878,208
(495,081)
17,383,127
$ 18,965,097
15,612,559
154,854
384,210
16,151,623
1,794,457
389,786
7,786,921
3,621,390
2,404,097
15,996,651
1,266,921
2,084,154
155,802
(505,842)
(12,366)
1,721,748
2,988,669
1,043,994
(639,924)
3,392,739
35,180,186
20,940,240
56,120,426
$ 59,513,165
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users
Other operating cash receipts
Payments to suppliers
Payments to employees
Net cash provided (used)
by operating activities
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers from other funds
Decrease in due from other funds
Transfers to other funds
Increase (decrease) in due to other funds
Transfers to restricted funds
Net cash provided (used) by
noncapital financing activities
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Acquisition of fixed assets
Principal paid on capital debt
Proceeds of revenue bonds
Interest paid on capital debt
Principal paid on promissory note
Net cash provided (used) by
capital and related f'mancing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, January 1
Cash and cash equivalents, December 31
Municipal
Liquor
$ 4,154,358
(3,149,391)
(345,609)
659,358
(183,300)
(183,300)
(145,000)
(44,927)
(189,927)
25,179
311,310
2,039,051
$ 2,350,361
Garbage
$ 813,503
5,530
(873,509)
(3,626)
(58,102)
2,130
(1,346)
784
792
(56,526)
98,962
$ 42,436
Sewer
$ 1,805,752
10,000
(335,840)
(253,867)
1,226,045
(331910)
(lll)
(34,021)
(243,049)
(190,000)
(152,372)
(585,421)
55,395
661,998
4,262,952
$ 4,924,95O
The notes to the f'mancial statements are an integral part of this statement.
30
Continued
Water
1,790,523
602,248
(1,112,746)
(151,674)
1,128,351
(106,926)
(505)
(107,431)
Electric
13,612,021
865,782
(11,132,501)
(857,022)
2,488,280
4,084
(317,918)
36,427
(277,407)
Total
$ 22,176,157
1,483,560
(16,603,987)
(1,611,798)
5,443,932
2,130
4,084
(642,054)
34,465
(601,375)
(1,631,718)
(280,000)
2,384,082
(261,434)
210,930
6,129
1,237,979
1,995,495
$ 3,233,474
(3,943,134)
1,271,250
(27,563)
(79,112)
(2,778,559)
37,527
(530,159)
2,250,971
$ 1,720,812
(5,817,901)
(615,000)
3,655,332
(486,296)
(79,112)
(3,342,977)
125,022
1,624,602
10,647,431
$ 12,272,033
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31, 2003
Reconciliation of operating income to net cash
provided (used) by operating activities:
Operating income (loss)
Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:
Other revenue related to operations
Depreciation expense
(Increase) decrease in assets: Accounts receivable
Due from other governments
Due from other funds
Inventories
Prepaid items
Increase (decrease) in:
Accounts payable
Salaries payable
Compensated absences
Net cash provided (used) by operating activities
Municipal
Liquor
$ 576,279
65,880
(234)
(1,684)
(13,231)
(4,105)
31,961
1,257
3,235
$ 659,358
Garbage
$ (53,724)
1,521
(13,296)
7,190
207
$ (58,102)
Sewer
$ (189,232)
752,615
685,800
(3,065)
(20,090)
384
(367)
$ 1,226,045
Noncash capital and related financing activities:
Amortization of bond discount
Discount on bonds issued
Disposal of capital assets
Disposal of assets under capitalization threshold
Assets from prior years added to list
10,865
$ 3,015
74,320
13,544,640
The notes to the f'mancial statements are an integral part of this statement.
32
Water
Electric
Total
(378,131)
$ 1,311,729
$ 1,266,921
750,434
585,354
(1,774)
(2,201)
4,058
167,612
(648)
3,647
$ 1,128,351
582,388
1,067,063
(56,368)
(54,645)
(242,208)
6,494
(148,841)
11,728
10,940
$ 2,488,280
2,085,437
2,404,097
(56,855)
(56,329)
(16,361)
(257,640)
6,447
37,832
12,928
17,455
$ 5,443,932
$ 9,351
34,668
1,220,756
615,699
10,992,343
206,307
626,977
131,896
$ 12,366
34,668
1,512,248
1,242,676
24,668,879
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF FIDUCIARY NET ASSETS
DEVELOPER ESCROW AGENCY FUND
DECEMBER 31, 2003
ASSETS
Cash
Accounts receivable
Total assets
$ 288,326
16,658
$ 304,984
LIABILITY
Accounts payable
Refundable deposits payable
Total liabilities
$ 26,444
278,540
$ 304,984
The notes to the f'mancial statements are an integral part of this statement.
34
ASSETS
Cash
Accounts receivable
Total assets
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
DEVELOPER ESCROW AGENCY FUND
YEAR ENDED DECEMBER 31, 2003
Beginning
Balance
$ 110,626
116,263
$ 226,889
Additions
$ 689,205
152,357
$ 841,562
Deductions
$ 511,505
251,962
$ 763,467
Ending
Balance
$ 288,326
16,658
$ 3O4,984
LIABILITIES
Accounts payable $ 51,806
Refundable deposits payable 175,083
485,709
617,925
$ 511,071
514,468
$ 26,444
278,540
Totalliabilities $ 226,889 $ 1,103,634 $ 1,025,539 $ 304,984
The notes to the financial statements are an integral part of this statement.
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, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Elk River operates under the "Optional Plan A" form of government as def'med in the State of Minnesota
Statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and four
elected Council Members. The Council exercises legislative authority and determines all matters of policy. The Council
appoints personnel responsible for the proper administration of all affairs relating to the City. As required by generally
accepted accounting principles, the financial statements of the reporting entity include those of the City of Elk River (the
primary government) and its component units. The Elk River Public Utilities Commission is considered to be part of the
primary government.
The Elk River Public Utilities Commission 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 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 Public Utilities, 13069 Orono Pkwy, Elk River.
The City has considered all potential units for which it is financially accountable, and other organizations for which the
nature and significance of their relationship with the City are such that exclusion would cause the City's financial
statements to be misleading or incomplete. The Governmental Accounting Standards Board (GASB) has set forth
criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of
an organization's governing body, and (1) the ability of the primary government to impose its will on that organization or
(2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on the primary
government. The City has the following component units:
Blended Component Unit
The Economic Development Authority (EDA) was created to carry out economic and industrial development and
redevelopment within the City in accordance with policies established by the City Council. The seven member board
consists of three Council Members, the Mayor and three other council approved members. The EDA may not exercise
any of its authorized powers without prior approval of the City Council. The activities of the EDA are blended and
reported as a special revenue fund. Separate financial statements are not prepared for the EDA.
Discretely Presented Component Unit
The Housing and Redevelopment Authority (HRA) is a separate legal entity created for the purpose of providing
redevelopment within the government's jurisdiction. The board consists of five council appointed members, one of
which is a Council Member. The City Council has the ability to approve the HRA's budget. The HRA is presented as a
governmental fund type. Separate fmancial statements are not prepared for the HRA.
B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets)
report information on all of the nonfiduciary activities of the primary government and its component units. For the most
part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally
are supported by taxes and intergovermnental revenues, are reported separately from business-type activities, which rely
to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from
certain legally separate component units for which the primary government is financially accountable.
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset
by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly
included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though
the latter are excluded from the government-wide financial statements. Major individual governmental funds and major
individual enterprise funds are reported as separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual
basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when
earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be
susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special
assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the
current period. All other revenue items are considered to be measurable and available only when cash is received by the
government.
The government reports the following major governmental funds:
The general fund is the govermnent's primary operating fund. It accounts for all f'mancial resources of the general
government, except those required to be accounted for in another fund.
The improvement bonds debt service fund accounts for the resources accumulated and payments made for
principal and interest on long-term general obligation special assessment debt. The proceeds were used to finance
various street, water, sewer and storm sewer improvements.
Thepublic safety/city hall expansion capital projects fund accounts for the costs to construct a public safety
facility and an addition to the City Hall.
The government reports the following major proprietary funds:
The municipal liquor fund accounts for the operations of the City's off-sale liquor store.
The garbage fund accounts for the activities of the City's garbage collection and recycling program.
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.
37
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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. The Developer Escrow Agency Fund is omitted
from the government-wide financial statements, and is included separately within the statement of fiduciary net
assets.
Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed
in both the government-wide and proprietary fund f'mancial statements to the extent that those standards do not conflict
with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of
following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same
limitation. The government has elected not to follow subsequent private-sector guidance.
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 government. Elimination of these charges would distort the direct costs and program revenues reported
for the various functions concerned.
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges
provided, 2) operating grants and contribution, 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.
When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted
resources first, then unrestricted resources as they are needed.
D. Assets, Liabilities, and Net Assets or Equity
1. Deposits and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments
with original maturities of three months or less from the date of acquisition.
Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings
from such investments are allocated to the respective funds on the basis of applicable cash balance participation of
each fund. Investments are reported at fair value, based upon quoted market prices.
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
2. Receivables and Payables
Due To/From Other Funds
During the course of operations, numerous transactions occur between individual funds for goods provided or
services rendered. These receivables and payables are classified as "due from other funds" or "due to other funds" on
the balance sheets of the fund financial statements. Any residual balances outstanding between the governmental
activities and business-type activities are reported in the government-wide financial statements as "internal balances."
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. 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.
In the fund financial statements, taxes that remain unpaid at December 31 are classified as delinquent taxes receivable
and are fully offset by deferred revenue, because they are not known to be available to finance current expenditures.
Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements.
Special Assessments
Special assessments receivable include the following components:
· Delinquent - includes amounts billed to property owners but not paid.
· Deferred - includes assessment installments that will be billed to property owners in future
years.
Special assessments in the fund financial statements are recognized as receivable and deferred revenue when the levy
against the benefited property is adopted by the City Council and certified to the County for collection. Deferred
revenue for go~,emmental activities is susceptible to full accrual on the government-wide statements.
Notes Receivable
The City received grant proceeds from the State of Minnesota to fund economic development projects. These funds
have been loaned to several businesses and the terms of repayment vary with each loan. Under terms of the grant
agreement, a portion of the original grant will be returned to the State of Minnesota and is reported as a due to other
governments liability. The portion of the notes receivable loaned to businesses is offset by deferred revenue.
Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements.
3. Inventories and Prepaid Items
For proprietary funds, inventories are valued at cost, which approximates market, based on physical counts.
Inventories are recorded as an expense when 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.
39
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
4. Capital Assets
Capital assets, which include property, plant, equipment, and infi'astructure 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 $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or
estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market
value at the date of donation.
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.
Major expenditures for improvement 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 in 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
Other park improvements
Machinery and equipment
Public domain infrastructure
System infrastructure
10 - 40
10 - 20
3 -20
15 - 50
4 - 50
5. Compensated Absences
It is the government's policy to permit employees to accumulate earned but unused vacation and sick pay benefits.
Unused vacation can be accrued by the employees up to a maximum of 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.
Employees can also accrue an unlimited amount of unused sick leave. Employees with five or more years of service
are entitled to receive severance pay equal to a percentage of unused sick pay ranging from 15-20 percent based on
years of service, up to a maximum of 192 hours. The liability for severance pay is accounted for the same as accrued
vacation pay.
6. Long-term Obligations
In the government-wide financial statements, and proprietary fund types in the fund f'mancial statements, long-term
debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type
activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs,
are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective
interest method.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond
issuance costs, during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other f'mancing sources while discounts on debt issuances are
reported as other tYmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are
reported as debt service expenditures.
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
7. Fund Equity
In the fund financial statements, govermnental funds report reservations of fund balance for amounts that are not
available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of
fund balance represent tentative management plans that are subject to change.
Note 2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated
budget are legally adopted for the general and some special revenue funds. Project-length financial plans are adopted for
all capital projects funds. All annual appropriations lapse at fiscal year end.
On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's
administrator so that a budget 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 decreased $243,200 due to the loss of state-aid funds.
B. Excess of Expenditures Over Appropriations
For the year ended December 3 I, 2003, expenditures exceeded appropriations in the landfill fund by $70,601 and the
EDA fund by $1,838. These over expenditures were funded by greater than anticipated revenues, available fund
balances and future revenues.
C. Deficit Fund Equity
The ice arena fund, improvement projects fund, and tax increment financing districts fund had deficit balances of
$18,592, $281,371, and $41,701, respectively. The fund deficits are expected to be covered from future fund revenues or
transfers from other funds.
Note 3: DETAILED NOTES ON ALL FUNDS
A. Deposits and Investments
Deposits
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 (140% in the case of mortgage
notes pledged).
