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6.2. SR 06-19-2017
EOty1� ,.,�� Request for Action River To Item Number Mayor and City Council 6.2 Agenda Section Meeting Date Prepared by Presentations,Awards, June 19, 2017 Lori Ziemer, Finance Director and Recognition Item Description Reviewed by Comprehensive Annual Financial Report for Year T.John Cunningham, Fire Chief Ended December 31, 2016 Reviewed by Tina Allard, City Clerk Action Requested Accept,by motion, the Comprehensive Annual Financial Report for the City of Elk River for the year ended December 31, 2016. Background/Discussion The city is required to have an annual independent audit of its financial statements in which the audit firm issues an opinion on the financial statements. For fiscal year 2016, the city contracted with the audit firm of CliftonLarsonAllen to conduct the city's annual audit. At the conclusion of their audit, the city's auditors review the Comprehensive Annual Financial Report (CAFR) with the City Council,which was reviewed at the June 5 work session. CliftonLarsonAllen has issued an unmodified or"clean" opinion on the city's 2016 financial statement audit and will present a brief summary of the 2016 Comprehensive Annual Financial Report. Financial Impact N/A Attachments ■ Comprehensive Annual Financial Report for the year ended December 31, 2016 ■ Internal Control Letter ■ Management Letter ■ Report on Minnesota Legal Compliance ■ Governance Letter POWERED 6T AR CITY OF ELK RIVER, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2016 PREPARED BY THE FINANCE DEPARTMENT MEMBER OF GOVERNMENTAL FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA CITY OF ELK RIVER TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2016 INTRODUCTORY SECTION LETTER OF TRANSMITTAL 1 ELECTED AND APPOINTED OFFICIALS 5 ORGANIZATIONAL CHART 6 CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING 7 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 9 MANAGEMENT'S DISCUSSION AND ANALYSIS 12 BASIC FINANCIAL STATEMENTS 22 STATEMENT OF NET POSITION 21 STATEMENT OF ACTIVITIES 22 BALANCE SHEET- GOVERNMENTAL FUNDS 23 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION - GOVERNMENTAL ACTIVITIES 24 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS 25 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES 26 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GENERAL FUND - BUDGET TO ACTUAL (GAAP BASIS) 27 STATEMENT OF NET POSITION - PROPRIETARY FUNDS 28 STATEMENT OF REVENUES. EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUNDS 30 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS 32 STATEMENT OF FIDUCIARY NET POSITION -AGENCY FUNDS 36 NOTES TO BASIC FINANCIAL STATEMENTS 37 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS FOR OTHER POSTEMPLOYMENT BENEFIT PLAN 74 PERA SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 75 PERA SCHEDULE OF CITY CONTRIBUTIONS 76 SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY - ELK RIVER FIRE RELIEF 77 CITY OF ELK RIVER TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMBER 31, 2016 SCHEDULE OF CITY CONTRIBUTIONS - ELK RIVER FIRE RELIEF 78 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET 80 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 81 NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET 83 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 85 LIBRARY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 87 ICE ARENA SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 88 LANDFILL SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 89 ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL 90 NONMAJOR DEBT SERVICE FUNDS COMBINING BALANCE SHEET 92 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 93 NONMAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET 95 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 97 AGENCYFUNDS STATEMENT OF CHANGES IN ASSETS AND LIABILITIES 100 COMPONENT UNIT FINANCIAL STATEMENTS HOUSING AND REDEVELOPMENT AUTHORITY BALANCE SHEET 102 RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION 103 CITY OF ELK RIVER TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMBER 31, 2016 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 104 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 105 STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT- LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) 107 CHANGES IN NET POSITION - LAST TEN FISCAL YEARS 108 FUND BALANCES, GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS 110 CHANGES IN FUND BALANCES OF GOVERNMENT FUNDS - LAST TEN FISCAL YEARS 111 ELECTRIC SALES - LAST TEN FISCAL YEARS 112 PRINCIPAL ELECTRIC CUSTOMERS - CURRENT YEAR AND NINE YEARS AGO 113 TAX CAPACITY, MARKET VALUE, AND ESTIMATED VALUE OF TAXABLE PROPERTY - LAST TEN FISCAL YEARS 114 PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS - LAST TEN FISCAL YEARS 116 PRINCIPAL TAXPAYERS - CURRENT YEAR AND NINE YEARS AGO 117 PROPERTY TAX LEVIES AND COLLECTIONS - LAST TEN FISCAL YEARS 118 RATIOS OF OUTSTANDING DEBT BY TYPE - LAST TEN FISCAL YEARS 119 RATIOS OF GENERAL BONDED DEBT OUTSTANDING - LAST TEN FISCAL YEARS 121 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 122 LEGAL DEBT MARGIN INFORMATION - LAST TEN FISCAL YEARS 123 PLEDGED-REVENUE COVERAGE - LAST TEN FISCAL YEARS 125 DEMOGRAPHIC AND ECONOMIC STATISTICS - LAST TEN FISCAL YEARS 127 PRINCIPAL EMPLOYERS - CURRENT YEAR AND NINE YEARS AGO 128 FULL-TIME EQUIVALENT BY FUNCTION - LAST TEN FISCAL YEARS 129 OPERATING INDICATORS BY FUNCTION - LAST TEN FISCAL YEARS 130 CAPITAL ASSET STATISTICS BY FUNCTION - LAST TEN FISCAL YEARS 131 INTRODUCTORY SECTION June 9, 2017 Honorable Mayor, Members of the City Council, and Citizens of Elk River: The Comprehensive Annual Financial Report (CAFR) for the City of Elk River for the fiscal year ended December 31, 2016, is hereby submitted. Minnesota State Statutes and the City's ordinance require an annual audit of the City's accounts by the state auditor or by independent certified public accountants. The firm of CliftonLarsonAllen, LLP was selected to perform the City's audit and their unmodified opinion has been included in this report. The independent auditors' report is included in the financial section of this report. This report was prepared by the City's Finance Department and responsibility for both the completeness and accuracy of this data, as well as the fairness of this presentation including all enclosures, rests with the City. To the best of my knowledge and belief, the enclosed data are accurate in all material respects and are recorded in a manner designed to present fairly the financial position and the results of operations of the various funds of the City. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed to both protect the City's assets from loss, theft, or misuse, and to compile sufficient reliable information for the preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America. Internal accounting controls are designed to provide reasonable but not absolute assurance regarding the safeguarding of the City's assets against loss, theft, or misuse, and ensuring that adequate financial records are maintained for preparing financial statements, and maintaining accountability for assets. The development of an appropriate internal control system requires estimates and judgments by management to ensure that the costs do not exceed the benefits of the system. The City of Elk River's internal control structure is designed so that the estimated costs of control do not exceed the benefits. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of a Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Elk River's MD&A immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. Profile of the Government The City of Elk River was originally incorporated in 1880 and consolidated with Elk River Township in 1978 to form a city of 44 square miles. The City of Elk River is located in Sherburne County and serves as the county seat. Elk River is located approximately halfway between the metropolitan areas of Minneapolis/St. Paul and Saint Cloud along the Mississippi River. The City of Elk River has been growing and will not reach full development in the near future. The current population is approximately 24,200. Urban services are available to about one-third of the land area in the City. (1) The City of Elk River operates under a statutory form of government consisting of a four member City Council and a Mayor who is also a voting member. Council members are elected by ward to a four-year term with two Council seats up for election each even year. The Mayor is also elected to a four-year term. The City Council is responsible for adopting the City's budget and tax levy, passing resolutions and ordinances, all hiring and firing decisions, policy making, development and growth planning, and overall direction of the City. In addition to providing general government services, the City of Elk River provides a full range of other services including police and fire protection, building and other safety inspections, planning and zoning, economic development, environmental services, parks and recreation, library, street, snow removal, infrastructure maintenance and repair, and others. The City also provides municipal water, sewer, garbage, and electric services and operates two off-sale liquor stores. The annual budget serves as the foundation for the City of Elk River's financial planning and control. Budget requests are submitted by all departments to the Finance Department each May. The Finance Department compiles these requests into a proposed budget. The Finance Department and city administrator review the information and present a draft budget to the Council in July for consideration. Following Council discussion and public input, the final tax levy and budget are approved in December. The City's Financial Management Policies allow department heads to make administrative budget amendments (excluding personal service and capital outlay) throughout the year as long as the total department budget does not change and the amendment is approved by the city administrator and finance director. The Council approves additional budget amendments in December of each year. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund this comparison is presented on page 28 as part of the basic financial statements for the governmental funds. For other governmental funds with appropriated annual budgets this comparison is presented in the governmental fund subsection of this report. Local Economy The local economy has continued to grow by the increase in building permits with a construction value of $51,368,317 being issued in 2016. Additions and remodels accounted for $21,700,085 of new value and $29,668,232 in new construction makes up the balance. The number of new housing units remained steady from 74 in 2015 to 75 in 2016. Single family homes accounted for 73 units and 2 twin homes accounted for the new housing units in 2016. The average value of a new home increased to $216,557. Many of Elk River's largest employers reported stable or growing employment levels between 2016 and 2017. This is largely due to the upward trend in manufacturing activity in the region. Many larger Elk River employers are experiencing modest growth. There has been continual interest in both affordable and market rate multi-family housing projects. In 2016, several businesses completed expansions and renovations to their facilities and several senior projects were approved with construction expected to be completed in 2017. The outlook in this region looks promising with commercial industrial activity and the recent increase in housing projects that have made their way through the review process for construction in 2017. (2) Long-term Financial Planning As part of a yearly budget process, the City Council reviews the updated Financial Management Plan. The Financial Management Plan provides a long-range forecast that brings together future expenditures, revenues, and development of the City. The Council has been diligent in maintaining a level tax rate. This plan provides the information needed to develop in a manner that will sustain or expand City services while keeping the property taxes stable. Department heads take part in this process to estimate staff additions, service levels, and capital needs for the next ten years. In addition, the City Council continually reviews cash flow analysis and long-term planning as part of the comprehensive Capital Improvement Plan (CIP) process. The CIP is a 5-year planning tool that forecasts the City's capital needs based on the City's long-range plans, goals, and policies. Relevant Financial Policies The City Council has adopted several Financial Management Policies and continually monitors and updates the policies. The Financial Management Policies include: revenues, property taxes, investments, purchasing, financial reporting, reserves, fund balance, capital investment, and debt policies. The City's policy on fund balance states that the City will maintain an unassigned fund balance of not less than 40-45% of budgeted general fund operating expenditures. The percentage of unassigned fund balance at December 31, 2016 is 45%. Since property tax payments are received by the City in two installments in July and December, the City needs adequate cash reserves for cash flow in order to avoid short-term borrowing to finance operations. Changes in state law over the past several years have resulted in funding changes for both schools and local governments. Replacements of Market Value Homestead Credits (MVHC) with the Market Value Exclusion (MVE) program and Local Government Aids (LGA) program have resulted in revenue losses to the City. Due to the uncertainty in receiving the aid from the state, the LGA and MVHC revenues are not included in the 2016 General Fund budget. The City does not expect in the short-term to see LGA and MVHC amounts restored to previous year's levels. Major Initiatives The City completed the long-term strategic plan of the Gravel Mining Area Study to shape the future of this highly developable 2,600-acre segment along US Highway 169 that runs through the City. In 2016, the City also completed the master planning process for the William H. Houlton Conservation Area and Bailey Point Nature Preserve, and formed a task force to evaluate and plan for future needs of the city's aging facilities. In addition, Elk River's Northstar Station continues to have the largest ridership numbers along the rail line that runs from Minneapolis to Big Lake. Awards and Acknowledgements The Government Finance Officers Association of the United Stated and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Elk River for its Comprehensive Annual Financial Report for the fiscal year ended December 31, 2015. This was the 27th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements. (3) A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The City received the GFOA Award for the Distinguished Budget Presentation for the City budget for the fiscal year beginning January 1, 2016. It was the eighth consecutive year the City received the award for the document. The preparation of this report is made possible by the efficient and dedicated services of the entire staff of the city administrator's office and Finance Department. The Mayor and City Council are to be commended for their diligence and resolve in keeping the City in sound and stable financial condition. The City Council's commitment to continually plan for the City's future and dedication to maintain high financial standards has helped the City maintain its strong financial condition during a long period of growth and subsequent market changes. Respectfully submitted, Lori Ziemer Finance Director (4) CITY OF ELK RIVER ELECTED AND APPOINTED OFFICIALS YEAR ENDED DECEMBER 31, 2016 Term Expires CITY COUNCIL December 31, John Dietz Mayor 2018 Barbara Burandt Council Member 2016 Jerry Olsen Council Member 2018 Matthew Westgaard Council Member 2016 Jennifer Wagner Council Member 2018 APPOINTED PERSONNEL Calvin Portner City Administrator Lori Ziemer Finance Director Ron Nierenhausen Police Chief T. John Cunningham Fire Chief Michael Hecker Parks and Recreation Director Justin Femrite City Engineer Suzanne Fischer Community Operations and Development Director (5) � § § � ' _ @ ± 4 3 \ / @ % } > Em / b ■ � e@C) CL = = z = o = ± = m2o2 E » W \ * eLums � om2 LL 2) 0 ± / ' \ \ / \ / � « n 2 > U w _ \ a kw 0 -0 § 0 / \ ; J0U mac ° — ) — < \t = � ® D ° \ / f D / \ 0 N 0 < \ \ \ / < p / 2 o w r_ 0 \ $ p cc 0 £ / = o / � / k \ 2 § cC:E 0 § [ CU f \ ° 7 5 # + 0 0CL > G[ § em = 4 00 EL 65 / / \ v %§ / = c _ LL ( � [ / k _ = y 5 E = _ 15 § \ k ( � \ \ / C) / i 2 \ \ / CITY OF ELK RIVER CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING DECEMBER 31, 2016 -1' 1 fiate of Achievement for Excellence in Financial Reporting Fsentca w City of Elk River Minnesota For its Conipmhensi ve. A nnuo1 Financial ancial Ri-,por[ for the Fiscal Year Ended December er 1# 201 *e�r,0 st-ro A� o t E w ui i wt! L]L3 txtL r-'C-Iz � (7) FINANCIAL SECTION CliftonLarsonAllen LLP CLAconnect.com Clifton Larson Allen INDEPENDENT AUDITORS' REPORT Honorable Mayor and the City Council City of Elk River, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City of Elk River's basic financial statements as listed in the table of contents. Our report includes a reference to other auditors who audited the financial statements of the City of Elk River Municipal Utilities, as described in our report on the City of Elk River's financial statements. This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors'Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Electric and Water proprietary funds, which represents 59% of the assets, 56% of the net position, and 76% of the revenues of the proprietary funds and business-type activities. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the proprietary funds and business-type activities, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Abe mem Nr of exia (9) International Honorable Mayor and the City Council City of Elk River, Minnesota An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River as of December 31, 2016, and the respective changes in financial position, the budgetary comparison schedule —general fund and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, schedule of funding progress for other postemployment benefits, schedule of the City's proportionate share of net pension liability, schedule of the City's pension contributions, and the schedule of changes in net pension liability and related ratios, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. (10) Honorable Mayor and the City Council City of Elk River, Minnesota Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Elk River's basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 9, 2017, on our consideration of the City of Elk River's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Elk River's internal control over financial reporting and compliance. zz-,�, CliftonLarsonAllen LLP Minneapolis, Minnesota June 9, 2017 (11) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 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, 2016. 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 and deferred outflows of resources of the City of Elk River exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $201,389,885 (net position). Of this amount, $28,050,825 (unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors. The City's total net position increased by $770,899, the net of a decrease of $2,187,272 in governmental activities, primarily attributable to the use of existing fund balance for capital acquisition and an increase in business-type activities of $2,953,172, which is primarily attributable to revenues in excess of expenses of $2.4 million in the Electric fund due to increased usage impacted by the additional territory acquisition. As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund balances of$38,334,630. Special Capital General Revenue Debt Service Projects Total Nonspendable $ 20,964 $ 108,176 $ - $ $ 129,140 Restricted - 1,405,144 10,840,535 12,245,679 Committed - 5,438,226 - 3,811,788 9,250,014 Assigned 266,832 1,338,446 11,294,502 12,899,780 Unassigned 6,470,281 - - (2,660,264) 3,810,017 Total Net Position $ 6,758,077 $ 8,289,992 $ 10,840,535 $ 12,446,026 $ 38,334,630 The City of Elk River's total long-term liabilities increased $3,469,298 during the current fiscal year, from $54,009,054 to $57,478,352. Beginning Ending GOVERNMENTAL ACTIVITIES Balance Additions Reductions Balance Bonds Payable $ 33,714,456 $ - $ (3,741,072) $ 29,973,384 Contracts for Deeds 1,410,000 - (1,410,000) - Compensated Absences 1,466,238 587,837 (559,646) 1,494,429 Total 36,590,694 587,837 (5,710,718) 31,467,813 Beginning Ending BUSINESS-TYPE ACTIVITIES Balance Additions Reductions Balance Bonds Payable $ 15,585,234 $ 11,630,525 $ (2,894,428) $ 24,321,331 Notes Payable 1,408,368 - (194,292) 1,214,076 Compensated Absences 424,758 194,008 (143,634) 475,132 Total 17,418,360 11,824,533 (3,232,354) 26,010,539 (12) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City of Elk River's basic financial statements. The City's basic financial statements comprise three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Elk River's finances, in a manner similar to a private-sector business. The statement of position presents information on all of the City of Elk River's assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Elk River is improving or deteriorating. The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Elk River that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Elk River include general government, public safety, public works, culture and recreation, economic development and interest on long-term debt. The business-type activities of the City of Elk River include municipal liquor, garbage, sewer, storm water, water, and electric. The government-wide financial statements include not only the City of Elk River itself (known as the primary government), but also a legally separate Housing & Redevelopment Authority (HRA) for which the City of Elk River is financially accountable. Financial information for the HRA is reported separately from the financial information presented for the primary government itself. The Elk River Municipal Utilities, although also legally separate, functions for all practical purposes as a department of the City of Elk River, and therefore has been included as an integral part of the primary government. The government-wide financial statements can be found starting on page 21 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Elk River, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Elk River can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. (13) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact by the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Elk River maintains three individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General, YMCA Bonds, and Pavement Management funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor funds is provided in the form of combining statements elsewhere in this report. The City of Elk River adopts an annual 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 starting on page 23 of this report. Proprietary funds. When the City of Elk River charges customers for the services it provides - whether to outside customers or to other departments of the City - these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net position and the statement of revenues, expenses, and changes in net position. The enterprise funds are the same as the business-type activities reported in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City of Elk River uses enterprise funds to account for its municipal liquor, garbage, sewer, storm water, water, and electric operations. The basic proprietary fund financial statements can be found starting on page 28 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Elk River's own program. