5.2. SR 06-19-2006
City of Elk River
REQUEST FOR COUNCIL ACTION
Agenda Section Meeting Date
Administration une 19, 2006
Item Description
Presentation of Comprehensive Annual Financial Report for the
eriod ended December 31, 2005
Administrator
Introduction
Steve McDonald of Abdo, Eick, and Meyers will present the city's 2005 Comprehensive Annual Financial
Report (CAFR) along with staff.
Discussion
The presentation of the CAFR will include reviewing general fund activity, various special revenue funds,
and all of the enterprise funds. We will briefly highlight the other funds but will concentrate mainly on
those with more activity. We will also briefly review the 2005 Fire Relief Association audit.
Summary comments and data on the city's financial status and economic condition are in the transmittal
letter beginning on page 1 and in management's discussion and analysis which begins on page 10. General
fund detailed financial data, including the original and final budgets along with actual revenue and
expenditure data, is on page 24; enterprise fund information starts on page 27. Reviewing those sections
of the CAFR will give you the highlights of the City's financial condition.
Additional trend information may be found in the back of the CAFR in the statistical section starting on
page 76. This section provides additional information on demographics, economic indicators, property
tax collections and related data, and 10-year historical revenue and expenditure data.
Financial Impact
None
Attachments
Previously distributed to Mayor and Council
· Comprehensive Annual Financial Report for the City of Elk River for the year ended December
31,2005
· Elk River Fire Department Relief Association financial statements and supplementary
information
Action Requested
City Council is asked to review and accept the Comprehensive Annual Financial Report for the City of
Elk River for year ended December 31, 2005.
s: \ Council\Lori\2006\ CAFR.doc
Council Ac:tion
Follow Up
Motion by _
Second by _
Vote _
s: \ Council\Lori\2006 \ CAFR.doc
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CITY OF ELK RIVER, MINNESOTA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
For the Year Ended December 31,2005
Prepared by the Finance Department
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CITY OF ELK RIVER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2005
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I. INTRODUCTORY SECTION
Page No.
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Letter of Transmittal
Certificate of Achievement
Organizational Chart
Elected and Appointed Officials
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II. FINANCIAL SECTION
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Independent Auditor's Report
Management's Discussion and Analysis
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
Statement of Activities
Fund Financial Statements:
Balance Sheet - Governmental Funds
Reconciliation of the Governmental Funds Balance Sheet to
the Statement of Net Assets
Statement of Revenues, Expenditures, and Changes in
Fund Balances - Governmental Funds
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities
Statement of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual - General Fund
Statement of Net Assets - Proprietary Funds
Statement of Revenues, Expenses, and Changes in
Fund Net Assets - Proprietary Funds
Statement of Cash Flows - Proprietary Funds
Statement of Fiduciary Net Assets - Developer
Escrow Agency Fund
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Notes to Financial Statements
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Combining and Individual Fund Statements and Schedules:
Nonmajor Governmental Funds:
Combining Balance Sheet - Nonmajor Governmental Funds
Combining Statement of Revenues, Expenditures, and Changes
in Fund Balances - Nonmajor Governmental Funds
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Nonmajor Special Revenue Funds:
Subcombining Balance Sheet - Nonmajor Special Revenue Funds
Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Special Revenue Funds
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CITY OF ELK RIVER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31,2005
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Special Revenue Funds:
Schedules of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual:
Library Maintenance
Ice Arena
Landfill
Economic Development Authority
Page No.
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Nonmajor Debt Service Funds:
Subcombining Balance Sheet - Nonmajor Debt Service Funds
Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Debt Service Funds
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Nonmajor Capital Projects Funds:
Subcombining Balance Sheet - Nonmajor Capital Projects Funds
Schedule of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Capital Projects Funds
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Statement of Changes in Assets and Liabilities -
Developer Escrow Agency Fund
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III. STATISTICAL SECTION (UNAUDITED)
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Net Assets by Component
Changes in Net Assets
Fund Balances of Governmental Funds
Changes is Fund Balances of Governmental Funds
Tax Capacity, Market Value and Estimated Actual Value of Taxable Property
Property Tax Rates
Principal Taxpayers
Property Tax Levies and Collections
Ratios of Outstanding Debt by Type
Ratios of General Bonded Debt Outstanding
Computation of Direct and Overlapping Debt
Legal Debt Margin Information
Pledged-Revenue Coverage
Special Assessment Levies and Collections
Demographic and Economic Statistics
Principal Employers
Full-Time Equivalent Employees by Function
Operating Indicators by Function
Capital Asset Statistics by Function
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I INTRODUCTORY SECTION
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May 15,2006
Honorable Mayor Klinzing, Members of the City Council,
and Citizens of Elk River:
The Comprehensive Annual Financial Report (CAFR) for the City of Elk River for the fiscal year ended
December 31, 2005, is hereby submitted. Minnesota State Statutes and the City's ordinance require an
annual audit of the City's accounts by the State Auditor's office or by independent certified public
accountants. The firm of Abdo, Eick, and Meyers was selected to perform the City's audit and their
unqualified opinion has been included in this report. The independent auditor's report is included in the
financial section of this report.
This report was prepared by the City's Finance Department and responsibility for both the completeness
and accuracy of this data, as well as the fairness of this presentation including all enclosures, rests with
the City. To the best of my knowledge and belief, the enclosed data are accurate in all material respects
and are recorded in a manner designed to present fairly the financial position and the results of operations
of the various funds of the City. To provide a reasonable basis for making these representations,
management of the City has established a comprehensive internal control framework that is designed to
both protect the City's assets from loss, theft, or misuse, and to compile sufficient reliable information
for the preparation of these financial statements in accordance with generally accepted accounting
principles (GAAP). Internal accounting controls are designed to provide reasonable but not absolute
assurance regarding the safeguarding of the City's assets against loss, theft, or misuse, and ensuring that
adequate financial records are maintained for preparing financial statements, and maintaining
accountability for assets. The development of an appropriate internal control system requires estimates
and judgments by management to ensure that the costs do not exceed the benefits of the system. The
City of Elk River's internal control structure is designed so that the estimated costs of control do not
exceed the benefits.
The Comprehensive Annual Financial Report (CAFR) is presented in three sections: Introductory,
Financial, and Statistical. The Introductory section includes this transmittal letter, the City's
organizational chart, and a list of City officials. The Financial section includes the Independent
Auditors' Report, Management's Discussion and Analysis (MD&A), government wide and fund financial
statements, notes to the financial statements, and the combining statements and individual fund
statements. The Statistical section includes selected financial, economic, and demographic information
generally presented on a multi-year basis.
Generally accepted accounting principles require that management provide a narrative introduction
overview and analysis to accompany the basic financial statements in the form of Management's
Discussion and Analysis (MD&A). This letter of transmittal is designed to compliment the MD&A and
should be read in conjunction with it. The City of Elk River's MD&A can be found immediately
following the report of the independent auditors.
Profile of the Government
The City of Elk River was originally incorporated in 1880 and consolidated with Elk River Township in
1978 to form a city of 44 square miles. The City of Elk River is located in Sherburne County and serves
as the county seat. Elk River is located approximately halfway between the metropolitan areas of
Minneapolis/St. Paul and Saint Cloud along the Mississippi River. The City of Elk River is rapidly
growing and will not reach full development in the near future. The current population is 21,548.
Population at full build out is estimated to be approximately 40,000. Urban services are available to
approximately one-third of the land area in the City. Only minor expansions of the urban services district
are contemplated at this time so part of the City will develop without city water and sewer service.
The City of Elk River operates under a statutory form of government consisting of a four member City
Council and a Mayor who is also a voting member. Council members are elected by ward to a four year
term with two Council seats up for election each even year. The Mayor is also elected to a four year
term. The City Council is responsible for adopting the City's budget and tax levy, passing resolutions
and ordinances, all hiring and firing decisions, policy making, development and growth planning, and
overall direction of the City.
In addition to providing general government services, the City of Elk River provides a full range of other
services including police and fire protection, building and other safety inspections, planning and zoning,
economic development, environmental services, parks and recreation, library, street, snow removal,
infrastructure maintenance and repair, and others. The City provides municipal water, sewer, garbage,
and electric services and operates two off-sale liquor stores.
The annual budget serves as the foundation for the City of Elk River's financial planning and control.
Budget requests are submitted by all departments to the Finance Department each June. The Finance
Department compiles these requests into a proposed budget. The Finance Department and City
Administrator review the information and present a draft budget to the Council in August for
consideration. Following Council discussion and public input, the final tax levy and budget are approved
in December. The City's Financial Management Plan allows department heads to make administrative
budget amendments (excluding personal service and capital outlay) throughout the year as long as the
total department budget does not change and the amendment is approved by the City Administrator and
Finance Director. The Council approves additional budget amendments in December of each year.
Budget to actual comparisons are provided in this report for each individual governmental fund for which
an appropriated annual budget has been adopted. For the general fund this comparison is presented on
page 24 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.
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when it is considered
from the broader perspective of the specific environment within which the City of Elk River operates.
Local economy. The local economy is strong as evidenced by building permits with a construction value
of$147,413,389 being issued in 2005. This is a 22 percent increase over 2004. New commercial,
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industrial, and institutional building accounted for $56,719,134 of new value with an additional
$10,870,784 in additions and remodeling. Tax exempt construction of $20,776,000 and residential
construction of $59,047,471 made up the balance. The number of housing units added declined from 548
in 2004 to 344 in 2005. The average value of new homes increased to $196,230. Single family homes
accounted for 195 of the new housing units compared to 301 built in 2004.
In 2005, four new industrial businesses located or expanded in Elk River adding 126 new jobs and
market value totaling $5,865,137. Three of the new companies located in the City's newly opened
Northstar Business Park. Infrastructure improvements to the park were partially financed by a $495,000
Infrastructure Grant from the Minnesota Department of Employment and Economic Development.
The downtown revitalization project that the Elk River Housing and Redevelopment Authority (HRA)
has been spearheading is now underway. A total of approximately $25,000,000 in redevelopment is
occurring in the historic downtown district. A City park is being constructed downtown to compliment
the new development. Two new buildings will consist of a combination of both for sale and rental
housing and commercial units, with some housing overlooking the Mississippi River. The Bank of Elk
River is building a major expansion to its main office that is located adjacent to the two new buildings.
In addition, the HRA is reviewing other areas of downtown and beginning initial planning to allow for
future redevelopment.
The City constructed its second liquor store in 2005, along with additions to the public works complex
and an expansion of the wastewater treatment plant. A new 16,000 square foot library is planned for
2006 adjacent to City Hall and the Public Safety Building.
Industrial and commercial development has been very strong and is expected to remain strong; however,
residential development has slowed considerably. There are approximately 800 residential lots available
with more lots becoming available in 2006. The City is currently preparing to open a new business park
with lots being available in 2007 or 2008.
Long-term financial planning. The City Council recently approved completing a Land Use Financial
Management Plan. This Plan builds on the Financial Management Plan and tax analysis study completed
in 2005. The Land Use Financial Management Plan will focus mainly on undeveloped property with the
goal of determining what type of development needs to occur in order to provide enough tax base to
support the City's demand for services when fully developed. The Council has been diligent in
maintaining a level tax rate. This study will provide the information needed to develop in a manner that
will sustain or expand City services while keeping the tax rate stable. Department heads will be
estimating staff additions, service levels, and capital needs for the next ten years as part of this process.