41
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Authorized collateral includes the legal investments described below, 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 f'mancial institution other than that furnishing the collateral.
At year end, the City's carrying amount of deposits was $8,586,118 and the bank balance was $9,778,133. The bank
balance was covered by federal depository insurance totaling $400,000 and securities held by the pledging financial
institution's agent in the City's name totaling $9,178,133. The remaining $200,000 was not collateralized.
The carrying amount of deposits for the HRA, a discretely presented component unit, was $91,450 and the bank balance
was $93,666. The bank balance was covered by federal depository insurance.
Investments
Minnesota Statutes 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.
Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with
capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal
Reserve Bank of New York or certain Minnesota securities broker-dealers.
The City's investment in the Minnesota Municipal Money Market Fund is valued at fair value and is the same as the
value of the pool shares.
At year end, the City's investment balances were as follows:
Reported
Category Amount/
1 2 3 Fair Value
U.S. Government securities
Negotiable CD's
Commercial paper
$ 10,235,265 $ $ $ 10,235,265
1,084,079 1,084,079
12,843,683 12,843,683
Total
$ 24. t63.02~7 $ $__ 24,163,027
Investments not subject to categorization:
Minnesota municipal investment pool
2,715,619
Total investments
26,878,646
Deposits
Total cash and investments
8,586,118
$ 35.464.76~4
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
The City's investments are categorized above to give an indication of the level of custodial credit risk assumed at year-
end. Category 1 includes investments that are insured or registered or for which the securities are held by the City or its
agent in the City's name. Category 2 includes uninsured and unregistered investments for which the securities are held
by the counterparty's trust department or agent in the City's name. Category 3 includes uninsured and unregistered
investments for which the securities are held by the counterparty or by its trust department or agent but not in the City's
name.
B. Deferred Revenue
Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be
available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection
with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components
of deferred revenue and unearned revenue reported in the governmental funds were as follows:
Unavailable Unearned
Delinquent property taxes receivable:
General Fund
Improvement Bonds
Nonmajor Funds
$ 77,936 $
987
23,424
Delinquent special assessments:
Improvement Bonds
Nonmajor Funds
Special assessments not yet due:
Improvement Bonds
Nonmajor Funds
Notes receivable not yet due:
Nonmajor Funds
66,624
145,146
4,955,011
1,778,677
262,741
Unearned miscellaneous fees:
General Fund
Nonmajor Funds
Total deferred/unearned revenue for governmental funds
C. Capital Assets
21,500
14,000
$ 7.310.54~6 $ 35:500
In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the
government-wide statement of net assets. Adjustments due to restatement represent the changes due to implementation
of GASB Statement No. 34 and a policy change related to capitalization thresholds. Capital asset activity for the year
ended December 31, 2003 was as follows:
43
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Primary Government
Governmental activities:
Capital assets not being depreciated:
Land
Construction in progress
Total capital assets
not being depreciated
Adjustments
Beginning Due to
. Balance Restatement
Additions
$ 5,447,784 $17,796,366 $1,560,345
4,182,338 1,328,896
Deletions
Capital assets being depreciated:
Buildings
Other improvements
Equipment
Infrastructure
Total capital assets
being depreciated
$
(3,289,734)
Less accumulated depreciation for:
Buildings
Other improvements
Equipment
Infrastructure
Total accumulated depreciation
Ending
Balance
Total capital assets
being depreciated, net
$24,804,495
2,221,500
Governmental activities
capital assets, net
9,630,122 17.796,366 2,889,241 (3,289,734) 27,025,995
Business-type activities:
Capital assets not being depreciated:
Land
Construction in progress
Total capital assets
not being depreciated
8,622,904 (173,862) 7,356,937 (454,024) 15,351,955
1,540,620 (278,951) 708,110 (161,970) 1,807,809
5,547,383 (293,102) 735,657 (396,768) 5,593,170
47,828,972 3,283,955 51,112,927
15,710,907 47,083,057 12,084,659 (1,012,762) 73,865,861
2,459,128 548,216 (302,683)
614,071 99,993 (115,308)
2,993,730 457,712 (274,333)
- 13,615,942 2,142,965
- 19,682,871 3,248,886 {692,324)
15,710,907 27.400.186 8,835,773 (320,438)
Capital assets being depreciated:
Buildings
Equipment
Collection and distribution
Total capital assets
being depreciated
$25.341.02_._.~__~9 $45.196.55~2 $11.725.01~4
Less accumulated depreciation for:
Buildings
Equipment
Collection and distribution
Total accumulated depreciation
1,459,076
34,104
Total capital assets
being depreciated, net
1,147
1,147
Business-type activities
capital assets, net
$(3.610.172__.____~)
(27,407)
(19,179)
(46,586)
(108,705)
(74,770)
(1,282,187)
(1,465.662)
1,493,180
12,584,894 2,609,902
479,625 243,049
39,775,144 23,426,203 6,449,300
52,839,663 23,426,203 9,302,251.
2,704,661
598,756
3,177,109
15,758,907
22,239,433
51,626,428
$78.652.42~3
1,431,669
16,072
1,447,74 t
15,086,091
647,904
68.368,460
84,102,455
4,000,975 - 517,068 (53,627) 4,464,416
231,279 60,488 (74,770) 216,997
13,529,744 3,654.757 1.826,541 (189,666) 18,821,376
17,761,998 3,654,757 2,404,097 (318,063) 23,502,789
35,077,665 19,771,446 6.898.154 (1,147,599) 60,599,666
$(1~194..185)
$36.570.84~5 $19.771.446 $ 6.899.30~1
$62.047.40~7
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government $ 86,065
Public safety 613,543
Public works 2,258,024
Culture and recreation 291,254
Total depreciation expense - governmental activities
$ 3.248.88~6
Business-type activities:
Municipal Liquor $ 65,880
Sewer 685,800
Water 585,354
Electric 1.067,063
Total depreciation expense - business-type activities
$ 2.404.097
D. Interfund Receivables, Payables, and Transfers
The composition ofinterfund balances as of December 31, 2003 is as follows:
Due to/from other funds:
Fund
Receivable
$
Ice Arena
Development Fund
Capital Outlay Reserve
DTED Grant/Loan
Economic Development Authority
Capital Projects
Street Improvement
Improvement Projects
East Hwy 10 Improvements
Public Safety/City Hall Expansion
Tax Increment Financing Districts
Garbage Fund
Sewer Fund
Water Fund
Electric Fund
270,000
49,330
17,528
741,773
150,085
76,896
89,750
Total
$ 1.395.36~2
Payable
$ 85,200
17,528
286,093
73,932
296,548
270,000
150,085
215,976
$ 1.395.362
Due to/from primary government and component unit:
Entity
Primary government:
Capital Projects
Tax Increment Financing Districts
Component unit - HRA
Total
45
Receivable
Payable
$ 64,718 $ -
320,540
320,540 64,718
$ 385.258 $ 385.258
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Interfund transfers:
Governmental Funds:
Major Funds:
General Fund
Improvement Bonds
Public Safety/City Hall Expansion
Nonmaj or Funds
Total Governmental Funds
Proprietary Funds:
Municipal Liquor
Garbage
Sewer
Water
Electric
Total Proprietary Funds
Total
Transfer In
$ 339,500
241,548
1,743,876
2,318,800
4,643,724
Transfer Out
$ 193,330
3,810,470
4,003,800
183,300
2,130
33,910
106,926
317,918
2,130 642,054
$ 4.645.854 $ 4.645._~____~854
Transfers between primary government and component unit:
Primary government:
General Fund
Nonmajor Funds
Component unit - HRA
Total
Transfer In Transfer Out
$ 1,500 $ -
9,172
- 10,672
$ 10,672 $ 10.67_____~2
E. Long-term Debt
The City issues general obligation bonds and equipment certificates to provide funds for the acquisition and construction
of major capital facilities. The reporting entity's long-term debt is segregated between the amounts to be repaid from
governmental activities and amounts to be repaid from business-type activities.
GOVERNMENTAL ACTIVITIES:
General Obligation Bonds:
1996C G.O. Ice Arena Bonds
Issue Maturity Interest Original Payable
Date Date Rate Issue 12/31/03
8/1/1996 12/1/2013 5.70% $ 2.100,000 $ 1,495,000
General Obligation Revenue Bonds:
1994C G.O. Storm Sewer Revenue Bonds
1997 City Hall and Law Enforcement
Facility Revenue Refunding Bonds
2002A Public Safety Building Lease
Revenue Bonds
6/1/1994 12/I/2009 5.40-5.80% 1,080,000 550,000
12/1/1997 2/1/2011 4.75-5.00% 2,295,000 1,765,000
9/1/2002 2/1/2023 2.00-4.85% 8,000,000 8,000,000
Total general obligation revenue bonds
11,375.000 10,315,000
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Special Assessment Bonds:
1996B G.O. Improvement Bonds
1997A G.O. Improvement Bonds
1998A G.O. Improvement Bonds
1999A G.O. Improvement Bonds
1999B G.O. Improvement Refunding Bonds
2000C G.O. Improvement Refunding Bonds
2003A G.O. Improvement Bonds
Issue Maturity Interest Original Payable
Date Date Rate Issue 12/31/03
7/1/1996 2/1/2004 4.50-5.00%
8/1/1997 2/1/2013 4.375-5.00%
12/1/1998 2/1/2009 3.55-4.30%
7/1/1999 2/1/2015 4.10-5.00%
12/1/1999 2/1/2004 4.30-4.60%
11/1/2000 2/1/2008 4.40-4.70%
12/9/2003 2/1/2014 2.00-4.00%
Total special assessment bonds
Permanent Improvement Revolving Bonds:
1993B G.O. Improvement Bonds
2000B G.O. Improvement Bonds
$ 500,000
1,165,000
1,375,000
5,725,000
580,000
900,000
1,255.000
Total permanent improvement revolving bonds
Tax Increment Bonds:
1992D G.O. Tax Increment Bonds
1994D G.O. Tax Increment Bonds
2000A G.O. Tax Increment Bonds
2000D G.O. Tax Increment Refunding Bonds
11,500,000
Total tax increment bonds
Certificates of Indebtedness:
1999 G.O. Equipment Certificates
2000 G.O. Equipment Certificates
2001 G.O. Fire Equipment Certificate
2003 G.O. Equipment Certificates
$ 70,000
435,000
575,000
4,420,000
125,000
640,000
1,255,000
Total equipment certificates
Total bonded indebtedness
Contract for deed
Compensated absences payable
7,520,000
Total governmental activities indebtedness
10/1/1993 2/1/2004 2.75-4.50% 2,400,000 200,000
11/1/2000 2/1/2016 4.40-5.40% 1,275,000 1,105,000
2/1/2007
2/1/2004
2/1/2015
2/1/2007
2/1/2004
2/1/2005
2/1/2006
2/1/2006
7.90%
4.50-5.85%
4.45-5.30%
6.70-7.40%
5.00%
6.00%
3.75%
2.25%
7.00%
11/10/1992
7/1/1994
11/1/2000
11/1/2000
11/1/1999
11/1/2000
12/1/2001
2/28/2003
3,675,000
160,000
255,000
800,000
510,000
1,725,000
162,750
198,200
202,000
357,100
920,050
31,295,050
465,000
$ 31.760.050
6/29/1999
1/15/2004
1,305,000
72,500
105,000
775,000
400,000
1,352,500
32,550
71,800
151,500
357,100
612,950
22,600,450
47,976
420,227
$ 23.068:653
BUSINESS-TYPE ACTIVITIES:
General Obligation Revenue Bonds:
1993B G.O. Water Revenue Bonds
1994B G.O. Sewer Revenue Bonds
1994D G.O. Water Revenue Bonds
1996A G.O. Sewer Revenue Bonds
1997 Liquor Revenue Bonds
1997B G.O. Water Revenue Bonds
1998B G.O. Water Revenue Bonds
200lA G.O. Water Revenue Bonds
2002B City Hall Expansion Revenue Bonds
2003B G.O. Water Revenue Bonds
Total general obligation revenue bonds
10/I/1993
6/I/1994
12/1/1994
7/1/1996
7/1/1997
8/I/1997
12/1/1998
10/1/2001
9/1/2002
12/9/2003
2/1/2009
2/1/2009
2/1/2009
2/1/2016
2/1/2007
2/1/2007
2/1/2014
2/I/2022
2/1/2023
2/1/2014
2.75-5.20%
5.40-5.80%
5.80-6.50%
5.00-5.80%
6.35%
4.00-4.90%
4.10-5.00%
2.50-4.90%
3.00-5.00%
2.00-3.70%
$ 1,125,000
1,280,000
1,010,000
2,655,000
1,245,000
335,000
820,000
3,590,000
1,695,000
1,995,000
$15,750,000
$ 555,000
660,000
580,000
1,975,000
635,000
150,000
655,000
3,530,000
1,695,000
1,995,000
$12,430,000
47
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3:
DETAILED NOTES ON ALL FUNDS - CONTINUED
Issue
Date
Certificates of Indebtedness:
2002 G.O. Electric Equipment Certificate 6/17/2002
Total bonded indebtedness
Promissory Note
Compensated absences payable
Total business-type activities indebtedness
Total City indebtedness
3/19/2002
Maturity Interest
Date Rate
2/1/2007 4.90%
12/31/2022 -%
Annual debt service requirements to maturity for general obligation bonds are as follows:
G.O. Bond
Governmental Activities
G.O. Revenue Bonds
Principal Interest Principal Interest
2004 $ 115,000 $ 85,215 $ 560,000 $ 428,248
2005 120,000 78,660 585,000 407,890
2006 130,000 71,820 605,000 385,639
2007 135,000 64,410 630,000 361,935
2008 145,000 56,715 660,000 335,605
2009-2013 850,000 151,050 2,520,000 1,293,406
2014-2018 2,120,000 859,593
2019-2023 2,635,000 325,845
Total $1.495:000 $ 507,870 $10.315.000 $ 4,398.161
Original Payable
Issue 12/31/03
$ 500,000 $ 500,000'
16,250,000 12,930,000