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 36 of this report. (14) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 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 starting on page 37 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Elk River's share of net pension liabilities (assets) for defined benefits plans, schedules of contributions, and progress in funding its obligation to provide pension and other postemployment benefits to its employees. Required supplementary information can be found starting on page 74 of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found starting on page 80 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Elk River, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $201,389,885 at the close of the most recent fiscal year. By far, the largest portion of the City of Elk River's net position (75%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City of Elk River uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Elk River's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 Current and Other Assets $ 41,740,557 $ 46,019,412 $ 33,038,957 $ 34,093,281 $ 74,779,514 $ 80,112,693 Capital Assets 97,910,819 100,211,719 107,714,850 93,681,707 205,625,669 193,893,426 Total Assets 139,651,376 146,231,131 140,753,807 127,774,988 280,405,183 274,006,119 Deferred Outflows of Resources 11,703,328 1,974,440 2,118,984 454,331 13,822,312 2,428,771 Noncurrent Liabilities Outstanding 39,193,948 44,557,234 29,692,408 20,816,200 68,886,356 65,373,434 Other Liabilities 13,189,478 2,338,153 7,862,145 4,980,591 21,051,623 7,318,744 Total Liabilities 52,383,426 46,895,387 37,554,553 25,796,791 89,937,979 72,692,178 Deferred Inflows of Resources 2,276,632 2,433,266 622,998 690,460 2,899,630 3,123,726 Net Position: Net Investment in Capital Assets 78,119,790 75,030,579 82,230,963 76,747,269 160,350,753 151,777,848 Restricted 11,990,647 3,675,588 997,660 490,500 12,988,307 4,166,088 Unrestricted 6,584,209 20,170,751 21,466,617 24,504,299 28,050,826 44,675,050 Total Net Position $ 96,694,646 $ 98,876,918 $104,695,240 $101,742,068 $ 201,389,886 $ 200,618,986 An additional portion of the City of Elk River's net position (6.4%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($28,050,825) may be used to meet the City of Elk River's ongoing obligations to citizens and creditors. (15) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 At the end of the current fiscal year, the City of Elk River is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business-type activities. Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 REVENUES Program Revenues: Charges for Services $ 2,883,489 $ 2,827,043 $ 47,867,360 $ 45,680,611 $ 50,750,849 $ 48,507,654 Operating Grants and Contributions 1,692,517 1,033,338 - - 1,692,517 1,033,338 Capital Grants and Contributions 1,333,057 3,574,036 1,758,131 2,708,564 3,091,188 6,282,600 General Revenues: - - Property Taxes 11,136,310 10,931,945 - - 11,136,310 10,931,945 Other Taxes 1,552,499 1,513,621 - - 1,552,499 1,513,621 Unrestricted Investment Earnings 311,469 512,193 167,849 259,494 479,318 771,687 Miscellaneous Revenue 1,820,248 1,642,098 - - 1,820,248 1,642,098 Gain on Sale of Capital Assets 29,695 2,796,041 1,050 8,899 30,745 2,804,940 Total Revenues 20,759,284 24,830,315 49,794,390 48,657,568 70,553,674 (4,071,031) EXPENSES General Government 3,996,316 3,619,293 - - 3,996,316 3,619,293 Public Safety 9,231,492 6,720,283 9,231,492 6,720,283 Public Works 5,539,045 5,351,630 5,539,045 5,351,630 Culture and Recreation 4,014,737 3,970,704 4,014,737 3,970,704 Economic Development 954,723 959,414 954,723 959,414 Interest on Long-Term Debt 996,933 1,084,902 - - 996,933 1,084,902 Municipal Liquor - - 6,063,922 5,945,126 6,063,922 5,945,126 Sewer 2,473,139 2,318,709 2,473,139 2,318,709 Garbage 1,475,027 1,382,890 1,475,027 1,382,890 Storm Water 645,596 736,411 645,596 736,411 Electric 32,190,114 30,012,830 32,190,114 30,012,830 Water 2,532,653 2,478,904 2,532,653 2,478,904 Total Expenses 24,733,246 21,706,226 45,380,451 42,874,870 70,113,697 3,027,020 CHANGE IN NET POSITION BEFORE SPECIAL ITEM AND TRANSFERES (3,973,962) 3,124,089 4,413,939 5,782,698 439,977 8,906,787 Special Item - - 330,923 - 330,923 - Transfers and Contributions 1,791,690 (10,891,333) (1,791,690) 10,891,333 - - CHANGE IN NET POSITION (2,182,272) (7,767,244) 2,953,172 16,674,031 770,900 8,906,787 Net Position-Beginning of Year 98,876,918 106,644,162 101,742,068 85,068,037 200,618,986 191,712,199 NET POSITION-END OF YEAR $ 96,694,646 $ 98,876,918 $104,695,240 $101,742,068 $201,389,886 $200,618,986 Governmental activities. Governmental activities account for 48% of the City of Elk River's net position. Governmental activities decreased the City's net position by $2,182,273. Key elements of the relevant changes are as follows: • In 2016 the City accepted a donation of police equipment valued at over $660,000. • The increase in public safety reflects the adjustment to the pension liability. (16) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Expenses and Program Revenues-Governmental Activities $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,0$0 0 ■ I — . . General Public Safety Public Works Culture and Economic Interest and Fiscal Government Recreation Development Charges N Revenues ■Expenses Revenues by Source- Governmental Activities Miscellaneous Revenue, Ga in on Sale of Capital 8.77% Assets,0.14% Charges forServices, 13.89% Unrestricted I Investment Earnings, 1.50% Operating Grants and Contributions,8.15% Oth e r Ta xe s,7.48% Capital Grants and Contri butioIns,6.42% PropertyTaxes,53.64% (17) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Business-type activities. Business-type activities increased the City of Elk River's net position by $2,953,172. Key elements of this increase are as follows: • Charges for services for business-type activities increased $1,708,347 due largely to an increase in electric usage. The electric utility accounts for 73% of the total charges for services. • In 2016, the Electric fund sold its security division for a gain on the sale of$330,293. Expenses and Program Revenues-Business-Type Activities $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $o ■ ■ _ ■s Municipal Liquor Sewer Garbage Storm Water Electric Water ■Revenues ■Expenses (18) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Revenues by Source- Business-Type Activities Unrestricted Investment Earnings, 0.34%, Capital Grants and Contributions,3.53% Cha rges forServices, 96.13% Financial Analysis of the Government's Funds Governmental funds. The focus of the City's governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $38,334,630. Approximately 10% of this total amount ($3,810,017) constitutes unassigned fund balance. The remainder of fund balance ($34,524,613) is not available for new spending because it is either 1) nonspendable ($129,140), 2) restricted ($12,245,679), 3) committed ($9,250,014) or 4) assigned ($12,899,780) for other purposes. The General fund is the chief operating fund of the City of Elk River. The total fund balance of the General fund increased $193,279 during the current year, resulting primarily from budgeted transfers in. The YMCA Bonds fund decreased $118,476 due to the debt service payments on the crossover advance refunding debt issued in 2013. (19) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 The Pavement Management fund increased $1,040,854 due to the collection of franchise fees and intergovernmental revenues in excess of current year expenditures. Proprietary funds. The City of Elk River's proprietary funds provide the same type of information found in the government-wide statements, but in more detail. Unrestricted net position in the respective proprietary funds are Municipal Liquor - $3,487,225, Sewer - $3,267,800, Garbage - $391,463, Storm Water - $389,724, Electric - $9,829,270, and Water - $4,101,135. The Garbage fund net position decreased $145,575 due to an increase in garbage disposal fees and the Storm Water fund net position decreased $329,516 due mainly to transfers out and capital contributions to other funds. All other proprietary funds had increases in net position. General Fund Budgetary Highlights There was no difference between the original budget and the final budget for the General fund. Key factors are as follows: • Total revenue collections were 103% of budget. Other tax collections were $32,873 over budget, intergovernmental revenue collections were $228,827 over budget and fines and forfeits were $28,966 over budget. • Expenditures were under budget by $60,962 due mainly to lower than anticipated fuel costs and sound fiscal control by City departments. 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, 2016, amounts to $205,625,669 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment and infrastructure. The total increase in the City of Elk River's investment in capital assets for the current year was $11,732,243 or 6%. Major capital asset events during the current fiscal year included the following: • $900,000 in public safety equipment. • Completion of the $4.9 million 2015 street project. • Construction of$437,000 for the River's Edge Park expansion. • Construction continued on the wastewater treatment facility improvements incurring over $4.7 million in 2016 and placing in service $15.4 million. • The electric system made a $9.4 million down payment on their buy-in to the power contract with Minnesota Municipal Power Agency. Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 Land $ 40,876,833 $ 40,876,833 $ 1,609,491 $ 1,526,407 $ 42,486,324 $ 42,403,240 Intangible Assets - - 9,804,951 - 9,804,951 - Construction in Progress 437,501 3,602,680 3,714,934 13,745,714 4,152,435 17,348,394 Buildings 45,048,097 45,048,097 24,363,780 19,525,901 69,411,877 64,573,998 Other Improvements 5,438,466 5,393,304 - - 5,438,466 5,393,304 Infrastructure 66,110,684 62,627,885 122,107,290 117,851,862 188,217,974 180,479,747 Equipment 12,764,099 11,989,388 10,665,822 4,408,461 23,429,921 16,397,849 Total Capital Assets 170,675,680 169,538,187 172,266,268 157,058,345 342,941,948 326,596,532 Less:Accumulated Depreciation (72,764,861) (69,326,468) (64,551,418) (63,376,638) (137,316,279) (132,703,106) Total Capital Assets,Net S 97,910,819 $ 100,211,719/ S 107,714,850 S 93.681.707 S 205,625,669 S 193,893,426 (20) CITY OF ELK RIVER MANAGEMENT'S DISCUSSION AND ANALYSIS ENDED DECEMBER 31, 2016 Long-term debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $81,906,740, an increase of $16,533,306 from 2015. General obligation improvement bonds ($29,530,000) were issued to finance the construction of a library, a recreation facility, a public safety/city hall facility, a public works facility, and improvement projects within the City. General obligation revenue bonds ($11,830,000) were used to finance sewer and water systems. Revenue bonds ($11,955,000) were used to finance electric system improvements. Governmental Activities Business-Type Activities Total 2016 2015 2016 2015 2016 2015 General Obligation Bonds $ 29,530,000 $ 33,220,000 $ - $ - $ 29,530,000 $ 33,220,000 General Obligation Revenue Bonds - - 11,830,000 12,535,000 11,830,000 12,535,000 Revenue Bonds - - 11,955,000 2,985,000 11,955,000 2,985,000 Issuance Premium 443,384 494,456 536,331 65,234 979,715 559,690 Total Bonds Payable, Net 29,973,384 33,714,456 24,321,331 15,585,234 54,294,715 49,299,690 Contracts for Deed - 1,410,000 - - - 1,410,000 Notes Payable - - 1,214,076 1,408,368 1,214,076 1,408,368 Compensated Absences 1,494,429 1,466,238 475,132 424,758 1,969,561 1,890,996 Net Pension Liability 18,541,368 7,589,597 5,321,616 3,277,492 23,862,984 10,867,089 Other Postemployment Benefits 426,720 376,943 138,683 120,348 565,403 497,291 Total Outstanding Debt $ 50,435,901 $ 44,557,234 $ 31,470,838 $ 20,816,200 $ 81,906,739 $ 65,373,434 Additional long-term debt in the amount of $1,214,076 is for notes payable, $1,969,561 is for compensated absences, $23,862,985 is for net pension liability, and $565,403 is for other postemployment benefits obligations. The City maintains a bond rating of AA+ from Standard & Poor's for general obligation debt. State statutes limit the amount of general obligation debt a Minnesota City may issue to 3% of total Estimated Taxable Market Value. The current debt limitation for the City of Elk River is $59,362,917. $15,146,053 of the City's net outstanding debt is counted within the statutory limitation Additional information on the City of Elk River's long-term debt can be found in Note 7 starting on page 55 of this report. Economic Factors and Next Year's Budget The City of Elk River estimates that the demand for City services will begin to grow at increased levels as compared to the prior years due to the improved economy and recent building activity. This was taken into consideration in preparation of the City's 2017 budget. The property tax levy is set annually and is adjusted as necessary to fund the cost of providing services to our citizens and customers. Charges for services are evaluated each year and adjusted if warranted. The City expects to keep the tax levy consistent in upcoming years. Requests for Information This financial report is designed to provide a general overview of the City of Elk River's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to City of Elk River, Attn: Finance Director, 13065 Orono Pkwy, Elk River, Minnesota 55330 or by calling 763-635-1000. (21) BASIC FINANCIAL STATEMENTS CITY OF ELK RIVER STATEMENT OF NET POSITION DECEMBER 31, 2016 Primary Government Governmental Business-Type Component Unit Activities Activities Total HRA ASSETS Cash and Investments $ 26,987,033 $ 26,260,342 $ 53,247,375 $ 1,289,705 Restricted Cash and Investments - 997,660 997,660 - Cash and Investments Held by Trustee 9,284,303 - 9,284,303 - Receivables: Accrued Interest 112,174 42,635 154,809 16,482 Taxes 631,259 - 631,259 - Special Assessments 955,579 - 955,579 Other Accounts Receivable 521,553 3,325,974 3,847,527 - Notes Receivable,Net 2,186,175 - 2,186,175 531,802 Due from Other Governments 401,578 19,163 420,741 - Due from Primary Government - - - 215,494 Due from Component Unit 8,202 - 8,202 - Internal Balances (144,417) 144,417 - Prepaid Items 129,140 225,420 354,560 Inventories - 2,023,346 2,023,346 Land Held for Resale 187,060 - 187,060 Pension Asset 480,918 - 480,918 - Capital Assets: Non-Depreciable: Land 40,876,833 1,609,491 42,486,324 257,100 Intangible Assets - 9,804,951 9,804,951 - Construction in Progress 437,501 3,714,934 4,152,435 Depreciable: Buildings and Building Improvements 45,048,097 24,363,780 69,411,877 - Improvements Other than Buildings 5,438,466 - 5,438,466 174,290 Infrastructure 66,110,684 - 66,110,684 - Distribution/Collection Systems - 122,107,290 122,107,290 Equipment and Furniture 12,764,099 10,665,822 23,429,921 - Total Capital Assets 170,675,680 172,266,268 342,941,948 431,390 Less: Accumulated Depreciation (72,764,861) (64,551,418) (137,316,279) (47,445) Total Capital Assets,Net 97,910,819 107,714,850 205,625,669 383,945 Total Assets 139,651,376 140,753,807 280,405,183 2,437,428 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows-Pensions 11,481,277 2,067,464 13,548,741 24,941 Deferred Charge on Debt Refunding 222,051 51,520 273,571 - 11,703,328 2,118,984 13,822,312 24,941 LIABILITIES Accounts and Contracts Payable 585,070 5,374,407 5,959,477 22,469 Accrued Salaries Payable 196,892 140,076 336,968 1,296 Due to Governmental Activities 4,602 185,974 190,576 - Due to Primary Government - - - 8,202 Due to Component Unit 215,494 - 215,494 - Unearned Revenue 568,062 91,854 659,916 Accrued Interest Payable 377,405 291,404 668,809 Compensated Absence-Due Within One Year 566,953 228,214 795,167 Notes Payable-Due Within One Year - 195,216 195,216 Bonds Payable-Due Within One Year 10,675,000 1,355,000 12,030,000 Noncurrent Liabilities: Other Postemployment Benefits 426,720 138,683 565,403 - Net Pension Liability 18,541,368 5,321,616 23,862,984 68,816 Compensated Absences-Due in More Than One Year 927,476 246,918 1,174,394 - Notes Payable-Due in More Than One Year - 1,018,860 1,018,860 Bonds Payable-Due in More Than One Year 19,298,384 22,966,331 42,264,715 - Total Liabilities 52,383,426 37,554,553 89,937,979 100,783 DEFERRED INFLOWS OF RESOURCES Deferred Inflows-Pensions 2,276,632 622,998 2,899,630 9,539 NET POSITION Net Investment in Capital Assets 78,119,790 82,230,963 160,350,753 383,945 Restricted for: Debt Service 10,582,630 997,660 11,580,290 - Landfill Mitigation 351,577 - 351,577 Economic Development 1,046,584 1,046,584 Law Enforcement 9,856 9,856 - Housing and Redevelopment - - - 1,968,102 Unrestricted 6,584,209 21,466,617 28,050,826 - Total Net Position $ 96,694,646 $ 104,695,240 $ 201,389,886 $ 2,352,047 See accompanying Notes to Basic Financial Statements. (21) O (O CO o o O o I- (O O I- O_ O O CO (O O o N Q o O W r Ln O N N N N M C N N Q = E O O C) +� Efl Efl o O a N I�W r Ln M M M N o o o O M O O co co o M M O (O (O Z M N I- o o M CO o m N o o o o O o o N o O CO CO (O I-- O o N d) O o N O N O M o (O N I- O O O o) W I: co O o (O (O o LO o N CO o d) o O (O N d) O O O O O o O t/) a) O O N d) N oM (O LO (O o (O LO N M M LO W a) y0 M m o N CO d) W O r Ln N N o Ln o CO M M I- (O M m F M CO V N•l•l CO •l•l N o o LO O O O L � N N C) O 69 69 C a) N ' ' ' ' ' N (O I� o o O O o) O M O CO N CO O C E o_ o o) N o o o 0 o o N o) (O I� (O o a) C >, (O o N o) N O O o O o) (O CO O N aa)) a) FT N o o N CO o o) o o r O M N LO > :. o I- (O (O LO (O o o (O M m N o o o) O o) r o N N N M I� N_ o) r (O N o o N o Q O O o a) wa °� 69 69 Z m N r o o M M M O o) m Co o) O N W (O �p (M N o o N o) CO CO m (O o m m N o (O I- O Ln N m � � M o o N (O (O m N m (O a) a) o m o o o o o (O N O o) N (O o E :.. m O N r m N N M LO N N m o CO I- O) C > M o) o N CO m CO o o M CO O (O (O V c4 .6 W (O N CO CO OQ , o) o) (D (A 69 T to (p I- o I- o ' ' ' (O CO •�' O LO N N o V (O t/) Cl) N W a Q Q (M N M(O o N o M N (O LO r U` (O LO M M o o I� O � M o m F / r Wo m 69 69 69 Um mo Y W o o o m o o J / (6 O N Ln o) N N W D V _ N W m L() � I, (D (D U) LL H p E C - } OZ a) � o w oQ W � o 0 a O m » » » E > m -Q aa)) o E r _ L Z in a) U c o U H W O o o O o o o Co o O o N C W O O o S -O Q r o (o O O m O r O N (O o O C X w a U N m w LL O (O �_ O (O m o LO �_O co O N co CO O > F a) a) a) -o a) a) Cl) a) CO m N co O N I- (O O I- O N a) x () U� E (� Z C C n a) .0 I� o m M M CO O N o I- o I- (O LO �' F '� a) C a) O O m Z (O O m W O m co o I� co CO I� a) t/) a) O W a) a) N r o N I- O Q a) N U C (p O o) o o L U) (o o LO O OL_ w 'm .0 Ul F C d d C� d o Z (� I (6 L a) a) 69 69 69 (7 U) C) Z z (O N LO M co (O N o) (D o (o (O O) o M N M o N �2 N m 0Ln o) (O Uj t/) M o o I- r O N O O Ln (O o (O CO a) (O m o o (O M M M o o O N O co LO L c m M M o m M o r r o m M CO a) O N LO O O O I- O o o O Lo co N o- Co o) LO o N (O N N N co o O w 69 69 69 CO (0 U U u `o Ca E u L O a) 0 5 o) > Q O o o O a` o Q a Eo a) a E z D- , Y Fm W o .> E o o 2 > ; c E y6 O o -6 -6 >O Q J o C O a) .0 a3 (� j o f U U N EO a Q Y6 y6 C 0 E a) o N y0 Ul a) Q E O O N o) 15 C a) a) . 5 O H C D N a) O a) a) H H C 'w C.1 o (7 a a U w m cn (7 n w E o T (ll a U CO CITY OF ELK RIVER BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2016 Other General Pavement Governmental ASSETS Fund YMCA Bonds Management Funds Totals Cash and Investments $ 6,453,058 $ 476,729 $ 3,458,873 $ 16,598,373 $ 26,987,033 Cash and Investments Held by Trustee - 9,284,303 - - 9,284,303 Receivables: Accrued Interest 27,718 - 15,261 69,195 112,174 Delinquent Taxes 559,427 18,242 - 53,590 631,259 Special Assessments - - - 955,579 955,579 Other Accounts Receivable 11,958 144,785 364,810 521,553 Notes Receivable,Net - - 2,186,175 2,186,175 Due from Other Governments 61,696 334,183 5,699 401,578 Due from Other Funds 209,809 266,738 1,541,748 2,018,295 Due from Component Unit 8,202 - - 8,202 Prepaids 20,964 108,176 129,140 Land Held for Resale - - - 187,060 187,060 Total Assets $ 7,352,832 $ 9,779,274 $ 4,219,840 $ 22,070,405 $ 43,422,351 LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCE LIABILITIES Accounts and Contracts Payable 315,239 71,697 $ 198,134 $ 585,070 Accrued Salaries Payable 187,463 - 9,429 196,892 Due to Other Governments 3,116 - 1,486 4,602 Due to Other Funds 6,219 2,172 2,154,321 2,162,712 Due to Component Unit - - 215,494 215,494 Unearned Revenue - - 568,062 568,062 Total Liabilities 512,037 - 73,869 3,146,926 3,732,832 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue- Taxes 82,718 3,492 - 8,924 95,134 Unavailable Revenue- Special Assessments - - - 925,572 925,572 Unavailable Revenue- Other - - 334,183 - 334,183 Total Deferred Inflows of Resources 82,718 3,492 334,183 934,496 1,354,889 FUND BALANCE Nonspendable 20,964 - - 108,176 129,140 Restricted - 9,775,782 - 2,469,897 12,245,679 Committed - - 3,811,788 5,438,226 9,250,014 Assigned 266,832 - 12,632,948 12,899,780 Unassigned 6,470,281 - (2,660,264) 3,810,017 Total Fund Balance 6,758,077 9,775,782 3,811,788 17,988,983 38,334,630 Total Liabilities,Deferred Inflows of Resources,and Fund Balance $ 7,352,832 $ 9,779,274 $ 4,219,840 $ 22,070,405 $ 43,422,351 See accompanying Notes to Basic Financial Statements. (23) CITY OF ELK RIVER RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL ACTIVITIES DECEMBER 31, 2016 Total Fund Balances for Governmental Funds $ 38,334,630 Total net position reported for governmental activities in the statement of net position is different because: Capital assets used in governmental funds are not financial resources and,therefore,are not reported in the funds. Those assets consist of: Land 40,876,833 Construction in Progress 437,501 Buildings 45,048,097 Other Improvements 5,438,466 Streets and Infrastructure 66,110,684 Equipment and Furniture 12,764,099 Total Capital Assets 170,675,680 Less:Accumulated Depreciation (72,764,861) 97,910,819 Long-term assets for pensions reported in governmental activities are not financial resources and therefore are not reported as assets in the funds. 480,918 Some of the City's receivables(including property taxes,special assessments and other long-term receivables)will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and,therefore,are reported as deferred inflows of resources in the governmental funds. 