The study completed in 2005 indicated that, based on the estimated tax base, the cost of current services
inflated over time, and projected capital expenditures, the City could continue to offer existing services
while keeping the tax rate stable with only minor fluctuations. This additional study will provide the
community development department vital information to assist in properly zoning undeveloped areas of
the City to maximize the tax base. Further, the study will evaluate the financial feasibility of expanding
the sewer system to property that will be available for development after gravel mining is complete,
which is expected to start occurring to a small degree in the next five years and continue over several
decades.
Cash management policies and practices. Cash temporarily idle during the year was invested in
demand deposits, certificates of deposits, United States government and agency securities, and
commercial paper as authorized by the City's investment policy. All idle cash is maintained in an
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investment pool on a combined basis where all funds with a cash balance participate in the investment
pool. The Economic Development Authority, water and electric funds do not participate in the
investment pool. The water and electric funds are invested by the Elk River Municipal Utilities. The
City's investment policy states that the safety and liquidity of the portfolio are more important than the
return on investment. The City's policy closely follows all of the Minnesota State Statutes governing the
investment of municipal funds.
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Risk management. The City of Elk River strives to limit both its liability risk and insurance costs in all
areas and has been successful in both limiting risk and keeping premium costs reasonable. This is done
by continually evaluating safety programs, maintaining adequate deductibles, maintaining correct
property and equipment schedules, and working with the City's insurance agent and underwriters to
initiate programs to achieve those goals. The City maintains an emergency/insurance reserve fund for the
purpose of funding insurance deductibles, promoting safety programs through our Safety Committee, and
providing safety training to all employees. However, the City does not self insure and does not intend to
self insure at any time in the future. The City's Safety Coordinator and the Safety Committee are
responsible for training all employees in the City's safety policies to protect the City's employees from
work related injuries and to help reduce work related insurance claims. The results of this can be seen
through the relatively low experience modification factor applied to our worker's compensation
insurance.
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Awards and Acknowledgements.
The Government Finance Officers Association of the United Stated and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the City of Elk River for its
comprehensive annual financial report (CAFR) for the fiscal year ended December 31, 2004. This was
the sixteenth consecutive year that the City has received this prestigious award. In order to be awarded a
Certificate of Achievement the government must publish an easily readable and efficiently organized
comprehensive annual financial report. This report must satisfy both generally accepted accounting
principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
Comprehensive Annual Financial Report continues to meet the Certificate of Achievement program
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
The preparation of this report is made possible by the dedicated efforts of Assistant Finance Director
Lori Ziemer and the entire 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.
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Respectfully submitted,
~~-
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Lori Johnson
City AdministratorlFinance Director
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Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Elk River,
Minnesota
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
December 31, 2004
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
~~
President
~~~
Executive Director
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CITY OF ELK RIVER 1
ORGANIZATIONAL CHART 1
1
1
Mayor &
City Council I-
Boards & 1
Commissions
1
City Attorney City
Administrator 1
1
Finance & Police 1
Admin. Services
1
Community Fire 1
Development
1
Parks & Public Works 1
Recreation
1
1
1
6 1
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CITY COUNCIL
Stephanie Klinzing
John Dietz
Larry Farber
Jerry Gumphrey
Paul Motin
CITY OF ELK RIVER, MINNESOTA
ELECTED AND APPOINTED OFFICIALS
YEAR ENDED DECEMBER 31, 2005
Term Expires
December 31.
Mayor
Council member
Council member
Council member
Council member
2006
2006
2008
2008
2006
APPOINTED PERSONNEL
Lori Johnson
Scott Clark
William Maertz
Jeff Beahen
Bruce West
Philip Hals
Terry Maurer
City AdministratorlFinance Director
Community Development Director
Parks & Recreation Director
Police Chief
Fire Chief
Street Superintendent
City Engineer
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FINANCIAL SECTION
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Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
INDEPENDENT AUDITOR'S REPORT
Honorable Mayor and Council
City of Elk River, Minnesota
We have audited the accompanying fmancial statements of the governmental activities, the business-type activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Elk River,
Minnesota (the City), as of and for the year ended December 31,2005 which collectively comprise the City's basic fmancial
statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our
responsibility is to express opinions on these fmancial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to fmancial audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of
the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and
the aggregate remaining fund information of the City as of December 31,2005, and the respective changes in fmancial position
and cash flows, where applicable, thereof and the budgetary comparison for the general fund for the year then ended in
conformity with accounting principles generally accepted in the United States of America
In accordance with Government Auditing Standards, we have also issued our report dated March 17, 2006, on our consideration
of the City's internal control over fmancial reporting and on our tests of its compliance with certain provisions oflaws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be considered in assessing the results of our audit.
The Management's Discussion and Analysis is not a required part of the basic financial statements but is supplementary
information required by accounting principles generally accepted in the United States of America. We have applied certain
limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and
presentation of the supplementary information. However, we did not audit the information and express no opinion on it.
952.835.9090 . Fax 952.835.3261
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www.aemcpas.com
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Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The combining,
individual fund financial statements, schedules and statistical information listed in the table of contents are presented for the
purpose of additional analysis and are not a required part of the financial statements of the City. Such information has been
subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, except for the statistical
data section marked "unaudited" on which we express no opinion, is fairly stated in all material respects in relation to the
fmancial statements taken as a whole.
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March 17, 2006
Minneapolis, Minnesota
,
~ ZiA. 7~/LLf
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
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952.835.9090 . Fax 952.835.3261
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Management's Discussion and Analysis
As management of the City of Elk River, we offer readers of the City's financial statements this narrative overview and
analysis of the financial activities of the City for the fiscal year ended December 31, 2005 . 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 ofthe City of Elk River exceeded its liabilities at the close of the most recent fiscal year by $175,618,989 (net
assets). Of this amount, $33,224,623 (unrestricted net assets) may be used to meet the City's ongoing obligations to
citizens and creditors.
The City's total net assets increased by $11,796,489, which is primarily due to contribution of capital assets.
As of the close of the current fiscal year, the City of Elk River's governmental funds reported combined ending fund
balances of $29,912,904.
General
Special
Revenue
Debt
Service
Capital
Projects
Total
Reserved
Designated
Undesignated
$ 210,298
4,391,083
$ 4,880,170
3,666,256
1,786,805
$ 6,595,667
$
8,528,524
(145,899)
$ 11,686,135
16,585,863
1,640,906
$ 4,601,381
$ 10,333,231
$ 6,595,667
$ 8,382,625
$ 29,912,904
The City of Elk River's total long-term liabilities increased $1,153,492 during the current fiscal year, from $35,273,735 to
$36,427,227.
Beginning Ending
Balance Additions Reductions Balance
Governmental activities:
Bonds payable $ 20,436,967 $ 1,715,000 $ (2,174,266) $ 19,977,701
Compensated absences 465,634 313,667 (298,205) 481,096
Total governmental activities 20,902,601 2,028,667 (2,472,4 71) 20,458,797
Business-type activities:
Bonds payable 11,425,000 2,860,000 (1,150,000) 13,135,000
Notes payable 2,663,145 (124,919) 2,538,226
Compensated absences 282,989 38,933 (26,718) 295,204
Total business-type activities 14,371,134 2,898,933 (1,301,637) 15,968,430
Total City long-term liabilities $ 35.273.735 $ 4.927.600 $ 0.774.108) $ 36.427.227
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City of Elk River's basic fmancial statements.
The City's basic financial statements comprise three components: I) government-wide fmancial statements, 2) fund
financial statements, and 3) notes to the fmancial statements. This report also contains other supplemental information in
addition to the basic financial statements themselves.
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Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the City of Elk
River's finances, in a manner similar to a private-sector business.
The statement of net assets presents information on all of the City of Elk River's assets and liabilities, with the difference
between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of
whether the financial position of the City of Elk River is improving or deteriorating.
The statement of activities presents information showing how the City's net assets changed during the most recent fiscal
year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of
the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only
result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements distinguish functions of the City of Elk River that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to
recover all or a significant portion of their costs through user fees and charges (business-type activities). The
governmental activities of the City of Elk River include general government, public safety, public works, culture and
recreation, economic development and interest on long-term debt. The business-type activities of the City of Elk River
include municipal liquor, garbage, sewer, water, and electric.
The government-wide financial statements include not only the City of Elk River itself (known as the primary
government), but also a legally separate Housing & Redevelopment Authority (HRA) for which the City of Elk River is
financially accountable. Financial information for the HRA is reported separately from the fmancial information presented
for the primary government itself. The Elk River Municipal Utilities, although also legally separate, functions for all
practical purposes as a department of the City of Elk River, and therefore has been included as an integral part of the
primary government.
The government-wide financial statements can be found on pages 18 - 19 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that
have been segregated for specific activities or objectives. The City of Elk River, like other state and local government,
uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of
the City of Elk River can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide fmancial statements. However, unlike the government-wide fmancial
statements, governmental fund fmancial statements focus on near-term inflows and outflows of spendable resources, as
well as on balances of spendable resources available at the end of the fiscal year. Such information 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 fmancing 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 five individual major governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund
balances for the General fund, Improvement Bonds, Capital Projects, Permanent Improvement Revolving and Tax
Increment Financing Districts. Data from the other governmental funds are combined into a single, aggregated
presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining
statements elsewhere in this report.
The City of Elk River adopts an annual appropriated budget for its general fund and some special revenue funds. A
budgetary comparison statement has been provided for those funds to demonstrate compliance with this budget.
The basic governmental fund fmancial statements can be found on pages 20 - 24 of this report.
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Proprietary funds. When the City of Elk River charges customers for the services it provides - whether to outside
customers or to other departments of the City - these services are generally reported in proprietary funds. Proprietary
funds are reported in the same way that all activities are reported in the statement of net assets and the statement of
revenues, expenses, and changes in net assets. The enterprise funds are the same as the business-type activities reported in
the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary
funds. The City of Elk River uses enterprise funds to account for its municipal liquor, garbage, sewer, water, and electric
operations.
The basic proprietary fund financial statements can be found on pages 25 - 32 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 fmancial statements can be found on page 33 of this report.
Notes to Financial Statements. The notes provide additional information that is essential to a full understanding of the
data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on
pages 34 - 56 of this report.
Other Information. The combining statements referred to earlier in connection with nonmajor governmental funds and
internal service funds are presented immediately following the notes to financial statements. Combining and individual
fund statements and schedules can be found on pages 57 - 75 of this report.
Government-wide Financial Analysis
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of
the City of Elk River, assets exceeded liabilities by $175,618,989 at the close of the most recent fiscal year.
By far, the largest portion of the City of Elk River's net assets (73 percent) reflects its investment in capital assets (e.g.,
land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The
City of Elk River uses these capital assets to provide services to citizens; consequently, these assets are not available for
future spending. Although the City of Elk River's investment in its capital assets is reported net of related debt, it should
be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets
themselves cannot be used to liquidate these liabilities.