2,860,000 2,775,424
252~975
19,110,000 15,958,399
$ 50.870:050 $ 39.027.05~2
Special Assessment Bonds
Principal Interest
$1,060,000 $ 292,347
925,000 262,755
960,000 225,487
935,000 187,577
620,000 154,967
2,010,000 472,879
1,010,000 58,200
$ 7.520.000 $1.654.21~2
Governmental Activities
Tax Increment Certificates of
PIR Bonds Bonds Indebtedness
Principal Interest Principal Interest
2004 $ 285,000 $ 56,732 $ 236,500 $ 73,267
2005 85,000 48,386 143,500 59,475
2006 85,000 44,498 145,000 50,495
2007 85,000 40,545 152,500 41,166
2008 85,000 36,529 95,000 33,657
2009-2013 425,000 120,700 420,000 91,759
2014-2018 255,000 20,442 160,000 8,440
Principal Interest
$ 237,983 $ 19,198
205,433 3,558
169,534 2,286
Contract for Deed
Principal Interest
$ 47,976 $ 1,679
Total $1.305.000 $ 367.83:2 $1.352.500 $ 358.259 $ 612.95~0 $ 25.042 $ 47.97____~6 $1.67___~9
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Business-Type Activities
G.O. Revenue Bonds Certific~es of Indebtedness Notes Payable
Principal Interest Principal Interest Principal Interest
2004 $ 1,335,000 $ 507,064 $125,000 $ 21,437 $ 122,484 $ ~
2005 870,000 487,569 125,000 15,312 124,919
2006 920,000 448,680 125,000 9,188 127,274
2007 910,000 408,140 125,000 3,062 129,554
2008 755,000 371,494 131,945
2009-2013 3,630,000 1,367,960 694,061
2014-2018 2,380,000 641,560 749,928
2019-2023 1,630,000 182,802 695,259
Total $12.430.00__.~0 $ 4.415.26____~9 $ 500.000 $ 48.99___~9 $ 2:775.424 $ -
Long-term liability activity for the year ended December 31, 2003 was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities:
Bonds payable:
G.O. bond $ 1,605,000 $ $ (110,000) $ 1,495,000 $ 115,000
G.O. revenue bonds 10,575,000 (260,000) 10,315,000 560,000
Special assessment bonds 7,450,000 1,255,000 (1,185,000) 7,520,000 1,060,000
PIR bonds 1,575,000 (270,000) 1,305,000 285,000
Tax increment bonds 1,477,500 (125,000) 1,352,500 236,500
Certificates of indebtedness 661,650 357,100 (405,800) 612,950 237,983
Total bonds payable 23,344,150 1,612,100 (2,355,800) 22,600,450 2,494,483
Contract for deed 148,808 (100,832) 47,976 47,976
Compensated absences 394,399 270,396 (244,568) 420,227
Governmental activity
long-term liabilities 5; 23.887.35'7 $ 1.882.49~6 $ (2.701.200~ $ 23.068.65~3 $ 2.542.459
Business-type activities:
Bonds payable:
G.O. revenue bonds $ 11,050,000 $ 1,995,000 $ (615,000) $ 12,430,000 $ 2,320,000
Certificates of indebtedness 500,000 500,000 125,000
Total bonds payable 11,550,000 1,995,000 (615,000) 12,930,000 2,445,000
Notes payable 2,854,536 (79,112) 2,775,424 122,484
Compensated absences 235,519 40,573 (23,117) 252,975
Business-type activity
long-term liabilities $ 14.640.05_~5 $ 2.035.57.._~3 $ (717.229_~~ $ 15.958.39_~9 $ 2.567.48._~4
For the governmental activities, bonds payable can be summarized in the following categories:
The general obligation bonds were used for the construction and expansion of an indoor ice arena. The bonds are
payable from ice arena revenues but are backed by the full faith and credit of the City.
The general obligation revenue bonds were used for the construction and expansion of city hall and a public safety
building. The bonds are payable from annual lease payments received by the EDA from the City.
49
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 3:
DETAILED NOTES ON ALL FUNDS - CONTINUED
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.
The permanent improvement revolving 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.
The tax increment bonds are used to finance land acquisition and other public costs to facilitate development within
the tax increment district. The bonds are payable from tax increment revenues generated by existing and new
development within the district. In addition, the bonds are general obligation of the City and are backed by its full
faith and credit.
The certificates of indebtedness are used to finance the purchase of capital equipment. The certificates are general
obligations backed by the full faith and credit of the City.
The contract for deed was entered into to finance the purchase of property
For the business-type activities, the general obligation revenue bonds are used to finance the acquisition and construction
of major capital facilities and the certificates of indebtedness are used to finance the purchase of equipment. The bonds
and certificates are payable from net revenues of the benefiting enterprise fund but are backed by the full faith and credit
of the City. The City also issued a promissory note to provide for the construction of a landfill gas generator. The note
is to be paid from revenue of the system and is secured by the facility.
F. Reserves/Designated Fund Equity
Fund equity in the various funds has been reserved for the following purposes as of December 31, 2003:
Special Debt Capital
General Revenue Service Projects Total
Reserved for:
Landfill mitigation $ $ 2,280,724 $ - $ $ 2,280,724
Capital projects 200,158 3,176,560 - 3,376,718
Notes receivable 188,862 - - 188,862
Prepaid items 1,268 41,221 - - 42,489
Property held for resale 171,263 - - 171,263
Contract commitments 146,600 - - - t 46,600
Debt service 635,300 5,756.402 - 6,391,702
Total reserved $ 348,026 $ 6.493.93~0 $ 5.756.40~2 $
Designated for:
Subsequent years expenditures
Capital projects
Western area utilities
Total designated
12.598,358
3,384,023 2,234,112
$ 3.732.04~9 $ 8.728,042 $ 5.756.40_~2
4,469,313
716,360
$ 5.185.67~3
5,618,135
4,469,313
716,360
$ 23.402.166
CITY OF, ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
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.
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 commercial insurance. The City
participates in the League of Minnesota Cities Insurance Trust (LMCIT), a public entity risk pool for its general property
and casualty, workers' compensation, and other miscellaneous insurance coverages.
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 government is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently
determinable, in the opinion of the government's counsel the resolution of these matters will not have a material adverse
effect on the financial condition of the government.
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 often years from the date of sale of each
individual area.
During 2003 and 2002, the Utilities paid $94,160 and $285,766, respectively, under this agreement, including $94,160
and $240,595 in 2003 and 2002, respectively, for loss of revenues. All amounts paid are included in property and
equipment.
51
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 4. OTHER INFORMATION - CONTINUED
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 Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which
are cost-sharing, multiple-employer retirement plans. These plans are established and administered in
accordance with Minnesota Statutes, Chapters 353 and 356.
PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are
covered by Social Security and Basic Plan members are not. All new members must participate in the
Coordinated Plan. All police officers, fire fighters and peace officers who qualify for membership by statute are
covered by the PEPFF.
PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon
death of eligible members. Benefits are established by State Statute, and vest after three years of credited
service. The defined retirement benefits are based on a member's highest average salary for any five successive
years of allowable service, age, and years of credit at termination of service.
Two methods are used to compute benefits for PERF's Coordinated and Basic Plan members. The retiring
member receives the higher of 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 PERF members hired prior to
July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of
service equal 90. Normal retirements age is 55 for PEPFF members and 65 for Basic and Coordinated members
hired prior to July 1, 1989. Normal retirements age is the age for unreduced Social Security benefits capped at
66 for Coordinated members hired on or after Julyl, 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 PERF and PEPFF. That report may be obtained on the web at mnpera.org, by writing to PERA,
60 Empire Drive #200, St. Paul, Minnesota, 55103-1855 or by calling (651) 296-7460 or 1-800-652-9026.
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 4.
OTHER INFORMATION - CONTINUED
b. Funding Policy
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are
established and amended by the state legislature. The City makes annual contributions to the pension plans
equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are
required to contribute 9.10% and 5.10%, respectively, of their annual covered salary. PEPFF members are
required to contribute 6.20% of their annual covered salary. The City of Elk River is required to contribute the
following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, 5.53% for
Coordinated Plan PERF members, and 9.30% for PEPFF members. The City's contributions to the Public
Employees Retirement Fund for the years ending December 31, 2003, 2002 and 2001 were $265,698, $245,550
and $208,133, respectively. The City's contributions to the Public Employees Police & Fire Fund for the years
ending December 31, 2003, 2002 and 2001 were $149,658, $146,567 and $140,634, respectively. The City's
contributions were equal to the contractually required contributions for each year as set by state statute.
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
fzom an insurance premium tax in accordance with the Volunteer Firefighter's Relief Association Financing
Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980.)
The Fire Relief Association issues a publicly available fmancial report that includes financial statements and
required supplementary information. The report may be obtained by writing to the Elk River Fire Department
Relief Association, 415 Jackson Ave., Elk River, MN 55330.
b. Funding Policy
The f'mancial 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. The following summarizes the City's annual pension cost and other related information for the
current year:
Annual pension cost
$112,146
Contributions made:
City (voluntary) $24,100
State aid $112,146
Actuarial valuation date
12/31/03
Actuarial cost method
Entry age normal
Amortization method
Level dollar closed
Remaining amortization period:
Normal cost
20 years
53
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 4.
Prior service cost
OTHER INFORMATION - CONTINUED
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increases
Inflation rate
Cost of living adjustment
5 years
Market
5%
N/A
N/A
None
Three-Year Trend Information
Annual Percentage Net
Year Pension of APC Pension
Endin~ Cost (APC) Contributed Obligation
12/31/01 $ 75,947 139% $ 0
12/31/02 88,790 126% 0
12/31/03 112,146 153% 0
Required Supplementary Information - Schedule of Funding Progress
Assets in
Excess of Pension
Actuarial Actuarial Actuarial (Unfunded) Benefit
Valuation Value of Accrued Percentage Accrued Per Year
Date Assets Liabilities Funded Liability of Service
12/31/01 $1,093,828 $1,223,881 89.4% $(130,053) $3,575
12/31/02 1,037,180 1,267,510 81.8 (230,330) 3,575
12/31/03 1,354,326 1,378,916 98.2 (24,590) 3,575
to
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 assets balance, this information has not been repeated in the notes to the basic f'mancial statements.
F. Conduit Debt Obligations
From time to time, the City has issued industrial revenue bonds to provide financial assistance to private-sector entities
for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds
are secured by the property f'manced 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 £mancial statements.
As of December 31, 2003, there were five series of industrial revenue bonds outstanding, with an aggregate principal
amount payable of $19,230,000.
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
Note 4. OTHER INFORMATION - CONTINUED
G. Change in Accounting Principle and Prior Period Adjustments
During fiscal year 2003, the City implemented the following new accounting pronouncements issued by the Government
Accounting Standards Board (GASB):
· GASB Statement No. 34, "Basic Financial Statements - and Management's Discussion and Analysis -for State
and Local Governments ".
· GASB Statement No. 37, "Basic Financial Statements - andManagement's Discussion andAnalysis -for State
and Local Governments: Omnibus".
· GASB Statement No. 38, "Certain Financial Statement Note Disclosures", paragraphs 6 through 11.