1,354,889 The City's net pension liability and related deferred inflows and deferred outflows are recorded only on the statement of net position. Balances at year end are: Net Pension Liability (18,541,368) Deferred Inflows of Resources-Pensions (2,276,632) Deferred Outflows of Resources-Pensions 11,481,277 (9,336,723) Long-term liabilities that pertain to governmental funds,including bonds payable,are not due and payable in the current period and,therefore,are not reported as fund liabilities. All liabilities-both current and long term-are reported in the statement of net position. Bonds Payable (29,530,000) Unamortized Premiums (443,384) Deferred Charge on Refunding 222,051 Accrued Interest Payable (377,405) Compensated Absence Payable (1,494,429) Other Postemployment Benefits (426,720) (32,049,887) Total Net Position of Governmental Activities $ 96,694,646 See accompanying Notes to Basic Financial Statements. (24) CITY OF ELK RIVER STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2016 Other General Pavement Governmental Fund YMCA Bonds Management Funds Totals REVENUE Property Taxes $ 9,585,347 $ 405,407 $ - $ 1,180,742 $ 11,171,496 Other Taxes 159,873 - 1,392,626 - 1,552,499 Special Assessments - - 456,666 456,666 Licenses and Permits 655,607 - - 655,607 Intergovernmental Revenue 517,177 668,072 496,417 1,681,666 Charges for Services 922,478 - 928,930 1,851,408 Fines and Forfeitures 155,966 11,560 167,526 Other Revenue: Landfill Expansion Fee - - - 1,220,232 1,220,232 Investment Earnings 95,458 86,962 2,004 127,045 311,469 Refunds and Reimbursements 120,158 - - 600,971 721,129 Contributions 43,540 261,059 355,008 659,607 Miscellaneous Revenue 19,303 - - 55,516 74,819 Total Revenue 12,274,907 753,428 2,062,702 5,433,087 20,524,124 EXPENDITURES Current: General Government 3,253,212 - - 348,256 3,601,468 Public Safety 6,685,257 173,882 6,859,139 Public Works 1,775,150 86,101 1,861,251 Culture and Recreation 1,862,109 1,010,172 2,872,281 Economic Development - 949,205 949,205 Capital Outlay General Government 37,982 37,982 Public Safety 266,490 266,490 Public Works 1,021,848 831,402 1,853,250 Culture and Recreation - - 524,636 524,636 Debt Service: Principal Retirement 380,000 4,720,000 5,100,000 Interest and Fiscal Charges - 629,691 - 518,844 1,148,535 Total Expenditures 13,575,728 1,009,691 1,021,848 9,466,970 25,074,237 EXCESS(DEFICIENCY)OF REVENUE OVER (UNDER)EXPENDITURES (1,300,821) (256,263) 1,040,854 (4,033,883) (4,550,113) OTHER FINANCE SOURCES(USES) Transfers In 1,769,750 137,787 - 4,617,000 6,524,537 Transfers Out (275,650) - (4,556,750) (4,832,400) Proceed from Sale of Capital Assets - - 80,587 80,587 Total Other Finance Sources(Uses) 1,494,100 137,787 - 140,837 1,772,724 NET CHANGE IN FUND BALANCES 193,279 (118,476) 1,040,854 (3,893,046) (2,777,389) FUND BALANCES Beginning of Year 6,564,798 9,894,258 2,770,934 21,882,029 41,112,019 End of Year $ 6,758,077 $ 9,775,782 $ 3,811,788 $ 17,988,983 $ 38,334,630 See accompanying Notes to Basic Financial Statements. (25) CITY OF ELK RIVER RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2016 Net Change in Fund Balances-Total Governmental Funds $ (2,777,389) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures and proceeds from the sale of capital assets as revenues. However, in the statement of activities,assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense.This is the amount by which depreciation exceeded capital outlays in the current period. Capital Outlays-Improvement Costs(Net of Proceeds) $ 2,270,879 Gain on Disposal of Capital Assets 29,695 Proceeds from the Sale of Capital Assets (80,587) Capital Contributions 663,516 Depreciation Expense (5,184,403) (2,300,900) The governmental funds report bond proceeds as financing sources,while repayment of bond principal is reported as an expenditure. In the statement of net position,however,issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, however,interest expense is recognized as it accrues, regardless of when it is due.The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Repayment of Principal on Long-Term Debt 5,100,000 Amortization of Bond Premium 51,072 Amortization of Deferred Charge on Refunding (36,265) Change in Accrued Interest Payable 136,795 5,251,602 Delinquent and certain other property taxes and special assessments receivable will be collected subsequent to year-end,but are not available soon enough to pay for the current period's expenditures and,therefore,are reported as deferred inflows of resources and excluded from revenues in the governmental funds. Deferred Inflows of Resources-December 31,2015 1,812,940 Deferred Inflows of Resources-December 31,2016 1,354,889 (458,051) In the statement of activities,compensated absences and other postemployment benefits are measured by the amounts earned during the year. In the governmental funds,however, expenditures for these items are measured by the amount of financial resources used(essentially, the amounts actually paid). During fiscal year 2016,compensated absence payable and other post employment benefits payable changed. (77,967) Pension expenses in the governmental funds are measured by current year employee contributions. Pension expenses on the statement of activities are measured by the change in net pension liability and the related deferred inflows and outflows of resources. (1,819,567) Change in Net Position of Governmental Activities $ (2,182,272) See accompanying Notes to Basic Financial Statements. (26) CITY OF ELK RIVER STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND - BUDGET TO ACTUAL (GAAP BASIS) YEAR ENDED DECEMBER 31, 2016 Budgeted Amounts Over(Under) Original Final Actual Final Budget REVENUE Taxes Property Taxes $ 9,596,850 $ 9,596,850 $ 9,585,347 $ (11,503) Other Taxes 127,000 127,000 159,873 32,873 Licenses and Permits 646,550 646,550 655,607 9,057 Intergovernmental Revenue 288,350 288,350 517,177 228,827 Charges for Services 915,800 915,800 922,478 6,678 Fines and Forfeits 127,000 127,000 155,966 28,966 Other Revenue: Investment Earnings 85,000 85,000 95,458 10,458 Refunds and Reimbursements 101,000 101,000 120,158 19,158 Contributions 20,000 20,000 43,540 23,540 Miscellaneous Revenue 7,500 7,500 19,303 11,803 Total Revenue 11,915,050 11,915,050 12,274,907 359,857 EXPENDITURES General Government 3,257,600 3,257,600 3,253,212 (4,388) Public Safety 6,514,600 6,514,600 6,685,257 170,657 Public Works 1,893,300 1,893,300 1,775,150 (118,150) Culture and Recreation 1,943,650 1,943,650 1,862,109 (81,541) Total Expenditures 13,609,150 13,609,150 13,575,728 (33,422) EXCESS(DEFICIENCY)OF REVENUE OVER (UNDER)EXPENDITURES (1,694,100) (1,694,100) (1,300,821) 393,279 OTHER FINANCE SOURCES(USES) Transfers In 1,969,750 1,969,750 1,769,750 (200,000) Transfers Out (275,650) (275,650) (275,650) Total Other Finance Sources(Uses) 1,694,100 1,694,100 1,494,100 (200,000) NET CHANGE IN FUND BALANCES $ - $ - 193,279 $ 193,279 FUND BALANCES Beginning of Year 6,564,798 End of Year $ 6,758,077 See accompanying Notes to Basic Financial Statements. (27) CITY OF ELK RIVER STATEMENT OF NET POSITION PROPRIETARY FUNDS DECEMBER 31, 2016 Municipal Liquor Sewer Garbage Storm Water Electric ASSETS AND DEFERRED OUTFLOWS OF RESOURCES CURRENT ASSETS Cash and Cash Equivalents $ 3,402,317 $ 4,102,071 $ 402,142 $ 414,817 $ 13,683,031 Cash and Investments Held by Trustee - - - - 997,660 Receivables: Accounts Receivable(Net) - 397,711 10,567 2,995 2,733,204 Accrued Interest 15,013 18,215 1,652 2,067 4,550 Due from Other Governments - 19,163 - - - Due from Other Funds - 337,293 111,086 37,932 10,416 Inventory 1,216,962 - - - 793,380 Prepaid Items - - - - 197,439 Total Current Assets 4,634,292 4,874,453 525,447 457,811 18,419,680 NONCURRENT ASSETS Capital Assets Nondepreciable 753,961 2,907,679 - - 10,173,274 Depreciable 3,040,025 49,500,208 18,001,807 51,422,779 Total 3,793,986 52,407,887 18,001,807 61,596,053 Less:Accumulated Depreciation (1,897,380) (16,087,084) (7,655,146) (23,639,805) Net Capital Assets 1,896,606 36,320,803 10,346,661 37,956,248 DEFERRED OUTFLOWS OF RESOURCES Pension Related 227,315 172,969 7,985 25,534 1,485,023 Deferred Charge on Debt Refunding - - - - 41,216 Total Deferred Outflows of Resources 227,315 172,969 7,985 25,534 1,526,239 Total Assets and Deferred Outflows of Resources $ 6,758,213 $ 41,368,225 $ 533,432 $ 10,830,006 $ 57,902,167 LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND NET POSITION CURRENT LIABILITIES Accounts and Contracts Payable $ 444,319 $ 1,059,181 $ 115,409 $ 5,551 $ 3,407,185 Accrued Salaries Payable 12,535 9,676 416 1,322 100,644 Due to Other Governments 70,771 - - - 113,078 Due to Other Funds - 509 1,060 895 755,539 Unearned Revenue 1,233 - - - 875 Accrued Interest Payable - 111,835 - 155,971 Compensated Absences Payable 32,098 13,834 2,191 156,874 Notes Payable - - - 195,216 Bonds Payable - 405,000 - - 706,000 Total Current Liabilities 560,956 1,600,035 116,885 9,959 5,591,382 NONCURRENT LIABILITIES Compensated Absences Payable 66,862 7,192 - 1,756 152,133 Other Postemployment Benefits 32,444 34,005 - 1,689 70,545 Net Pension Liability 627,186 477,240 22,030 70,452 3,749,423 Notes Payable - - - - 1,018,860 Bonds Payable - 9,195,000 - - 12,380,218 Total Noncurrent Liabilities 726,492 9,713,437 22,030 73,897 17,371,179 Total Liabilities 1,287,448 11,313,472 138,915 83,856 22,962,561 DEFERRED INFLOWS OF RESOURCES Deferred Inflows-Pensions 86,934 66,150 3,054 9,765 415,506 NET POSITION Net Investment in Capital Assets 1,896,606 26,720,803 - 10,346,661 23,697,170 Restricted - - - - 997,660 Unrestricted 3,487,225 3,267,800 391,463 389,724 9,829,270 Total Net Position 5,383,831 29,988,603 391,463 10,736,385 34,524,100 Total Liabilities,Deferred Inflows of Resources,and Net Position $ 6,758,213 $ 41,368,225 $ 533,432 $ 10,830,006 $ 57,902,167 See accompanying Notes to Basic Financial Statements. (28) CITY OF ELK RIVER STATEMENT OF NET POSITION (CONTINUED) PROPRIETARY FUNDS DECEMBER 31, 2016 Water Totals $ 4,255,964 $ 26,260,342 - 997,660 181,497 3,325,974 1,138 42,635 - 19,163 429,289 926,016 13,004 2,023,346 27,981 225,420 4,908,873 33,820,556 1,294,462 15,129,376 35,172,073 157,136,892 36,466,535 172,266,268 (15,272,003) (64,551,418) 21,194,532 107,714,850 148,638 2,067,464 10,304 51,520 158,942 2,118,984 $ 26,262,347 $ 143,654,390 $ 342,762 $ 5,374,407 15,483 140,076 2,125 185,974 23,596 781,599 89,746 91,854 23,598 291,404 23,217 228,214 - 195,216 244,000 1,355,000 764,527 8,643,744 18,975 246,918 - 138,683 375,285 5,321,616 - 1,018,860 1,391,113 22,966,331 1,785,373 29,692,408 2,549,900 38,336,152 41,589 622,998 19,569,723 82,230,963 - 997,660 4,101,135 21,466,617 23,670,858 104,695,240 $ 26,262,347 $ 143,654,390 (29) CITY OF ELK RIVER STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Municipal Liquor Sewer Garbage Storm Water Electric SALES AND COST OF SALES Sales $ 7,007,627 $ $ $ $ Cost of Sales (4,997,934) Gross Profit 2,009,693 OPERATING REVENUE User Charges $ - 1,917,991 1,332,910 475,046 $ 34,746,670 Delinquent Collections - 1,474 8,517 2,331 253,137 Other 1,947 1,725 1,473 - (535,411) Total Operating Revenue 1,947 1,921,190 1,342,900 477,377 34,464,396 OPERATING EXPENSES Personnel Services 670,303 581,334 18,356 85,917 2,853,048 Supplies 21,161 114,855 2,046 6,193 110,343 Purchased Power - - - - 23,991,069 Other Service Charges 253,424 532,855 1,454,625 102,017 2,867,046 Depreciation 121,100 983,689 - 447,535 2,005,093 Total Operating Expenses 1,065,988 2,212,733 1,475,027 641,662 31,826,599 OPERATING INCOME(LOSS) 945,652 (291,543) (132,127) (164,285) 2,637,797 NONOPERATING REVENUE(EXPENSES) Connection and Other Fees - 587,300 - - Investment Earnings 287 48,005 3,836 90,804 Interest Expense - - - (198,194) Gain(Loss)on Disposal of Capital Asset (260,406) (3,934) (80,126) Miscellaneous Revenue 102,993 - 281,702 Bond Issuance Costs - - - 0.00 (85,195) Total Nonoperating Revenue(Expenses) 287 477,892 3,836 (3,934) 8,991 INCOME(LOSS)BEFORE CONTRIBUTIONS AND TRANSFERS 945,939 186,349 (128,291) (168,219) 2,646,788 Capital Grants and Contributions - 636,152 - Capital Contributions to Other Funds - - (99,553) Transfers In 27,716 Transfers Out (704,567) (119,255) (45,000) (61,744) (1,089,287) Total Contributions and Transfers (704,567) 516,897 (17,284) (161,297) (1,089,287) CHANGE IN NET POSITION BEFORE SPECIAL ITEM 241,372 703,246 (145,575) (329,516) 1,557,501 Special Item - - 330,923 CHANGE IN NET POSITION 241,372 703,246 (145,575) (329,516) 1,888,424 NET POSITION Beginning of Year 5,142,459 29,285,357 537,038 11,065,901 32,635,676 End of Year $ 5,383,831 $ 29,988,603 $ 391,463 $ 10,736,385 $ 34,524,100 See accompanying Notes to Basic Financial Statements. (30) CITY OF ELK RIVER STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION (CONTINUED) PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Water Totals $ $ 7,007,627 (4,997,934) 2,009,693 $ 2,121,380 $ 40,593,997 17,142 282,601 34,999 (495,267) 2,173,521 40,381,331 589,338 4,798,296 230,396 484,994 - 23,991,069 506,623 5,716,590 1,148,310 4,705,727 2,474,667 39,696,676 (301,146) 2,694,348 - 587,300 24,917 167,849 (57,986) (256,180) 1,050 (343,416) 196,700 581,395 - (85,195) 164,681 651,753 (136,465) 3,346,101 431,686 1,067,838 - (99,553) 300,000 327,716 - (2,019,853) 731,686 (723,852) 595,221 2,622,249 - 330,923 595,221 2,953,172 23,075,637 101,742,068 $ 23,670,858 $ 104,695,240 (31) CITY OF ELK RIVER STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Municipal Liquor Sewer Garbage Storm Water CASH FLOWS FROM OPERATING ACTIVITIES Cash Receipts from Customers $ 7,009,388 $ 1,996,517 $ 1,346,101 $ 474,994 Cash Paid to Suppliers (5,061,531) (619,623) (1,459,207) (103,673) Cash Paid to Employees (655,626) (527,311) (22,643) (79,804) Other Receipts - - - Net Cash Provided(Used)by Operating Activities 1,292,231 849,583 (135,749) 291,517 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Connection Fees Received - 587,300 - Grants Received 560,363 Proceeds from Issuance of Bonds - Principal Payments on Bonds (400,000) Interest Payments on Bonds (3,334) Principal Payments on Promissory Note Acquisition of Capital Assets (4,735,877) Proceeds from Sale of Capital Assets 36,501 Net Cash Provided(Used)by Capital and Related Financing Activities (3,955,047) - CASH FLOWS FROM INVESTING ACTIVITIES Interest Received on Investments (5,987) 52,009 3,782 (1,486) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other Revenue 102,993 - Transfers In - 27,716 Transfers Out (704,567) (119,255) (45,000) (61,744) Repayment of Advances from Other Funds Repayment of Advances to Other Funds Sale of Business Line Net Cash Provided(Used)by Noncapital Financing Activities (704,567) (16,262) (17,284) (61,744) NET INCREASE(DECREASE)IN CASH AND CASH EQUIVALENTS 581,677 (3,069,717) (149,251) 228,287 Cash and Cash Equivalents-Beginning of the Year 2,820,640 7,171,788 551,393 186,530 CASH AND CASH EQUIVALENTS-END OF THE YEAR $ 3,402,317 $ 4,102,071 $ 402,142 $ 414,817 See accompanying Notes to Basic Financial Statements. (32) CITY OF ELK RIVER STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Electric Water Total $ 34,621,945 $ 2,213,416 $ 47,662,361 (27,213,605) (798,435) (35,256,074) (2,243,498) (487,884) (4,016,766) 288,497 191,150 479,647 5,453,339 1,118,247 8,869,168 - 358,684 945,984 - - 560,363 11,545,329 - 11,545,329 (2,227,000) (233,000) (2,860,000) (119,657) (60,193) (183,184) (194,292) (194,292) (12,422,917) (1,415,644) (18,574,438) 44,218 1,050 81,769 (3,374,319) (1,349,103) (8,678,469) 88,699 24,390 161,407 - 102,993 - 300,000 327,716 (1,089,287) - (2,019,853) (396) (205,297) (205,693) 96,106 562 96,668 330,923 330,923 (662,654) 95,265 (1,367,246) 1,505,065 (111,201) (1,015,140) 13,175,626 4,367,165 28,273,142 $ 14,680,691 $ 4,255,964 $ 27,258,002 (33) CITY OF ELK RIVER STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Municipal Liquor Sewer Garbage Storm Water RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED(USED)BY OPERATING ACTIVITIES Operating Income(Loss) $ 945,652 $ (291,543) $ (132,127) $ (164,285) Adjustments to Operating Income(Loss): Other Revenue Related to Operations - - - NonCash Expenses Included in Net Income: Depreciation 121,100 983,689 447,535 Change in Assets, Deferred Outflows, Liabilities, and Deferred Inflows: (Increase)Decrease in: Accounts Receivable (39,194) 3,955 (1,322) Prepaid Items - Inventory (26,905) - Due from Other Funds (15,604) (754) (1,061) Due from Other Governmental Units 114,521 - Deferred Outflows Related to Pensions (176,136) (138,236) (5,716) (19,987) Increase(Decrease)in: Accounts Payable 234,459 44,185 (1,787) 5,404 Accrued Salaries Payable 4,080 3,538 145 457 Due to Other Funds - (494) (749) (867) Due to Other Governmental Units 3,434 - - - Deposits Payable - Unearned Revenue (186) - - Compensated Absences Payable 4,355 4,588 2,771 Other Postemployment Benefits 4,999 4,999 - 833 Net Pension Liability 190,221 180,696 2,654 23,089 Deferred Inflows Related to Pensions (12,842) (1,562) (1,370) (1,050) Net Cash Provided(Used)by Operating Activities $ 1,292,231 $ 849,583 $ (135,749) $ 291,517 NONCASH TRANSACTIONS Capital Contribution to Governmental Activities $ - $ - $ - $ (99,553) See accompanying Notes to Basic Financial Statements. (34) CITY OF ELK RIVER STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2016 Electric Water Total $ 2,637,797 $ (301,146) $ 2,694,348 283,665 196,700 480,365 2,005,093 1,148,310 4,705,727 (71,825) 10,257 (98,129) (18,660) 1,044 (17,616) 198,183 1,011 172,289 - - (17,419) 114,521 (1,212,074) (120,148) (1,672,297) (95,736) 9,205 195,730 22,614 1,836 32,670 - - (2,110) (26,936) (851) (24,353) 235,294 20,633 255,927 875 3,455 4,144 25,477 13,183 50,374 7,504 - 18,335 1,506,308 141,156 2,044,124 (44,240) (6,398) (67,462) $ 5,453,339 $ 1,118,247 $ 8,869,168 $ $ - $ (99,553) (35) CITY OF ELK RIVER STATEMENT OF FIDUCIARY NET POSITION AGENCY FUNDS YEAR ENDED DECEMBER 31, 2016 Developers Escrow FSA Plans ASSETS Cash $ 194,795 $ 11,174 Accounts Receivable 17,248 - Prepaid Items 660 - Total Assets $ 212,703 $ 11,174 LIABILITIES Refundable Deposits Payable $ 212,703 $ - Accounts Payable - 11,174 $ 212,703 $ 11,174 See accompanying Notes to Basic Financial Statements. (36) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The City of Elk River, Minnesota (the City) operates under the "Optional Plan A" form of government as defined in Minnesota Statutes. Under this plan, the City Council, composed of an elected mayor and four elected Council Members. The Council appoints personnel responsible for the proper administration of all affairs relating to the City. The financial statements and the accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. B. Reporting Entity As required by accounting principles generally accepted in the United States of America, the financial statements of the reporting entity include those of the City of Elk River (the primary government) and its component units. The Elk River Municipal Utilities is considered to be part of the primary government. The Elk River Municipal Utilities was established and statutory authority is provided in accordance with Chapter 412.321 of the Minnesota Statutes and is considered to be part of the City. The Utilities Commission has three council approved members who serve overlapping three-year terms. The statutes provide the City Council all the discretionary authority necessary to operate the utilities, except as its powers have been delegated to the Commission. The Utility funds are included with the enterprise funds of this report. Separate financial statements for the Utilities may be obtained at the Elk River Municipal Utilities, 13069 Orono Pkwy, Elk River, Minnesota. 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. Based upon the application of these criteria, the City has the following component units: Blended Component Unit The Economic Development Authority (EDA) was created to carry out economic and industrial development and redevelopment within the City in accordance with policies established by the City Council. The seven member board consists of three Council Members, the Mayor and three other council approved members. The criteria that result in the EDA being reported as a blended component unit include the fact that the EDA may not exercise any of its authorized powers without prior approval of the City Council and the City having operational responsibility. The EDA is reported as a special revenue fund and does not issue separate financial statements. (37) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Reporting Entity (Continued) Discretely Presented Component Unit The Housing and Redevelopment Authority (HRA) is a legally separate entity created to carry out community development consistent with policies established by the City Council. The HRA is governed by five council appointed members, one of which is a Council Member; however, the City does not have a financial benefit or burden relationship and does not have operational responsibility. The criteria that results in the HRA being reported as a discretely presented component unit include 1) the five council appointed member board and 2) the ability of the City to impose its will on the HRA by significantly influencing the programs, projects, activities or level of service performed by the HRA by approving the HRA's budget. The HRA does not issue separate financial statements and are included in the financial section of this report. C. Government-Wide Financial Statements The government-wide financial statements (statement of net position and statement of activities) display information about the reporting government as a whole. These statements include all of the financial activities of the City, except fiduciary funds. Since, by definition, fiduciary fund assets are held for the benefit of a third party and cannot be used for activities or obligations of the City, these funds are excluded from the government-wide financial statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on sales, fees, and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other internally directed revenues are reported as general revenues. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the fiscal year for which they are levied. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. (38) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Government-Wide Financial Statements (Continued) As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. However, charges between the City's enterprise funds and other functions are not eliminated, as that would distort the direct costs and program revenues reported in those functions. The City applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available. Depreciation expense can be specifically identified by function (see Note 5). Interest on long-term debt is considered an indirect expense and is reported separately on the statement of activities. D. Fund Financial Statement Presentation The fund financial statements provide information about the City's funds, including fiduciary funds and blended component units. Separate statements for each fund category — governmental, proprietary, and fiduciary — are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. The government reports the following major governmental funds: The General fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The YMCA Bonds debt service fund is used to account for the accumulation of resources and payment of principal and interest on bonds used to finance the construction of a recreation facility which is leased to the YMCA. The Pavement Management fund is used to account for franchise taxes collected to fund expenditures for the ongoing maintenance and repair of the City streets. The government reports the following major enterprise funds: The Municipal Liquor fund accounts for the operations of the City's off-sale liquor stores. The Sewer fund accounts for the activities of the sanitary sewer treatment system. The Garbage fund accounts for the activities of the garbage and recycling collection programs. The Storm Water fund accounts for the activities of the storm water collection system. The Electric fund accounts for the activities of the electric distribution system. The Water fund accounts for the activities of the water 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 FSA Plans agency fund is used to account for resources received from employees for the City's self-administered medical and dependent care FSA plans. (39) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Fund Financial Statement Presentation (Continued) Proprietary fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting, similar to the government-wide financial statements. 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. The operating expenses for the 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. Fiduciary fund financial statements use the accrual basis of accounting. Agency funds, the City's only fiduciary type, are custodial in nature (assets equal liabilities) and do not have a measurement focus. E. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are legally adopted for the General fund and the Library, Ice Arena, Landfill and Economic Development Authority special revenue funds. Project-length financial plans are adopted for all capital projects funds. All annual appropriations lapse at fiscal yearend. On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's administrator so that a budget may be prepared. Before September 30, 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. (40) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Cash and Investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings from such investments are allocated to the respective funds on the basis of applicable cash balance participation of each fund. Investments are generally reported at fair value. The Minnesota Municipal Money Market (4M) Fund is an external investment pool regulated by Minnesota Statutes that is not registered with the Securities and Exchange Commission (SEC), but follows the same regulatory rules of the SEC under Rule 2a7. The City's investment in this fund is measured based on the amortized cost method that approximates fair value. Cash and investments held by trustee reflect balances held in segregated accounts for specific purposes. Interest earned on these investments is allocated directly to those accounts. G. Accounts Receivable Accounts receivable include amounts billed for services provided before year-end. It is the City's policy to charge uncollectibles directly to operations as accounts become worthless. The Utilities has established a reserve for uncollectible accounts which is adjusted annually based on the receivable activity. No substantial losses from present receivable balances are anticipated. A summary of the Utilities' uncollectible account balances at December 31, 2016 is as follows: 2016 Electric $ 109,845 Water 26,250 Total $ 136,095 H. Property Taxes The City Council annually adopts a tax levy and certifies it to the county in December each year for collection the following year. The county is responsible for collecting all property taxes for the City. Property tax levies are based on property values assessed on January 2 of the preceding year. The county spreads all levies over all taxable property. These taxes attach an enforceable lien on taxable property as of January 1 and are payable by the property owner in May and October each year. The taxes are collected by the County Treasurer and tax settlements are made to the city three times a year, in January, July and December. In the fund financial statements, taxes that remain unpaid at December 31 are classified as delinquent taxes and are offset by a deferred inflow of resources for delinquent taxes not received within 60 days after year-end. Deferred inflow of resources for taxes in governmental activities is susceptible to full accrual on the government-wide statements. (41) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Special Assessments Special assessments receivable include the following components: • Delinquent— includes amounts billed to property owners but not paid. • Unavailable — includes assessment installments that will be billed to property owners in future years. Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as receivables upon certification to the county. In governmental fund financial statements, special assessments are recognized as revenue when they are received in cash or within 60 days after year-end. All governmental special assessments receivable not received within 60 days after year-end are offset by a deferred inflow of resources in the governmental fund financial statements. At December 31, 2016, the total delinquent special assessment receivable balance was $80,261. J. Notes Receivable Notes receivable consist primarily of loans made by the City to area businesses for development purposes. The terms and interest rates of the individual loans vary. K. Inventories and Prepaid Items For the proprietary funds, inventories are valued at cost, which approximates market, using the first-in, first-out (FIFO) method. Inventories are recorded as an expense when sold or consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. L. Property Held for Resale These assets are recorded at the lower of original cost or current net realizable value in the governmental fund which purchased them. M. Restricted Assets The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond issues. They will be used for future debt service. (42) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Donated capital assets are recorded at estimated fair market value at the date of donation. With the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities), the City chose to include all such items regardless of their acquisition date. The City was able to obtain historical costs for the initial reporting of these assets through public works project records. Major expenditures for improvements or capital asset projects are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, net of interest earned on the invested proceeds over the same period. Property, plant, and equipment of the City, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Asset Years Buildings and Improvements 10 -40 Other Park Improvements 10 - 20 Machinery and Equipment 3 - 20 Public Domain Infrastructure 15 - 50 System Infrastructure 4 - 50 O. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has two items that qualify for reporting in this category. A deferred charge on refunding reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Deferred pension resources are reported only in the statements of net position. This item results from actuarial calculations and current year pension contributions made subsequent to the measurement date. (43) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Deferred Outflows/Inflows of Resources (Continued) In addition to liabilities, the statement of financial position and fund financial statements will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has only two types of items, which arise under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the items, state aid received for subsequent years and unavailable revenue, are reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from three sources: property taxes, special assessments and other. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The state aid received for subsequent years also qualifies and is presented as a deferred inflow of resources on the statement of net position. Furthermore, the City has one additional item which qualifies for reporting in this category on the statements of net position. The item, deferred pension resources, is reported only in the statements of net position and results from actuarial calculations involving net differences between projected and actuarial earnings on plan investments and changes in proportions. P. Pensions For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA except that PERA's fiscal year is June 30. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the defined benefit plan administered by Elk River Fire Relief Association and additions to and deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. Investments are reported at fair value. Q. Unearned Revenue Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are also recorded as unearned revenue. At December 31, 2016, the balance reported in the governmental fund financial statements consists of$568,062 from unearned park dedication credits. (44) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) R. Long-Term Liabilities In the government-wide and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, if material, are amortized over the life of the bonds using the straight-line method. Bond issuance costs are expensed as incurred. In the governmental fund financial statements, long-term debt and other long-term obligations are not reported as liabilities. The face amount of debt issued is reported as other financing sources. Premiums or discounts on debt issuances are reported as other financing sources or uses, respectively. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. S. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Unused vacation can be accrued by the employees up to a maximum of 200 hours, the limit of which is determined by years of service. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. In the event a liability is recorded in the governmental funds, the General fund would be used to liquidate the compensated absences payable. Employees can also accrue an unlimited amount of unused sick leave. Employees with two or more years of service are entitled to receive severance pay equal to 50% of unused sick leave, up to a maximum of 480 hours. The liability for severance pay is accounted for the same as accrued vacation pay. T. Fund Balance In the fund financial statements, fund balance is divided into five classifications based primarily on the extent to which the City is bound to observe constraints imposed upon the use of resources reported in governmental funds. These classifications are as follows: Nonspendable - consists of amounts that cannot be spent because it is not in spendable form, such as prepaid items. Restricted- consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. Committed - consists of amounts that are constrained for specific purposes that are internally imposed by formal action (resolution) of the City Council. Those committed amounts cannot be used for any other purpose unless City Council removes or changes the specified use by taking the same type of action it employed to previously commit those amounts. (45) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) T. Fund Balance (Continued) Unassigned- is the residual classification for the General fund and also reflects negative residual amounts in other funds. The City uses restricted amounts to be spent first when both restricted and unrestricted fund balance is available. Additionally, the City would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. The City Council has formally adopted a fund balance policy for the General fund. The City's policy is to maintain a minimum unassigned fund balance of 40-45% of budgeted operating expenditures for cash-flow timing needs. Assigned- consists of amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the General fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the General fund, assigned amounts represent intended uses established by the governing body itself or by an official to which the governing body delegates the authority. Pursuant to City Council Resolution, the City's Finance Director and/or City Administrator is authorized to establish assignments of fund balance. U. Net Position Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources. Net position is displayed in three components: Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. Restricted net position - Consists of net position balances restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, laws or regulations of other governments. Unrestricted net position - All other net position balances that does not meet the definition of"restricted" or "net investment in capital assets". When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. V. Interfund Receivables and Payables Activity between funds that is representative of lending or borrowing arrangements is reported as either "due to/from other funds" (current portion) or "advances to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." (46) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) W. Revenues and Expenditures/Expenses Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. NOTE 2 STEWARDSHIP AND ACCOUNTABILITY A. Expenditures in Excess of Appropriations All expenditures in excess of appropriations in 2016 were funded by available fund balance. For the year ended December 31, 2016, expenditures exceeded appropriations in the following funds: Fund Budget Expenditures Excess Special Revenue Funds: Landfill $ 31,050 $ 34,243 $ 3,193 Economic Development Authority 255,850 323,070 67,220 B. Deficit Fund Balance The following funds had deficit fund balances at December 31, 2016: Fund Fund Balance Capital Projects Funds: Park Dedication $ (1,181,389) TIF Districts (1,478,875) (47) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 3 DEPOSITS AND INVESTMENTS A. Components of Cash and Investments Cash and investments are presented in the financial statements as follows: Primary Component Total Primary Statement of Net Position Government Unit-HRA Gov and CU Cash and Investments $ 53,247,375 $ $ 53,247,375 Restricted Cash and Investments 997,660 997,660 Cash and Investments Held by Trustee 9,284,303 9,284,303 Cash and Investments-Discrete CU - 1,289,705 1,289,705 Statement of Fiduciary Net Position Cash and Investments-Agency Funds 205,969 - 205,969 Total $ 63,735,307 $ 1,289,705 $ 65,025,012 B. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts and certificates of deposit. The following is considered the most significant risk associated with deposits: Custodial Credit Risk — In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The fair value of collateral pledged must equal 110% of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AX or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City (including Elk River Municipal Utilities) has an investment policy in place to address custodial credit risk for deposits, stating all deposits and investments must be in compliance with Minnesota Statutes 118A, with collateralization levels of 110% of the market value of the principal and accrued interest. At year-end, the carrying amount of the City's deposits was $17,491,619 while the balance on the bank records was $17,643,205. At December 31, 2016, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. At year-end, the carrying amount of deposits for the HRA, a discretely presented component unit, was $1,289,705 and the bank balance was $1,289,705. At December 31, 2016, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. (48) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments Minnesota Statutes and the City's investment policy authorize the City to invest in the following: a. Direct obligations or obligations guaranteed by the United States or its agencies. b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. c. General obligations of the state of Minnesota or any of its municipalities. d. Bankers acceptances of United States Banks eligible for purchase by the Federal Reserve System. e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and maturing in 270 days or less. The City has the following investments at year-end: Primary Government Investments Measured at Fair Value Fair Value U.S.Treasuries with Maturities at Purchase of Greater Than 1 Year $ 20,951 Negotiable Certificates of Deposit with Maturities at Purchase of Greater Than 1 Year 10,243,800 Federal National Mortgage Association 12,864,776 Federal Farm Credit Bank Bond 500,630 Municipal Bonds 17,804,343 Total Investments Measured at Fair Value $ 41,434,500 Investments Measured at Amortized Cost Amortized Cost UBS Select Prime Institutional Money Market $ 994,781 Minnesota Municipal Money Market(4M Fund) 3,781,083 Other Money Market Funds 33,324 Total Investments Measured at Amortized Cost $ 4,809,188 Interest Rate Risk — This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City's investment policy uses diversification of maturity dates as a means of managing exposure to fair value by stating that no more than 30% of the City's investments may extend beyond a five-year maturity. Credit Risk — This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City's investments in certain types of investments. The City's investment policy does not further limit the ratings of their investments. (49) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments (Continued) A schedule of the maturities and ratings of the City's investments as of December 31, 2016 is as follows: Maturity and Rating Breakdown of Investments: Maturity Duration in Years Investment Type Total Less Than 1 1 to 5 More Than 5 Rating U.S.Treasury Notes $ 20,951 $ 20,951 $ - $ - Negotiable Certificates of Deposit 10,243,800 3,487,814 6,755,986 - Not Rated Federal National Mortgage Association 12,864,776 9,263,352 2,600,914 1,000,510 AA+/Aaa Federal Farm Credit Bank Bond 500,630 500,630 - - AA+/Aaa Municipal Bonds 17,804,343 502,065 6,152,550 11,149,728 AA-to AAA UBS Select Prime Institutional Money Market 994,781 - - - Not Rated Minnesota Municipal Money Market(4M Fund) - Not Rated Other Money Market Funds 33,324 Total Investments $ 42,462,605 $ 13,774,812 $ 15,509,450 $12,150,238 Custodial Credit Risk— For an investment, the custodial credit risk is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker- dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. As of December 31, 2016 all investments were insured or registered, or securities were held by the City or its agent in the City's name. Concentration Risk — This is the risk associated with investing a significant portion of the City's investment (considered 5% or more) in the securities of a single issuer and no more than 50% of the City's total investment portfolio may be invested in certificates of deposit or commercial paper. At December 31, 2016, the following is a list of investments which individually comprise more than 5% of the City's total investments: Percent of Total Fair Value Federal National Mortgage Association $ 12,864,776 27.82% Minnesota Municipal Money Market(4M Fund) 3,781,083 8.18% Fair Value Measurements The City uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The City follows an accounting standard which defines fair value, establishes framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded disclosures about fair value measurements. In accordance with this standard, the City has categorized its investments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quotes and prices in active markets for identical assets and liabilities (Level1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. (50) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 3 DEPOSITS AND INVESTMENTS (CONTINUED) C. Investments (Continued) Financial assets and liabilities recorded on the combined statements of financial position are categorized based on the inputs to the valuation techniques as follows: Level 1 — Financial assets and liabilities are valued using inputs that are unadjusted quoted prices in active markets accessible at the measurement date of identical financial assets and liabilities. Level 2 — Financial assets and liabilities are valued based on quoted prices for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 3 — Financial assets and liabilities are valued using pricing inputs which are unobservable for the asset, inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset. Investment Type Level Level Level Total U.S.Treasuries with Maturities at Purchase of Greater Than 1 Year $ 20,951 $ $ $ 20,951 Negotiable Certificates of Deposit with Maturities at Purchase of Greater Than 1 Year - 10,243,800 10,243,800 Federal National Mortgage Association 12,864,776 - 12,864,776 Federal Farm Credit Bank Bond 500,630 - 500,630 Municipal Bonds - 17,804,343 17,804,343 Total Investments Measured at Fair Value $ 13,386,357 $ 24,507,666 $ 41,434,500 Investments Measured at Amortized Cost 4,809,188 Total Investments $ 46.243.688 NOTE 4 NOTES RECEIVABLE The City has made several business subsidy loans to local businesses, some of which were funded with grant proceeds received from the state and federal governments. The terms of repayment vary with each loan and will be repaid over a period of 10 years. Under the terms of the grant agreement, the City retains the grant repayments. Notes receivable of$596,074 in the Revolving Loan fund and $301,512 in the State DEED fund are outstanding at December 31, 2016. In 2015, the City issued a $1,288,589 long-term note receivable related to the sale of property to a developer under an abatement agreement. The note shall be payable in semiannual installments as tax abatement revenues are received, commencing on August 1, 2017, and maturing February 1, 2037. A note receivable of $1,288,589 in the Development Fund is outstanding at December 31, 2016. In 2006, the HRA issued a loan to a developer to assist in the financing of a housing development for the benefit of low and moderate income residents which was funded with state grant proceeds. Repayment of the loan is deferred for 30 years, payable in one lump sum at an interest rate of 1%. Notes receivable of $400,000 in the HRA is outstanding at December 31, 2016. In 2015, the HRA issued loans to applicants under the rehabilitation loan program. The terms of each loan vary and are payable over five to 15 years with rates from 1.25% to 3.25%. Notes receivable of$131,802 in the HRA are outstanding at December 31, 2016. (51) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 5 CAPITAL ASSETS Capital asset activity for the year ended December 31, 2016 was as follows: Beginning Ending PRIMARY GOVERNMENT Balance Additions Deletions Transfers Balance Governmental Activities: Capital Assets,Not Being Depreciated: Land $ 40,876,833 $ - $ - $ $ 40,876,833 Construction in Progress 3,602,680 1,748,140 (4,913,319) 437,501 Total Capital Assets,Not Being Depreciated 44,479,513 1,748,140 (4,913,319) - 41,314,334 Capital Assets,Being Depreciated: Buildings 45,048,097 - - 45,048,097 Other Improvements 5,393,304 45,162 - 5,438,466 Equipment 11,989,388 1,141,093 (390,632) 24,250 12,764,099 Infrastructure 62,627,885 4,913,319 (1,430,520) - 66,110,684 Total Capital Assets,Being Depreciated 125,058,674 6,099,574 (1,821,152) 24,250 129,361,346 Accumulated Depreciation for: Buildings (17,196,857) (1,646,735) - (18,843,592) Other Improvements (3,456,239) (305,786) - (3,762,025) Equipment (8,284,603) (838,248) 356,517 (24,250) (8,790,584) Infrastructure (40,388,769) (2,393,634) 1,413,743 - (41,368,660) Total Accumulated Depreciation (69,326,468) (5,184,403) 1,770,260 (24,250) (72,764,861) Total Capital Assets,Being Depreciated,Net 55,732,206 915,171 (50,892) 56,596,485 Governmental Activities Capital Assets,Net $ 100,211,719 $ 2,663,311 $ (4,964,211) $ $ 97,910,819 Beginning Ending PRIMARY GOVERNMENT Balance Increases Decreases Transfers Balance Business-Type Activities: Capital Assets,Not Being Depreciated: Land $ 1,526,407 $ 83,084 $ $ $ 1,609,491 Intangible Assets - 9,804,951 9,804,951 Construction in Progress 13,745,714 3,841,023 (13,871,803) 3,714,934 Total Capital Assets,Not Being Depreciated 15,272,121 13,729,058 (13,871,803) 15,129,376 Capital Assets,Being Depreciated: Buildings 19,525,901 8,381,453 (3,543,574) 24,363,780 Equipment 4,408,461 6,458,744 (177,133) (24,250) 10,665,822 Collection and Distribution 117,851,862 4,467,049 (211,621) 122,107,290 Total Capital Assets,Being Depreciated 141,786,224 19,307,246 (3,932,328) (24,250) 157,136,892 Accumulated Depreciation for: Buildings (10,156,734) (609,368) 3,246,667 - (7,519,435) Equipment (2,138,248) (341,511) 155,309 24,250 (2,300,200) Collection and Distribution (51,081,656) (3,754,848) 104,721 - (54,731,783) Total Accumulated Depreciation (63,376,638) (4,705,727) 3,506,697 24,250 (64,551,418) Total Capital Assets,Being Depreciated,Net 78,409,586 14,601,519 (425,631) - 92,585,474 Business-Type Activities Capital Assets,Net $ 93,681,707 $ 28,330,577 $ (14,297,434) $ $ 107,714,850 Beginning Ending COMPONENTUNIT Balance Increases Decreases Transfers Balance Capital Assets,Not Being Depreciated: Land $ 257,100 $ $ $ $ 257,100 Capital Assets,Being Depreciated: Other Improvements 174,290 174,290 Accumulated Depreciation for: Other Improvements (35,826) (11,619) (47,445) Total Capital Assets,Being Depreciated,Net 138,464 (117619) 126,845 Component Unit Capital Assets,Net $ 395,564 $ (11,619) $ $ $ 383,945 (52) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 5 CAPITAL ASSETS (CONTINUED) Depreciation expense was charged to functions/programs of the primary government and component unit as follows: Governmental Activities: General Government $ 293,322 Public Safety 722,243 Public Works 3,021,695 Culture and Recreation 1,147,143 Total Depreciation Expense, Governmental Activities $ 5,184,403 Business-Type Activities: Electric $ 2,005,093 Water 1,148,310 Sewer 983,689 Storm Water 447,535 Liquor 121,100 Total Depreciation Expense, Business-Type Activities $ 4,705,727 Component Unit Housing and Redevelopment Authority $ 11,619 NOTE 6 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances as of December 31, 2016 is as follows: Due to/from other funds Receivable Fund Payable Fund Amount General Nonmajor Governmental Funds $ 11,923 General Electric 174,290 General Water 23,596 Pavement Management Electric 266,738 Nonmajor Governmental Funds Nonmajor Governmental Funds 1,541,748 Sewer Nonmajor Governmental Funds 171,800 Sewer Electric 165,493 Garbage Electric 111,086 Storm Water Electric 37,932 Electric General 5,780 Electric Pavement Management 2,172 Electric Sewer 509 Electric Garbage 1,060 Electric Storm Water 895 Water General 439 Water Nonmajor Governmental Funds 428,850 $ 2,944,311 The interfund receivable/payable balances result from the distribution of utility collections and the lending/borrowing between funds for operating or capital purposes. (53) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 6 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS (CONTINUED) Due to/from Component Unit Receivable Entity Payable Entity Amount Primary Government-General Fund Component Unit- HRA $ 8,202 Component Unit- HRA Nonmajor Governmental Funds 215,494 Total $ 223,696 The outstanding balance between the primary government and the component unit represents the transfer for administrative services and the lending/borrowing arrangement to finance construction costs. The $215,494 payable to the HRA will be paid with the collection of tax increment revenue and will not be repaid within one year. Interfund Transfers Fund Transfer In Transfer Out Governmental Funds General Fund $ 1,769,750 $ 275,650 YMCA Bonds 137,787 - Nonmajor Governmental Funds 4,617,000 4,556,750 $ 6,524,537 $ 4,832,400 Proprietary funds Municipal Liquor $ - $ 704,567 Sewer - 119,255 Garbage 27,716 45,000 Storm Water - 61,744 Electric - 1,089,287 Water 300,000 - $ 327,716 $ 2,019,853 Interfund transfers are used to provide additional capital funding or to move revenues from the fund with collection authorization to debt service funds as principal and interest payments come due. In addition, interfund transfers are occasionally authorized to allow redistribution of resources between funds for the most efficient use of funds. (54) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 7 LONG-TERM DEBT A. Components of Long-Term Debt The City had the following long-term liabilities outstanding at December 31, 2016: Final Maturity Balance- Description Issue Date Date Original Issue Interest Rate End of Year PRIMARY GOVERNMENT Governmental Activities: General Obligation Bonds Payable: EDA G.O.Bonds 2007D 11/08/07 02/01/17 10,000,000 3.80% $ 9,620,000 G.O.Capital Improvement Bonds 2010A 04/21/10 02/01/23 6,105,000 2.00-4.00% 3,540,000 G.O.Capital Improvement Bonds 2012A 03/15/12 02/01/33 6,975,000 1.00-2.50% 6,090,000 EDA G.O.Refunding Bonds 2013A 02/12/13 02/01/33 9,685,000 2.00-3.00% 9,685,000 G.O.Improvement Refunding Bonds 20128 03/15/12 02/01/18 1,525,000 2.00% 595,000 Total General Obligation Bonds 29,530,000 Unamortized Bond Premiums 443,384 Compensated Absences 1,494,429 Total Governmental Activities $ 31,467,813 Business-Type Activities: General Obligation Revenue Bonds: G.O.Water Revenue Refunding Bonds 2008A 02/20/08 02/01/22 $ 780,000 0.50-2.80% $ 1,480,000 G.O.Capital Improvement Bonds 201 OA 04/21/10 08/01/23 525,000 3.00% 750,000 G.O.Sewer Revenue Bonds 2014B 08/21/14 02/01/35 2,620,000 2.00-3.00% 9,600,000 Total General Obligation Revenue Bonds 11,830,000 Revenue Bonds Electric Revenue Refunding Bonds 2014A 03/13/14 08/01/18 2,030,000 2.00-4.00% 830,000 Electric Revenue Bonds 2016A 07/14/16 02/01/36 9,755,000 2.00-4.00% 9,755,000 Electric Revenue Refunding Bonds 20168 07/14/16 02/01/22 1,370000 2.00-4.00% 1,370,000 Total Revenue Bonds 11,955,000 Total Bonds 23,785,000 Unamortized Bond Premiums 536,331 Notes Payable 1,214,076 Compensated Absences 475,132 Total Business-Type Activities $ 26,010539 For the governmental activities, bonds payable can be summarized in the following categories: The general obligation bonds were used to construct a recreation facility, a public safety facility, a public works facility and finance a street improvement project. The recreation facility is leased to the YMCA, which has pledged to pay one-third of the bonds outstanding. The bonds are general obligations of the City and are backed by its full faith and credit. In 2013 the EDA issued $9,685,000 G.O. Refunding Bonds, Series 2013A. The bonds bear an average coupon rate of 2.2% and will be used to call $9,225,000 of the outstanding principal of the EDA G.O. Bonds, Series 2007D on February 1, 2017. As a result of the refunding issue, the EDA will save $1,001,112 in debt service payments and achieve an economic gain (the present value of the difference between the old and the new debt service) of$795,866. For the business-type activities, the general obligation revenue bonds were issued to finance capital improvements. The bonds are payable from future revenues pledged from the Sewer and Water funds and are backed by the full faith and credit of the City. Annual principal and interest payments on the bonds are expected to require about 21% and 13% of revenues from the Sewer and Water funds, respectively. (55) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 7 LONG-TERM DEBT(CONTINUED) A. Components of Long-Term Debt (Continued) The revenue bonds were issued to finance the acquisition and construction of major capital facilities and are to be repaid from future revenues pledged from the Electric fund. Annual principal and interest payment on the bonds required about 7% of revenues from the Electric fund. 