Current and other assets
Capital assets
Net Assets
Governmental Business-type
Activities Activities Total
2005 2004 2005 2004 2005 2004
$ 37,056,564 $ 33,345,931 $ 16,673,329 $ 14,701,975 $ 53,729,893 $ 48,047,906
92.155.242 86.758.430 70.250.300 66.465.832 162.405.542 153.224.262
129.211.806 120.104.361 86.923.629 81.167.807 216.135.435 20 1.272.168
20,458,797 20,902,601 15,968,430 14,371,134 36,427,227 35,273,735
1.924.364 1. 724.828 2.164.855 1.741.105 4.089.219 3.465.933
22.383.161 22.627.429 18.133.285 16.1 12.239 40.516.446 38.739.668
Total assets
Long-term liabilities
outstanding
Other liabilities
Total liabilities
Net assets
Invested in capital assets,
net of related debt
Restricted
Unrestricted
73,150,041 67,061,167 54,577,074 52,377,687 127,727,115 119,438,854
12,410,832 10,963,518 2,256,419 14,667,251 10,963,518
21.267.772 19.452.247 11.956.851 12.677.881 33.224.623 32.130.128
$ 106828645 $ 97476932 $ 68 790 344 $ 65 055 568 $175618989 $162532500
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Total net assets
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An additional portion of the City of Elk River's net assets (8 percent) represents resources that are subject to external I
restrictions on how they may be used. The remaining balance of unrestricted net assets ($33,224,623) may be used to meet
the City of Elk River's ongoing obligations to citizens and creditors.
At the end of the current fiscal year, the City of Elk River is able to report positive balances in all three categories of net I
assets, both for the City as a whole, as well as for its separate governmental and business-type activities.
Governmental activities I
Governmental activities increased the City of Elk River's net assets by $8,061,713. Key elements ofthis increase are as
follows: I
Changes in Net Assets
Governmental Business-type I
Activities Activities Total
2005 2004 2005 2004 2005 2004
Revenues: I
Program revenues:
Charges for services $ 3,875,843 $ 3,401,452 $ 24,444,243 $ 24,544,637 $ 28,320,086 $ 27,946,089
Operating grants and I
contributions 480,649 427,513 9,255 8,615 489,904 436,128
Capital grants and
contributions 7,573,752 11,879,536 3,654,383 3,028,454 11 ,228, 13 5 14,907,990
General revenues:
Property taxes 7,569,131 6,425,933 7,569,131 6,425,933 I
Tax increment 768,397 734,115 768,397 734,115
Grants and contributions not
restricted to specific programs 2,427,605 2,141,152 2,427,605 2,141,152 I
Unrestricted investment earnings 758,612 375,550 305,923 153,218 1,064,535 528,768
Gain on disposal of capital assets 326.853 9.180 326.853 9.180
Total revenues 23.780.842 25.394.431 28.413.804 27.734.924 52.194.646 53.129.355
Expenses: I
General government 2,503,826 2,440,200 2,503,826 2,440,200
Public safety 5,255,974 4,988,424 5,255,974 4,988,424
Public works 4,281,725 4,277,071 4,281,725 4,277,071 I
Culture and recreation 2,535,955 2,058,882 2,535,955 2,058,882
Economic development 938,164 912,698 938,164 912,698
Interest on long-term debt 881,001 936,515 881,001 936,515
Municipal liquor 4,344,915 3,760,156 4,344,915 3,760,156 I
Garbage 1,047,479 953,432 1,047,479 953,432
Sewer 1,629,353 1,464,409 1,629,353 1,464,409
Water 2,099,428 1,809,128 2,099,428 1,809,128
Electric 14.880.337 13.338.580 14.880.337 13.338.580 I
Total expenses 16.396.645 15.613.790 24.001.512 21.325.705 40.398.157 36.939.495
Increase in net assets before
transfers 7,384,197 9,780,641 4,412,292 6,409,219 11,796,489 16,189,860 I
Transfers 677.516 866.816 (677.516) (866.816)
Change in net assets 8.061.713 10.647.457 3.734.776 5.542.403 I 1.796.489 16.189.860 I
Net assets - beginning 97,476,932 86,829,475 65,055,568 59,513,165 162,532,500 146,342,640
Prior period adjustment 1.290.000 1.290.000
Net assets - beginning, as restated 98.766.932 86.829.475 65.055.568 59.513.165 163.822.500 146.342.640 I
Net assets - ending $106828645 $ 97 476 932 $ 68 790 344 $ 65 055 568 $ 175618989 $ 162532500
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Below are specific graphs which provide comparisons of the governmental activities revenues and expenditures.
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
Expenses and Program Rewnue - Gowrnmental Activities
$-
General
government
Public safety
Public works
Culture and
recreation
Economic
development
Interest on long-
term debt
I-Revenue -Expense I
Revenue Sources - Governmental Activities
Gain on disposal of capital
assets
1.34%
Tax increment
3.14%
Transfers
2.77%
Charges for services
15.85%
Property taxes
30.95%
Operating grants and
contributions
1.97%
Unrestricted investment
earnings
3.10% Grants and contributions
not restricted to specific
programs
9.93%
Capital grants and
contributions
30.97%
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Business-type activities
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Business-type activities increased the City of Elk River's net assets by $3,734,776. Below are graphs showing the
business-type activities revenue and expense comparisons.
$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
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Expenses and Program Revenue - Business-type Activities
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Municipal liquor
Garbage
Sewer
Water
Electric
. Revenue
I
. Expense
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Revenue by Source - Business-type Activities
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Capital grants and
contributions
13.00%
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Charges for services
86.97%
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Operating grants and
contributions
0.03%
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Financial Analysis ofthe Government's Funds
Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements.
In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for
spending at the end of the fiscal year.
As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of
$29,912,904. Approximately 61 % of this total amount ($18,226,769) constitutes unreserved fund balance, which is
available for spending at the City's discretion. The remainder of fund balance ($11,686,135) is reserved to indicate that it is
not available for new spending because it has already been committed to provide for 1) debt service ($6,595,667), 2) capital
equipment/projects ($2,716,718), 3) landfill mitigation ($2,160,268), or 4) a variety of other restricted purposes ($213,482).
The General fund is the chief operating fund of the City of Elk River. The total fund balance of the General fund increased
by $634,001 in 2005, which was primarily due to increased revenues collected for licenses and permits and charges for
services. In addition, expenditures were under budget due to a mild winter and personnel vacancies.
The Improvement Bonds fund increased by $616,142, which is primarily due to transfers. The Capital Projects fund and
Permanent Improvement Revolving fund increased by $1,276,780 and $1,268,016, respectively, due to the prepayment of
assessments on improvement projects. The Tax Increment Financing Districts fund increased by $311,370 due to developer
reimbursement of project costs.
Proprietary funds. The City of Elk River's proprietary funds provide the same type of information found in the
government-wide statements, but in more detail.
Unrestricted net assets in the respective proprietary funds are Municipal Liquor - $2,003,444, Garbage - $109,789, Sewer _
$7,194,852, Water - $891,943, and Electric - $1,756,823. All proprietary funds had increases in net assets.
General Fund Budgetary Highlights
Differences between the original budget and the final budget for the General fund amounted to $305,400. The revenue and
expenditure budgets were amended to reflect increased revenues in licenses and permits, and charges for services, and
expenditure increases in all categories due to increased activity and demand for services.
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, 2005, amounts to $162,405,542 (net of accumulated depreciation). This investment in capital assets includes
land, buildings, improvements, equipment and infrastructure.
Capital Assets, Net of Depreciation
Governmental
Activities
2005 2004
Business-type
Activities
2005 2004
Total
2005 2004
Land $ 31,489,967 $ 29,033,685 $ 1,442,669 $ 1,442,669 $ 32,932,636 $ 30,476,354
Construction in progress 2,432,002 1,116,526 1,030,122 3,548,528 1,030,122
Buildings 14,703,884 15,062,808 10,310,583 9,105,721 25,014,467 24,168,529
Other improvements 1,383,039 1,216,737 1,383,039 1,216,737
Equipment 3,112,197 2,485,867 377,459 372,216 3,489,656 2,858,083
Infrastructure 39.034.153 38.959.333 57.003.063 54.515.104 96.037.216 93.474.437
Total $ 92155242 $ 86 758 430 $ 70 250 300 $ 66 465832 $162405542 $153224262
Additional information on the City's capital assets can be found in Note 3C on pages 44 - 46 of this report.
Long-term debt. At the end of the current fiscal year, the City had total long-term debt outstanding of $36,427,227, an
increase of$I,153,492 from 2004. General obligation revenue bonds ($14,530,000) were used to finance the construction
ofan ice arena, a liquor store, and sewer, water and electric systems. Lease revenue bonds ($8,785,000) were used to
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finance the construction of a public safety/city hall facility. Special assessment bonds ($6,605,000) and permanent
improvement revolving bonds ($935,000) fmanced improvement projects within the City and are assessed to the benefiting
properties. Tax increment bonds ($972,500) financed the City's economic development program. Certificates of
indebtedness ($1,285,201) financed capital equipment purchases.
Additional long-term debt in the amount of$2,538,226 and $776,300 is for notes payable and compensated absences,
respectively.
City of Elk River Outstanding Debt
Governmental Business-type
Activities Activities Total
2005 2004 2005 2004 2005 2004
Bonds payable:
General obligation
revenue bonds $ 1,645,000 $ 1,850,000 $ 12,885,000 $ 11,050,000 $ 14,530,000 $ 12,900,000
Lease revenue bonds 8,785,000 9,285,000 8,785,000 9,285,000
Special assessment bonds 6,605,000 6,460,000 6,605,000 6,460,000
Permanent improvement
revolving bonds 935,000 1,020,000 935,000 1,020,000
Tax increment bonds 972,500 1,116,000 972,500 1,116,000
Certificates of indebtedness 1.035.201 705.967 250.000 375.000 1.285.201 1.080.967
Total bonds payable 19,977,701 20,436,967 13,135,000 11,425,000 33,112,701 31,861,967
Notes payable 2,538,226 2,663,145 2,538,226 2,663,145
Compensated absences 481.096 465.634 295.204 282.989 776.300 748.623
Total $ 20.458 797 $ 20 902 601 $ 15968430 $ 14371 134 $ 36 427 227 $ 35 273 735
The City's bond rating was upgraded to Al from Moody's for general obligation debt.
State statutes limit the amount of general obligation debt a Minnesota city may issue to 2% of total Estimated Taxable
Market Value. The current debt limitation for the City of Elk River is $30,805,499. Only $9,089,408 of the City's net
outstanding debt is counted within the statutory limitation.
Additional information on the City of Elk River's long-term debt can be found in Note 3E on pages 47 - 52 of this report.
Economic Factors and Next Year's Budget
The City of Elk River estimates that the demand for city services will continue to grow at a level similar to last year due to
population growth. This was taken into consideration in preparation of the City's 2006 budget. The property tax levy is set
annually and is adjusted as necessary to fund the additional cost of providing services related to the City's growth and the
addition of new programs. Charges for services are evaluated each year and adjusted if warranted. The City expects to
keep the tax rate consistent in upcoming years.
Requests for Information
This financial report is designed to provide a general overview of the City of Elk River's finances for all those with an
interest in the City's finances. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to City of Elk River, Attn: Finance Director, 13065 Orono Pkwy, Elk
River, Minnesota 55330 or by calling (763) 635-1000.