Because of implementation of the new standards, an adjustment is required for the December 31, 2002, carry forward
(net asset) balance of the governmental funds. The following schedule reconciles the January 1, 2003 balance to the
December 31, 2002 net asset balance using the new accounting standards.
Fund balance - December 31, 2002
$ 27,815,843
Adjustments:
Net book value of capital assets
Bonds payable, net
Contract for deed
Accrued interest
Compensated absences payable
Deferred revenue
Prior period adjustment - financial obligation omitted in 2002
70,537,581
(23,344,150)
(148,808)
(408,681)
(394,399)
8,447,979
(360,728)
Total net assets as restated - January 1, 2003
$ 82.144.638
As described in Note 3C, a prior period adjustment was recorded in the enterprise funds to recognize the effects of a
higher capitalization threshold and record additional assets as a result of GASB 34 implementation.
55
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 finances by proprietary funds.
CITY OF ELK RIVER, MINNESOTA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
DECEMBER 31, 2003
ASSETS
Cash and investments
Cash with fiscal agent
Receivables:
Interest
Taxes
Accounts
Special assessments
Notes
Due from other governments
Due from other funds
Due from component unit
Prepaid items
Property held for resale
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Due to component unit
Deferred revenue
Total liabilities
Fund balances (deficit):
Reserved
Unreserved:
Designated
Undesignated
Total fund balances (deficit)
Total liabilities and fund balances
Special Debt Capital
Revenue Service Projects
Funds Funds Funds
$ 9,450,035
35,137
12,994
208,314
731,917
33,722
336,858
41,221
171,263
$ 11,021,461
$ 104,572
15,277
280,314
102,728
282,396
785,287
6,493,930
2,234,112
1,508,132
10,236,174
$ 11,021,461
$ 1,124,041
499,032
4,517
36,865
$ 1,664,455
$ 1,639
12,563
14,202
1,650,253
1,650,253
$ 1,664,455
$ 4,612,547
20,230
28,142
10,630
1,963,174
366,316
891,858
64,718
$ 7,957,615
$ 215,420
630,025
320,540
1,929,029
3,095,014
5,185,673
(323,072)
4,862,601
$ 7,957,615
Total Nonmajor
Governmental
Funds
$ 15,186,623
499,032
59,884
78,001
218,944
1,963,174
731,917
400,038
1,228,716
64,718
41,221
171,263
$ 20,643,531
321,631
15,277
280,314
732,753
320,540
2,223,988
3,894,503
8,144,183
7,419,785
1,185,060
16,749,028
$ 20,643,531
56
CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Intergovernmental revenue
Charges for services
Fines and forfeits
Special assessments
Interest income
Miscellaneous revenue
Landfill surcharge
O~er
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Debt service:
Principal
Interest and service charges
Capital outlay:
Public safety
Public works
Culture and recreation
Infrastructure/development projects
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfer in - component unit
Transfers out
Proceeds of long-term debt
Discount on long-term debt issued
Sale of capital assets
Total other financing sources (uses)
Net change in fund balances
Fund balances ~ January 1, as previously stated
Prior period adjustments
Fund balances - January 1, as restated
Fund balances - December 31
Special Debt · Capital
Revenue Service Projects
Funds Funds Funds
$ 265,607 $ 940,539 $
225,902 62,0>8
1,027,737
13,669
134,686 12,111
Total Nonmajor
Governmental
Funds
940,986 $ 2,147,132
940,354 1,228,314
118,421 1,146,158
13,669
728,476 728,476
57,534 204,331
1,051,691 178,881 1,230,572
667,185 244,087 911,272
3,386,477 1,014,708 3,208,739 7,609,924
1,170,800
762,577
517,153
248,297
18,060
184,007
156,517
1,651,286
155,927
70,656
109,456
771,445
401,166
108,016
6,709
124,239
155,927
70,656
626,609
771,445
649,463
1,170,800
780,637
292,023
163,226
124,239
1,651,286
1,747,614 1,933,377 2,775,320 6,456,311
1,638,863 (918,669) 433,419 1,153,613
625,128 879,068 814,604 2,318,800
3,500 5,672 9,172
(2,546,251) (1,264,219) (3,810,470)
1,612,100 1,612,100
(5,566) (5,566)
34,562 - 34,562
(1,883,061) 879,068 1,162,591 158,598
(244,198) (39,601) 1,596,010 1,312,211
10,480,372 1,689,854 3,627,319 15,797,545
(360,728) (360,728)
10,480,372 1,689,854 3,266,591 15,436,817
$ 16,749,028
$10,236,174 $ 1,650,253 $ 4,862,601
NONMAJOR SPECIAL REVENUE FUNDS
Library Maintenance - 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.
Senior Citizen Special Account - This fired is used to account for Senior Citizen program costs funded by revenues
generated from Senior Citizen activities.
Park Dedication - This fund accounts for park dedication fees from developers and expenditures for park land
acquisitions and park capital improvements.
Landfill - This fund was established to segregate solid waste surcharge revenues to be used for landfill abatement
and other environmental issues.
Landfill Construction Debris - This fund was established to account for the tax collected on construction debris
deposited in the landfill and is to be used for related environmental issues.
Revolving Loan - This fund was established to account for the City's portion of state economic development grant
repayments which are used to fund other economic development projects.
DTED Grant/Loan - This fund was established to account for the Department of Trade and Economic Development
grant repayments which are used to fund economic development projects.
Development Fund - This fund was established to attract businesses to develop within the City's business park.
Capital Outlay Reserve - This fund was established to help build reserves for the purchase of capital equipment. The
major source of revenue is from defeased bond issues and related special assessments.
Emergency/Insurance Reserve - This fund was opened to account for insurance deductibles and litigation costs not
covered by insurance. The major source of revenue is from insurance premium refunds.
Government Buildings Reserve - This fund was established to account for the revenues and expenditures of
preliminary studies of the construction of a new City Hall.
Dru~ Forfeiture Reserve - This fund was established to account for revenues received as a result of drug related
crimes. These funds must be used for drug education and prevention.
Severance Pay Reserve - This fund was established to account for resources earmarked for severance pay
expenditures.
NSP/RDF Reserve - This fund was established to account for revenues received from the license agreement between
the City and Northern States Power.
Economic Development Authority - This fund was established to account for a special tax levy authorized to help
encourage development in the City.
EDA DTED Loan - This fund was established to account for the Department of Trade and Economic Development
grant repayments of the Economic Development Authority (EDA) which are used to fund economic development
projects.
CITY OF ELK RIVER, MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2003
ASSETS
Cash and investments
Receivables:
Interest
Taxes
Accounts
Notes
Due fi-om other governments
Due fi-om other funds
Prepaid items
Property held for resale
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Deferred revenue
Total liabilities
Fund balances (deficit):
Reserved for -
Building debt
Landfill mitigation
Development/building projects
Notes
Prepaid items
Property held for resale
Unreserved -
Designated for subsequent years
expenditures
Undesignated
Total fund balances (deficit)
Total liabilities and fund balances
Library
Maintenance
$ 524,696
1,987
3,028
7,087
$ 536,798
$ 3,417
1,251
4,668
110,300
421,830
532,130
$ 536,798
Ice Arena
81,911
33,139
$ 115,050
$ 24,508
9,934
85,200
14,000
133,642
Senior
Citizen
Account
$ 10,922
41
$ 10,963
$ 59
59
(18,592) 10,904
(18,592) 10,904
$ 115,050 $ 10,963
Park
Dedication
$1,205,838
4,359
$1,210,197
$ 49,559
49,559
1,160,638
1,160,638
$1,210,197
58
Continued
Landfill
$ 1,897,266
7,193
10,065
$ 1,914,524
Landfill
Construction
Debris
$ 557,413
2,111
3,118
$ 562,642
Revolving
Loan
$ 787,029
2,981
50,000
543,055
$ 1,383,065
DTED
Grant/Loan
$ 164,782
624
$ 165,406
Development
Fund
$ 448,887
1,700
1,186
270,000
$ 721,773
Capital
Outlay
Reserve
$ 825,587
3,187
17,717
49,330
$ 895,821
$ 7,552
1,343
8,895
$ 770
280,314
262,741
543,825
17,528
17,528
990
990
10,664
10,664
1,905,629
375,095
839,240
147,878
720,783
1,905,629
$ 1,914,524
187,547
562,642
$ 562,642
839,240
$ 1,383,065
59
147,878
$ 165,406
720,783
$ 721,773
885,157
885,157
$ 895,821
CITY OF ELK RIVER, MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31, 2003
ASSETS
Cash and investments
Receivables:
Interest
Taxes
Accounts
Notes
Due fzom other governments
Due fxom other funds
Prepaid items
Property held for resale
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Salaries payable
Due to other governments
Due to other funds
Deferred revenue
Total liabilities
Fund balances (deficit):
Reserved for -
Building debt
Landfill mitigation
Development/building projects
Notes
Prepaid items
Property held for resale
Unreserved -
Designated for subsequent years
expenditures
Undesignated
Total fund balances (deficit)
Total liabilities and fund balances
Emergency/
Insurance
Reserve
$ 547,354
2,082
2,983
41,221
$ 593,640
$ 798
798
41,221
551,621
592,842
$ 593,64O
Government
Buildings
Reserve
$1,750,977
6,631
35,433
$1,793,041
525,000
1,268,041
1,793,041
$1,793,041
Drag
Forfeiture
Reserve
$ 11,319
43
583
$ 11,945
$ 2,831
2,831
9,114
9,114
$ 11,945
Severance
Pay
Reserve
$ 178,527
676
$ 179,203
179,203
179,203
$ 179,203
60
NSP/RDF
Reserve
$ 353,300
1,522
171,263
$ 526,085
Economic
Development
Authority
$ 173,370
8,780
17,528
$ 199,678
EDA DTED
Loan
$ 12,768
188,862
$ 201,630
Total Nonmajor
Special Revenue
Funds
$ 9,450,035
35,137
12,994
208,314
731,917
33,722
336,858
41,221
171,263
$ 11,021,461
$ 4,414
4,000
3,414
11,828
$ 104,572
15,277
280,314
102,728
282,396
785,287
171,263
187,850
12,768
188,862
635,300
2,280,724
3,176,560
188,862
41,221
171,263
354,822
526,085
$ 526,085
187,850
$ 199,678
201,630
$ 201,630
61
2,234,112
1,508,132
10,236,174
$ 11,021,461
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Intergovernmental revenue
Charges for services
Fines and forfeits
Interest income
Miscellaneous
Landfill surcharge
Other
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Capital outlay:
Public safety
Public works
Culture and recreation
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Sale of capital assets
Total other f'mancing sources (uses)
Net change in fund balances
Fund balances - January 1
Fund balances - December 31
Senior
Library Citizen
Maintenance Ice Arena Account
Park
Dedication
$ 64,451 $ - $ $
4,626 -
533,825 883 492,529
5,701 - 132 15,005
119,254 -
500 50,717 2,197 8,881
194,532 584,542 3,212 516,415
3,935
46,455 481,099
236,019
124,239
46,455 481,099 3,935 360,258
148,077 103,443 (723) 156,157
(723)
11,627
$ 10,904
- 115,407
(29,000) (201,485)
(29,000) (86,078)
119,077 17,365
413,053 (35,957)
$ 532,130 $ (18,592)
48,500
48,500
204,657
955,981
$1,160,638
62
Continued
Landfill
22,283
192,703
214,986
Landfill
Construction
Debris
6,920
47,031
53,951
Revolving
Loan
$
200,000
500
8,795
224,722
434,017
DTED
Grant/Loan
1,869
42,264
44,133
Development
Fund
Capital
Outlay
Reserve
$ 5,712 $
386 5,502
5,189
11,287
8,702
105,433
40,027
159,664
81,351
81,351
133,635
(32,130)
(32,130)
101,505
1,804,124
$ 1,905,629
53,951
53,951
508,691
$ 562,642
60,180
60,180
373,837
(2oo,ooo)
(200,000)
173,837
665,403
$ 839,240
44,133
(17,528)
(17,528)
26,605
121,273
$ 147,878
112,098
112,098
(100,811)
12,775
(45,280)
(32,505)
(133,316)
854,099
$ 720,783
2,833
62,378
28,105
3,937
92,668
6,709
196,630
(36,966)
230,918
(6,678)
34,562
258,802
221,836
663,321
$ 885,157
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES,
NONMAJOR SPECIAL REVENUE FUNDS
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Imergovemmental revenue
Charges for services
Fines and forfeits
Interest
Miscellaneous
Landfill surcharge
Miscellaneous
Total revenues
EXPENDITURES
Current:
General government
Public safety
Public works
Culture and recreation
Economic development
Capital outlay:
Public safety
Public works
Culture and recreation
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Sale of capital assets
Total other f'mancing sources (uses)
Net change in fund balances
Fund balances - January 1
Fund balances - December 31
Emergency/ Government Drag Severance
Insurance Buildings Forfeiture Pay
Reserve Reserve Reserve Reserve
6,740
30,136
36,876
40,282
40,282
(3,406)
(3,406)
596,248
$ 592,842
39,939
587,270
627,209
627,209
(1,812,293)
(1,812,293)
(1,185,084)
2,978,125
13,669
57
13,726
212
8,278
15,348
23,838
(10,112)
(10,112)
19,226
2,121
2,121
2,121
2,121
177,082
$ 1,793,041 $ 9,114 $ 179,203
64
NSP/RDF
Reserve
7,577
257,209
264,786
Economic
Development
Authority
$ 195,444
15,388
2,026
10,532
223,390
EDA DTED
Loan
1,630
1,630
Total Nonmajor
Special Revenue
Funds
$ 265,607
225,902