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. B. Changes in Long-Term Debt Long-term liability activity for the year ended December 31, 2016 was as follows: Beginning End of Due Within PRIMARY GOVERNMENT of Year Additions Retirements Year One Year GOVERNMENTAL ACTIVITIES: General Obligation Bonds $ 32,320,000 $ $ (3,385,000) $ 28,935,000 $ 10,375,000 General Obligation Special Assessment Bonds 900,000 (305,000) 595,000 300,000 Unamortized Bond Premiums 494,456 (51,072) 443,384 - Total Bonds Payable 33,714,456 (3,741,072) 29,973,384 10,675,000 Contract for Deed 1,410,000 (1,410,000) - - Compensated Absences 1,466,238 587,837 (559,646) 1,494,429 566,953 Total Governmental Activities 36,590,694 587,837 (5,710,718) 31,467,813 11,241,953 Business-Type Activities: General Obligation Revenue Bonds 12,535,000 - (705,000) 11,830,000 725,000 Revenue Bonds 2,985,000 11,125,000 (2,155,000) 11,955,000 630,000 Unamortized Bond Premiums 65,234 505,525 (34,428) 536,331 - Total Bonds Payable 15,585,234 11,630,525 (2,894,428) 24,321,331 1,355,000 Notes Payable 1,408,368 - (194,292) 1,214,076 195,216 Compensated Absences 424,758 194,008 (143,634) 475,132 228,214 Total Business-Type Activities 17,418,360 11,824,533 (3,232,354) 26,010,539 1,778,430 Total Primary Government $ 54,009,054 $ 12,412,370 $ (8,943,072) $ 57,478,352 $ 13,020,383 C. Future Minimum Debt Payments Annual debt service requirements to maturity for long-term obligations are as follows: Primary Government-Governmental Activities G.O. Bonds G.O.Special Assessment Bonds Year Ending December 31, Principal Interest Principal Interest 2017 $ 10,375,000 $ 686,092 $ 300,000 $ 8,900 2018 1,280,000 460,863 295,000 2,950 2019 1,315,000 425,412 - - 2020 1,350,000 388,863 2021 1,390,000 351,162 2022-2026 5,735,000 1,255,163 2027-2031 5,195,000 665,481 2032-2033 2,295,000 65,150 - - Totals $ 28,935,000 $ 4,298,186 $ 595,000 $ 11,850 (56) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 7 LONG-TERM DEBT(CONTINUED) C. Future Minimum Debt Payments (Continued) Primary Government-Business-Type Activities G.O.Revenue Bonds Revenue Bonds Notes Payable Year Endina December 31, Principal Interest Principal Interest Principal Interest 2017 $ 725,000 $ 339,205 $ 630,000 $ 334,457 $ 195,216 $ - 2018 750,000 320,103 640,000 307,425 198,252 - 2019 760,000 299,795 635,000 286,375 200,916 - 2020 785,000 278,803 665,000 264,925 203,952 - 2021 810,000 256,875 680,000 242,675 206,616 - 2022-2026 2,850,000 1,011,640 2,720,000 934,750 209,124 - 2027-2031 2,670,000 645,298 2,810,000 618,056 - - 2032-2035 2,480,000 174,842 3,175,000 240,169 - - Totals $ 11,830,000 $ 3,326,561 $ 11,955,000 $ 3,228,832 $ 1,214,076 $ - NOTE 8 FUND BALANCES At December 31, 2016, a summary of the governmental fund balance classifications is as follows: Other Pavement Governmental General Fund YMCA Bonds Management Funds Total Nonspendable Prepaid Items $ 20,964 $ - $ $ 108,176 $ 129,140 Restricted for: Debt Service - 9,775,782 1,064,753 10,840,535 Landfill Mitigation - 351,577 351,577 Economic Development 1,043,711 1,043,711 Law Enforcement - 9,856 9,856 Total Restricted $ $ 9,775,782 $ $ 2,469,897 $ 12,245,679 Committed for: Library Operations - 428,065 428,065 Ice Arena 475,875 475,875 Economic Development 4,405,478 4,405,478 Insurance Reserve 128,808 128,808 Street Improvements 3,811,788 - 3,811,788 Total Committed $ $ $ 3,811,788 $ 5,438,226 $ 9,250,014 Assigned for: Landfill Mitigation - 784,017 784,017 Law Enforcement 1,956 1,956 Economic Development 552,473 552,473 Capital Equipment 266,832 1,802,898 2,069,730 Building Construction/Improvements - 1,966,631 1,966,631 Street Improvements 1,165,148 1,165,148 Other Improvement Projects 5,941,024 5,941,024 Park Improvements - 418,801 418,801 Total Assigned $ 266,832 $ $ $ 12,632,948 $ 12,899,780 (57) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE A. Plan Description The City of Elk River participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA's defined-benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined-benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code. 1. General Employees Retirement Fund (GERF) All full-time and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. 2. Public Employees Police and Fire Fund (PEPFF) The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. B. Benefits Provided PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases. The benefit provisions stated in the following 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. (58) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) 1. GERF Benefits 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 PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Disability benefits are available for vested members and are based upon years of service and average high-five salary. 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50% after five years up to 100% after 10 years of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest on a prorated basis from 50% after 10 years up to 100% after 20 years of credited service. The annuity accrual rate is 3% of average salary for each year of service. For PEPFF who were first hired prior to July 1, 1989, a full annuity is available when age plus years of service equal at least 90. C. Contributions Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. 1. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50%, respectively, of their annual covered salary in calendar year 2016. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50% for Coordinated Plan members in calendar year 2016. The City and HRA contributions to the GERF for the year ended December 31, 2016, were $686,519 and $4,292, respectively. Both the City and HRA contributions were equal to the required contributions as set by state statute. 2. PEPFF Contributions Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2016. The City was required to contribute 16.20% of pay for PEPFF members in calendar year 2016. The City contributions to the PEPFF for the year ended December 31, 2016, were $495,478. The City contributions were equal to the required contributions as set by state statute. (59) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) D. Pension Costs 1. GERF Pension Costs At December 31, 2016, the City and HRA reported liabilities of $11,582,672 and $68,816, respectively, for their proportionate shares of the GERF's net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City and HRA's proportions of the net pension liability were based on the their respective contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2015, through June 30, 2016, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2016, the City and HRA's combined proportion was .1435%, a decrease of .0003% from the June 30, 2015 measurement date. PERA considers contributions received from the City and HRA as all City contributions and therefore does not assign separate proportions for each. For the year ended December 31, 2016, the City and HRA recognized pension expense of $1,261,483 and $9,493, respectively, for their proportionate shares of the GERF's pension expense. At December 31, 2016, the City reported its proportionate share of the GERF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows Description of Resources of Resources Differences Between Expected and Actual Economic Experience $ 35,483 $ 954,733 Changes in Actuarial Assumptions 2,498,754 - Net Difference Between Projected and Actual Earnings on Pension Plan Investments 1,306,283 - Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions 124,523 536,113 City Contributions Subsequent to the Measurement Date 371,656 - Total $ 4,336,699 $ 1,490,845 A total of $373,868 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Ending December 31, Amount 2017 $ 600,963 2018 342,040 2019 1,112,814 2020 418,381 (60) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 1. GERF Pension Costs (Continued) At December 31, 2016, the HRA reported its proportionate share of the GERF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows Description of Resources of Resources Differences Between Expected and Actual Economic Experience $ 203 $ 5,590 Changes in Actuarial Assumptions 14,842 - Net Difference Between Projected and Actual Earnings on Pension Plan Investments 7,683 - Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions - 3,948 City Contributions Subsequent to the Measurement Date 2,213 - Total $ 24,941 $ 9,539 A total of $2,213 reported as deferred outflows of resources related to pensions resulting from HRA contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Endinq December 31, Amount 2017 $ 3,024 2018 1,452 2019 6,228 2020 2,485 2. PEPFF Pension Costs At December 31, 2016, the City reported a liability of$12,280,312 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2015, through June 30, 2016, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2016, the City's proportion was .3060%, an increase of .002% from the June 30, 2015 measurement date. (61) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) D. Pension Costs (Continued) 2. PEPFF Pension Costs (Continued) For the year ended December 31, 2016, the City recognized pension expense of $1,900,792 for its proportionate share of the PEPFF's pension expense. The City also recognized $27,540 for the year ended December 31, 2016, as pension expense (and grant revenue) for its proportionate share of the state of Minnesota's on-behalf contributions to the PEPFF. Legislation passed in 2013 required the state of Minnesota to begin contributing $9 million to the PEPFF each year, starting in fiscal year 2014. At December 31, 2016, the City reported its proportionate share of the PEPFF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows Description of Resources of Resources Differences Between Expected and Actual Economic Experience $ 2,774 $ 1,408,785 Changes in Actuarial Assumptions 7,254,028 - Net Difference Between Projected and Actual Earnings on Pension Plan Investments 1,058,679 - Changes in Proportion and Differences Between City Contributions and Proportionate Share of Contributions 66,467 - City Contributions Subsequent to the Measurement Date 284,459 Total $ 8,666,407 $ 1,408,785 A total of $284,459 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Pension Expense Year Endinq December 31, Amount 2017 $ 1,327,727- 2018 1,327,720 2019 1,735,411 2020 1,417,827 2021 1,164,485 Thereafter - For year ended December 31, 2016, the City and HRA recognized total pension expenses of $3,162,275 and $9,493, respectively, for their proportionate shares of the pension expense for all of the plans in which they participate. (62) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) E. Actuarial Assumptions The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.70% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% Salary increases were based on a service-related table. Mortality rates for active members, retirees, survivors, and disabilitants were based on RP-2014 tables for males or females, as appropriate, with slight adjustments. Benefit increases for retirees are assumed to be 1% per year for all future years for the General Employees Plan. Actuarial assumptions used in the June 30, 2016, valuation were based on the results of actuarial experience studies. The most recent four-year experience study in the General Employees Plan was completed in 2015. The following changes in actuarial assumptions occurred in 2016 for the General Employees Fund: • The assumed post-retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter, to 1.0% per year for all future years. • The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. • Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. The long-term expected rate of return on pension plan investments is 7.5%. The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the long-term expected rate of return on a regular basis using a building-block method in which best-estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized below: Long-Term Target Expected Real Asset Class Allocation Rate of Return Domestic Equity 45% 5.5077 International Equity 15% 6.00% Bonds 18% 1.45% Alternative Assets 20% 6.40% Cash 2% 0.50% Totals 100% (63) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 9 DEFINED BENEFIT PENSION PLANS —STATE-WIDE (CONTINUED) F. Discount Rate The discount rate used to measure the total pension liability was 7.5%, a reduction from the 7.9% used in 2015. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rate specified in statute. Based on that assumption, each of the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following presents the City's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: GERF PENSION LIABILITY 1%Decrease in 1% Increase in Discount Rate Current Discount Discount Rate Description (6.50%) Rate(7.50%) (8.50%) City's Proportionate Share of the GERF Net Pension Liability $ 13,037,324 $ 11,582,672 $ 6,001,335 HRA's Proportionate Share of the GERF Net Pension Liability 97,741 68,816 44,992 PEPFF PENSION LIABILITY 1%Decrease in 1% Increase in Discount Rate Current Discount Discount Rate Description (4.60%) Rate(5.60%) (6.60%) City's Proportionate Share of the PEPFF Net Pension Liability $ 17,190,808 $ 12,280,312 $ 8,268,065 H. Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in a separately-issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or by calling 651-296-7460 or 1-800-652-9026. NOTE 10 DEFINED CONTRIBUTION PLAN Three council members of the City of Elk River are covered by the Public Employees Defined Contribution Plan (PEDCP), a multiple-employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The PEDCP is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. (64) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 10 DEFINED CONTRIBUTION PLAN (CONTINUED) Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and twenty-five hundredths of 1% of the assets in each member's account annually. Total contributions made by the City of Elk River during fiscal year 2016 were: Contribution Amount Percentage of Covered Payroll Required Employee Employer Employee Employer Rates $1,405 $1,405 5.0% 5.0% 5.0% NOTE 11 DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION A. Plan Description All members of the Elk River Fire Department (the Department) are covered by a defined benefit plan administered by the Elk River Fire Department Relief Association (the Association). As of December 31, 2014, the plan covered 40 active fire fighters and five vested terminated firefighters whose pension benefits are deferred. The plan is a single employer retirement plan and is established and administered in accordance with Minnesota statute, chapter 69. The Association maintains a separate Special fund to accumulate assets to fund the retirement benefits earned by the Department's membership. Funding for the Association is derived from an insurance premium tax in accordance with the Volunteer Firefighter's Relief Association Financing Guidelines Act of 1971 (chapter 261 as amended by chapter 509 of Minnesota statutes 1980). Funds are also derived from investment income. B. Benefits Provided A fire fighter who completes at least 20 years as an active member of the Department is entitled, after age 50, to a full service pension upon retirement. The bylaws of the Association also provide for an early vested service pension for a retiring member who has completed fewer than 20 years of service. The reduced pension, available to members with a minimum of five years of service, shall be equal to 40% of the pension as prescribed by the bylaws. This percentage increases 4% per year so that at 20 years of service, the full amount prescribed is paid. 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. (65) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 11 DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION (CONTINUED) C. Contributions Minnesota statutes, chapters 424 and 424A authorize pension benefits for volunteer fire relief associations. The plan is funded by fire state aid, investment earnings and, if necessary, employer contributions as specified in Minnesota statutes and voluntary City contributions (if applicable).The State of Minnesota contributed $179,192 in fire state aid to the plan on behalf of the City Fire Department for the year ended December 31, 2016, which was recorded as a revenue. Required employer contributions are calculated annually based on statutory provisions. The City's statutorily-required contribution to the plan for the year ended December 31, 2016 was $-0- but the City voluntarily contributed $30,000. D. Pension Costs At December 31, 2016, the City reported a net pension asset of $480,918 for the plan. The net pension liability (asset) was measured as of December 31, 2015. The total pension liability used to calculate the net pension liability (asset) in accordance with GASB 68 was determined by Van Iwaarden Associates applying an actuarial formula to specific census data certified by the Department as of December 31, 2015. For the year ended December 31, 2016, the City recognized pension expense of $176,635. At December 31, 2016, the City reported deferred outflows of resources, including its contributions subsequent to the measurement date, related to pension from the following sources: Deferred Outflows Deferred Inflows Description of Resources of Resources Changes in Actuarial Assumptions $ 258,790 $ Net Difference Between Projected and Actual Earnings on Pension Plan Investments 286,845 - City Contributions Subsequent to the Measurement Date - - Total $ 545,635 $ - Deferred outflows of resources totaling $0 related to pensions resulting from the City's contributions to the plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and inflows of resources related to the plan will be recognized in pension expense as follows: Pension Expense Year Ending December 31, Amount 2017 $ 113,343 2018 113,343 2019 113,343 2020 102,480 2021 38,916 Thereafter 64,210 (66) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 11 DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION (CONTINUED) E. Actuarial Assumptions The total pension liability at December 31, 2015 was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Retirement Eligibility Age 50 or After 20 Years of Service If both Age 50 and Minimum 5 Year of Service but not 20 Years, Pension Reduced 4% for Each Year Less Than 20 Years Inflation 2.75% per year Active Member Payroll Growth 2.75% per year Investment Rate of Return 6.00% 20-Year Municipal Bond Yield 3.57% The 6% long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimates for expected future real rates of return (expected returns, net of inflation) were developed for each asset class using the plan's target investment allocation along with long-term return expectations by asset class. Inflation expectations were applied to derive the nominal rate of return for the portfolio. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Allocation at Long-Term Measurement Expected Real Asset Class Date Rate of Return Domestic Equity 42.44% 5.52% International Equity 15.88% 5.78% Fixed Income 25.80% 2.12% Real Estate and Alternatives 1.68% 4.12% Cash and Equivalents 14.20% 0.82% Totals 100% F. Discount Rate The discount rate used to measure the total pension liability was 6%. The projection of cash flows used to determine the discount rate assumed that contributions to the plan will be made as specified in statute. Based on that assumption and considering the funding ratio of the plan, the fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. Pension Liability Sensitivity The following presents the City's net pension liability (asset) for the plan, calculated using the discount rate disclosed in the preceding paragraph, as well as what the City's net pension liability (asset) would be if it were calculated using a discount rate 1% lower or 1% higher than the current discount rate: (67) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 11 DEFINED BENEFIT PENSION PLANS — FIRE RELIEF ASSOCIATION (CONTINUED) G. Pension Liabilitiy Sensitivity (Continued) Retirement Eligibility Age 50 or After 20 Years of Service If both Age 50 and Minimum 5 Year of Service but not 20 Years, Pension Reduced 4% for Each Year Less Than 20 Years Inflation 2.75% per year Active Member Payroll Growth 2.75% per year Investment Rate of Return 6.00% 20-Year Municipal Bond Yield 3.57% H. Pension Plan Fiduciary Net Position The Association issues a publicly available financial report. The report may be obtained by writing to the Elk River Fire Department Relief Association, 13073 Orono Parkway, Elk River, Minnesota 55330. NOTE 12 POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS A. Plan Description The City provides other postemployment health insurance benefits for retired employees through two defined benefit plans: Municipal Retirees Health Plan (MRHP), a single- employer plan, and Utilities Retirees Health Plan (URHP), a multi-employer plan. Each plan provides benefits for eligible retirees and their dependents through the City's group health insurance plans, which cover both active and retired members. Since the premium is a blended rate determined on the active and retiree population, the retirees are receiving an implicit rate subsidy. The MRHP and the URHP do not issue publicly available financial reports. B. Funding Policy Contribution requirements are reviewed at the time changes are made to the plans. Benefit provisions for MRHP are established and amended by the City. The Utilities has been delegated authority to establish and amend benefit provisions for URHP. Eligible retirees receiving benefits are required to pay 100% of the total premium. C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost for each plan is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The URHP has elected to calculate the ARC and related information using the alternative measurement method permitted for employers in plans with fewer than one hundred total plan members. (68) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 12 POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) C. Annual OPEB Cost and Net OPEB Obligation (Continued) The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation: Municipal Utility Retiree Retiree Health Plan Health Plan Annual Required Contribution $ 125,720 $ 11,682 Interest on Net OPEB Obligation 17,370 2,522 Adjustment to Annual Required Contribution (25,899) (3,645) Annual OPEB Cost(Expense) 117,191 10,559 Contributions Made (56,583) (3,055) Increase in Net OPEB Obligation 60,608 7,504 Net OPEB Obligation - Beginning of Year 434,250 63,041 Net OPEB Obligation - End of Year $ 494,858 $ 70,545 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the last three years are as follows: Percentage Annual of Annual Net OPEB OPEB Cost OPEB Fiscal Year Ended Cost Contributed Obligation MRHP December 31, 2016 $ 117,191 48.3% $ 494,858 December 31, 2015 118,780 41.0% 434,250 December 31, 2014 120,448 33.0% 364,110 URHP December 31, 2016 $ 10,559 28.9% $ 70,545 December 31, 2015 10,260 21.0% 63,041 December 31, 2014 9,890 0.0% 54,932 D. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short- term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. For the MRHP, in the January 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4% investment rate of return and an annual healthcare cost trend rate of 7.5% initially, reduced incrementally to an ultimate rate of 5% after 10 years. The actuarial value of assets was not determined as the City has not advance-funded its obligation. The plan's unfunded actuarial accrued liability was amortized as a level dollar amount over a closed basis. (69) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 12 POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) D. Actuarial Methods and Assumptions (Continued) The remaining amortization period at December 31, 2015 was over no more than 30 years. For the URHP, the following simplifying assumptions were made: Retirement age for active employees — Based on the historical average retirement age for the covered group, active plan members were assumed to retire at age 60, or at the first subsequent year in which the member would qualify for benefits. Participation Rate — It is assumed that 10% of active participants continue coverage until age 65. Participants are assumed to continue in their current coverage type (single or family). It is assumed that 100% of retirees will continue their current coverage until age 65. Life Expectancy— Life expectancies were based on mortality tables from the National Center for Health Statistics. The 2000 United States Life Tables for Males and for Females were used. Turnover — Non-group-specific age-based turnover data from GASB Statement 45 were used as the basis for assigning active member a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. Healthcare cost trend rate — The expected rate of increase in healthcare insurance premiums was based on projections of the Office of the Actuary at the Centers for Medicare & Medicaid Services. A rate of 7.5% initially, reduced to an ultimate rate of 5% after eight years, was used. Health insurance premiums — 2014 health insurance premiums for retirees were used per the valuation report. Withdrawal—The probability that an employee will remain employed until the assumed retirement age was determined using non-group specific age-based turnover data provided in Table 1 in Paragraph 35b of GASB 45. Actuarial Method — Projected Unit Credit with 30-year amortization of the unfunded liability. For the URHP, a discount rate of 4% was used based on the historical and expected returns of the Utilities' short-term investment portfolio. In addition, a simplified version of the entry age actuarial cost method was used. The unfunded actuarial accrued liability is being amortized as a level dollar amount over an open basis. The remaining amortization period at December 31, 2015 was 30 years. (70) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 13 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. B. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial. The City's tax increment districts are subject to review by the State of Minnesota Office of the State Auditor (OSA). Any disallowed claims or misuse of tax increments could become a liability of the applicable fund. The City's management is not aware of any instances of noncompliance which would have a material effect on the financial statements. C. Territorial Acquisition Agreement In 1991, the Utilities entered into a 20 year agreement to transfer ownership of electric plant and electric service to customers in certain areas receiving electric service from Anoka Electric Cooperative, Inc. (AEC). In 2010 the Utility completed the final purchase under this agreement. The agreed cost of property purchased from AEC is net book value. The Utilities also pays AEC for loss of revenue for each area acquired based on a formula outlined in the agreement. In addition, the Utilities will compensate AEC for the loss of revenue from the future sale of electricity to electric customers in the areas acquired from AEC for a period of 10 years from the date of sale of each individual area. The Utilities paid $214 in 2016 for loss of revenues under this agreement. All amounts paid are included in property and equipment. (71) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 13 OTHER INFORMATION (CONTINUED) D. Territorial Acquisition Agreement (Continued) In 2015, the Utilities entered into an agreement to transfer ownership of electric plant and electric service to customers in eight designated areas receiving service from Connexus Energy. Specific payment terms have been negotiated for five years, and if any of the eight areas are not acquired within this timeframe, the payment terms may be renegotiated. The agreed cost of property purchased from Connexus Energy is net book value, integration expenses, and a loss of revenue payment. The loss of revenue payment for each area acquired is based on a formula outlined in the agreement, payable for the subsequent 10 years after initial purchase. The Utilities acquired the first of the designated service areas 1 and 2 in 2015 and 2016, respectively, for $877,807 and $663,583. The first loss of revenue payment will be made in 2017 for $411,157. All amounts paid are included in property and equipment. E. Conduit Debt Obligations From time to time, the City has issued revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial, multi-family and educational facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payment received from the benefited entity. Neither the City, the state, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2016, there were five series of revenue bonds outstanding, with an aggregate principal payable amount of$12,508,407. F. Commitments The Utilities has received notice from their power supplier regarding the existing all requirements power contract exercising their right to give 10 years notice to cancel the contract. The cancellation date would be effective September 30, 2018. On May 14, 2013 the Utilities signed a new agreement with Minnesota Municipal Power Agency (MMPA). The Utilities entered into an agreement in 2007 with Central Minnesota Municipal Power Agency (CMMPA) to acquire an interest in the CAPX Initiative Brookings Project, a power transmission line in Minnesota. The project is a 250 mile, 345 kV AC transmission line with a rating of 2,300 MW, between Brookings, South Dakota, and the Southeast Twin Cities. In 2011 there was increased opportunity for investment, and subsequent agreements provide the Utilities with an ownership share of $5.6 million or 18.89%. The return on this investment through CMMPA is designed to provide approximately $124,000 annually over the 40-year project life. The transmission payments for 2016 were $51,478 of which $7,141 was receivable at December 31, 2016. (72) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 13 OTHER INFORMATION (CONTINUED) G. Joint Ventures The City has agreements with government and other entities which provide reduced costs, better service and additional benefits to the participants. In 2007, the City and neighboring municipalities formed the Sherburne/Wright Cable Communications Commission (the Commission). The purpose of the organization is to monitor the operation and activities of cable communications of the member municipalities. The Commission also provides coordination, administration and enforcement of the franchises for the cable communication system. Financial statements for the Commission can be obtained by writing to: Sherburne/Wright Cable Communications Commission at 444 Cedar Street, Suite 950, St. Paul, Minnesota 55101. H. Segment Information The City maintains six enterprise funds that account for the municipal liquor operations, garbage collections, and sewer, storm water, water and electric utilities. The City considers each of its enterprise funds to be a segment. Since the required segment information is already included in the City's proprietary funds' balance sheet and statement of revenues, expenses, and changes in net position balance, this information has not been repeated in the notes to the basic financial statements. I. Special Item Elk River Municipal Utilities agreed to the sale of its security business on September 30, 2016. As a result of the sale of the security business, Elk River Municipal Utilities has a gain of $330,293 reported as a special item on the financial statements. The gain includes the price of acquisition less the costs associated with the sale. NOTE 14 TAX ABATEMENTS The City of Elk River has established a tax abatement program pursuant to Minnesota Statutes, Sections 469.1812 through 469.1815. As part of the City's program the City enters into agreements through the use of tax increment financing districts under Minnesota Statutes Section 469.174 to 469.179 (the Tax Increment Act). Under these statutes the City annually abates taxes collected above the district's base tax capacity which is established during adoption of the tax increment district. These agreements are established to foster economic development and redevelopment through creating jobs, removing blight and providing affordable housing. For fiscal year ending December 31, 2016, the City has two agreements established under Minnesota Statutes Section 469.174 to 469.179 which resulted in property taxes totaling $260,375 being abated. Individual abatement payments which constituted more than 1% of the City's 2016 tax levy include: • A pay-as-you-go note resulting in an abatement amount of $139,837, for a financial institution. (73) CITY OF ELK RIVER NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDING DECEMBER 31, 2016 NOTE 14 TAX ABATEMENTS (CONTINUED) As part of the City's tax abatement program, the City also enters into agreements with local businesses in the form of business subsidy agreements established under Minnesota Statutes Section 116J.993 through 116J.995. These agreements must meet a public purpose which may include, but may not be limited to, increasing the tax base. In 2016 the City of Elk River had seven business subsidy agreements in place which resulted in property taxes totaling $143,788 being abated. Individual agreements which result in taxes abated in excess of 1% of the City's total tax levy would be disclosed individually. There were no such payments made in 2016 in excess of this amount. (74) REQUIRED SUPPLEMENTARY INFORMATION CITY OF ELK RIVER SCHEDULE OF FUNDING PROGRESS FOR OTHER POSTEMPLOYMENT BENEFIT PLAN DECEMBER 31, 2016 Municipal Retiree Health Plan Actuarial UAAL as a Actuarial Accrued Percentage Actuarial Value of Liability Unfunded Funded Covered of Covered Valuation Assets (AAL) AAL Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 1/1/2014 $ - $ 996,344 $ 996,344 - $ 7,442,216 13.39% 1/1/2011 - 908,610 908,610 - 6,901,671 13.17% 1/1/2008 - 88,718 88,718 - 4,095,000 2.17% Utilities Retiree Health Plan Actuarial UAAL as a Actuarial Accrued Percentage Actuarial Value of Liability Unfunded Funded Covered of Covered Valuation Assets (AAL) AAL Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) ((b-a)/c) 1/1/2014 $ - $ 68,948 $ 68,948 - $ 2,810,413 2.45% 1/1/2011 - 42,681 42,681 - 2,286,547 1.87% 1/1/2008 - 56,892 56,892 - 2,300,000 2.47% (74) $ m a $ $ $ m a $ $ \ \ S / g / 2 \ / S / g / 2 EQ % w3 & & EQ % w3 & & C) 6 g J 2 e / 6 g J 2 00 ¥ e ww ¥ = ww 3 3 3 3 > j > j ee ee $ a $ $ $ ab $ $ � r rr ro � r orr ro 5 G = o = e % \ = o = e EQ e / ƒ ƒ \ EQ / ƒ ƒ \ / \ e \ C) '31 w C) '31 ww¥ ww / we = 3 3 3 3 > j > j ee ee w � $ a m $ $ $ a m $ $ 3 \ \ 2 \ 2 S S \ \ 2 \ 2 S S w E Q \ ƒ ƒ ® \ E e \ ƒ ƒ ® \ w e / 0 2 0 % e / o a o % « = e 2 a = = 2 a 3 � 222@ > U � � a 2 2 _- Ct) m LU 2w LLQ ( w LU \ co » 0 \ » co = e \ = e L w a \ a \ —i LL ® je e R 2 / \ \ 2 \ w = _ _ _ _ _ 5 [ 5 E e = 2 e = 2 m A a 5 A a 5 w 0 % 0 % \ \ \ / :\ \ \ / j / \ U) a)) U)= 5 ® = 5 ® o z z ƒ / o z z ƒ / ` ° 7 ° e ® U) ° 7 ° e ® a) \ / \ = A \ } \ / 0 = A \ % _ = e § _ % a) = e § _0z % $ % & 2 = f } \ ƒ ® ° _ _ _ U)= m0 m = 0 5 = m o m = i 5 \ \ E 2 0 E \ % % 2 ± = 2z = ± = 2z = \ \ \ / E » \ \ \ / E » o of .9 ® o of .9 ® / / 6 E-0 R E / / o 2 R E / 2 { 7 / _ _ / 2 { 7 / ± = f ± = f \ \ \ \ © ƒ \ \ \ \ \ © ƒ \ OO ' Ln o 00 00 I- O N N C) N 00 a2 O LO r V V Ln o N N co co N Ln M M M N Ln Ln c VCD EA EA EA N 00 o O O O O EA EA EA 00 N 00 00 (O L 1- Ln r V V O O co o N N co co O O (O (O Ln 00 00 Ln I-� 6a EA EA O 00 N 00 00 ' (O o I- 1- O O (A (A (A V V Ln N `D � � L O Z r V V O O O co o N co O 00 00 00 Ln m O O O N � Ef) EA EA W O N Ef) EA EA Y Cl W U W LL LL 00 _ J L) D W 000 N N W O O U U) U) Cl) m m _ _0 o m O m c c W o o a 2 m 2 m c m a) c m a) O p O p U m m U m m _ m _ m o o Q Z Q a E `m a E `m W } W } U) - U C - U a0 U)N O O O O N O � 7 O 3 U U U U C (n �O m C (n p m ++ N U) T W N U) T W 00 7 +�'' U m O O O U m O O U W c _0 >,x i W c _0 w -O m Q O Q } -O m N Q LL O d V of W � V - W U 3 m U) 3 7 LL N O p N O C d LL N O p N O C C C C t of C C C V T O O > O O V >1.0 O O O CO t - O E N s - O E LL O U Q LL O -0 -0 U -0 Q O i O LL C C T C L d y) C C T C L W R m 0 O 7t' O � W R m 0 O O 1-- C) U U U U « d J (n U U U U « ~ q - / - 2 E \ E / E $ $ CV) + \ r \ - \ 0 0 0 o n r o \ R r \ k b / \ % R 7 C co - 2 ? 7 \ \ \ A S A Q o - o z z 1-: C4 C � m m M n o o 0 0 � o 0 0 0 M� o A co + r - o o - CO 0 o A o 0 (0 ¥ ¥ 00 Nt Nt ¥ ¥ o o ¥ o o r ¥ o - o ¥ \ r © $ \ \ \ E % % R \ M \ / \ 9 \ 2 \ \ \ \ A A n n - o z z CNC SMC � m m � � Q � 2 O Cl) 2 w a w w � 2 w wb _wo � wW04 W_ � w � LLw 0 « » w z w 0 QR _ p � w O a O 2 a LL # \ O = j G D2 U) \ 2 ? k < / & Cl) / y 2 3 2 C) E \ F $ ƒ k C: � \ § � _ ` A C: $ '\ $ % % 'e $ 5 $ \ u,):: / / » z j j 3 - w * j k ( \ * * CL ` ° k / ' ' d \ ƒ t ƒ j - 2 # 7 - E [ 5 � 2 2 p = a $ k " \ % / 0 \ § j ` 2 y § ® ) 7 5 j $ ® 3 ` \ _ _ a \ / \ \ \ ± o § C j q > < \ ) § § ; § g = / > - 5 5 2 / k / 0 / \ \ t \ 9 9 § / ƒ f t \ \ z z $ e E / / 0 \ \ \ \ } } : / } \ / ƒ ƒ 0 \ \ 7 ( ( \ a 2 G G = © a s � -E ° - ° '[ / g ° q o \ o o = y = = 5 5 « « © k 5 5 = = 2 § & + o 5 U \ m _ o o co z e e a / E z I < z E z < E o z M M O O O O � O I- 1- O M (O O M O N EA EA Lo Lo O CD ONO ONO CD- 'T V O V (O O M O N EA EA (O (O O CD OO NO NO O V V O Ln N O N Cl) EA EA Z O D LL O m W O) O) O a/ CO W Wo p N Z w Q N N 0 LV > M W L W C OVL W � LL > w 0 � CnU VJJJ0 D W 0 W 2 0 O U) N O X W_ c O > UC-)c _0 c a) O O � � 0 N r T o O c U O _ U O Q U COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS Special Revenue - Special revenue funds are used to account for the proceeds of proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. They are usually required by statute or local ordinance to finance particular functions or activities of government. Debt Service - Debt service funds account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and other related costs. Capital Projects - Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. (79) CITY OF ELK RIVER COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2016 Special Debt Capital Revenue Service Projects Totals ASSETS Cash and Investments $ 4,708,173 $ 1,040,742 $ 10,849,458 $ 16,598,373 Receivables: Accrued Interest 16,329 4,479 48,387 69,195 Delinquent Taxes 31,733 21,396 461 53,590 Special Assessments - 115,444 840,135 955,579 Other Accounts Receivable 184,284 - 180,526 364,810 Notes Receivable, Net 2,186,175 - - 2,186,175 Due from Other Governmental Units 1,794 - 3,905 5,699 Due from Other Funds 971,525 - 570,223 1,541,748 Prepaid Items 108,176 - - 108,176 Land Held for Resale 187,060 - - 187,060 Total Assets $ 8,395,249 $ 1,182,061 $ 12,493,095 $ 22,070,405 LIABILITIES, DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCE LIABILITIES Accounts and Contracts Payable $ 74,129 $ 1,300 $ 122,705 $ 198,134 Accrued Salaries Payable 9,429 - - 9,429 Due to Other Governments 1,486 - - 1,486 Due to Other Funds 15,123 - 2,139,198 2,154,321 Due to Component Unit - - 215,494 215,494 Unearned Revenue - - 568,062 568,062 Total Liabilities 100,167 1,300 3,045,459 3,146,926 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue-Taxes 5,090 3,603 231 8,924 Unavailable Revenue-Special Assessments - 112,405 813,167 925,572 Total Deferred Inflows of Resources 5,090 116,008 813,398 934,496 FUND BALANCE Nonspendable 108,176 - - 108,176 Restricted 1,405,144 1,064,753 - 2,469,897 Committed 5,438,226 - - 5,438,226 Assigned 1,338,446 - 11,294,502 12,632,948 Unassigned - - (2,660,264) (2,660,264) Total Fund Balance 8,289,992 1,064,753 8,634,238 17,988,983 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 8,395,249 $ 1,182,061 $ 12,493,095 $ 22,070,405 (80) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2016 Special Debt Capital Revenue Service Projects Totals REVENUE Property Taxes $ 545,902 $ 364,466 $ 270,374 $ 1,180,742 Special Assessments - 135,447 321,219 456,666 Intergovernmental Revenue 8,207 - 488,210 496,417 Charges for Services 795,975 - 132,955 928,930 Fines and Forfeits 11,560 - - 11,560 Other Revenue: Landfill Expansion Fee - - 1,220,232 1,220,232 Investment Earnings 47,180 10,770 69,095 127,045 Refunds and Reimbursements 190,971 - 410,000 600,971 Contributions 5,435 - 349,573 355,008 Miscellaneous Revenue 38,960 - 16,556 55,516 Total Revenue 1,644,190 510,683 3,278,214 5,433,087 EXPENDITURES Current General Government 194,496 - 153,760 348,256 Public Safety 13,803 - 160,079 173,882 Public Works 34,243 - 51,858 86,101 Culture and Recreation 703,933 - 306,239 1,010,172 Economic Development 750,227 - 198,978 949,205 Capital Outlay General Government - - 37,982 37,982 Public Safety - - 266,490 266,490 Public Works - - 831,402 831,402 Culture and Recreation - - 524,636 524,636 Debt Service Principal Retirement - 3,310,000 1,410,000 4,720,000 Interest and Fiscal Charges - 344,615 174,229 518,844 Total Expenditures 1,696,702 3,654,615 4,115,653 9,466,970 EXCESS(DEFICIENCY)OF REVENUE OVER(UNDER) EXPENDITURES (52,512) (3,143,932) (837,439) (4,033,883) OTHER FINANCE SOURCES (USES) Transfers In 28,350 3,170,860 1,417,790 4,617,000 Transfers Out (317,903) - (4,238,847) (4,556,750) Proceeds form Sale of Capital Assets 27,600 - 52,987 80,587 Total Other Finance Sources (Uses) (261,953) 3,170,860 (2,768,070) 140,837 NET CHANGE IN FUND BALANCES (314,465) 26,928 (3,605,509) (3,893,046) FUND BALANCES Beginning of Year 8,604,457 1,037,825 12,239,747 21,882,029 End of Year $ 8,289,992 $ 1,064,753 $ 8,634,238 $ 17,988,983 (81) NONMAJOR SPECIAL REVENUE FUNDS Library - This fund accounts for any library maintenance costs which are not paid by the Great River Regional Library System. Ice Arena - This fund accounts for the operation and maintenance of the ice arena which is funded by user fees. Landfill - This fund was established to segregate solid waste surcharge revenues to be used for landfill abatement and other 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. Federal DEED - This fund was established to account for the federal share of Department of Employment and Economic Development grant repayments which are used to fund economic development projects. State DEED — This fund was established to account for the state share of Department of Employment and Economic Development grant repayments which are used to fund economic development projects. Development Fund - This fund was established to attract businesses to develop within the City's business park. Insurance Reserve - This fund was opened to account for insurance deductibles and litigation costs not covered by insurance. The major source of revenue is from insurance premium refunds. Drug Forfeiture Reserve - This fund was established to account for revenues received as a result of drug related crimes. These funds must be used for drug education and prevention. YMCA Grant - This fund was established to account for grant revenues received from the County for the YMCA building. Economic Development Authority - This fund was established to account for a special tax levy authorized to help encourage development in the City. (82) CITY OF ELK RIVER COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2016 Revolving Federal Library Ice Arena Landfill Loan DEED Loan ASSETS Cash and Investments $ 427,195 $ 342,748 $ 1,132,052 $ 575,187 $ Receivables Accrued Interest 1,838 1,475 5,117 2,538 Delinquent Taxes 3,407 - - - Other Accounts Receivable - 172,391 - Notes Receivable,Net - 596,074 Due from Other Governments - - Due from Other Funds 3,200 Prepaid Items - Land Held for Resale - - - - Total Assets $ 432,440 $ 519,814 $ 1,137,169 $ 1,173,799 $ LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCE LIABILITIES Accounts and Contracts Payable $ 3,840 $ 35,107 $ 1,436 $ $ Accrued Salaries Payable - 7,346 139 Due to Other Governments 1,486 - Due to Other Funds - - - Total Liabiltiies 3,840 43,939 1,575 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue-Taxes 535 - - FUND BALANCE Nonspendable - - Restricted - - 351,577 Committed 428,065 475,875 - 1,173,799 Assigned - 784,017 - Total Fund Balance 428,065 475,875 1,135,594 1,173,799 Total Liabilities, Deferred Inflows of Resources,and Fund Balance $ 432,440 $ 519,814 $ 1,137,169 $ 1,173,799 $ (83) CITY OF ELK RIVER COMBINING BALANCE SHEET(CONTINUED) NONMAJOR SPECIAL REVENUE FUNDS DECEMBER 31, 2016 Development Insurance Drug State DEED Fund Reserve Forfeiture YMCA Grant EDA Totals $ 116,940 $ 958,726 $ 127,561 $ 12,043 $ - $ 1,015,721 $ 4,708,173 516 4,230 563 52 - - 16,329 - 8,622 - - - 19,704 31,733 - - 11,176 - - 717 184,284 301,512 1,288,589 - - - - 2,186,175 - - - 76 - 1,718 1,794 - 968,325 - - - - 971,525 - - 108,176 - - - 108,176 - 12,060 - - - 175,000 187,060 $ 418,968 $ 3,240,552 $ 247,476 $ 12,171 $ - $ 1,212,860 $ 8,395,249 $ - $ 7,191 $ 10,492 $ 359 $ - $ 15,704 $ 74,129 - - - - - 1,944 9,429 - - - - - - 1,486 - - - - - 15,123 15,123 - 7,191 10,492 359 - 32,771 100,167 - 1,682 - - - 2,873 5,090 - - 108,176 - - - 108,176 418,968 - - 9,856 - 624,743 1,405,144 - 3,231,679 128,808 - - - 5,438,226 - - - 1,956 - 552,473 1,338,446 418,968 3,231,679 236,984 11,812 - 1,177,216 8,289,992 $ 418,968 $ 3,240,552 $ 247,476 $ 12,171 $ - $ 1,212,860 $ 8,395,249 (84) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS YEAR ENDED DECEMBER 31, 2016 Revolving Federal Library Ice Arena Landfill Loan DEED Loan REVENUE Property Taxes $ 59,132 $ $ - $ $ Intergovernmental Revenue - 8,012 Charges for Services 769,720 11,255 3,000 Fines and Forfeits - - - - Other Revenue: Investment Earnings 7,004 6,204 4,765 7,122 Refunds and Reimbursements - - - - Contributions 5,435 - Miscellaneous Revenue - 18,243 - 10,644 Total Revenue 66,136 799,602 24,032 20,766 EXPENDITURES Current General Government - - - - Public Safety - Public Works - - 34,243 Culture and Recreation 82,199 621,734 - - Economic Development - - - 85,120 200,000 Total Expenditures 82,199 621,734 34,243 85,120 200,000 EXCESS(DEFICIENCY)OF REVENUE OVER (UNDER)EXPENDITURES (16,063) 177,868 (10,211) (64,354) (200,000) OTHER FINANCE SOURCES(USES) Transfers In 28,350 - Transfers Out - - (82,716) Proceed from Sale of Capital Assets - 27,600 Total Other Finance Sources(Uses) 28,350 27,600 (82,716) NET CHANGE IN FUND BALANCES 12,287 205,468 (92,927) (64,354) (200,000) FUND BALANCES Beginning of Year 415,778 270,407 1,228,521 1,238,153 200,000 End of Year $ 428,065 $ 475,875 $ 1,135,594 $ 1,173,799 $ - (85) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (CONTINUED) NONMAJOR SPECIAL REVENUE FUNDS YEAR ENDED DECEMBER 31, 2016 Development Insurance Drug State DEED Fund Reserve Forfeiture YMCA Grant EDA Totals $ - $ 144,196 $ - $ - $ - $ 342,574 $ 545,902 - - - - - 195 8,207 - 12,000 - - - - 795,975 - - - 11,560 - - 11,560 - 16,142 1,773 231 519 3,420 47,180 - 45,509 145,462 - - - 190,971 - - - - - - 5,435 6,240 - - - - 3,833 38,960 6,240 217,847 147,235 11,791 519 350,022 1,644,190 - - 194,496 - - - 194,496 - - - 13,803 - - 13,803 - - - - - - 34,243 - - - - - - 703,933 - 142,037 - - - 323,070 750,227 - 142,037 194,496 13,803 - 323,070 1,696,702 6,240 75,810 (47,261) (2,012) 519 26,952 (52,512) - - - - - - 28,350 - (62,600) - - (137,787) (34,800) (317,903) - - - - - - 27,600 - (62,600) - - (137,787) (34,800) (261,953) 6,240 13,210 (47,261) (2,012) (137,268) (7,848) (314,465) 412,728 3,218,469 284,245 13,824 137,268 1,185,064 8,604,457 $ 418,968 $ 3,231,679 $ 236,984 $ 11,812 $ - $ 1,177,216 $ 8,289,992 (86) CITY OF ELK RIVER SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL- LIBRARY SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2016 Budgeted Amounts Over(Under) Original Final Actual Final Budget REVENUE Property Taxes $ 59,400 $ 59,400 $ 59,132 $ (268) Investment Earnings 4,000 4,000 7,004 3,004 Total Revenue 63,400 63,400 66,136 2,736 EXPENDITURES Current Culture and Recreation: 91,750 91,750 82,199 (9,551) Capital Outlay Culture and Recreation: 19,000 19,000 - (19,000) Total Expenditures 110,750 110,750 82,199 (28,551) EXCESS(DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES (47,350) (47,350) (16,063) 31,287 OTHER FINANCE SOURCES(USES) Transfers In 28,350 28,350 28,350 - NET CHANGE IN FUND BALANCES $ (19,000) $ (19,000) 12,287 $ 31,287 FUND BALANCES Beginning of Year 415,778 End of Year $ 428,065 (87) CITY OF ELK RIVER SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL- ICE ARENA SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2016 Budgeted Amounts Over(Under) Original Final Actual Final Budget