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BASIC FINANCIAL STATEMENTS
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I CITY OF ELK RIVER, MINNESOTA
I STATEMENT OF NET ASSETS
DECEMBER 31, 2005
I Primary Government
Governmental Business-type Component
Activities Activities Total Unit - HRA
I ASSETS
Cash and investments $ 29,507,163 $ 9,047,752 $ 38,554,915 $ 232,421
Restricted cash and investments 2,256,419 2,256,419
I Cash with fiscal agent 515,568 1,633,679 2,149,247
Receivables (net):
Interest 104,756 84,158 188,914
Taxes 370,161 370,161 9,261
I Accounts 487,023 1,749,549 2,236,572
Special assessments 5,274,675 5,274,675
Notes 529,923 529,923
I Due from other governments 106,014 106,014
Due from primary government 394,145
Internal balances 81,889 (81,889)
I Inventories 1,769,190 1,769,190
Prepaid items 79,392 68,036 147,428
Deferred charges 146,435 146,435
I Capital assets:
Nondepreciable 33,921,969 2,559,195 36,481,164
Depreciable (net) 58,233,273 67,691,105 125,924,378
I Total assets 129,211,806 86,923,629 216,135,435 635,827
LIABILITIES
I Accounts payable 814,223 1,807,920 2,622,143 27,602
Salaries payable 147,512 24,330 171,842 920
Due to other governments 214,544 81,958 296,502
I Due to component unit 394,145 394,145
Accrued interest payable 345,245 250,091 595,336
Unearned revenue 8,695 556 9,251
Non-current liabilities:
I Due within one year 6,887,942 2,643,167 9,531,109
Due in more than one year 13,570,855 13,325,263 26,896,118
I Total liabilities 22,383,161 18,133,285 40,516,446 28,522
NET ASSETS
I Invested in capital assets,
net of related debt 73,150,041 54,577,074 127,727,115
Restricted for:
I Debt service 10,250,564 2,256,419 12,506,983
Landfill mitigation 2,160,268 2,160,268
Unrestricted 21,267,772 11,956,851 33,224,623 607,305
I Total net assets $ 106,828,645 $ 68,790,344 $ 175,618,989 $ 607,305
I The notes to the fmancial statements are an integral part ofthis statement.
I 18
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CITY OF ELK RIVER, MINNESOTA
RECONCILIA TION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS
DECEMBER 31, 2005
FUNDBALANCE-TOTALGOVERNMENTALFUNDS
Amounts reported for governmental activities in the statement of net assets are different because:
1. Capital assets used in governmental activities are not current financial resources
and therefore are not reported in the governmental funds:
Governmental capital assets
Less accumulated depreciation
2. Deferred revenue in governmental funds is susceptible to full accrual on the
government-wide statements.
3. Long-term liabilities are not payable with current financial resources and are
therefore not reported in the governmental funds:
Bonds payable
Accrued interest payable
Compensated absences
NET ASSETS OF GOVERNMENTAL ACTIVITIES
The notes to the [mancial statements are an integral part of this statement.
21
$121,749,380
(29,594,138)
(19,977,701)
(345,245)
(481,096)
$ 29,912,904
92,155,242
5,564,541
(20,804,042)
$106,828,645
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CITY OF ELK RIVER, MINNESOTA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
YEAR ENDED DECEMBER 31,2005
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
Amounts reported for governmental activities in the statement of activities are different because:
1. Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by
which depreciation exceeded capital outlays in the current period.
Capital outlay
Depreciation expense
2. The net effect of various miscellaneous transactions involving capital assets
including donations and disposals, which increase net assets.
Donations
Disposals
Depreciation on disposals
3. Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the governmental funds.
General property taxes
Special assessments
Notes receivable
4. The issuance of long-term debt provides current financial resources to governmental
funds, while the repayment of the principal oflong-term debt consumes the current
financial resources of governmental funds. Neither transaction, however, has any
effect on net assets. This amount is the net effect of these differences in the
treatment of long-term debt and related items.
Issuance of long-term debt
Repayment of principal of long-term debt
5. Some expenses reported in the statement of activities do not require use of current
financial resources and, therefore, are not reported as expenditures in governmental funds.
Accrued interest payable
Compensated absences
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES
The notes to the financial statements are an integral part of this statement.
23
$ 4,586,135
(3,961,479)
3,877,869
(713,352)
317,639
53,545
(924,348)
4,382
(1,715,000)
2,174,266
304
(15,462)
$ 4,377,214
624,656
3,482,156
(866,421)
459,266
(15,158)
$ 8,061,713
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I CITY OF ELK RIVER, MINNESOTA
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
I YEAR ENDED DECEMBER 31, 2005
I Budget Variance with
Original Final Actual Final Budget
REVENUES
I General property taxes $ 5,997,800 $ 5,683,300 $ 5,721,248 $ 37,948
Licenses and permits 871,000 1,188,000 1,240,336 52,336
Intergovernmental revenue 1,017,750 1,332,250 1,353,246 20,996
I Charges for services 700,850 887,950 994,653 106,703
Fines 154,000 154,000 164,216 10,216
Interest income 45,000 75,000 111,242 36,242
Miscellaneous revenue 16,200 16,200 25,532 9,332
I Total revenues 8,802,600 9,336,700 9,610,473 273,773
EXPENDITURES
I Current:
General government 2,141,450 2,160,850 2,055,050 105,800
Public safety 4,311,000 4,391,150 4,451,843 (60,693)
Public works 1,421,100 1,454,100 1,407,269 46,831
I Culture and recreation 1,205,250 1,224,900 1,284,211 (59,311)
Capital outlay:
General government 20,500 20,500 17,620 2,880
Public safety 28,600 99,600 85,724 13,876
I Public works 7,500 7,500 8,419 (919)
Culture and recreation 8,000 8,569 (569)
Total expenditures 9,135,400 9,366,600 9,318,705 47,895
I Revenues over (under) expenditures (332,800) (29,900) 291,768 321,668
OTHER FINANCING SOURCES (USES)
I Transfers in 481,500 494,000 493,135 (865)
Transfers out (148,700) (158,700) (150,902) 7,798
Total other financing sources (uses) 332,800 335,300 342,233 6,933
I Net increase in fund balance 305,400 634,001 328,601
Fund balance - January 1 3,967,380 3,967,380 3,967,380
I Fund balance - December 31 $ 3,967,380 $ 4,272,780 $ 4,601,381 $ 328,601
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I The notes to the financial statements are an integral part of this statement.
I 24
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I
Water Electric Total
I $ 754,023 $ 760,014 $ 9,047,752
1,000,000 1,256,419 2,256,419
I 1,633,679
32,977 25,35 I 84,158
223,699 1,509,318 1,749,549
I 197,268
28,544 938,912 1,769, I 90
7,667 55,855 68,036
2,046,910 4,545,869 16,806,05 I
I
95,066 21,150 146,435
I 11,000 383,897 2,559,195
28,125,688 36,788,875 97,207,371
(5,312,000) (13,928,871) (29,5 16,266)
I 22,824,688 23,243,901 70,250,300
22,919,754 23,265,051 70,396,735
24,966,664 27,810,920 87,202,786
I
68,327 975,088 1,807,920
I 1,441 8,749 24,330
81,958 81,958
14,940 264,217 279,157
556
I 104,605 41,605 250,091
20,487 61,461 110,895
127,272 127,272
410,000 245,000 2,405,000
I 619,800 1,805,350 5,087,179
40,233 . 120,699 184,309
I 2,410,954 2,410,954
5,736,250 2,133,750 10,730,000
5,776,483 4,665,403 13,325,263
I 6,396,283 6,470,753 18,412,442
I 16,678,438 18,326,925 54,577,074
1,000,000 1,256,419 2,256,419
891,943 1,756,823 11,956,851
I $ 18,570,381 $ 21,340,167 $ 68,790,344
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I 26
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CITY OF ELK RIVER, MINNESOTA I
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31, 2005 I
Municipal I
Liquor Garbage Sewer
Sales and cost of sales: I
Sales $ 4,801,541 $ $
Cost of sales (3,505,709)
Gross profit 1,295,832
Operating revenues: I
User charges 1,048,655 1,250,222
Delinquency collections 7,098 I
Other 4,520 9,255 11,631
Total operating revenues 4,520 1,065,008 1,261,853
Operating expenses: I
Personal services 430,364 7,611 303,247
Supplies 70,711 44 65,996
Purchased power I
Other service charges 156,441 1,039,824 327,342
Depreciation 139,907 767,400
Total operating expenses 797,423 1,047,479 1,463,985 I
Operating income (loss) 502,929 17,529 (202,132)
Nonoperating revenues (expenses): I
Connection charges 1,167,045
Interest income 49,287 2,235 147,214 I
Interest expense (41,541) (130,661)
Bond issuance costs (242) (20,281 )
Loss on sale of capital assets (14,426)
Total nonoperating revenues (expenses) 7,504 2,235 1,148,891 I
Income before contributions and transfers 510,433 19,764 946,759
Capital contributions 556,429 I
Transfers in (out) (233,300) 3,480 (33,030)
Change in net assets 277,133 23,244 1,470,158 I
Total net assets - January 1 3,781,870 86,545 23,240,846 I
Total net assets - December 31 $ 4,059,003 $ 109,789 $ 24,711,004
I
The notes to the fmancial statements are an integral part of this statement. I
27 I
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I Water Electric Total
I $ $ $ 4,801,541
(3,505,709)
1,295,832
I 1,347,542 15,426,330 19,072,749
I 15,360 150,599 173,057
2,234 378,511 406,151
1,365,136 15,955,440 19,651,957
I 356,566 1,160,627 2,258,415
192,549 134,818 464,118
I 9,739,500 9,739,500
488,920 2,188,372 4,200,899
790,454 1,553,663 3,251,424
I 1,828,489 14,776,980 19,914,356
(463,353) 1,178,460 1,033,433
I 852,518 545,353 2,564,916
75,685 31,502 305,923
I (263,234) (101,007) (536,443)
(7,705) (2,350) (30,578)
(14,426)
I 657,264 473,498 2,289,392
193,911 1,651,958 3,322,825
I 533,038 1,089,467
(25,739) (388,927) (677,516)
I 701,210 1,263,031 3,734,776
17,869,171 20,077,136 65,055,568
I $ 18,570,381 $ 21,340,167 $ 68,790,344
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CITY OF ELK RIVER, MINNESOTA I
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31,2005 I
Municipal I
Liquor Garbage Sewer
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users $ 4,801,197 $ 1,048,024 $ 2,405,326 I
Other operating cash receipts 4,520 9,255 11 ,631
Payments to suppliers (4,073,944) (1,041,013) (300,413)
Payments to employees (340,037) (6,361) (240,608)
Net cash provided by operating activities 391,736 9,905 1,875,936 I
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES I
Transfers from other funds 3,480
Transfers to other funds (233,300) (33,030)
Increase (decrease) in due to other funds I
Increase in due to other governments
Net cash provided (used) by
non capital financing activities (233,300) 3,480 (33,030) I
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTMTIES
Acquisition of capital assets (1,654,871) (1,211,165) I
Principal paid on capital debt (480,000) (115,000)
Proceeds of revenue bonds 1,196,000 1,635,796
Interest paid on capital debt (22,741) (101,736) I
Principal paid on promissory note
Proceeds from sale of capital assets 54,607
Net cash provided (used) by I
capital and related fmancing activities (961,612) 262,502
CASH FLOWS FROM INVESTING ACTMTIES
Interest received 47,034 2,012 134,261 I
Net increase (decrease) in cash and cash equivalents (756,142) 15,397 2,239,669
Cash and cash equivalents, January 1 2,437,357 77 ,234 5,153,879 I
Cash and cash equivalents, December 31 $ 1,681,215 $ 92,631 $ 7,393,548 I
Reconciliation of cash and cash equivalents I
to the Balance Sheet:
Cash and investments $ 1,681,215 $ 92,631 $ 5,759,869
Restricted cash and investments
Cash with fiscal agent 1,633,679 I
Total cash and cash equivalents $ 1,681,215 $ 92,631 $ 7,393,548
The notes to the fmancial statements are an integral part of this statement. I
29 I
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CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
YEAR ENDED DECEMBER 31,2005
Municipal
Liquor Garbage Sewer
Reconciliation of operating income to net cash
provided (used) by operating activities:
Operating income (loss) $ 502,929 $ 17,529 $ (202,132)
Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:
Other revenue related to operations 1,167,045
Depreciation expense 139,907 767,400
(Increase) decrease in assets:
Accounts receivable (900) (1,722) (3,593)
Due from other funds (6,007) (8,348)
Inventories (316,329)
Prepaid items (437)
Increase (decrease) in:
Accounts payable 58,359 190 152,297
Salaries payable 3,237 (85) 1,291
Deferred revenue 556
Compensated absences 4,414 1,976
Net cash provided by operating activities $ 391,736 $ 9,905 $ 1,875,936
Noncash capital and related financing activities:
Amortization of bond issuance costs $ 242 $ $ 20,281
Assets purchased on account
Disposal of capital assets 15,967 139,013
Contribution of capital assets from developers 556,429
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The notes to the [mancial statements are an integral part of this statement.