1,027,737
13,669
134,686
1,051,691
667,185
3,386,477
112,600
112,600
152,186
(196,857)
(196,857)
(44,671)
570,756
$ 526,085
228,888
228,888
(5,498)
17,528
3,500
(5,000)
16,028
10,530
177,320
$ 187,850
1,630
200,000
200,000
201,630
$ 201,630
155,927
70,656
109,456
771,445
401,166
108,016
6,709
124,239
1,747,614
1,638,863
625,128
3,500
(2,546,251)
34,562
(1,883,061)
(244,198)
10,480,372
$ 10,236,174
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - LIBRARY MAINTENANCE
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Intergovernmental revenue
Interest income
Miscellaneous revenue
Total revenues
EXPENDITURES
Current:
Culture and recreation
Revenues over expenditures
OTHER FINANCING SOURCES (USES)
Tranfers out
Net increase in fund balance
Fund balance - January 1
Fund balance - December 31
Budget
Original Final Actual
64,300 $ 64,300
4,700 4,700
I0,000 10,000
50,000 50,000
Variance with
Final Budget -
Positive
(Negative)
$ 64,451 $ 151
4,626 (74)
5,701 (4,299)
119,754 69,754
129,000 129,000 194,532 65,532
52,750 52,750 46,455 6,295
76,250 76,250 148,077 71,827
(29,000)
119,077
413,053
$ 532,130
(11,000) (11,000)
$ 65,250 $ 65,250
(18,ooo)
$ 53,827
66
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ICE ARENA
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2003
REVENUES
Charges for services
Miscellaneous revenue
Vending machines
Other
Total revenues
EXPENDITURES
Current:
Culture and recreation
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total other f'mancing sources (uses)
Net increase (decrease) in fund balance
Fund balance (deficit) - January 1
Fund balance (deficit) - December 31
Budget
Original Final Actual
$ 584,900 $ 584,900 $ 533,825
34,500 34,500 30,47l
3,500 3,500 20,246
622,900 622,900 584,542
Variance with
Final Budget -
Positive
(Negative)
(51,075)
(4,029)
16,746
(38,358)
486,900 486,900 481,099 5,801
136,000 136,000 103,443 (32,557)
35,600 35,600 115,407
(201,500) (201,500) (201,485)
(86,078)
(165,900) (165,900)
$ (29,900) $ (29,900)
17,365
(35,957)
$ (18,592)
79,807
15
79,822
$ 47,265
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - LANDFILL
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2003
REVENUES
Interest
Miscellaneous revenue
Landfill surcharge
Total revenues
EXPENDITURES
Current:
Public works
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers out
Net increase (decrease) in fund balance
Fund balance - January 1
Fund balance - December 31
Budget
Original Final Actual
$ 35,000 $ 35,000
275,000 275,000
310,000 310,000
$ 22,283
192,703
214,986
Variance with
Final Budget -
Positive
(Negative)
$ (12,717)
(82,297)
(95,014)
10,750 10,750 81,351 (70,601)
299,250 299,250 133,635 (165,615)
(35,000) (35,000) (32,130) 2,870
101,505
1,804,124
$ 264,250 $ 264,250
$1,905,629
$ (162,745)
68
CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ECONOMIC DEVELOPMENT AUTHORITY
SCHEDULE OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Intergovernmental revenue
Interest
Miscellaneous
Total revenues
EXPENDITURES
Current:
Economic development
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Total other financing sources (uses)
Net increase (decrease) in fund balance
Fund balance - January 1
Fund balance - December 31
Budget
Original Final ' Actual
Variance with
Final Budget -
Positive
(Negative)
$ 199,250 $ 199,250 $ 195,444 $ (3,806)
10,500 10,500 15,388 4,888
3,000 3,000 2,026 (974)
12,000 12,000 10,532 (1,468)
224,750 224,750 223,390 (1,360)
227,050 227,050 228,888 (1,838)
(2,300) (2,300) (5,498) (3,198)
22,900 22,900 17,528
3,500 3,500 3,500
(5,000) (5,000) (5,000)
16,028
10,530
177,320
$ 187,850
21,400 21,400
$ 19,100 $ 19,100
(5,372)
(5,372)
$ (8,570)
NONMAJOR DEBT SERVICE FUNDS
Government Buildina Bonds - This fund is used to account for the accumulation of resources and payment
of principal and interest to finance the construction of a City Hall and Public Safety facility.
Equipment Certificates - This fund is used to account for the accumulation of resources and payment of
principal and interest to finance the purchase of public safety and street and other equipment as authorized
by Minnesota Statutes.
PIR Bonds - This fund is used to account for the accumulation of resources and payment of principal and
interest to finance public improvements.
Tax Increment Financing Bonds - This fund is used to account for the accumulation of resources and
payment of principal and interest to finance administrative and development costs within the various TIF
districts.
Storm Sewer Revenue Bonds - This fund is used to account for the accumulation of resources and payment
of principal and interest to finance repair and construction of various storm drainage projects.
Ice Arena Bonds - This fund is used to account for the accumulation of resources and payment of principal
and interest to finance the construction of the ice arena.
CITY OF ELK RIVER, MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR DEBT SERVICE FUNDS
DECEMBER 31, 2003
ASSETS
Cash and investments
Cash with fiscal agent
Receivables:
Interest
Taxes
Total assets
Government
Building Equipment
Bonds Certificates
PIR Bonds
$ 526,278 $ 232,058 $ 231,461
499,032 -
1,993 879 876
22,422 9,395 -
$1,049,725 $ 242,332 $ 232,337
TIF Bonds
$ 95,177
621
$ 95,798
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Deferred revenue
Total liabilities
Fund balances:
Reserved for debt service
Total liabilities and fund balances
$ 1,184 $
6,756 3,731
7,940 3,731
1,041,785 238,601 232,337
$1,049,725 $ 242,332 $ 232,337
95,798
$ 95,798
70
Storm Sewer
Revenue
Bonds
$ 39,067
148
5,048
$ 44,263
Ice Arena
Bonds
Total Nonmajor
Debt Service
Funds
$ 1,124,041
499,032
4,517
36,865
$ 1,664,455
$ 455
2,076
2,531
$ $
1,639
12,563
14,202
41,732
$ 44,263 $ $
1,650,253
1,664,455
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
NONMAJOR DEBT SERVICE FUNDS
YEAR ENDED DECEMBER 31, 2003
Government Equipment
Building Bonds Certificates
PIR Bonds
TIF Bonds
$ 45,271
2,219
REVENUES
General property taxes $ 584,547 $ 203,100 $ -
Intergovernmental revenue 40,858 13,876 -
Interest income 5,055 3,002 1,151
Total revenues 630,460 219,978 1,151
EXPENDITURES
Debt service:
Principal 185,000 405,800 270,000
Interest and service charges 455,972 27,399 69,715
Total expenditures 640,972 433,199 339,715
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in 282,174 339,014
Net change in fund balances 271,662 450
Fund balances - January 1 770,123 231,887
Fund balances - December 31 $ 1,041,785 $ 238,601 $ 232,337
47,490
125,000
82,806
207,806
(10,512) (213,221) (338,564) (160,316)
(213,221)
451,822
56,395
(103,921)
199,719
$ 95,798
72
Storm Sewer
Revenue
Bonds
Ice Arena
Bonds
Total Nonmajor
Debt Service
Funds
$ 107,621 $ - $ 940,539
7,324 - 62,058
684 - 12,111
t 15,629
1,014,708
75,000
35,200
110,200
5,429
I10,000
91,485
201,485
(201,485)
1,170,800
762,577
1,933,377
(918,669)
5,429
36,303
$ 41,732
201,485
879,068
(39,601)
1,689,854
$ 1,650,253
NONMAJOR CAPITAL PROJECTS FUNDS
Capital Projects - This fund is used to account for reser,.,es to be used for future improvement projects.
Street Improvement - This fund is funded by solid waste surcharge revenues which are set aside to repair road
damage caused by large garbage trucks.
Permanent Improvement Revolvine - This fund was established to account for bond proceeds to be used to f'mance
public improvements and to account for special assessment collections levied for the improvements.
Equipment Certificates - This fund was established to account for equipment certificate proceeds used to fund capital
equipment purchases as authorized by Minnesota Statutes.
Improvement Projects - This fund is used to account for the construction of various street and utility improvements
within the City.
East Hiehway 10 Water and Sewer - This fund is used to account for the construction of extending water and sewer
services to this area and street improvements.
Tax Increment Financin~ Districts - This fund is used to account for administrative and development costs associated
with the various tax increment financing projects.
CITY OF ELK RIVER, MINNESOTA
SUBCOMBINING BALANCE SHEET
NONMAJOR CAPITAL PROJECTS FUNDS
DECEMBER 31, 2003
ASSETS
Cash and investments
Cash with fiscal agent
Receivables:
Interest
Taxes
Accounts
Special assessments
Due from other governments
Due fi.om other funds
Due fi.om component unit
Total assets
Capital Street
Projects Improvement
Permanent
Improvement
Revolving
$1,921,075 $1,759,634 $ 346,026
10,240 6,664 1,310
7,877 5,678
10,630
615,953 - 1,347,221
93,604
741,773 150,085
64,718
$ 3,455,240 $1,932,691 $1,694,557
Equipment
Certificates
$ 53,576
$ 53,576
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Due to other funds
Due to component unit
Deferred revenue
Total liabilities
Fund balances (deficit):
Unreserved -
Designated for -
Capital projects
Western area utilities
Undesignated
Total fund balances (deficit)
Total liabilities and fund balances
$ 6,846
615,327
622,173
2,116,707
716,360
2,833,067
$3,455,240
$ 49,117
1,848
50,965
1,881,726
1,881,726
$1,932,691
1,311,854
1,311,854
382,703
382,703
$1,694,557
$ 38,000
38,000
15,576
15,576
$ 53,576
74
Improvement
Projects
115,620
$ 115,620
East Hwy 10
Improvements
157,092
$ 157,092
Tax Increment
Financing
Districts
$ 532,236
2,016
14,587
$ 548,839
Total Nonmajor
Capital Projects
Funds
$ 4,612,547
20,230
28,142
10,630
1,963,174
366,316
891,858
64,718
$ 7,957,615
$ 110,898 $ 10,559 $ -
286,093 73,932 270,000
- 32O,540
396,991 84,491 590,540
$ 215,420
630,025
320,540
1,929,029
3,095,014
(281,371)
(281,371)
$ 115,620
72,601
72,601
$ 157,092
(41,701)
(41,701)
$ 548,839
4,469,313
716,360
(323,072)
4,862,601
$ 7,957,615
CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
NONMAJOR CAPITAL PROJECTS FUNDS
YEAR ENDED DECEMBER 31, 2003
REVENUES
General property taxes
Intergovernmental revenue
Charges for services
Special assessments
Interest income
Miscellaneous revenue
Landfill surcharge
Other
Total revenues
EXPENDITURES
Current:
Public works
Economic development
Capital outlay:
Public safety
Public works
Infrastructure/development projects
Debt service:
Service charges
Total expenditures
Revenues over (under) expenditures
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers in - component unit
Transfers out
Proceeds of long-term debt
Discount on long-term debt issued
Total other financing sources (uses)
Net change in fund balances
Fund balances - January 1, as previously stated
Prior period adjustment
Fund balances - January, as restated
Fund balances - December 31
Permanent
Capital Street Improvement
Projects Improvement Revolving
$ 163,511 $ 139,891 $
146,369 9,636
118,421
288,368 173,219 206,547
26,993 20,262 4,948
178,881
243,127
743,662 765,016 211,495
74,645 159,159
7,398 930,098
- 18,060
82,043 1,107,317
661,619 (342,301)
78,565
5,672
(225,421)
(141,184)
520,435
2,312,632
2,312,632
$ 2,833,067
(590,282)
1,255,000
(5,566)
659,152
316,851
1,564,875
1,564,875
$ 1,881,726
211,495
(339,014)
(339,014)
(127,519)
510,222
510,222
$ 382,703
Equipment
Certificates
1,000
184,007
156,517
341,524
(341,524)
357,100
357,100
15,576
$ 15,576
76
Improvement
Projects
$
433,734
60,342
494,076
East Hwy 10
Improvements
350,615
96O
351,575
Tax Increment
Financing
Districts
Total Nonmajor
Capital Projects
Funds
$ 637,584 $ 940,986
940,354
118,421
728,476
5,331 57,534
642,915
178,881
244,087
3,208,739
269,887
698,304
968,191
(474,115)
12,462
15,486
27,948
323,627
248,297
248,297
394,618
517,153
248,297
184,007
156,517
1,651,286
18,060
2,775,320
433,419
736,039
736,039
261,924
(543,295)
(543,295)
$ (281,371)
(109,502)
(109,502)
323,627 285,116
(251,026) 33,911
(360,728)
(251,026) (326,817)
$ 72,601 $ (41,701)
814,604
5,672
(1,264,219)
1,612,100
(5,566)
1,162,591
1,596,010
3,627,319
(360,728)
3,266,591
$ 4,862,601
77
CITY OF ELK RIVER, MINNESOTA
GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION (1)
LAST TEN FISCAL YEARS
TABLE 1
Culture
Fiscal Total General Public Public and Debt
Year Expenditures Government Safety Works Recreation Service Other (2)
1994 $ 6,314,935 $ 807,365 $ 1,871,374 $ 602,367 $ 278,626 $ 2,023,192 $ 732,011
1995 8,155,218 849,937 1,930,388 645,538 363,732 3,418,519 947,104
1996 7,788,029 992,982 2,138,708 715,194 370,909 3,027,766 542,470
1997 8,551,129 1,058,761 2,314,313 752,962 709,201 2,874,845 841,047
1998 8,871,497 1,155,809 2,796,509 783,712 859,515 2,315,760 960,192
1999 10,854,441 1,185,907 2,806,627 821,226 903,364 3,695,403 1,441,914
2000 10,030,318 1,337,745 3,129,669 927,475 1,102,577 2,899,626 633,226
2001 11,570,397 1,592,027 3,389,370 1,376,161 1,133,090 3,152,347 927,402
2002 12,047,899 2,200,458 3,583,232 1,298,397 1,325,118 2,742,786 897,908
2003 * 12,304,294 1,693,609 3,596,796 1,297,665 1,635,806 3,440,288 640,130
(1) Includes General, Special Revenue and Debt Service Funds.