REVENUE Charges for Services $ 762,350 $ 762,350 $ 769,720 $ 7,370 Investment Earnings 2,500 2,500 6,204 3,704 Contributions 6,700 6,700 5,435 (1,265) Miscellaneous Revenue 19,200 19,200 18,243 (957) Total Revenue 790,750 790,750 799,602 8,852 EXPENDITURES Current Culture and Recreation: 698,350 698,350 621,734 (76,616) Capital Outlay Culture and Recreation: 256,350 256,350 - (256,350) Total Expenditures 954,700 954,700 621,734 (332,966) EXCESS(DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES (163,950) (163,950) 177,868 341,818 OTHER FINANCE SOURCES(USES) Proceeds from Sale of Capital Assets - - 27,600 27,600 NET CHANGE IN FUND BALANCES $ (163,950) $ (163,950) 205,468 $ 369,418 FUND BALANCES Beginning of Year 270,407 End of Year $ 475,875 (88) CITY OF ELK RIVER SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL- LANDFILL SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2016 Budgeted Amounts Over(Under) Original Final Actual Final Budget REVENUE Intergovernmental Revenue $ 8,200 $ 8,200 $ 8,012 $ (188) Charges for Services 11,000 11,000 11,255 255 Investment Earnings 8,500 8,500 4,765 (3,735) Total Revenue 27,700 27,700 24,032 (3,668) EXPENDITURES Current Public Works 31,050 31,050 34,243 3,193 EXCESS(DEFICIENCY)OF REVENUE OVER (UNDER) EXPENDITURES (3,350) (3,350) (10,211) (6,861) OTHER FINANCE SOURCES(USES) Transfers Out (73,600) (73,600) (82,716) (9,116) NET CHANGE IN FUND BALANCES $ (76,950) $ (76,950) (92,927) $ (15,977) FUND BALANCES Beginning of Year 1,228,521 End of Year $ 1,135,594 (89) CITY OF ELK RIVER SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- BUDGET AND ACTUAL ECONOMIC DEVELOPMENT AUTHORITY SPECIAL REVENUE FUND YEAR ENDED DECEMBER 31, 2016 Budgeted Amounts Over(Under) Original Final Actual Final Budget REVENUE Property Taxes $ 360,100 $ 360,100 $ 342,574 $ (17,526) Intergovernmental Revenue - - 195 195 Investment Earnings 4,500 4,500 3,420 (1,080) Miscellaneous Revenue 3,500 3,500 3,833 333 Total Revenue 368,100 368,100 350,022 (18,078) EXPENDITURES Current Economic Development 255,850 255,850 323,070 67,220 EXCESS(DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES 112,250 112,250 26,952 (85,298) OTHER FINANCE SOURCES(USES) Transfers Out (34,800) (34,800) (34,800) - NET CHANGE IN FUND BALANCES $ 77,450 $ 77,450 (7,848) $ (85,298) FUND BALANCES Beginning of Year 1,185,064 End of Year $ 1,177,216 (90) NONMAJOR DEBT SERVICE FUNDS Improvement Bonds - This fund is used to account for the accumulation of resources and payment of principal and interest on long-term general obligation special assessment debt used to finance various street, water, sewer, and storm sewer improvements. Government Building Bonds - This fund is used to account for the accumulation of resources and payment of principal and interest to finance the construction of City facilities. (91) CITY OF ELK RIVER COMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS DECEMBER 31, 2016 Government Improvement Building Bonds Bonds Totals ASSETS Cash and Investments $ 241,161 $ 799,581 $ 1,040,742 Receivables Accrued Interest 1,038 3,441 4,479 Delinquent Taxes 321 21,075 21,396 Special Assessments 115,444 - 115,444 Total Assets $ 357,964 $ 824,097 $ 1,182,061 LIABILITIES, DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCE LIABILITIES Accounts and Contracts Payable $ - $ 1,300 $ 1,300 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue-Taxes 310 3,293 3,603 Unavailable Revenue- Special Assessments 112,405 - 112,405 Total Deferred Inflows of Resources 112,715 3,293 116,008 FUND BALANCE Restricted 245,249 819,504 1,064,753 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 357,964 $ 824,097 $ 1,182,061 (92) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS YEAR ENDED DECEMBER 31, 2016 Government Improvement Building Bonds Bonds Totals REVENUE Property Taxes $ 108 $ 364,358 $ 364,466 Special Assessments 135,447 - 135,447 Other Revenue: Investment Earnings 2,658 8,112 10,770 Total Revenue 138,213 372,470 510,683 EXPENDITURES Debt Service Principal Retirement 305,000 3,005,000 3,310,000 Interest and Fiscal Charges 15,400 329,215 344,615 Total Expenditures 320,400 3,334,215 3,654,615 EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES (182,187) (2,961,745) (3,143,932) OTHER FINANCE SOURCES (USES) Transfers In 177,233 2,993,627 3,170,860 NET CHANGE IN FUND BALANCES (4,954) 31,882 26,928 FUND BALANCES Beginning of Year 250,203 787,622 1,037,825 End of Year $ 245,249 $ 819,504 $ 1,064,753 (93) NONMAJOR CAPITAL PROJECTS FUNDS Park Dedication - This fund accounts for park dedication fees from developers and expenditures for park land acquisitions and park capital improvements. Capital Reserve - This fund was established to help build reserves for the purchase of capital equipment. Government Buildings - This fund is used to account for resources and expenditures related to City facilities projects. The major source of revenue is from landfill expansion fees. GRE Reserve - This fund was established to account for revenues received from the license agreement between the City and Great River Energy. Street Improvements - This fund is used to account for the construction of street improvement projects throughout the City. Improvement Projects - This fund is used to account for the construction of various improvements within the City. Equipment Replacement - This fund is used to account for the purchase of capital equipment. Park Improvements - This fund was established to account for the replacement and maintenance of park equipment and for the beautification of City parks. TIF Districts — This fund is used to account for administrative and development costs associated with the various tax increment financing projects. (94) CITY OF ELK RIVER COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS DECEMBER 31, 2016 Park Capital Outlay Government GRE Dedication Reserve Buildings Reserve ASSETS Cash and Investments $ 7,307 $ 836,442 $ 1,787,088 $ 1,728,546 Receivables Accrued Interest - 3,766 7,885 7,865 Delinquent Taxes - - - - Special Assessments - 1,806 - - Other Accounts Receivable - 310 175,816 - Due from Other Governments - 3,905 - - Due from Other Funds - - - 570,223 Total Assets $ 7,307 $ 846,229 $ 1,970,789 $ 2,306,634 LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCE LIABILITIES Accounts and Contracts Payable $ 50,411 $ 20,069 $ 4,158 $ - Due to Other Funds 570,223 - - - Due to Component Unit - - - - Unearned Revenue 568,062 - - - Total Liabiltiies 11188,696 20,069 4,158 - DEFERRED INFLOWS OF RESOURCES Unavailable Revenue-Taxes - - - - Unavailable Revenue-Special Assessments - 1,329 - - Total Deferred Inflows of Resources - 1,329 - - FUND BALANCE Restricted - - - - Assigned - 824,831 1,966,631 2,306,634 Unassigned (1,181,389) - - - Total Fund Balance (1,181,389) 824,831 1,966,631 2,306,634 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 7,307 $ 846,229 $ 1,970,789 $ 2,306,634 (95) CITY OF ELK RIVER COMBINING BALANCE SHEET(CONTINUED) NONMAJOR CAPITAL PROJECT FUNDS YEAR ENDED DECEMBER 31, 2016 Street Improvement Equipment Park Improvements Projects Replacement Improvements TIF Districts Totals $ 1,156,574 $ 3,898,347 $ 1,003,158 $ 430,802 $ 1,194 $ 10,849,458 5,406 17,200 4,411 1,854 - 48,387 441 - 20 - - 461 308,243 530,086 - - - 840,135 - - - - 4,400 180,526 - - - - 3,905 - - - - - 570,223 $ 1,470,664 $ 4,445,633 $ 1,007,589 $ 432,656 $ 5,594 $ 12,493,095 $ 4,690 $ - $ 29,522 $ 13,855 $ - $ 122,705 - 300,000 - - 1,268,975 2,139,198 - - - - 215,494 215,494 - - - - - 568,062 4,690 300,000 29,522 13,855 1,484,469 3,045,459 231 - - - - 231 300,595 511,243 - - - 813,167 300,826 511,243 - - - 813,398 1,165,148 3,634,390 978,067 418,801 - 11,294,502 - - - - (1,478,875) (2,660,264) 1,165,148 3,634,390 978,067 418,801 (1,478,875) 8,634,238 $ 1,470,664 $ 4,445,633 $ 1,007,589 $ 432,656 $ 5,594 $ 12,493,095 (96) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL FUNDS YEAR ENDED DECEMBER 31, 2016 Park Capital Outlay Government GRE Dedication Reserve Buildings Reserve REVENUE Property Taxes $ - $ - $ - $ - Special Assessments - 7,113 - - Intergovernmental Revenue 10,000 42,250 10,000 - Charges for Services 117,274 2,600 - - Other Revenue: Landfill Expansion Fee - - 1,220,232 - Investment Earnings 460 3,977 17,198 17,723 Refunds and Reimbursements 410,000 - - - Contributions - 136,203 - 203,170 Miscellaneous Revenue - 1,680 - - Total Revenue 537,734 193,823 1,247,430 220,893 EXPENDITURES Current General Government - 135,689 18,071 - Public Safety - 81,668 22,755 - Public Works - 28,170 23,688 - Culture and Recreation 56,112 - 51,861 - Economic Development - - - - Capital Outlay General Government - 37,982 - - Public Safety - 28,804 30,333 - Public Works - - - - Culture and Recreation 390,833 - - - Debt Service Principal Retirement 1,410,000 - - - Interest and Fiscal Charges 158,540 - - - Total Expenditures 2,015,485 312,313 146,708 - EXCESS(DEFICIENCY)OF REVENUE OVER (UNDER) EXPENDITURES (1,477,751) (118,490) 1,100,722 220,893 OTHER FINANCE SOURCES (USES) Transfers In 786,036 - - - Transfers Out - (30,050) (2,993,627) (669,261) Proceeds from Sale of Capital Assets - - - - Total Other Finance Sources(Uses) 786,036 (30,050) (2,993,627) (669,261) NET CHANGE IN FUND BALANCE (691,715) (148,540) (1,892,905) (448,368) FUND BALANCES Beginning of Year (489,674) 973,371 3,859,536 2,755,002 End of Year $ (1,181,389) $ 824,831 $ 1,966,631 $ 2,306,634 (97) CITY OF ELK RIVER COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (CONTINUED) NONMAJOR CAPITAL FUNDS YEAR ENDED DECEMBER 31, 2016 Street Improvement Equipment Park Improvements Projects Replacement Improvement TIF Districts Totals $ 4,241 $ - $ 131 $ - $ 266,002 $ 270,374 134,601 179,505 - - - 321,219 160,000 - 265,960 - - 488,210 - - - 13,081 - 132,955 - - - - - 1,220,232 14,109 8,467 - 7,161 - 69,095 - - - - - 410,000 - - - 10,200 - 349,573 - - 5,000 - 9,876 16,556 312,957 187,972 271,091 30,442 275,878 3,278,214 - - - - - 153,760 - - 55,656 - - 160,079 - - - - - 51,858 - - - 198,266 - 306,239 - - - - 198,978 198,978 - - - - - 37,982 - - 207,353 - - 266,490 780,607 - 50,795 - - 831,402 - - 88,641 45,162 - 524,636 - - - - - 1,410,000 - - - - 15,689 174,229 780,607 - 402,445 243,428 214,667 4,115,653 (467,656) 187,972 (131,354) (212,986) 61,211 (837,439) - - 366,137 265,617 - 1,417,790 (245,909) (300,000) - - - (4,238,847) - - 52,987 - - 52,987 (245,909) (300,000) 419,124 265,617 - (2,768,070) (713,565) (112,028) 287,770 52,631 61,211 (3,605,509) 1,878,713 3,746,418 690,297 366,170 (1,540,086) 12,239,747 $ 1,165,148 $ 3,634,390 $ 978,067 $ 418,801 $ (1,478,875) $ 8,634,238 (98) AGENCYFUNDS Agency Funds are used to account for assets held by the City as an agent for individuals, private organizations and/or other governmental units. The City of Elk River had the following Agency Fund during the year: Developer Fee Escrow - This fund is used to account for the collection and distribution of funds relating to private development projects. FSA Plans — This fund is used to account for the collection of contributions from employees and distributions related to the City's self-administered medical and dependent care FSA plans. (99) CITY OF ELK RIVER STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCYFUNDS YEAR ENDED DECEMBER 31, 2016 Developers Escrow Beginning Ending Balance Additions Deductions Balance ASSETS Cash $ 115,073 $ 187,580 $ 107,858 $ 194,795 Accounts Receivable 510 26,043 9,305 17,248 Prepaid Items - 660 - 660 Total Assets $ 115,583 $ 214,283 $ 117,163 $ 212,703 LIABILITIES Refundable Deposits Payable $ 115,583 $ 208,519 $ 111,399 $ 212,703 FSA Plans Fund Beginning Ending Balance Additions Deductions Balance ASSETS Cash $ 5,650 $ 49,164 $ 43,640 $ 11,174 Accounts Payable $ 5,650 $ 49,164 $ 43,640 $ 11,174 (100) COMPONENT UNIT FINANCIAL STATEMENTS The Housing and Redevelopment Authority of Elk River is a component unit of the City. Its operations are presented as a separate column on the combined financial statements. Governmental Fund Housing and Redevelopment Authority Fund - This fund is used to account for housing and redevelopment activities. Revenues are derived from the HRA property tax levy. (101) CITY OF ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY BALANCE SHEET GOVERNMENTAL FUND DECEMBER 31, 2016 Housing and Redevelopment Authority ASSETS Cash and Investments $ 1,289,705 Receivables: Taxes 16,482 Notes 531,802 Due from Primary Government 215,494 Total Assets $ 2,053,483 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE LIABILITIES Accounts Payable $ 22,469 Accrued Salaries Payable 1,296 Due to Primary Government 8,202 Total Liabilities 31,967 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue -Taxes 2,387 FUND BALANCE Nonspendable 531,802 Restricted for Housing and Redevelopment 1,487,327 Total Fund Balance 2,019,129 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 2,053,483 (102 CITY OF ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2016 Total Fund Balance - Housing and Redevelopment Authority $ 2,019,129 Total net position reported for govermental activities in the statement of net position is different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Those assets consist of: Land $ 257,100 Other Improvements 174,290 Total Capital Assets 431,390 Less: Accumulated Depreciation (47,445) 383,945 Some of the receivables (including property taxes and other long-term receivables) will be collected after year-end, but are not available soon enough to pay for the current period's expenditures and, therefore, are reported as deferred inflows of resources in the governmental funds. 2,387 The net pension liability and related deferred inflows and deferred outflows are recorded only on the statement of net position. Balances at year end are: Net Pension Liability $ (68,816) Deferred Inflows of Resources - Pensions (9,539) Deferred Outflows of Resources - Pensions 24,941 (53,414) Total Net Position - Housing and Redevelopment Authority $ 2,352,047 (103) CITY OF ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY STATEMENT OF REVENUES, EXPENDITIURES, AND CHANGE IN FUND BALANCES GOVERNMENTAL FUND YEAR ENDED DECEMBER 31, 2016 Housing and Redevelopment Authority REVENUE Property Taxes $ 285,831 Intergovernmental Revenue 163 Other Revenue: Investment Earnings 8,081 Miscellaneous Revenue 2,000 Total Revenue 296,075 EXPENDITURES Current: Economic Development 166,503 EXCESS (DEFICIENCY) OF REVENUE OVER(UNDER) EXPENDITURES 129,572 OTHER FINANCE SOURCES (USES) Transfers Out to Primary Government (28,250) NET CHANGE IN FUND BALANCES 101,322 FUND BALANCES Beginning of Year 1,917,807 End of Year $ 2,019,129 (104) CITY OF ELK RIVER HOUSING AND REDEVELOPMENT AUTHORITY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITIURES, AND CHANGE IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2016 Net Change in Fund Balances- Housing and Redevelopment Authority $ 101,322 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures and proceeds from the sale of capital assets as revenues. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. Depreciation Expense (11,619) Delinquent and certain other property taxes receivable will be collected subsequent to year-end, but are not available soon enough to pay for the current period's expenditures and,therefore, are reported as deferred inflows of resources and excluded from revenues in the governmental funds. Unavailable Revenue- Property Taxes 833 Pension expenses in the governmental funds are measured by current year employee contributions. Pension expenses on the statement of activities are measured by the change in net pension liability and the related deferred inflows and outflows of resources. (9,494) Change in Net Position - Housing and Redevelopment Authority $ 81,042 (105) This page intentionally left blank. This part of the City of Elk River's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Page Financial Trends 107 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 112 These schedules contain information to help the reader assess the City's most significant local revenue sources;electric sales and property taxes. Debt Capacity 119 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information 127 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 129 These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 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(113) CITY OF ELK RIVER TAX CAPACITY, MARKET VALUE, AND ESTIMATED VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS 2007 2008 2009 2010 Tax capacity Real property $ 23,166,911 $ 25,790,055 $ 26,550,210 $ 25,611,065 Personal property 281,606 279,154 302,166 310,180 Total tax capacity 23,448,517 26,069,209 26,852,376 25,921,245 Tax increment (786,795) (744,597) (899,835) (888,285) Taxable net tax capacity $ 22,661,722 $ 25,324,612 $ 25,952,541 $ 25,032,960 Total tax capacity rate 43.056% 42.494% 43.280% 44.560% Taxable market value Real property $ 1,998,598,900 $ 2,186,595,580 $ 2,235,538,000 $ 2,121,774,900 Personal property 14,318,500 14,221,560 15,363,900 15,764,700 Taxable market value 2,012,917,400 2,200,817,140 2,250,901,900 2,137,539,600 Estimated actual market value of taxable property $ 2,262,479,345 $ 2,457,361,368 $ 2,429,563,505 $ 2,191,955,185 Taxable market value as a percentage of estimated actual market value 88.97% 89.56% 92.65% 97.52% Source: Sherburne County Assessor Note: Property in the county is reassessed annually. The county assessor's market value of property is approximately 93 per cent of actual value for all types of real and personal property. (114) 2011 2012 2013 2014 2015 2016 $ 24,736,999 $ 21,946,865 $ 19,969,977 $ 20,047,632 $ 21,060,822 $ 21,850,219 350,946 344,032 353,390 367,641 366,113 385,056 25,087,945 22,290,897 20,323,367 20,415,273 21,426,935 22,235,275 (784,101) (698,130) (122,648) (116,513) (198,997) (204,017) $ 24,303,844 $ 21,592,767 $ 20,200,719 $ 20,298,760 $ 21,227,938 $ 22,031,258 45.723% 47.588% 50.373% 48.544% 47.190% 46.170% $ 2,035,543,052 $ 1,775,334,600 $ 1,599,513,500 $ 1,622,624,100 $ 1,735,898,300 $ 1,826,858,800 17,758,600 17,412,900 18,055,900 18,736,600 18,585,200 19,469,900 2,053,301,652 1,792,747,500 1,617,569,400 1,641,360,700 1,754,483,500 1,846,328,700 $ 2,403,906,238 $ 1,907,992,306 $ 1,758,428,600 $ 1,838,493,300 $ 1,900,894,800 $ 1,978,763,900 85.42% 93.96% 91.99% 89.28% 92.30% 93.31% (115) CITY OF ELK RIVER PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS City of Elk River Overlapping Rates Total School District Direct and Fiscal Debt Referendum Special Overlapping Year Operating Service Total County Operating Mkt. Value Districts Rates 2007 37.743 5.313 43.056 40.720 33.208 0.144 3.905 121.033 2008 37.249 5.245 42.494 40.675 32.344 0.161 3.988 119.662 2009 38.319 4.961 43.280 41.999 36.215 0.164 4.040 125.698 2010 40.940 3.620 44.560 44.519 40.050 0.183 4.703 134.015 2011 42.449 3.274 45.723 46.342 43.489 0.188 4.956 140.698 2012 44.925 2.663 47.588 52.014 45.548 0.187 5.296 150.633 2013 47.222 3.151 50.373 54.420 50.058 0.190 5.260 160.301 2014 46.740 1.804 48.544 54.861 51.286 0.156 4.987 159.834 2015 45.433 1.757 47.190 51.979 42.483 0.209 4.779 146.640 2016 44.507 1.663 46.170 50.478 39.268 0.215 4.778 140.909 Source: Sherburne County Auditor/Treasurer Overlapping rates are those of local and county governments that apply to property owners within the City of Elk River. Not all overlapping rates apply to all City of Elk River property owners (e.g., the rates for special districts apply only to the proportion of the city's property owners whose property is located within the geographic boundaries of the special district.) (116) CITY OF ELK RIVER PRINCIPAL TAXPAYERS CURRENT YEAR AND NINE YEARS AGO 2016 2007 Percentage Percentage Net Tax of Total Net Net Tax of Total Net Taxpayer Capacity Rank Tax Capacity Capacity Rank Tax Capacity Great River Energy $ 1,029,374 1 4.63 % $ 596,514 1 2.54 % JPM Capital Corporation 375,608 2 1.69 - - - Target Corp. 262,184 3 1.18 117,416 10 0.50 Walmart Stores 251,896 4 1.13 281,648 3 1.20 BRE Retail Residual Owner, LLC 247,548 5 1.11 - - - Minngasco Property Accounting 156,736 6 0.70 - - - Broadstone STI Minnesota LLC 133,314 7 0.60 - - - Home Depot 130,066 8 0.58 138,340 7 0.59 Menards, Inc 119,250 9 0.54 144,050 6 0.61 ARHC ERELKMN01 LLC 104,444 10 0.47 - - - Envision Company LLC - - - 124,832 8 0.53 Resource Recovery Technology - - - 297,786 2 1.27 Bradley Operating LP - - - 182,479 4 0.78 Phoenix Enterprises - - - 147,883 5 0.63 B &G Realty, Inc - - - 118,162 9 0.50 TOTAL $ 2,810,420 12.63 $ 2,149,110 9.15 Source: Sherburne County Assessor (117) This page intentionally left blank. 0 N (6 > O O O O O 00 00 O I— Lo C N O O O O O O O O O O N J O O O O O O O O O O O O O 0 O U) C O U N 0 O M r- O O M 00 O U 000 = N O N m I- I-00 00 M N N m r- m 00 CO Lo V M C O M NLO LO 00 M O M V O M O V M CO M LO 00 E O O O O O O Q EA O LO O M r� 00 ' N O LO O 00 V M O M M 00 CO M V O O N C N00 LLLo mO m c LO N U) u N N M N C N N N Z (n O U f» H U W J (q J O < 0 W U W O) > M M CO N O 00 CO O LO O p > V 00 00 O O) O N LO LO a' Q Q 2 rn rn rn rn rn rn rn rn rn rn J 0 Cl) o > a) ao LU LU J LL OJW _ X ~ `m O O co M O co I- m U ~ Q N } N N LO M O V O 0 LN M J O V LO O V O N N V O co U U) c I- LO II- N LO m l-- O v Z v I- O M O LO LO M LO 00 W m O of o p o o 0 0 0 0 a } Q O w a N OM O LOC) I� co N M 000 N O M � N LC) r- N_ N � � >. V M Cl) V VC) L(') 00 I- > O co Cl) (O CO O L(') LO 00 76 J M O V I- (O COLO 00 O J O O O O O O H O H EA (6 I- 00 O O N M U O O O O � U) O O O O O O O O O O O CITY OF ELK RIVER RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities Governmental Activities General Fiscal General Obligation Lease Special Tax Certificates of Year Obligation Revenue Revenue Assessment Increment Indebtedness Other 2007 $ 13,220,000 $ 1,200,000 $ 7,730,000 $ 4,825,000 $ 675,000 $ 1,090,350 $ 2,123,092 2008 15,412,946 955,000 7,170,000 4,480,000 505,000 756,033 1,839,792 2009 16,677,757 700,000 6,175,000 3,970,000 440,000 421,716 1,646,492 2010 22,002,000 540,000 - 3,460,000 375,000 87,400 1,499,746 2011 20,897,939 - 2,955,000 305,000 - 1,410,000 2012 26,579,666 4,035,306 - 1,410,000 2013 35,223,141 1,633,459 1,410,000 2014 34,023,916 1,246,612 1,410,000 2015 32,789,690 924,765 1,410,000 2016 29,365,466 607,918 - Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See the Schedule of Demographic and Economic Statistics for personal income and population data. (119) Business-Type Activities General Total Percentage Obligation Revenue Notes Primary of Personal Per Revenue Bonds Payable Government Income' Capita' $ 6,465,000 $ 9,690,000 $ 2,879,054 $ 49,897,496 7.29 $2,152 8,630,000 9,280,000 2,701,994 51,730,765 6.97 2,166 8,070,000 8,840,000 2,524,646 49,465,611 7.14 2,093 6,180,000 6,940,000 2,345,318 43,429,464 6.32 1,890 5,520,656 6,310,000 2,162,882 39,561,477 5.81 1,713 4,791,567 5,085,000 1,975,812 43,877,351 6.30 1,890 4,027,478 4,340,000 1,789,224 48,423,302 7.00 2,072 12,868,388 3,634,845 1,599,876 54,783,637 7.14 2,309 12,564,299 3,020,935 1,408,368 52,118,057 6.69 2,183 11,858,552 12,462,779 1,214,076 55,508,791 na 2,294 (120) CITY OF ELK RIVER RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Less Amounts Less Percentage Net General Restricted Cash with Net of Net Bonded Bonded Fiscal Bonded for Debt Fiscal Bonded Debt to Tax Debt per Year Debt' Service Agent Debt Capacity` Capita' 2007 $ 17,792,017 $ 4,253,142 $ $ 13,538,875 59.74 $583.90 2008 18,391,033 3,712,036 14,678,997 57.96 614.49 2009 17,471,716 3,027,915 14,443,801 55.65 611.17 2010 18,040,733 3,787,324 14,253,409 56.94 620.41 2011 17,120,000 3,234,939 13,885,061 57.13 601.06 2012 23,286,667 3,044,599 20,242,068 93.74 871.75 2013 32,141,667 2,329,723 9,712,875 20,099,069 99.50 860.04 2014 31,001,667 1,599,852 9,580,144 19,821,671 97.65 837.91 2015 28,986,667 1,154,728 9,423,440 18,408,499 86.72 770.88 2016 25,728,333 997,660 9,284,304 15,446,369 70.11 638.28 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Only includes debt supported by tax levy. See the Schedule of Tax Capacity,Market Value and Estimated Actual Value of Taxable Property for property value data. Population data can be found in the Schedule of Demographic and Economic Statistics. (121) CITY OF ELK RIVER DIRCT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT DECEMBER 31, 2016 Percent of Debt City's Outstanding Applicable Share Debt to City' of Debt Direct Debt: City of Elk River` $ 29,973,384 100.00% $ 29,973,384 Overlapping Debt: Sherburne County 11,048,136 24.58 2,715,613 School District#728 274,800,000 29.62 81,394,563 Total overlapping debt 285,848,136 84,110,176 Total direct and overlapping debt $ 315,821,520 $ 114,083,560 Debt Ratios: Ratio of debt per capita (24,200 population) $4,714 Ratios of debt to taxable market value of$1,846,328,700 6.18% Source: Sherburne County and School District#728 ' The percentage of overlapping debt applicable is estimated using taxable market property values. Applicable percentages were estimated by determining the portion of the county's and school district's taxable market value that is within the city's boundaries and dividing it by the county's and school district's total taxable market value. Excludes debt payable from enterprise revenue. Note: Overlapping governments are those that coincide, at least in part,with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and business of the City of Elk River. This process recognizes that,when considering the city's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. (122) CITY OF ELK RIVER LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2007 2008 2009 2010 Debt limit $ 40,258,348 $ 66,024,514 $ 67,527,057 $ 64,126,188 Bonds 17,792,017 18,391,033 17,471,716 18,040,733 Reserves 861,726 1,318,186 1,418,700 1,164,060 Total net debt applicable to limit 16,930,291 17,072,847 16,053,016 16,876,673 Legal debt margin $ 23,328,057 $ 48,951,667 $ 51,474,041 $ 47,249,515 Total net debt applicable to the limit as a percentage of debt limit 42.05% 25.86% 23.77% 26.32% Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed 3 percent of the market value of taxable property. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for the extinguishment of those obligations. Only 2/3 of the$9,620,000 GO EDA Bonds, Series 2007 is subject to the debt limit. The Remaining 1/3 will be paid by the YMCA. (123) CITY OF ELK RIVER LEGAL DEBT MARGIN INFORMATION (CONTINUED) LAST TEN FISCAL YEARS 2011 2012 2013 2014 2015 2016 $ 61,599,050 $ 58,316,472 $ 52,752,858 $ 53,892,054 $ 57,026,844 $ 59,362,917 17,120,000 23,286,667 32,141,667 30,071,667 28,986,667 25,706,667 1,030,418 1,202,093 10,819,006 10,743,409 10,673,852 10,560,614 16,089,582 22,084,574 21,322,661 19,328,258 18,312,815 15,146,053 $ 45,509,468 $ 36,231,898 $ 31,430,197 $ 34,563,796 $ 38,714,029 $ 44,216,864 26.12% 37.87% 40.42% 35.86% 32.11% 25.51% Legal Debt Margin Calculation for Fiscal Year 2016 Estimated taxable market value $ 1,978,763,900 Debt limit(3%of market value) $ 59,362,917 Debt applicable to limit: G.O. capital improvement bonds 9,630,000 G.O. EDA bonds 16,076,667 Less: Cash and investments in related debt service funds (10,560,614) Total net debt applicable to limit 15,146,053 Legal debt margin $ 44,216,864 (124) CITY OF ELK RIVER PLEDGED-REVENUE COVERAGE LAST TEN FISCAL YEARS Revenue Bonds' Net Fiscal Gross Operating Revenue Debt Service Year Revenue' Expenses' Available Principal Interest Coverage 2007 $ 25,212,616 $ 19,212,200 $ 6,000,416 $ 1,045,000 $ 595,642 3.66 2008 28,380,372 22,562,437 5,817,935 1,330,000 669,406 2.91 2009 29,665,332 23,654,659 6,010,673 1,000,000 681,124 3.58 2010 31,869,940 25,849,033 6,020,907 3,785,000 564,105 1.38 2011 33,672,393 27,326,836 6,345,557 1,335,000 458,888 3.54 2012 35,944,367 28,444,321 7,500,046 1,950,000 410,320 3.18 2013 34,737,779 28,629,356 6,108,423 1,505,000 341,419 3.31 2014 35,249,153 29,806,010 5,443,143 3,940,000 282,209 1.29 2015 36,568,235 30,281,264 6,286,971 900,000 464,938 4.61 2016 38,559,107 32,376,907 6,182,200 2,860,000 183,634 2.03 Note: Details regarding the government's outstanding debt can be found in the notes to the financial statements. Includes Liquor, Sewer,Water and Electric revenue bonds ` Gross revenue excludes interest income, connection fees and miscellaneous revenues Expenses exclude depreciation, interest on bonds and miscellaneous expenses " Excludes$1,540,000 refunded principal paid through cash with fiscal agent. (125) CITY OF ELK RIVER PLEDGED-REVENUE COVERAGE (CONTINUED) LAST TEN FISCAL YEARS Special Assessment Bonds Special Assessment Debt Service Collections Principal Interest Coverage $ 231,839 $ 395,000 $ 64,339 0.50 611,290 345,000 192,553 1.14 421,724 510,000 168,335 0.62 368,936 510,000 148,276 0.56 327,975 505,000 124,185 0.52 287,759 505,000 122,209 0.46 202,457 850,000 4 87,268 0.22 182,191 375,000 29,000 0.45 162,519 310,000 21,550 0.49 135,447 305,000 15,400 0.42 (126) CITY OF ELK RIVER DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Personal Fiscal Income Per Capita Median School Unemployment Year Population' (in thousands) Income` Age' Enrollment" Rate' 2007 23,187 $ 684,689 $ 29,529 32 13,058 5.6 % 2008 23,888 742,439 31,080 33 13,031 8.2 2009 23,633 692,376 29,297 33 13,073 9.0 2010 22,974 3 687,129 29,909 33 13,036 8.1 2011 23,101 681,179 29,487 34 13,117 7.3 2012 23,147 696,794 30,103 34 13,255 6.4 2013 23,370 691,962 29,609 35 13,367 5.5 2014 23,730 767,666 32,350 36 13,627 4.1 2015 23,987 782,528 32,623 35 13,751 4.0 2016 24,200 na na 36 14,077 3.4 Data Sources: ' State Demographer Bureau of Economic Analysis ' US Census Bureau " School District ' Minnesota Department of Employment and Economic Development na - not available (127) CITY OF ELK RIVER PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2016 2007 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Independent School District 728 2,000 1 15.89 % 633 1 5.84 Sherburne County 616 2 4.89 600 2 5.53 Guardian Angels of Elk River 374 3 2.97 355 5 3.27 Walmart 350 4 2.78 450 3 4.15 Sportech, Inc. 230 5 1.83 - - - Great River Energy 207 6 1.64 438 4 4.04 Menards 200 7 1.59 164 10 1.51 Emerson Processing Managements 150 8 1.19 200 8 1.84 City of Elk River 146 9 1.16 205 7 1.89 Cornerstone Auto Resource 138 10 1.10 - - - Cub Foods - - - 250 6 2.31 Target - - - 179 9 1.65 Total 4,411 35.05 3,474 32.03 Total Employment` 12,585 10,608 Total District figure includes all full-time, part-time, contract, and substitute teachers as of 2016. Prior year figures included teachers only. Minnesota Department of Employment and Economic Development s Formerly Tescom Corporation. (128) M O O O O O O U? O O O O O O 00 CO O N O M O LO ti N M CO - 00 1-t N N M M N O N N M O O O O O O O O O O O O 00 O N O M 't O LO ti N M CO 00 It N N M MC) N N M O O ti O O O Cf) O 00 O N O O Lo 00 N M CO 00 M N M M N N O O O ti O CO O9 O O ' O O ti M CO - O O 00 LO 00 N M CO 00 - O N M M O N N 0 W 00 O O ti O Cf) Z N LO 00 O 00 LO 00 N M CO 00 O I— N M M O Z N N N 0 0 ZCl) U 00 O O ti O CO Lf) O Cf) O ' O O C') 0 Q j L C) N ce)O 00 M o� ti O N CO N H N N D J Y LL Uao O9 ti O Cfl O 0 0 0 O O Ln J �_ O It — 00 M00 1— 't O N It CO LO O N N M M N O W m LL N N LL 0Zw W w _ J 00 O O Cf? 0 CO — O O O ' O Cf? 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Our report includes a reference to other auditors who audited the financial statements of the City of Elk River Municipal Utilities, as described in our report on the City of Elk River’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. The financial statement of Elk River Municipal Utilities were not audited in accordance with Government Auditing Standards. Internal control over financial reporting In planning and performing our audit of the financial statements, we considered the City of Elk River's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Elk River’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Elk River’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Honorable Mayor and City Council City of Elk River Compliance and other matters As part of obtaining reasonable assurance about whether the City of Elk River's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. CliftonLarsonAllen LLP Minneapolis, Minnesota June 9, 2017 CliftonLarsonAllen LLP CLAconnect.com Management City of Elk River Elk River, Minnesota In planning and performing our audit of the financial statements of the City of Elk River (the City) as of and for the year ended December 31, 2016, in accordance with auditing standards generally accepted in the United States of America, we considered the entity’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we do not express an opinion on the effectiveness of the entity’s internal control. However, during our audit we became aware of other matters that are opportunities to strengthen your internal control and improve the efficiency of your operations. Our comments and suggestions regarding those matters are summarized below. A separate communication dated June 9, 2017, contains our written communication of significant deficiencies and material weaknesses in the entity’s internal control. This letter does not affect our communication dated June 9, 2017 Documentation of review procedures During our review of the City’s internal controls we noted that the City has implemented many review procedures as part of its internal control system. However, it was noted that not all of these reviews are documented. Specifically, it was noted that the reviews over bank reconciliations, investment reconciliations, the payroll register, PERA exclusion reports, liquor store inventory variance reports, liquor store transfer reports, liquor store cash counts, and the debt reconciliation work paper are not specifically documented. Based on verbal corroboration and other indicators, such as notes and other review marks on reports, it appears the City is conducting all of these reviews, but the final piece of a thorough review procedure is the documentation to show those outside of the process, including senior management and governance, that controls are operating effectively. We recommend that the City revise its procedures to include a documentation process for each review that is in place, such as manual signatures, email communications, etc. Capital asset inventory process During our review of the City’s internal controls over capital assets we noted that it has been over eight years since the City has done a physical inventory of its capital assets and the City is currently not completing annual or period cycle counts. We recommend that the City implement a policy which includes the specific periodic physical inventory of all capital assets or a periodic schedule with counts by department or asset type to ensure a large amount of time does not go by between physical reviews and all assets are properly accounted for. Liquor store cash counts and variance reports During our review of the internal controls at the City’s municipal liquor stores, we noted that only one person completes the cash count. As a compensating control there is a camera in the room, however anytime cash is being counted and/or reconciled we recommend there be more than one person present or an independent reconciliation to sales reports is conducted that is also recorded on video camera. Management City of Elk River Page 2 We also noted that liquor store variance reports are not remitted to the finance department of the City. We recommend that these reports be provided to City management so they are aware of the types and magnitudes of any variances that are being noted. Utility revenue reports During our review of internal controls over the City’s utility revenue we noted that the City receives utility revenue remittances from Elk River Municipal Utilities on a periodic basis, but that these receipts are generally not accompanied by detailed billing reports. We recommend that the City request usage and billing summaries that can be reviewed and reconciled to the receipts that are remitted from Elk River Municipal Utilities. We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with various entity personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of management and others within the entity, and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota June 9, 2017 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS’ REPORT ON MINNESOTA LEGAL COMPLIANCE Honorable Mayor and Members of the City Council City of Elk River Elk River, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River, Minnesota as of and for the year then ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated June 9, 2017. Our report includes a reference to other auditors who audited the financial statements of the City of Elk River Municipal Utilities, as described in our report on the City of Elk River’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. The Minnesota Legal Compliance Audit Guide for Cities promulgated by the State Auditor pursuant to Minnesota Statute § 6.65 contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City of Elk River, Minnesota failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City of Elk River, Minnesota’s noncompliance with the above-referenced provisions. The purpose of this report is solely to describe the scope of our testing of compliance relating to the provisions of the Minnesota Legal Compliance Audit Guide for Cities and the results of that testing, and not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose. CliftonLarsonAllen LLP Minneapolis, Minnesota June 9, 2017 CliftonLarsonAllen LLP CLAconnect.com Honorable Mayor and City Council City of Elk River Elk River, Minnesota We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Elk River as of and for the year ended December 31, 2016, and have issued our report thereon dated June 9, 2017. Our report includes a reference to other auditors who audited the financial statements of the City of Elk River Municipal Utilities, as described in our report on the City of Elk River’s financial statements. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit, we also previously communicated to you the financial statements of Elk River Municipal Utilities were not audited under Government Auditing Standards. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by City of Elk River are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2016. We noted no transactions entered into by the entity during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management’s estimate of the valuation of investments is based on published market values as of December 31, 2016. We evaluated the key factors and assumptions used to develop the value of investments in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of the depreciation expense on capital assets is based on management’s estimated useful lives of those assets. We evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. Honorable Mayor and City Council City of Elk River Page 2 Management’s estimate of the valuation of land held for resale is based on the lower of the cost of the land or the current market value. We evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of City’s liability for other postemployment benefits is based on an actuarial determined liability which is based on various assumptions, including investment rates of return, health care trend rates, mortality rates, etc. We evaluated the key factors and assumptions used to develop the liability in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of the City’s liability for compensated absences is based on employee wage information and the City’s policies of earning vacation and sick pay. We evaluated the key factors and assumptions used to develop the liability in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of the City’s proportionate share of PERA’s GERF and PEPFF net pension liabilities as well as the related deferred inflows and outflows is based on guidance from GASB Statement No. 68, GASB Statement No. 71, and the plans’ allocation tables. The plans’ allocation tables allocate a portion of the plans’ net pension liabilities based on the City’s contributions during the plans’ fiscal years as a percentage of total contributions received for the related fiscal year by the plans. We evaluated the key factors and assumptions used to develop the liability in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of the City’s net pension asset and related deferred inflows and outflows related to the City’s Fire Relief Association are based on an actuarially determined liability. This liability is based on various assumptions including the investments rate of return, projected salary increases, and mortality rates. We evaluated the key factors and assumptions used to develop the liability in determining that it is reasonable in relation to the financial statements taken as a whole. Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures. The financial statement disclosures are neutral, consistent, and clear. Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management did not identify and we did not notify them of any uncorrected financial statement misstatements. Corrected misstatements None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. Honorable Mayor and City Council City of Elk River Page 3 Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. No such disagreements arose during our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated June 9, 2017. Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the entity’s financial statements or a determination of the type of auditors’ 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. Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the entity’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Other audit findings or issues We have provided a separate letter to you dated June 9, 2017, communicating internal control related matters identified during the audit. Audits of group financial statements We noted no matters related to the group audit that we consider to be significant to the responsibilities of those charged with governance of the group. Quality of component auditor’s work There were no instances in which our evaluation of the work of a component auditor gave rise to a concern about the quality of that auditor’s work. Limitations on the group audit There were no restrictions on our access to information of components or other limitations on the group audit. Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. Honorable Mayor and City Council City of Elk River Page 4 With respect to the combining and individual fund financial statements and component unit financial statements (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated June 9, 2017. The introductory and statistical accompanying the financial statements, which is the responsibility of management, was prepared for purposes of additional analysis and is not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it. Other information is being included in documents containing the audited financial statements and the auditors’ report thereon. Our responsibility for such other information does not extend beyond the financial information identified in our auditors’ report. We have no responsibility for determining whether such other information is properly stated and do not have an obligation to perform any procedures to corroborate other information contained in such documents. As required by professional standards, we read the introductory and statistical sections (the other information) in order to identify material inconsistencies between the audited financial statements and the other information. We did not identify any material inconsistencies between the other information and the audited financial statements Our auditors’ opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document. This communication is intended solely for the information and use of the City council and management of the City of Elk River and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota June 9, 2017 Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, an SECLLC, -registered investment advisor. | ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND www.CLAconnect.com Audit Presentation Year Ending December 31, 2016Monday, June 19, 2017Exit Conference City of Elk River, Minnesota ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 2 •The City has an unmodified (clean) opinion for the December 31, 2016 financial statement audit. Required Communications •See separate Governance Communication Letter. ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 3 Material Weaknessesthat there is a reasonable possibility that a with governance.important enough to that are corrected on a timely basis.misstatementless severe than material weaknesseswould not be prevented or detected and –deficiencies in internal control such merit attention by those charged material , yet Significant DeficienciesNone NotedNone Noted-deficiencies in internal control Internal Control Items ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 4 No Findings Auditors conducted applicable testing and completed a 25 page check list to verify that the City complied with the applicable Minnesota State Statutes. Minnesota Legal Compliance ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 5 •Proportion of taxes fairly consistentand Other revenues Intergovernmental, sliding up slightlycharges for services sliding down, while •Licenses and Permits, General Fund Financial Results -Revenues ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 6 al revenue had as contributionsrevenue as well fines and forfeits mostly due to over by $94k ($229k)largest overage •Over budget $360k (3.02%) ––IntergovernmentOther Revenue General Fund Financial Results –Revenue Budget ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 7 •Total expenditures slightlyworks decreasing slightly while public proportions increasing and public safety 201616.3% from 2012 to and 5.6% (2016) between 2.1% (2014) increased each year ••Overall increase of General government General Fund Financial Results -Expenditures ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 8 except Public $118kState Fire Aidbudget due to was $171k over Safety, which •Under budget $33K (0.2%)––All under budget Public Works General Fund Financial Results –Expenditure Budget ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 9 of 40%assignmentequipment to allow for budgetof next year’s -45% •Fund Balance Policy––Unassigned General Fund Financial Results –Fund Balance ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 10 ––Decrease from 78% in 2015Peak was 78% in 2015 •Covering approximately $2.2Moperating expenses of investments of $4.1M and $850K in 2016.provided by operations (usage and rate increase).increased from prior year. 70% of depreciation.. •••Operating revenues Total cash and Financial Results –Sewer Fund ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 11 •No depreciation in Fundexpenses of $1.5M.of $402K and operating 2016.by operations $136K in (contracted services)increased from prior year ••••Operating revenues slight Cash and investments used Operating expenses Financial Results –Garbage Fund ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 12 •Covering 63% of of $415K and operating 2016.by operations $291K in services)(personnel and other decrease from prior year increase from prior year.14% in 2015Depreciation in 2016 and ••••Operating revenues slight Cash and investments used Operating expenses Financial Results –Storm Water Fund ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 13 •Gross profit percentage other Metro Cities is unknown at this time.the 7was 27.9%.the 7year.down slightly from prior --County Metro area County Metro area –––––Monticello Fridley Anoka Buffalo Big Lake –––24.4%–25.6%26.8%27.3%–27.7% •••2015 gross profit Equal or higher than 2016 gross profit %%for for Financial Results –Liquor ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 14 increase •2016 = $1.8Bat $2.25B–$405M •2009 was the Financial Results –Taxable Market Values ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND CityTotalSpecial TaxingSchoolCounty*Rates Expressed as a percentage of net tax capacity125.0546.9 39.3 42.5 28.6 28.3 27.5 27.1 50.5 52.0 42.3 42.9 44.1 44.7 46.2 47.2 43.0 43.4 46.5 125.6141.861136.1316.9 0.2 0.2 8.7 8.8 6.9 20152016123.4122.62015201620152016Average Tax Rate StateAll CitiesSevenMetro AreaElk River-City ofWide-County 15 -Source: League of Minnesota Cities Tax Rate Tables Tax Rates •••The City continues to have a lower tax rate than surrounding cities and the State.School rate Controlling what the City can control.–is a blend of Districts serving the City. Financial Results ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 16 •Meeting fund balance policy for General FundGFOA Certificate for Excellence in Financial Reporting.change in fund balance and operating cash flow operationssarenegative –27 consecutive years! •••••No internal control or legal compliance findingsLast year, for the 2015 CAFR audit, the City was awarded the Liquor fund transferred over $700k to other fundsGarbage fund will continue to need to be monitored as Liquor and Sewer funds are providing cash flows from Conclusion ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 17 –––#74 Applicable December 31, 2017Other Postemployment Benefits#75 Applicable December 31, 2018 •Governmental Accounting Standards Board Statement Nos. 74 and 75 –––December 31, 2017December 31, 2019December 31, 2019 •••Statement No. 81 Statement No. 84 Statement No. 83 –––Split Interest AgreementsFiduciary ActivitiesAsset Retirement Obligations Accounting Standards ©2016 CliftonLarsonAllen LLP WEALTH ADVISORY CONSULTING| OUTSOURCING| AUDIT, TAX, AND 18 Michelle Hoffmanmichelle.hoffman@CLAconnect.com612-397-3269Lucas Chaselucas.chase@claconnect.com612-397-3267 Contact Information: audit completed timely and for allowing us to serve you! 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