31
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I Water Electric Total
I $ (463,353) $ 1,179,460 $ 1,034,433
I 852,518 545,353 2,564,916
790,454 1,553,663 3,251,424
I (98,437) (210,700) (315,352)
(14,355)
(736) (74,287) (391,352)
I (875) (28,544) (29,856)
2,621 93,096 306,563
I (599) 723 4,567
556
1,456 4,369 12,215
I $ 1,083,049 $ 3,063,133 $ 6,423,759
I $ 7,705 $ 2,350 $ 30,578
41,105 41,105
I 154,980
533,038 1,089,467
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ASSETS
Cash
Accounts receivable
Total assets
LIABILITY
Accounts payable
Refundable deposits payable
Total liabilities
CITY OF ELK RIVER, MINNESOTA
STATEMENT OF FIDUCIARY NET ASSETS
DEVELOPER ESCROW AGENCY FUND
DECEMBER 31, 2005
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Agency
Fund
$ 280,520
93,859
$ 374,379
$ 68,869
305,510
$ 374,379
The notes to the financial statements are an integral part of this statement.
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Elk River operates under the "Optional Plan A" form of government as defined in the State of Minnesota
Statutes. Under this plan, the government of the City is directed by a Council composed of an elected Mayor and four
elected Council Members. The Council exercises legislative authority and determines all matters of policy. The Council
appoints personnel responsible for the proper administration of all affairs relating to the City. As required by generally
accepted accounting principles, the financial statements of the reporting entity include those of the City of Elk River (the
primary government) and its component units. The Elk River Municipal Utilities is considered to be part of the primary
government.
The Elk River Public Utilities was established and statutory authority is provided in accordance with Chapter 412.321 of
the Minnesota Statutes and is considered to be part of the City. The Utilities Commission has three council approved
members who serve overlapping three year terms. The statutes provide the City Council all the discretionary authority
necessary to operate the utilities except as its powers have been delegated to the Commission, The Utility funds are
included with the enterprise funds of this report. Separate financial statements for the Utilities may be obtained at the
Elk River Municipal Utilities, 13069 Orono Pkwy, Elk River.
The City has considered all potential units for which it is financially accountable, and other organizations for which the
nature and significance oftheir 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 [mancial accountability. These criteria include appointing a voting majority of
an organization's governing body, and (I) 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 [mancial burdens on the primary
government. The City has the following component units:
Blended Component Unit
The Economic Development Authority (EDA) was created to carry out economic and industrial development and
redevelopment within the City in accordance with policies established by the City Council. The seven member board
consists of three Council Members, the Mayor and three other council approved members. The EDA may not exercise
any of its authorized powers without prior approval of the City Council. The activities of the EDA are blended and
reported as a special revenue fund.
Discretely Presented Component Unit
The Housing and Redevelopment Authority (HRA) is a separate legal entity created for the purpose of providing
redevelopment within the government's jurisdiction. The board consists of five council appointed members, one of
which is a Council Member. The City Council has the ability to approve the HRA's budget. The HRA is presented as a
governmental fund type. Separate [mancial statements for the HRA may be obtained at the City of Elk River, 13065
Orono Pkwy, Elk River.
B. Government-Wide and Fund Financial Statements
The government-wide [mancial statements (i.e., the statement of net assets and the statement of changes in net assets)
report information on all of the nonfiduciary activities of the primary government and its component units. For the most
part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally
are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely
to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from
certain legally separate component units for which the primary government is financially accountable.
34
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset
by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.
Program revenues include I) charges to customers or applicants who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly
included among program revenues are reported instead as general revenues.
Separate fmancial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though
the latter are excluded from the government-wide financial statements. Major individual governmental funds and major
individual enterprise funds are reported as separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual
basis of accounting, as are the proprietary fund fmancial statements. Revenues are recorded when earned and expenses
are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all
eligibility requirements imposed by the provider have been met. The City's only fiduciary funds are agency funds.
Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
Governmental fund financial statements are reported using the current fmancial resources measurement focus and the
modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to
pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be
susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special
assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the
current period. All other revenue items are considered to be measurable and available only when cash is received by the
government.
Non-exchange transactions, in which the City receives value without directly giving equal value in return, include
property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the
year for which the tax is levied. Revenue from grants, entitlements and donations is recognized in the year in which all
eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year
when the resources are required to be used or the year when use is first permitted, matching requirements, in which the
City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the
resources are provided to the City on a reimbursement basis. On a modified accrual basis, revenue from non-exchange
transactions must also be available before it can be recognized.
Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfies. Grants and
entitlements received before eligibility requirements are met are also recorded as deferred revenue. On the modifies
accrual basis, receivables that will not be collected within the available period have also been reported as deferred
revenue in the fund fmancial statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
35
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CITY OF ELK RNER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
The government reports the following major governmental funds:
The General fund is the government's primary operating fund. It accounts for all fmancial resources of the general
government, except those required to be accounted for in another fund.
The Improvement Bonds debt service fund accounts for the resources accumulated and payments made for
principal and interest on long-term general obligation special assessment debt. The proceeds were used to finance
various street, water, sewer and storm sewer improvements.
The Capital Projects fund is used to account for various improvement projects that are financed by the City.
The Permanent Improvement Revolving capital projects fund is used to account for bond proceeds used to fmance
public improvements and to account for special assessment collections levied for the improvements.
The Tax Increment Financing Districts capital projects fund is used to account for administrative and
development costs associated with the various tax increment fmancing projects.
The government reports the following major proprietary funds:
The Municipal Liquor fund accounts for the operations of the City's off-sale liquor stores.
The Garbage fund accounts for the activities of the City's garbage collection and recycling program.
The Sewer fund accounts for the activities of the City's sanitary sewer treatment system.
The Water fund accounts for the activities of the City's water distribution system.
The Electric fund accounts for the activities of the City's electric distribution system
Additionally, the government reports the following fund types:
The Developer Escrow agency fund is used to account for resources received from developers for the payment of
expenses incurred by the City for private development projects. The Developer Escrow agency fund is omitted
from the government-wide financial statements, and is included separately within the statement of fiduciary net
assets.
Private-sector standards of accounting and fmancial reporting issued prior to December 1, 1989, generally are followed
in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict
with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of
following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same
limitation. The government has elected not to follow subsequent private-sector guidance.
As a general rule, the effect of interfund activity has been eliminated from government-wide financial statements.
Exceptions to this general rule are charges between the City's sewer, water and electric functions and various other
functions of the government. Elimination of these charges would distort the direct costs and program revenues reported
for the various functions concerned.
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges
provided, 2) operating grants and 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.
36
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with a proprietary
fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to
customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services,
administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are
reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted
resources fIrst, then unrestricted resources as they are needed.
D. Assets, Liabilities, and Net Assets or Equity
1. Deposits and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments
with original maturities of three months or less from the date of acquisition.
Cash balances from all funds are combined and invested to the extent available in authorized investments. Earnings
from such investments are allocated to the respective funds on the basis of applicable cash balance participation of
each fund. Investments are reported at fair value, based upon quoted market prices. The Minnesota Municipal
Money Market fund operates in accordance with appropriate State of Minnesota laws and regulations. The reported
value of the pool is the same as the fair value of the pool shares. Financial statements of the Minnesota Municipal
Money Market fund can be obtained by contacting Voyageur Asset Management at 100 South Fifth Street, Suite
2300, Minneapolis, MN 55402-1240.
2. Receivables and Payables
Due TolFrom Other Funds
During the course of operations, numerous transactions occur between individual funds for goods provided or
services rendered. These receivables and payables are classifIed as "due from other funds" or "due to other funds" on
the balance sheets of the fund fInancial statements. Any residual balances outstanding between the governmental
activities and business-type activities are reported in the government-wide [mancial statements as "internal balances."
Property Taxes
The City Council annually adopts a tax levy and certifIes it to the County in December each year for collection the
following year. The County is responsible for collecting all property taxes for the City. These taxes attach an
enforceable lien on taxable property as of January 1 and are payable by the property owner in May and October each
year. The taxes are collected by the County Treasurer and tax settlements are made to the City three times a year, in
January, July and December.
Taxes payable on homestead property, as defIned by Minnesota statutes, are partially reduced by a market value
credit aid. The credit is paid to the City by the State in lieu of taxes levied against the homestead property. The State
remits this credit in two equal installments in October and December each year.
In the fund fInancial statements, taxes that remain unpaid at December 31 are classifIed as delinquent taxes receivable
and are fully offset by deferred revenue, because they are not known to be available to fInance current expenditures.
Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements.
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Accounts Receivable
Accounts receivable include amounts billed for services provided before year end. 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. No substantial losses from present receivable balances are anticipated.
Special Assessments
Special assessments receivable include the following components:
· Delinquent - includes amounts billed to property owners but not paid.
· Deferred - includes assessment installments that will be billed to property owners in future
years.
Special assessments in the fund financial statements are recognized as receivable and deferred revenue when the levy
against the benefited property is adopted by the City Council and certified to the County for collection. Deferred
revenue for governmental activities is susceptible to full accrual on the government-wide statements.
Notes Receivable
The City received grant proceeds from the State of Minnesota to fund economic development projects. These funds
have been loaned to several businesses and the terms of repayment vary with each loan. Under terms of the grant
agreement, a portion of the original grant will be returned to the State of Minnesota and is reported as a due to other
governments liability. The portion of the notes receivable loaned to businesses is offset by deferred revenue.
Deferred revenue in governmental activities is susceptible to full accrual on the government-wide statements.
3. Inventories and Prepaid Items
For proprietary funds, inventories are valued at cost, which approximates market, based on physical counts.
Inventories are recorded as an expense when consumed rather than when purchased.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in
both government-wide and fund financial statements.
4. Restricted Assets
The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond
issues. They will be used for future debt service.
5. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and
similar items), are reported in the applicable governmental or business-type activities columns in the government-
wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of
more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or
estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to
the value of the asset or materially extend assets lives are not capitalized. Donated capital assets are recorded at
estimated fair market value at the date of donation.
With the initial capitalization of general infrastructure assets (Le., 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.