(2) Other includes health and sanitation, economic develop~nent and capital outlay.
* Due to the implementation of GASB Statement No. 34 in 2003, the City changed its expenditure classifications. Prior expenditures
have not been reclassified and are therefore not comparable.
CITY OF ELK RIVER, MINNESOTA
GENERAL FUND EXPENDITURES BY FUNCTION
LAST TEN FISCAL YEARS
TABLE 2
Fiscal
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Total
Expenditures
$ 3,441,188
3,610,044
4,041,533
4,389,283
5,136,399
5,241,161
5,804,752
6,676,951
7,170,254
7,116,392
Culture
General Public Public and
Government Salty Works Recreation
$ 740,994 $ 1,853,254 $ 599,993 $ 246,947
823,042 1,901,051 600,538 285,413
939,769 2,091,111 712,694 297,959
1,033,220 2,271,131 752,962 331,970
1,127,786 2,773,306 767,599 467,708
1,142,257 2,785,666 812,637 500,601
1,299,473 3,077,431 868,426 559,422
1,480,302 3,336,889 1,272,908 586,852
1,721,334 3,456,887 1,249,019 743,014
1,537,682 3,526,140 1,188,209 864,361
79
CITY OF ELK RIVER, MINNESOTA
GENERAL GOVERNMENTAL REVENUES BY SOURCE (I)
LAST TEN FISCAL YEARS
TABLE 3
Fiscal
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
General Licenses
Total Property and Inter- Charges for
Revenues Taxes Permits Governmental Services Fines
$ 6,313,647 $ 2,107,280 $ 244,018 $ 1,487,820 $ 505,473 $ 76,370
7,292,684 2,313,772 287,446 1,288,660 426,151 73,058
7,778,650 2,691,630 439,001 1,296,023 617,047 80,028
9,726,943 3,116,976 492,321 1,412,134 1,025,417 84,221
9,922,367 3,302,208 540,826 1,457,796 968,206 115,753
11,202,982 3,844,413 511,306 1,598,697 1,581,415 117,614
12,174,969 4,123,465 749,888 1,249,906 1,335,274 119,421
13,648,389 4,717,861 989,052 1,345,218 1,503,350 89,221
12,847,949 4,692,795 715,852 1,760,780 1,743,948 134,840
13,676,233 5,566,592 1,143,612 1,190,923 1,923,970 190,911
Special
Assessments
$ 691,139
1,244,854
1,436,760
1,227,424
1,517,687
1,696,938
1,804,743
1,758,417
1,607,767
1,705,463
Interest
Income
$ 283,882
401,614
359,899
651,411
500,810
420,827
850,814
640,395
444,496
218,357
Miscellaneous
$ 917,665
1,257,129
858,262
1,717,039
1,519,081
1,431,772
1,941,458
2,604,875
1,747,471
1,736,405
(1) Includes General, Special Revenue and Debt Service Funds excluding proceeds of long-term debt
and transfers.
CITY OF ELK RIVER, MINNESOTA
GENERAL FUND REVENUES BY SOURCE
LAST TEN FISCAL YEARS
TABLE 4
Fiscal
Year
Total
Revenues
General Licenses
Property and Inter- Charges for
Taxes Permits Governmental Services
1994 $ 3,217,771 $ 1,520,021 $ 244,018 $ 924,685 $ 375,878
1995 3,581,808 1,801,547 287,446 941,211 392,941
1996 4,205,315 2,160,675 439,001 957,127 476,632
1997 4,747,628 2,470,418 492,321 1,041,804 509,975
1998 5,096,109 2,629,952 540,826 1,169,774 516,794
1999 5,358,633 3,057,609 511,306 1,104,281 491,197
2000 6,043,721 3,288,976 749,888 1,109,078 596,203
2001 6,967,810 3,895,113 989,052 1,157,280 693,373
2002 7,070,822 3,936,404 715,852 1,533,367 648,113
2003 7,510,182 4,336,668 1,143,612 901,421 896,233
Interest
Fines Income
Miscellaneous
76,370 $ 46,221 $ 30,578
73,058 63,516 22,089
80,028 69,517 22,335
84,221 119,200 29,689
115,753 92,846 30,164
117,614 53,578 23,048
119,421 161,759 18,396
89,221 106,262 37,509
134,840 76,714 25,532
177,242 37,477 17,529
CITY OF ELK RIVER, MINNESOTA
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
TABLE5
Collection Collection Percentage
Total of Cu~ent Percentage of Prior of Total
Fiscal Gross Year's of Levy Years' Total Collections
Year Levy Levy Collected Levy Collections to Levy
1994 $ 2,359,297 $ 2,333,909 98.92% $ 25,850 $ 2,359,759 100.02%
1995 2,837,744 2,802,475 98.76 23,110 2,825,585 99.57
1996 3,163,819 3,124,233 98.75 32,675 3,156,908 99.78
1997 3,544,555 3,505,466 98.90 56,321 3,561,787 100.49
1998 3,852,494 3,782,638 98.19 39,974 3,822,612 99.22
1999 4,230,293 4,193,069 99.12 50,595 4,243,664 100.32
2000 4,596,694 4,503,035 97.96 23,010 4,526,045 98.46
2001 5,058,511 4,999,317 98.83 97,124 5,096,441 100.75
2002 5,118,288 5,079,960 99.25 59,882 5,139,842 100.42
2003 5,980,161 5,853,161 97.88 61,503 5,914,664 98.90
CITY OF ELK RIVER, MINNESOTA
TAXABLE TAX CAPACITY, TAX LEVIES AND TAX CAPACITY RATES
(shown by year of tax collectibility)
LAST TEN FISCAL YEARS
Tax capacity
Tax increment
Taxable tax capacity
Taxable market value
Estimated actual value of
taxable property
Tax levies
General
Debt service
Library
Dam improvements
Development
Infrastructure improvements
Total
Tax capacity rate
General
Debt service
Library
Dam improvements
Development
Infrastructure improvements
Total
2003 2002 2001 2000
$ 13,993,235 $ 12,165,884 $ 14,906,332 $ 13,350,134
(588,732) (426,854) (338,069) (141,898)
$ 13,404,503 $ 11,739,030 $ 14,568,263 $ 13,208,236
$1,155,029,800 $ 996,907,800 $ 867,190,078 $ 777,417,699
$1,382,785,926 $1,145,691,994 $ 985,576,523 $ 883,478,872
$ 4,589,796 $ 4,156,999 $ 4,340,783 $ 3,809,355
990,651 514,929 275,602 385,617
69,000 67,200 66,650 66,650
23,000 32,572 32,572
5,714 6,160 137,383 145,000
325,000 350,000 205,521 157,500
$ 5,980,161 $ 5,118,288 $ 5,058,511 $ 4,596,694
34.241% 35.411% 26.255% 25.067%
7.391 4.386 1.667 2.538
0.503 0.572 0.403 0.439
0.000 0.196 0.197 0.214
0.043 0.052 0.831 0.954
2.436 2.983 1.243 1.036
44.614% 43.600% 30.596% 30.248%
83
Table 6
1999
$ 12,605,479
(229,853)
$ 12,375,626
$ 712,271,190
$ 804,826,203
$ 3,489,800
350,921
62,500
32,572
135,000
159,500
$ 4,23O,293
24.191%
2.433
0.433
0.226
0.936
1.105
29.324%
1998
$ 12,644,462
(261,339)
$ 12,383,123
$ 645,916,470
$ 732,331,599
$ 3,139,536
348,963
54,950
32,572
125,000
151,473
$ 3,852,494
21.396%
2.378
0.375
0.222
0.852
1.032
26.255%
1997
$ 12,251,909
(326,877)
$ 11,925,032
$ 565,528,013
$ 631,169,657
$ 2,939,800
223,133
54,950
32,572
125,000
169,100
$ 3,544,555
20.472%
1.554
0.382
0.227
0.871
1.177
24.683%
1996
11,028,524
(333,668)
10,694,856
519,105,699
594,622,794
$ 2,619,859
219,387
50,600
32,572
241,401
$ 3,163,819
19.901%
1.667
0.384
0.247
1.834
24.033%
1995
$ 9,895,736
(571,376)
$ 9,324,360
$ 473,795,328
$ 542,720,880
$ 2,286,082
258,490
50,600
32,572
210,000
$ 2,837,744
19.301%
2.182
0.427
0.275
1.773
23.958%
1994
$ 8,670,801
(619,389)
$ 8,051,412
$ 418,427,403
$ 481,504,491
$ 2,069,582
258,943
41,700
32,572
$ 2,402,797
18.809%
2.404
0.387
0.302
21.902%
CITY OF ELK RIVER, MINNESOTA
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
LAST TEN FISCAL YEARS
TABLE7
Year
Taxes
Payable City
1994 21.902%
1995 23.958%
1996 24.033%
1997 24.683%
1998 26.255%
1999 29.324%
2000 30.248%
2001 30.596%
2002 (t) 43.600%
2003 44.614%
School
Referendum
Market
County School Value EDA HRA Total
21.807% 63.103% 0.053% 0.793% 0.612% 108.270%
22.380% 56.511% 0.051% 0.792% 0.606% 104.298%
23.574% 54.530% 0.053% 0.773% 0.587% 103.550%
24.392% 62.359% 0.053% 0.759% 0.574% 112.820%
27.235% 56.539% 0.051% 0.842% 0.633% 111.555%
30.265% 59.886% 0.136% 0.946% 0.709% 121.266%
31.468% 56.027% 0.111% 0.976% 0.729% 119.559%
32.341% 63.870% 0.203% 0.996% 0.741% 128.747%
47.577% 45.969% 0.082% (2) 1.540% 1.113% 139.881%
46.277% 41.352% 0.076% 1.565% 1.131% 135.015%
EDA - Economic Development Authority
HRA - Housing and Redevelopment Authority
(1) In 2002 tax rates for cities and counties increased significantly due to reductions in state aids and
in class rates used to calculate net tax capacity values.