38
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property, plant, and equipment of the City, as well as the component units, are depreciated using the straight line
method over the following estimated useful lives:
Assets
Buildings and improvements
Other park improvements
Machinery and equipment
Public domain infrastructure
System infrastructure
Years
10 - 40
10 - 20
3 - 20
15 - 50
4 - 50
6. Compensated Absences
It is the government's policy to permit employees to accumulate earned but unused vacation and sick pay benefits.
Unused vacation can be accrued by the employees up to a maximum of240 hours, the limit of which is determined
by years of service. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial
statements. A liability for these amounts is reported in governmental funds only if they have matured, for example,
as a result of employee resignations and retirements.
Employees can also accrue an unlimited amount of unused sick leave. Employees with five or more years of service
are entitled to receive severance pay equal to a percentage of unused sick pay ranging from 15-25 percent based on
years of service, up to a maximum of 240 hours. The liability for severance pay is accounted for the same as accrued
vacation pay.
7. Long-term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term
debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type
activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs,
are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective
interest method.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond
issuance costs, during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are
reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are
reported as debt service expenditures.
8. Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not
available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of
fund balance represent tentative management plans that are subject to change.
9. Net Assets
In the government-wide financial statements, net assets represent the difference between assets and liabilities. Net
assets are displayed in three components:
a. Invested in capital assets, net of related debt - Consists of capital assets, net of accumulated depreciation
reduced by and outstanding debt attributable to acquire capital assets.
b. Restricted net assets - Consist of net assets restricted when there are limitations imposed on their use
through external restrictions imposed by creditors, grantors, laws or regulations of other governments.
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in
capital assets, net of related debt".
Note 2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated
budgets are legally adopted for the General fund and the Library Maintenance, 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 year end.
On or before July 1 of each year, all departments and agencies of the City submit requests for appropriation to the City's
administrator so that a budget may be prepared. Before September 15, the proposed budget is presented to the City
Council for review and approval. The City Council holds public hearings and may add to, subtract from, or change
appropriations. Any changes in the budget must be within the revenue and reserves estimated as available or the revenue
estimates must be changed by an affirmative vote by a majority of the City Council.
The budget is prepared by fund, function, and activity and includes information on the past year, current year estimates,
and requested appropriations for the next fiscal year. Expenditures may not legally exceed budgeted appropriations at
the fund level without Council approval. Spending control is established by the amount of expenditures budgeted for the
fund, but management control is exercised at the department level. Reported budget amounts are as originally adopted or
as amended by Council approved supplemental appropriations and budget transfers. Supplemental budgetary
appropriations increased $305,400 due mainly to increased collections oflicense and permit revenues.
B. Excess of Expenditures Over Appropriations
For the year ended December 31, 2005, expenditures exceeded appropriations in the Ice Arena fund by $79,906 and the
Landfill fund by $18,131. These over expenditures were funded by greater than anticipated revenues, available fund
balances and future revenues.
C. Deficit Fund Equity
The Improvement Projects fund had a deficit fund balance of$145,899. The fund deficit is expected to be covered with
future fund revenues.
Note 3: DETAILED NOTES ON ALL FUNDS
A. Deposits and Investments
Deposits
Custodial credit risk for deposits is the risk that in the event of a bank failure, the City's deposits may not be returned or
the City will not be able to recover collateral securities in the possession of an outside party. In accordance with
Minnesota statutes, the City maintains deposits at the depository banks authorized by the City Council, all of which are
members of the Federal Reserve System. Minnesota Statutes require that all City deposits be protected by insurance,
surety bond, or collateral. The market value of collateral pledged must equalll 0% of the deposits not covered by
insurance or bonds (140% in the case of mortgage notes pledged). Authorized collateral includes the legal investments
as prescribed by Minnesota statutes, as well as certain first mortgage notes, and certain other state or local government
40
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
obligations. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer
or in a fmancial institution other than that furnishing the collateral.
At year end, the City's carrying amount of deposits was $4,585,183 and the bank balance was $5,366,417. The bank
balance was covered by federal depository insurance totaling $410,909 and the remaining balance was covered by
securities held by the pledging financial institution's agent in the City's name.
The carrying amount of deposits for the HRA, a discretely presented component unit, was $232,421 and the bank
balance was $232,411. The bank balance was covered by federal depository insurance totaling $100,000 and the
remaining balance was covered by securities held by the pledging financial institution's agent in the HRA' s name.
Investments
Minnesota Statutes authorize the City to invest in the following:
a. Direct obligations or obligations guaranteed by the United States or its agencies.
b. Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only
investments are in securities described in (a) above.
c. General obligations of the State of Minnesota or any of its municipalities.
d. Bankers acceptances of United States Banks eligible for purchase by the Federal Reserve System.
e. Commercial paper of the highest quality issued by United States corporations or their Canadian subsidiaries and
maturing in 270 days or less.
f. Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with
capitalization exceeding $10,000,000, a primary reporting dealer in U.S. government securities to the Federal
Reserve Bank of New York or certain Minnesota securities broker-dealers.
g. Guaranteed investment contracts (GIC's) issued or guaranteed by United States commercial banks or domestic
branches of foreign banks or United States insurance companies if similar debt obligation of the issuer or the
collateral pledged by the issuer is in the top two rating categories, or in the top three rating categories for long-
term GIC's issued by Minnesota banks.
The City's investment policy does not allow the City to invest in reverse repurchase agreements or guaranteed
investment contracts.
The City's investments are potentially subject to various risks including the following:
· Custodial credit risk - The risk that in the event of a failure of the counterparty to an investment transaction
(typically a broker) the government would not be able to recover the value of the investment or collateral
securities.
· Credit risk - The risk that an issuer or other counterparty to an investment will not fulfill its obligations.
· Concentration risk - Investing 5 percent or more of the City's investments in the securities ofa single issuer. At
year end, the City's investment portfolio included securities held with Sunbelt Funding of $2,580,055 and
General Electric of $5,256,480. The City's investment policy does not allow for the undue concentration of
investments with one broker or fmancial institution, or any one type of instrument.
· Interest rate risk - 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
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
City's investment policy requires the investment maturities to be staggered to avoid concentration at a specific
maturity sector. The maturities selected shall provide for stability of income and reasonable liquidity.
As of December 31,2005, the City had the following investments that are insured or registered, or securities held by the
City or its agent in the City's name.
Types of Investments
Pooled investments:
Minnesota Municipal Money Market Fund
Credit
Quality/
Ratings (1)
Segmented
Time
Distribution (2)
N/A
Less than 6 months
Total pooled investments
Non-pooled investments:
U.S. Government Securities
AAA
AAA
AAA
AAA
Less than 6 months
6 to 12 months
1 to 5 years
More than 5 years
Total U.S. Government Securities
Commercial Paper
PI
Less than 6 months
Negotiable CD's
N/A
Less than 6 months
Total non-pooled investments
Total investments
Deposits
Cash on hand
Total cash and investments
Fair Value
and
Carrying
Amount
$ 2,224,042
2,224,042
5,917,674
1,335,142
5,815,433
3,258,209
16,326,458
18,752,933
1,345,715
36,425,106
38,649,148
4,585,183
6,770
$ 43,241,101
(1) Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk.
(2) Interest rate risk is disclosed using the segmented time distribution method.
N/ A Indicates not applicable.
42
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Cash and investments are presented in the [mancial statements as follows:
Primary
Government
Component
Unit - HRA
Statement of Net Assets
Cash and investments
Restricted cash and investments
Cash with fiscal agent
Statement of Fiduciary Net Assets
Cash and investments
$ 38,554,915
2,256,419
2,149,247
$ 232,421
280,520
Total
$ 43,241,101
$ 232,421
B. Deferred Revenue
Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be
available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection
with resources that have been received, but not yet earned. At the end ofthe current fiscal year, the various components
of deferred revenue and unearned revenue reported in the governmental funds were as follows:
Unavailable Unearned
Delinquent property taxes receivable:
General fund $ 150,497 $
Improvement bonds 3,513
Capital projects 5,298
Nonmajor funds 38,063
Delinquent special assessments:
Improvement bonds 22,758
Capital projects 6,494
Permanent improvement revolving 2,620
Special assessments not yet due:
Improvement bonds 3,948,198
Capital projects 1,132,598
Permanent improvement revolving 73,213
Notes receivable not yet due:
Nonmajor funds 181,289
Unearned miscellaneous fees:
Nonmajor funds 8,695
Total $ 5,564,541 $ 8,695
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
C. Capital Assets
In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the
government-wide statement of net assets. Capital asset activity for the year ended December 31, 2005 was as follows:
Adjustments
Beginning Due to Ending
Primary Government Balance Restatement Additions Deletions Balance
Governmental activities:
Capital assets not being depreciated:
Land $ 29,033,685 $ 1,290,000 $ 1,539,970 $ (373,688) $ 31,489,967
Construction in progress 2,432,002 2,432,002
Total capital assets
not being depreciated 29,033,685 1,290,000 3,971,972 (373,688) 33,921,969
Capital assets being depreciated:
Buildings 18,525,212 419,143 18,944,355
Other improvements 1,923,177 291,305 2,214,482
Equipment 6,109,160 1,251,923 (339,664) 7,021,419
Infrastructure 57,102,256 2,544,899 59,647,155
Total capital assets
being depreciated 83,659,805 4,507,270 (339,664) 87,827,411
Less accumulated depreciation for:
Buildings 3,462,404 778,067 4,240,471
Other improvements 706,440 125,003 831,443
Equipment 3,623,293 603,568 (317,639) 3,909,222
Infrastructure 18,142,923 2,470,079 20,613,002
Total accumulated depreciation 25,935,060 3,976,717 (317,639) 29,594,138
Total capital assets
being depreciated, net 57,724,745 530,553 (22,025) 58,233,273
Governmental activities
capital assets, net $ 86.758.430 $ 1.290.000 $ 4.502.525 $ (395.713) $ 92.155242
44
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Beginning Ending
Primary Government Balance Additions Deletions Balance
Business-type activities:
Capital assets not being depreciated:
Land $ 1,442,669 $ $ $ 1,442,669
Construction in progress 1,030,122 3,308,819 (3 ,222,415) 1,116,526
Total capital assets
not being depreciated 2,4 72, 791 3,308,819 (3 ,222,415) 2,559,195
Capital assets being depreciated:
Buildings 13,572,278 1,678,671 (25,924) 15,225,025
Equipment 647,904 133,479 (129,057) 652,326
Collection and distribution 76,109,528 5,220,491 81,330,019
Total capital assets
being depreciated 90,329,710 7,032,641 (154,981) 97,207,370
Less accumulated depreciation for:
Buildings 4,466,557 469,301 (21,416) 4,914,442
Equipment 275,688 63,711 (64,532) 274,867
Collection and distribution 21 ,594,424 2,732,532 24,326,956
Total accumulated depreciation 26,336,669 3,265,544 (85,948) 29,516,265
Total capital assets
being depreciated, net 63,993,041 3,767,097 (69,033) 67,691,105
Business-type activities
capital assets, net $ 66.465.832 $ 7.075.916 $(3 .291.448) $ 70.250.300
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government
Public safety
Public works
Culture and recreation
$ 283,426
650,058
2,632,011
395,984
Total depreciation expense - governmental activities
$ 3.961.479
Business-type activities:
Municipal liquor
Sewer
Water
Electric
$ 139,907
767,400
790,454
1,553,663
Total depreciation expense - business-type activities
$ 3.251.424
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Construction commitments
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
At December 31, 2005, the City had construction project contracts in progress. The commitments related to the
remaining contract balances are summarized as follows:
Project
2005 Street Rehabilitation
Northstar Business Park
Public Works Paving
Fire Station Expansion
WWTP Headworks Improvements
Total
D. Interfund Receivables, Payables, and Transfers
Spent
to date
$ 790,512
604,619
163,886
123,182
425,846
$ 2,108,045
Due to/from other funds:
The composition of interfund balances as of December 31, 2005 is as follows:
Receivable Fund
General
Capital projects
Garbage
Sewer
Nonmajor governmental funds
Total
Payable Fund
Electric
Nonmajor governmental funds
Electric
Electric
General
Tax increment financing districts
Water
Electric
Nonmajor governmental funds
Remaining
Commitment
$ 134,534
40,796
63,594
366,518
1,350,154
$ 1,955,596
Amount
$ 39,822
186,656
89,956
107,312
2,553
480,189
14,940
27,127
19,759
$ 968,314
The interfund receivable and payable balances result mainly from the distribution of utility collections and the
lendinglborrowing arrangements to cover deficit cash balances at the end of the year.
46
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
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Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Interfund transfers:
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Transfer Out
$ 150,902
14,772
236,812
150,120
1,658,853
2,211,459
233,300
33,030
25,739
388,927
680,996
$ 2.892,455
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Governmental funds:
Major funds -
General fund
Improvement bonds
Capital projects
Permanent improvement revolving
Tax increment financing districts
Nonmajor funds
Total governmental funds
Transfer In
$ 493,135
416,941
173,817
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1,805,082
2,888,975
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Proprietary funds:
Municipal liquor
Garbage
Sewer
Water
Electric
Total proprietary funds
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Total
$ 2.892,455
Interfund transfers are used to 1) allocate resources to the funds that received benefit from services provided by another
fund, 2) move revenues from the fund with collection authorization to debt service funds as principal and interest
payments come due, and 3) close completed bond and project funds.
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E. Long-term Debt
The City issues general obligation bonds and equipment certificates to provide funds for the acquisition and construction
of major capital facilities. The reporting entity's long-term debt is segregated between the amounts to be repaid from
governmental activities and amounts to be repaid from business-type activities.
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Issue Maturity Interest Authorized Payable
Date Date Rate and Issued 12/31/05
GOVERNMENTAL ACTIVITIES:
General Obligation Revenue Bonds:
1994C G.O. Storm Sewer Revenue Bonds 6/1/1994 12/1/2009 5.40-5.80% $ 1,080,000 $ 385,000
1996C G.O. Ice Arena Bonds 8/1/1996 12/1/2013 5.70% 2,100,000 1,260,000
Total general obligation revenue bonds 3,180,000 1,645,000
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I CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
I DECEMBER 31,2005
I Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Issue Maturity Interest Authorized Payable
Date Date Rate and Issued 12/31/05
I Lease Revenue Bonds:
1997 City Hall and Law Enforcement
Facility Revenue Refunding Bonds 12/1/1997 2/1/20 II 4.75-5.00% $ 2,295,000 $ 1,365,000
I 2002A Public Safety Building Lease
Revenue Bonds 9/1/2002 2/1/2023 2.00-4.85% 8,000,000 7,420,000
I Total lease revenue bonds 10,295,000 8,785,000
Special Assessment Bonds:
I 1997A G.O. Improvement Bonds 8/1/1997 2/1/2006 4.375-5.00% 1,165,000 285,000
1998A G.O. Improvement Bonds 12/1/1998 2/1/2009 3.55-4.30% 1,375,000 295,000
1999A G.O. Improvement Bonds 7/1/1999 2/1/2006 4.10-5.00% 5,725,000 3,510,000
2000C G.O. Improvement Refunding Bonds 11/1/2000 2/1/2006 4.40-4.70% 900,000 375,000
I 2003A G.O. Improvement Bonds 12/9/2003 2/1/2014 2.00-4.00% 1,255,000 1,070,000
2005A G.O. Improvement Bonds 6/14/2005 2/1/2016 2.75-3.70% 1,070,000 1,070,000
I Total special assessment bonds 11,490,000 6,605,000
Permanent Improvement Revolving Bonds:
I 2000B G.O. Improvement Bonds 11/1/2000 2/1/2006 4.40-5.40% 1,275,000 935,000
Tax Increment Bonds
I 1992D G.O. Tax Increment Bonds 11/10/1992 2/1/2007 7.9% 160,000 37,500
2000A G.O. Tax Increment Bonds 11/1/2000 2/1/2015 4.45-5.30% 800,000 675,000
2000D G.O. Tax Increment Refunding Bonds 11/1/2000 2/1/2007 6.70-7.40% 510,000 260,000
I Total general obligation tax increment bonds 1,470,000 972,500
Certificates of Indebtedness:
I 2001 G.O. Fire Equipment Certificates 12/1/2001 2/1/2006 3.75% 202,000 50,500
2003 G.O. Equipment Certificates 2/28/2003 2/1/2006 2.25% 357,100 119,034
2004 G.O. Equipment Certificates 6/1/2004 2/1/2007 2.50% 331,000 220,667
I 2005D G.O. Equipment Certificates 6/1/2005 2/1/2010 3.90% 645,000 645,000
Total equipment certificates 1,535,100 1,035,201
I Total bonded indebtedness 29,245,100 19,977,701
Compensated absences payable 481,096
I Total governmental activities indebtedness $ 29,245,100 $ 20,458,797
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Issue Maturity Interest Authorized Payable
Date Date Rate and Issued 12/31/05
BUSINESS-TYPE ACTIVITIES:
General Obligation Revenue Bonds:
1996A G.O. Sewer Revenue Bonds 7/1/1996 2/1/2006 5.00-5.80% $ 2,655,000 $ 1,750,000
1997B G.O. Water Revenue Bonds 8/1/1997 2/1/2007 4.00-4.90% 335,000 80,000
1998B G.O. Water Revenue Bonds 12/1/1998 2/1/2014 4.10-5.00% 820,000 555,000
2001A G.O. Water Revenue Bonds 10/1/2001 2/1/2022 2.50-4.90% 3,590,000 3,285,000
2002B City Hall Expansion Revenue Bonds 9/1/2002 2/1/2023 3.00-5.00% 1,695,000 1,585,000
2003B G.O. Water Revenue Bonds 12/9/2003 2/1/2014 2.00-3.70% 1,995,000 1,830,000
2004A Electric Revenue Bonds 8/1/2004 2/1/2015 3.00-4.25% 940,000 940,000
2005B G.O. Sewer Revenue Refunding Bonds 6/14/2005 2/1/2016 3.00-4.00% 1,660,000 1,660,000
2005C Liquor Revenue Bonds 6/1/2005 2/1/2015 4.50% 1,200,000 1,200,000
Total general obligation revenue bonds 14,890,000 12,885,000
Certificates of Indebtedness:
2002 G.O. Electric Equipment Certificates 6/17/2002 2/1/2007 4.90% 500,000 250,000
Total bonded indebtedness 15,390,000 13,135,000
Promissory note 03/19/02 12/31/22 -% 2,860,000 2,538,226
Compensated absences payable 295,204
Total business-type activities indebtedness $ 18,250,000 $ 15,968,430
Total City indebtedness $ 47,495,100 $ 36,427,227
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Annual debt service requirements to maturity for general obligation bonds are as follows:
Governmental Activities
G.O. Revenue Bonds Lease Revenue Bonds Special Assessment Bonds
Principal Interest Principal Interest Principal Interest
2006 $ 215,000 $ 93,605 $ 520,000 $ 363,854 $ 4,475,000 $ 179,036
2007 230,000 81,520 535,000 344,825 395,000 64,339
2008 245,000 68,505 560,000 323,815 270,000 54,702
2009 255,000 54,540 585,000 300,744 275,000 45,795
2010 160,000 39,900 615,000 275,730 200,000 38,011
2011-2015 540,000 62,700 2,010,000 1,107,944 875,000 92,633
2016 - 2020 2,310,000 666,680 115,000 2,128
2021 - 2023 1,650,000 121,656
Total $ 1,645,000 $ 400,770 $ 8,785,000 $ 3,505,248 $ 6,605,000 $ 476,644
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I CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
I DECEMBER 31,2005
I Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Governmental Activities
PIR Bonds Tax Increment Bonds Certificates of Indebtedness
I Principal Interest Principal Interest Principal Interest
2006 $ 935,000 $ 23,226 $ 145,000 $ 50,495 $ 337,867 $ 34,640
I 2007 152,500 41,166 257,084 21,411
2008 95,000 33,657 146,750 14,308
2009 105,000 27,953 146,750 8,585
I 2010 100,000 22,061 146,750 2,862
2011 - 2015 375,000 50,185
2016 - 2020
I 2021 - 2023
Total $ 935,000 $ 23,226 $ 972,500 $ 225,517 $ 1,035,201 $ 81,806
I Business-Type Activities
G.O. Revenue Bonds Certificates of Indebtedness Notes Payable
Principal Interest Principal Interest Principal Interest
I 2006 $ 2,280,000 $ 471,808 $ 125,000 $ 9,188 $ 127,272 $
2007 740,000 422,535 125,000 3,062 129,556
I 2008 745,000 397,653 131,945
2009 800,000 370,468 134,255
2010 835,000 340,338 136,485
I 2011-2015 4,725,000 1,145,355 716,709
2016 - 2020 1,835,000 439,445 771,684
2021 - 2023 925,000 56,323 390,320
I Total $ 12,885,000 $ 3,643,925 $ 250,000 $ 12,250 $ 2,538,226 $
I Long-term liability activity for the year ended December 31,2005 was as follows:
Beginning Ending Due Within
I Balance Additions Reductions Balance One Year
Governmental activities:
Bonds payable:
I G.O. revenue bonds $ 1,850,000 $ $ (205,000) $ 1,645,000 $ 215,000
Lease revenue bonds 9,285,000 (500,000) 8,785,000 520,000
Special assessment bonds 6,460,000 1,070,000 (925,000) 6,605,000 4,475,000
PIR bonds 1,020,000 (85,000) 935,000 935,000
I Tax increment bonds 1,116,000 (143,500) 972,500 145,000
Certificates of indebtedness 705,967 645,000 (315,766) 1,035,201 337,867
Total bonds payable 20,436,967 1,715,000 (2,174,266) 19,977,701 6,627,867
I Compensated absences 465,634 313,667 (298,205) 481,096 260,075
Governmental activity
I long-term liabilites $ 20.902.601 $ 2.028.667 $(2.4 72.4 71) $ 20.458.797 $ 6.887.942
I 50
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Business-type activities:
Bonds payable
G.O. revenue bonds $ 11,050,000 $ 2,860,000 $(1,025,000) $ 12,885,000 $ 2,280,000
Certificates of indebtedness 375,000 (125,000) 250,000 125,000
Total bonds payable 11,425,000 2,860,000 (1,150,000) 13,135,000 2,405,000
Notes payable 2,663,145 (124,919) 2,538,226 127,272
Compensated absences 282,989 38,933 (26,718) 295,204 110,895
Business-type activity
long-term liabilities $ 14.371.134 $ 2.898.933 $(1.301.637) $ 15.968.430 $ 2.643.167
For the governmental activities, bonds payable can be summarized in the following categories:
The general obligation revenue bonds were used for the construction of various drainage projects and expansion of
an indoor ice arena. The bonds are payable from revenues but are backed by the full faith and credit of the City.