(2) As a result of property tax reform measures enacted in 2001, tax rates for school districts for 2002
are substantially less than the comparable figures from prior years.
85
Taxpayer
Great River Energy
NRG Energy
Wal Mart Stores
Bradley Operating L.P.
Menards, Inc
CerterPoint Energy
Home Depot
B & G Realty, Inc.
Target Corp.
Medical Facilities
TOTAL
CITY OF ELK RIVER, MINNESOTA
PRINCIPAL TAXPAYERS
DECEMBER 31, 2003
Type of Business
Utility
Resource recovery facility
Commercial
Commercial
Commercial
Utility
Commercial
Commercial
Commercial
Commercial
2003
Net Tax
Capacity
$ 512,354
263,296
163,494
155,229
123,548
122,508
121,734
107,104
103,308
100,050
$ 1,772,625
TABLE 8
Percentage
of Total Net
Tax Capacity
3.66%
1.88
1.17
1.11
0.88
0.88
0.87
0.77
0.74
0.72
12.68%
CITY OF ELK RIVER, MINNESOTA
SPECIAL ASSESSMENT LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
TABLE 9
Collection
of Collection Percentage
Current Percentage of Prior of Total
Total Year's of Levy Year's Total Collections
Year Levy Levy Collected Levy Collections To Levy
1994 $ 1,093,726 $ 1,022,634 93.50% $ 62,067 $ 1,084,701 99.17%
1995 1,226,036 1,114,094 90.87 43,934 1,158,028 94.45
1996 1,345,870 1,237,131 91.92 80,769 1,317,900 97.92
1997 1,245,284 994,551 79.87 104,789 1,099,340 88.28
1998 1,248,370 1,176,468 94.24 22,542 1,199,010 96.05
1999 1,205,017 1,158,992 96.18 55,994 1,214,986 100.83
2000 1,628,510 1,590,930 97.69 24,601 1,615,531 99.20
2001 1,545,974 1,531,686 99.08 56,784 1,588,470 102.75
2002 1,506,889 1,422,575 94.40 18,017 1,440,592 95.60
2003 1,547,973 1,344,806 86.88 32,904 1,377,710 89.00
87
CITY OF ELK RIVER, MINNESOTA
COMPUTATION OF LEGAL DEBT MARGIN
DECEMBER 31, 2003
TABLE 10
Estimated taxable market value
Debt Limit: 2.0% of market value
Amount of debt applicable to debt limit:
Total bonded debt
Less: Nonapplicable debt
Special assessment bonds
Permanent improvement revolving bonds
Revenue bonds
Tax increment f'mancing bonds
Less: Cash and investment in related debt service funds
$ 35,530,450
(7,520,000)
(1,305,000)
(16,240,000)
(1,352,500)
(1,280,386)
Total Debt Applicable to Debt Limit
Legal Debt Margin
Note (A): M.S.A. Section 475.53 (Limit on Net Debt)
"Subdivision 1. Generally. Except as otherwise provided in Sections 475.51 to 475.75, no
municipality, except a school district or a city of the fn-st class, shall incur or be subject to
a net debt in excess of 2.0 percent of the market value of taxable property in the municipality."
Note (B): M.S.A. Section 475.51 (Definitions:)
"Subdivision 4. 'Net Debt' means the amount remaining after deducting from its gross debt the
aggregate of the principal of the following:
Obligations issued for improvements which are payable wholly or partly from the proceeds of
special assessments levied upon property specially benefitted thereby, including those which
are general obligations of the municipality issuing them, if the municipality is entitled to
reimbursement in whole or in part from the proceeds of the special assessments.
2. Warrants or orders having no defmite or fixed maturity.
3. Obligations payable wholly from the income from revenue-producing conveniences.
4. Obligations issued to create or maintain a permanent improvement revolving fund.
Obligations issued for the acquisition and betterment of public water works systems, and
public lighting, heating or power systems and of any combination thereof, or for any other
public convenience from which a revenue is or may be derived.
6. Amount of all money and the face value of all securities held as a sinking fund for the
extinguishment of obligations other than those deductible under this subdivision.
All other obligations which under the provisions of the law authorizing their issuance, are
not to be included in computing the net debt of the municipality."
88
$1,155,029,800
$23,100,596
7,832,564
$15,268,032
CITY OF ELK RIVER, MINNESOTA
RATIO OF NET BONDED DEBT TO TAX CAPACITY
AND NET BONDED DEBT PER CAPITA
LAST TEN FISCAL YEARS
TABLE 11
Less
Amount
Gross in Debt Net
Fiscal Estimated Tax Bonded Service Bonded
Year Population (1) Capacity Debt (2) Funds Debt
1994 12,811 $ 8,051,412 $ 3,354,050 $ 468,280 $ 2,885,770
1995 13,286 9,324,360 2,943,800 937,281 2,006,519
1996 14,019 10,694,856 2,489,475 855,501 1,633,974
1997 14,667 11,925,032 2,268,750 587,881 1,680,869
1998 15,714 12,383,123 2,075,675 481,627 1,594,048
1999 16,542 12,375,626 1,714,425 471,158 1,243,267
2000 16,447 13,208,236 2,248,950 530,176 1,718,774
2001 17,380 14,568,263 2,119,925 326,909 1,793,016
2002 18,082 12,165, 884 8,661,650 1,221,945 7,439,705
2003 18,758 13,993,235 8,612,950 1,280,386 7,332,564
Percentage
of Net Bonded
Debt to Tax
Capacity
35.84%
21.52
15.28
14.10
12.87
10.05
13.01
12.31
61.15
52.40
Net
Bonded
Debt per
Capita
$ 225.26
151.03
116.55
114.60
101.44
75.16
104.50
103.17
411.44
390.90
(1) 1994-1999, 2001-2003 population based on state demographer estimates, 2000 population based on U.S. census
(2) Only includes debt supported by tax levy.
89
CITY OF ELK RIVER, MINNESOTA
RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR
GENERAL BONDED DEBT TO TOTAL GENERAL EXPENDITURES
LAST TEN FISCAL YEARS
TABLE 12
Total
Fiscal Total General
Year Principal Interest Debt Service Expenditures*
1994 $ 1,285,365 $ 737,824 $ 2,023,189 $ 6,314,935
1995 2,372,314 1,046,205 3,418,519 8,155,218
1996 2,141,823 885,943 3,027,766 7,788,029
1997 1,891,360 983,485 2,874,845 8,551,129
1998 1,403,619 912,141 2,315,760 8,871,497
1999 1,611,592 930,671 2,542,263 10,854,441
2000 1,669,624 1,048,545 2,718,169 10,030,318
2001 2,203,112 949,235 3,152,347 11,570,397
2002 1,948,275 794,511 2,742,786 12,047,899
2003 2,355,800 1,084,488 3,440,288 12,304,294
Percentage of
Debt Service
to General
Expenditures
32.04%
41.92
38.88
33.62
26.10
23.42
27.10
27.24
22.77
27.96
* Includes General, Special Revenue and Debt Service Fund Expenditures
CITY OF ELK RIVER, MINNESOTA
COMPUTATION OF DIRECT AND OVERLAPPING DEBT
DECEMBER 31, 2003
TABLE 13
Direct Debt:
City of Elk River
Overlapping Debt:
Sherbume County
School District #728
Total Overlapping Debt
Total Direct and
Overlapping Debt
Net Debt
Total Debt Outstanding
$ 35,530,450 $ 29,774,048
32,185,000 29,116,896
156,602,785 153,630,849
188,787,785 182,747,745
$ 224,318,235 $ 212,521,793
Percent
of Debt
Applicable
to Cit~
100.00%
24.34
39.41
City's
Share
of Debt
$ 29,774,048
7,087,052
60,545,918
67,632,970
$ 97,407,018
Debt Ratios:
Ratio of debt per capita (18,758 population)
Ratios of debt to estimated taxable market value of $1,155,029,800
5,193
8.43%
91
CITY OF ELK RIVER, MINNESOTA
REVENUE BOND COVERAGE
LAST TEN FISCAL YEARS
TABLE 14
Fiscal
Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
(1)
Gross
Revenue
(2)
Expenses
Net
Revenue
Available
(3)
Debt Service
Principal Interest Total
55,789 $ 120,789
182,919 292,919
185,006 420,006
324,942 704,942
408,168 793,168
411,969 844,469
395,299 885,299
368,819 886,319
463,726 1,053,726
486,296 1,101,296
$ 5,816,203 $ 4,637,917 $ 1,178,286 $ 65,000 $
7,862,991 5,647,186 2,215,805 110,000
8,424,632 6,148,986 2,275,646 235,000
9,627,607 6,232,066 3,395,541 380,000
11,185,465 7,255,594 3,929,871 385,000
12,272,861 7,798,108 4,474,753 432,500
13,579,218 8,699,897 4,879,321 490,000
14,455,781 9,562,295 4,893,486 517,500
15,434,083 10,904,432 4,529,651 590,000
16,432,764 12,708,022 3,724,742 615,000
Coverage
9.75
7.56
5.42
4.82
4.95
5.30
5.51
5.52
4.30
3.38
(1) Gross revenue excludes customer penalties, interest income and miscellaneous income
(2) Expenses exclude depreciation, interest on bonds and miscellaneous expenses
(3) Debt service includes principal and interest on enterprise revenue bonds only
Note: Includes Liquor, Sewer, Water and Electric revenue bonds which are payable fxom revenues of the
Municipal Liquor, Sewage Disposal, Water and Electric Enterprise Funds.
CITY OF ELK RIVER, MINNESOTA
PROPERTY VALUE, CONSTRUCTION AND BANK DEPOSITS
LAST TEN FISCAL YEARS
TABLE 15
(1)
Commercial
Construction
Residential Construction
Fiscal Number
Year Value of Units
(2)
Bank
Value Deposits Commercial
1994 $ 12,495,899 175 $ 17,377,520
1995 12,144,652 267 22,301,966
1996 15,727,954 235 25,571,715
1997 19,001,891 225 28,779,100
1998 22,651,652 289 34,748,798
1999 18,821,937 205 27,388,627
2000 30,945,290 284 41,118,528
2001 46,449,527 254 44,772,839
2002 11,103,711 244 47,788,984
2003 7,100,808 550 90,893,238
$ 218,500,000 $ 142,142,614
246,800,000 158,105,464
267,610,000 174,583,499
316,190,000 184,214,107
358,168,000 202,911,850
422,868,000 218,125,510
497,279,000 239,438,499
589,624,000 256,929,400
606,708,324 274,651,700
670,000,000 309,775,400
(3)
Property Value
Residential
Total
276,287,189
315,689,864
344,522,200
381,313,906
443,004,620
494,145,680
537,979,200
610,260,678
722,256,100
845,254,400
$ 418,429,803
473,795,328
519,105,699
565,528,013
645,916,470
712,271,190
777,417,699
867,190,078
996,907,800
1,155,029,800
(1) City of Elk River
(2) Minnesota Department of Trade and Economic Development
(3) Sherbume County Auditor's Office
CITY OF ELK RIVER, MINNESOTA
MISCELLANEOUS STATISTICS
DECEMBER 31, 2003
Year of incorporation
Year of consolidation with Elk River Township
Form of government
Fiscal year begins
Bond rating
Population
Area of city
Miles of city streets
Number of employees
Regular
Temporary/seasonal
Total
Elections
Number of votes cast in last election - 2002 General Election
Number of registered voters
Percentage of registered voters voting
TABLE 16
Continued
1880
1978
Weak Mayor-Council
January 1
A2-Moody's
18,758
44 square miles
147 miles approx.
142
100
242
7,844
10,139
77%
Building permits issued in 2003
Number of permits
Value of permits
Fire services
Number of volunteers
Number of calls in 2003
Police services
Number of licensed officers
Number of community service officers
Number of reserves
Number of calls in 2003
1,896
$103,211,037
35
426
27
2
15
18,250
94
CITY OF ELK RIVER, MINNESOTA
MISCELLANEOUS STATISTICS
DECEMBER 31, 2003
TABLE 16
Continued
Parks
Number of parks
Acres of park
Sewer utility
Miles of sanitary sewer
Number of lift stations
Average daily flow
Plant capacity
Water utility
Storage capacity
Average daily demand
Pumping capacity
41
843 approx.
63
19
1,082,000 gal.
1,600,000 gal.
4,000,000 gal.
3,700,000 gal.
4,650 gal./min.
Fiscal
Year Population
1994 12,811
1995 13,286
1996 14,019
1997 14,667
1998 15,714
1999 16,542
2000 16,447
2001 17,380
2002 18,082
2003 18,758
Sources - * Minnesota State Demographer, ** U.S. Census
Elementary
Junior High
Senior High
Private
Total
Education
Number of
Schools
Enrollment
6 4,816
4 2,502
3 2,983
4 956
17 11,257
Source - Elk River School District
2003 Unemployment Rate for Sherburne County - 4.8%
Source - Minnesota Department of Economic Security
95
CITY OF ELK RIVER, MINNESOTA
MISCELLANEOUS STATISTICS
DECEMBER 31, 2003
TABLE 16
Continued
Employer
Sherbume County
Independent School District 728
Walmart
Great River Energy
Guardian Angels of Elk River
City of Elk River
Cub Foods
Target
First National Bank
Menards
MAJOR EMPLOYERS
Products/Services
Government
Education
Retail Store
Electric Utility
Nursing/Health Care/Housing
Government
Grocery Store
Retail Store
Bank
Retail Store
Source - Written survey (October 2003), Minnesota State Business Directory
and the 2003 Minnesota Manufacturers Register.
# Employees
492
471
366
331
330
242
200
180
175
170
96
ELK RIVER FIRE DEPARTMENT
REL~F ASSOCIATION
ELK RIVER, MINNESOTA
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2003
INTRODUCTORY SECTION
Organization
FINANCIAL SECTION
Independent Auditor's Report
Special Pension Trust Fund Statements of Plan Net Assets
Statements of Changes in Plan Net Assets
Notes to Financial Statements
SUPPLEMENTARY INFORMATION
Schedule of Funding Progress
Schedule of Employer Contributions
Notes to Supplementary Information
COMPLIANCE SECTION
Report on Minnesota Legal Compliance
Page No.
5-8
10
INTRODUCTORY SECTION
ELK RIVER FItLE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2003 AND 2002
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
ORGANIZATION
DECEMBER 31, 2003
Elected Members
Robert Dreissig
Cliff Skogstad
Robert Pearson
Rich Niemela
Dennis Anderson
Keith Thorson
Board of Trustees
Title
President
Vice President
Secretary
Treasurer
Trustee
Trustee
Ex Officio
Members
Stephanie Klinzing
Lori Johnson
Brace West
Mayor
Finance Director
Fire Chief
-1-
FINANCIAL SECTION
ELK RIVER FIRE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2003 AND 2002
ABD0
EICK &
Certified Public Accountants & Consultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Elk River Fire Department Relief Association
Elk River, Minnesota
We have audited the accompanying statements of plan net assets of the Elk River Fire Department Relief Association (the
Association), Elk River, Minnesota, Special Pension Trust Fund as of December 31, 2003 and 2002, and the related statements of
changes in plan net assets for the years then ended. These fmancial statements are the responsibility of the Association's
management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the Financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall f'mancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the f'mancial statements referred to above present fairly, in all material respects, the plan net assets of the
Association, as of December 31, 2003 and 2002, and the changes in its plan net assets for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the £mancial statements taken as a whole. The supplementary
information listed in the table of contents is presented for the purpose of additional analysis, but is a required part of the f'mancial
statements of the Association. Such information has been subjected to the auditing procedures applied in the audit of the f'mancial
statements and, in our opinion, is fairly stated in all material respects in relation to the £mancial statements taken as a whole.
March 16, 2004
Minneapolis, Minnesota
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
952.8/35.9090 · Fax 952.835.3261
www.aemcpas.com
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
SPECIAL PENSION TRUST FUND
STATEMENTS OF PLAN NET ASSETS
YEARS ENDED DECEMBER 31, 2003 AND 2002
ASSETS
Cash and certificates of deposits
Investments at fair value
Due from other governments - State of Minnesota
Supplemental benefit
TOTAL ASSETS
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS
2003
46,656
1,307,670
$ 1,354,326
$ 1,354,326
2002
138,136
898,044
1,000
$ 1,037,180
$ 1,037,180
See Notes to Financial Statements.
-3-
ELK RIVER FIRE DEPARTMENT RELIEF AssOCIATION
ELK RIVER, MINNESOTA
SPECIAL PENSION TRUST FUND
STATEMENTS OF CHANGES 1N PLAN NET ASSETS
YEARS ENDED DECEMBER 31, 2003 AND 2002
2003
2002
ADDITIONS
Contributions
City of Elk River
State of Minnesota
State aid
Supplemental benefit reimbursement
Investment income
Interest
Dividends
Net appreciation (depreciation) in fair value of investments
Other
TOTAL ADDITIONS
DEDUCTIONS
Pensions
Administration
Directors fees
Professional services
Dues
Bond
Other
TOTAL DEDUCTIONS
NET INCREASE (DECREASE)
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, JANUARY 1
NET ASSETS HELD IN TRUST FOR PENSION BENEFITS, DECEMBER 31
24,100 $ 23,400
112,146 88,790
2,0OO 2,000
2,659 5,898
88O
179,890 (96,479)
285 34
321,080 24,523
1,000 77,055
1,985 1,905
415 1,015
125
409 966
125 105
3,934 81,171
317,146 (56,648)
1,037,180~ _ 1,093,828_
$ 1,354,326~ _~$ 1,037,180~
See Notes to Financial Statements.
Note 1:
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
PLAN DESCRIPTION
A. The Financial Reporting Entity
Firefighters of the City of Elk River (the City) are members of the Elk River Fire Department Relief Association
(the Association). The Association is the administrator of a single-employer def'med benefit pension plan
available to frrefighters. The Association was established in 1922 and operates 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.
For financial reporting purposes, the Association's financial statements are not included with the City's financial
statements because the Association is not a component unit of the City.
B. Membership Information
Membership data related to the Association follows:
2003 2002
Retirees and beneficiaries currently receiving benefits and terminated
employees entitled to benefits but not yet receiving them
Active plan participants
Vested
Non-vested
4 3
23 21
11 12
Total 34 36
C. Pension Benefits
The Association operates under a de£med 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 $3,575 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 nonforfeitable percentage of pension as follows:
-5-
Note 1:
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
PLAN DESCRIPTION - CONTINUED
Completed years
of service _
Non-forfeitable percentage
of e~ion amount _
40%
5 44
6 48
7 52
8 56
9 60
10 64
11 68
12 72
13 76
14 80
15 84
16 88
17 92
18 96
19 100
20 and thereafter
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 credited sum of said member's pension. 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.
Contributions Required and Contributions Made
Minnesota statutes, chapter 69.772 specifies minimum support rates required on an annual basis. The minimum
support rates from the municipality and from State aid are determined as the amount required to meet the normal
cost plus amortizing any existing prior service costs over a ten-year period. The significant actuarial
assumptions used to compute the municipal support are the same as those used to compute the accrued pension
liability. The Association is comprised of volunteers; therefore, there are no payroll expenditures.
Contributions of $24,100 and $23,400 from the City and $112,146 and $88,790 from the State were made in
accordance with Minnesota statute requirements for the years ended December 31, 2003 and 2002, respectively.
In addition, the Association recognized $2,000 and $2,000 of supplemental benefit reimbursement from the
State of Minnesota for the years ended December 31, 2003 and 2002, respectively.
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Note 2:
Note 3:
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ao
Fund Accounting
The resources of the Association consist of the Special Fund, which is a 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 statute, from
the two-percent insurance premium tax and amortization aid from the State of Minnesota and from investment
activity of the Association.
Be
Basis of Accounting
The Association's financial statements are prepared on the accrual basis of accounting for the Special Fund.
Under the accrual basis of accounting, revenue is recorded when earned, and expenses are recorded when
incurred.
Co
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expense during the reporting period.
Actual results could differ from those estimates.
De
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.
DETAILED NOTES ON ACCOUNTS
Deposits and ,Investments
Deposits
Minnesota statute, section 118.005 authorizes the Association to deposit cash and to invest in certificates of deposit in
fmancial institutions designated by the governing body. At December 31, 2003, the Association's bank deposits
totaled $46,656, of which $3,760 was cash deposits and $42,896 was invested in certificates of deposit. Minnesota
statutes require that all Association deposits be covered by deposit insurance, surety bond, or pledged collateral.
Following is a summary of the deposits covered by insurance or collateral at December 31, 2003 and 2002:
Book Bank
2003 2002 2003 2002
Covered Deposits
Insured, or collateralized with
securities held by the Association
or its agent in the Association's name
137,447
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Note 3:
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCLhTION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
DETAILED NOTES ON ACCOUNTS - CONTINUED
Investments
Minnesota statute, sections 69.77 and 11 A.24 authorize and define the types of securities available to the Association
for investment. Accounting principles generally accepted in the United States of America have determined three
categories of credit risk for investments:
1. Investments that are insured or registered, or for which the investments are held by the Association or its agent
in the Association s nam ,
2. Investments that are uninsured and unregistered and are held by the counterparty's trust department or agent in
the Assomat~on s name; and
3. Investments that are uninsured and unregistered and are held by the counterparty, or by its trust department or
agent, but not in the Association's name.
Following is a summary of the carrying values of the Association's securities, categorized into aforementioned levels
of risk, along with the cost of the securities, at December 31, 2003 and 2002:
Categor~ Fair Value
1 2 3 ._ 2003 2002
Note 4:
Investments
Krupps Limited Parmership $ $ _ $ $ $ 689
Investments not subject to categorization:
Minnesota State Board of Investments Mutual Funds
Bond market
Common stock index
Growth share
Income share
Money market
Total Investments
298,718 193,365
194,575 94,536
154,224 63,959
651,300 543,875
8,853 2~309
898,733
All investments are reported at fair value using published market quotes. Interest is recognized as revenue when
earned; dividends are recorded when received.
RISK MANAGEMENT
The Association is exposed to various risks of loss related to theft of assets for which the Association carries
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's investments are also subject to risk of decrease in value.
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SUPPLEMENTARY INFORMATION
ELK RIVER FIRE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEAR ENDED
DECEMBER 31, 2003
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
SUPPLEMENTARY INFORMATION
DECEMBER 31, 2003 AND 2002
A. Schedule of Funding Progress
Actuarial Actuarial Actuarial
Valuation Value Accrued
of Assets~_ Liability _ _
._~Date~
12/31/03 $ 1,354,326 $ 1,378,916
12/31/02 1,037,180 1,267,510
12/31/01 1,093,828 1,223,881
12/31/00 1,273,996 1,305,344
12/31/99 1,309,219 1,134,930
12/31/98 1,390,291 1,155,967
12/31/97 1,192,103 1,088,123
B. Schedule of Employer Contributions
Funded
Ratio __
98.2%
81.8
89.4
97.6
115.4
120.3
109.6
2003
2002
2001
2000
1999
1998
1997
C. Notes to Supplementary Information
Valuation date
Actuarial cost method
Amortization method
Remaining amortization period:
Normal cost
Prior service cost
Asset valuation method
Actuarial assumptions:
Investment rate of return
Projected salary increases
Inflation rate
Cost of living adjustments
Assets in
Excess of
(Unfunded)
Accrued
_ LiabiliW
(24,590) $
(230,330)
(130,053)
(31,348)
174,289
234,324
103,980
Annual
Required
Contribution
$ 112,150
88,790
75,947
64,092
61,600
59,352
55,308
Benefit
per Year
of Service
3,575
3,575
3,575
3,370
2,900
2,674
2,500
Percent
Contributed
153%
126
131
139
135
134
163
12/31/03
Entry age normal
Level dollar closed
20 years
5 years
Market
5%
N/A
N/A
None
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COMPLIANCE SECTION
ELK RIVER FIRE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2003 AND 2002
ABDO
EICK &
MEYERS
Certified Public Accountants & Co~ultants
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
REPORT ON MINNESOTA LEGAL COMPLIANCE
Board of Trustees
Elk River Fire Department Relief Association
Elk River, Minnesota
We have audited the financial statements of the Elk River Fire Department Relief Association (the Association), Elk River,
Minnesota, as of and for the year ended December 31, 2003, and have issued our report thereon dated March 16, 2004.
This letter resulting from part of the audit includes our report on legal compliance and management practices.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the
provisions of the Minnesota Legal Compliance Audit Guide for Local Govemmen.t, promulgated by the Minnesota Office of the
State Auditor pursuant to Minnesota statutes, section 6.65. Accordingly, the audit included such tests of the accounting records
and such other auditing procedures, as we considered necessary in the circumstances.
The Minnesota Legal Compliance Audit Guide for Local Government covers three main categories of compliance to be tested in
audits of relief associations: deposits and investments, conflicts of interest and 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, others within the Association 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.
March 16, 2004
Minneapolis, Minnesota
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
952.835.9090 ° Fax 952.835.3261
www.aemcpas.com
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