The lease revenue bonds were used for the construction of city hall and a public safety building and the expansion of
city hall. The bonds are payable from annual lease payments received by the EDA from the City.
The special assessment bonds are used to finance assessable improvements within the City. The bonds are payable
primarily from special assessments levied against properties benefited by the improvements. In addition, the bonds
are general obligations of the City and are backed by its full faith and credit.
The permanent improvement revolving bonds are used to finance assessable improvements within the City. The
bonds are payable primarily from special assessments levied against properties benefited by the improvements. In
addition, the bonds are general obligations of the City and are backed by its full faith and credit.
The tax increment bonds are used to [mance land acquisition and other public costs to facilitate development within
the tax increment district. The bonds are payable from tax increment revenues generated by existing and new
development within the district. In addition, the bonds are general obligation of the City and are backed by its full
faith and credit.
The certificates of indebtedness are used to finance the purchase of capital equipment. The certificates are general
obligations backed by the full faith and credit of the City.
For the governmental activities, compensated absences are generally liquidated through the General Fund.
For the business-type activities, the general obligation revenue bonds are used to [mance the acquisition and construction
of major capital facilities and the certificates of indebtedness are used to [mance the purchase of equipment. The bonds
and certificates are payable from net revenues of the benefiting enterprise fund but are backed by the full faith and credit
of the City. The City also issued a promissory note to provide for the construction of a landfill gas generator. The note
is to be paid from revenue of the system and is secured by the facility.
The City issued $1,660,000 General Obligation Sewer Revenue Refunding Bonds, Series 2005B, the proceeds of which
will be used to refund in advance the 2007-2016 maturities of the General Obligation Sewer Revenue Bonds, Series
1996. On February 1,2006, the escrow account will be used to call the $1,630,000 remaining principal of the General
Obligation Sewer Revenue Bonds, Series 1996. Until this call date the City will continue to make debt service payments
on the General Obligation Sewer Revenue Bonds, Series 1996 issue, while the interest payments on the General
Obligation Sewer Revenue Refunding Bonds, Series 2005B issue will be paid from proceeds on the escrow account.
This "crossover refunding" was undertaken to reduce its total debt service payments over the next ten years by $175,500
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CITY OF ELK RNER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 3: DETAILED NOTES ON ALL FUNDS - CONTINUED
and to obtain an economic gain (difference between the present value of the debt service payments on the old and new
debt) of$141,070. Assets held with the escrow agent total $1,633,679 at December 31, 2005.
Note 4. OTHER INFORMATION
A. Risk Management
The City is exposed to various risks of loss related to torts; theft of damage to and destruction of assets; errors and
omissions; injuries to employees; and natural disasters for which the City carries insurance. The City obtains insurance
through participation in the League of Minnesota Cities Insurance Trust (LMCIT) which is a risk sharing pool with
approximately 800 other governmental units. The City pays an annual premium to LMCIT for its workers compensation
and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for
claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the City's coverage
in any of the past three fiscal years.
Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably
estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported (IBNRs). The City's
management is not aware of any incurred but not reported claims.
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.
C. Territorial Acquisition Agreement
The Utilities has entered into an agreement to transfer ownership of electric plant and electric service to customers in
certain areas currently receiving electric service from Connexus Energy.
The cost of property purchased from Connexus Energy will be net book value. The Utilities will also pay for loss of
revenue for each area acquired based on a formula outlined in the agreement.
In addition, the Utilities will compensate Connexus Energy for the loss of revenue from the future sale of electricity to
electric customers in the areas acquired from Connexus Energy for a period often years from the date of sale of each
individual area.
During 2005 and 2004, the Utilities paid $324,824 and $333,787, respectively, under this agreement, including $19,039
and $185,933 in 2005 and 2004, respectively, for loss of revenues. All amounts paid are included in property and
equipment.
52
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 4. OTHER INFORMATION - CONTINUED
D. Pension Plans
1. Public Employees Retirement Association
a. Plan Description
All full-time and certain part-time employees of the City of Elk River are covered by defined benefit pension
plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers
the Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF) which
are cost-sharing, multiple-employer retirement plans. These plans are established and administered in
accordance with Minnesota Statutes, Chapters 353 and 356.
PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are
covered by Social Security and Basic Plan members are not. All new members must participate in the
Coordinated Plan. All police officers, fire fighters and peace officers who qualify for membership by statute are
covered by the PEPFF.
PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon
death of eligible members. Benefits are established by state statute, and vest after three years of credited
service. The defmed retirement benefits are based on a member's highest average salary for any five successive
years of allowable service, age, and years of credit at termination of service.
Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring
member receives the higher of step-rate benefit accrual formula (Method 1) or a level accrual formula (Method
2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each
of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a
Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each
remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan
members and 1.7 percent for Coordinated Plan members for each year of service. For PEPFF members, the
annuity accrual rate is 3.0 percent for each year of service. For all PEPFF and PERF members hired prior to
July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of
service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members
hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at
66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to
eligible members seeking early retirement.
There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime
annuity that ceases upon the death of the retiree-no survivor annuity is payable. There are also various types
of joint and survivor annuity options available which will be payable over joint lives. Members may also leave
their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at
retirement age. Refunds of contributions are available at any time to members who leave public service, but
before retirement benefits begin.
The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to
active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them
yet are bound by the provisions in effect at the time they last terminated their public service.
PERA issues a publicly available financial report that includes financial statements and required supplementary
information for PERF and PEPFF. 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.
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 4. OTHER INFORMATION - CONTINUED
b. Funding Policy
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are
established and amended by the state legislature. The City makes annual contributions to the pension plans
equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are
required to contribute 9.10% and 5.10%, respectively, of their annual covered salary in 2005. Contribution
rates in the Coordinated Plan will increase in 2006 to 5.5%. PEPFF members are required to contribute 6.20%
of their annual covered salary in 2005. That rate will increase to 7.0% in 2006. The City of Elk River is
required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF
members, 5.53% for Coordinated Plan PERF members, and 9.30% for PEPFF members. Employer contribution
rates for the Coordinated Plan and PEPFF will increase to 6.0% and 10.5% respectively effective January 1,
2006. The City's contributions to the Public Employees Retirement Fund for the years ending December 31,
2005,2004 and 2003 were $368,213, $314,861 and $265,698, respectively. The City's contributions to the
Public Employees Police & Fire Fund for the years ending December 31,2005,2004, and 2003 were $180,763,
$169,689 and $149,658, respectively. The City's contributions were equal to the contractually required
contributions for each year as set by state statute.
2. Volunteer Fire Department Relief Association
a. Plan Description
The Elk River Fire Relief Association is the administrator of a single employer public employee defined benefit
retirement system (PERS) established to provide benefits for members of the Elk River Fire Department.
The Fire Relief Association maintains a separate Special Fund to accumulate assets to fund the retirement
benefits earned by the Fire Department's membership. Funding for the relief association is derived primarily
from an insurance premium tax in accordance with the Volunteer Firefighter's Relief Association Financing
Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980).
The Fire Relief Association issues a publicly available fmancial report that includes financial statements and
required supplementary information. The report may be obtained by writing to the Elk River Fire Department
Relief Association, 13073 Orono Parkway, Elk River, MN 55330.
b. Funding Policy
The fmancia1 requirements of the Special Fund are determined in accordance with Section 69.772 of the
Minnesota Statutes, which requires the payment of pension benefits in a lump sum or optionally in annual
installments. The Association is comprised of volunteers and therefore members have no contribution
requirements. The following summarizes the City's annual pension cost and other related information for the
current year:
Annual pension cost
$136,429
Contributions made:
City (voluntary)
State aid
$28,100
$136,429
Actuarial valuation date
12/31/05
Actuarial cost method
Entry age normal
Amortization method
Level dollar closed
54
CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
Note 4. OTHER INFORMATION - CONTINUED
Remaining amortization period:
Normal cost
Prior service cost
20 years
5 years
Asset valuation method
Market
Actuarial assumptions:
Investment rate of return
Projected salary increases
Inflation rate
Cost of living adjustment
5%
N/A
N/A
None
Three-Year Trend Information
Annual Percentage Net
Year Pension of APC Pension
Ending Cost (APC) Contributed Obligation
12/31/03 $112,146 123% $0
12/31/04 147,589 117% 0
12/31/05 136,429 121% 0
Required Supplementary Information - Schedule of Funding Progress
Assets in
Excess of Pension
Actuarial Actuarial Actuarial (Unfunded) Benefit
Valuation Value of Accrued Percentage Accrued Per Year
Date Assets Liabilities Funded Liability of Service
12/31/03 $1,354,326 $1,378,916 98.2% $(24,590) $3,575
12/31/04 1,646,533 1,664,129 98.9 (17,596) 4,000
12/31/05 1,886,585 1,781,082 105.9 105,503 4,000
E. Segment Information
The City maintains five enterprise funds that account for the municipal liquor operations, garbage collections, and sewer,
water and electric utilities. The City considers each of its enterprise funds to be a segment. Since the required segment
information is already included in the City's proprietary funds' balance sheet and statement of revenues, expenses, and
changes in net assets balance, this information has not been repeated in the notes to the basic fmancial statements.
F. Conduit Debt Obligations
From time to time, the City has issued industrial revenue bonds to provide fmancial assistance to private-sector entities
for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds
are secured by the property fmanced 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 fmancial statements.
As of December 31, 2005, there were five series of industrial revenue bonds outstanding, with an estimated aggregate
principal amount payable of$20,845,000.
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CITY OF ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005
Note 4. OTHER INFORMATION - CONTINUED
G. Prior Period Adjustment
An adjustment is required for the December 31, 2004 carry forward (net asset) balance of the governmental funds to
record the omission of governmental capital assets. The following schedule reconciles the December 31,2004 net asset
balance as restated:
Fund balance - December 31, 2004
Prior period adjustment - capital assets omitted in 2004
Total net assets as restated - January 1,2005
H. Subsequent Events
$97,476,932
1.290.000
$98.766.932
On March 2, 2006, the City issued $3,595,000 of electric revenue bonds to finance and electric utility project. The
interest rate on the bonds range from 3.15 to 4.00 percent and the maturity date is August 1,2021.
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NonMajor Governmental Funds
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Special Revenue
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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.
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Debt Service
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Debt service funds account for the accumulation of resources for, and the payment of, general long-term debt
principal, interest and other related costs.
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Capital Projects
Capital projects funds are used to account for the acquisition and construction of major capital facilities other than
those finances by proprietary funds.
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I CITY OF ELK RIVER, MINNESOTA
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
I YEAR ENDED DECEMBER 31,2005
I Special Debt Capital Total Nomnajor
Revenue Service Projects Govermnental
Funds Funds Funds Funds
I REVENUES
General property taxes $ 331,848 $ 1,072,004 $ 139,714 $ 1,543,566
Intergovermnental revenue 147,166 56,279 274,245 477,690
Charges for services 1,325,610 1,325,610
I Fines and forfeits 25,846 25,846
Special assessments 97,000 97,000
Interest income 289,382 24,077 89,265 402,724
I Miscellaneous revenue
Landfill host fee 876,231 149,114 1,025,345
Other 607,405 113,947 721,352
I . Total revenues 3,603,488 1,152,360 863,285 5,619,133
EXPENDITURES
I Current:
General govermnent 140,938 8,638 149,576
Public safety 197,167 197,167
Public works 233,541 551,526 785,067
I Culture and recreation 804,294 804,294
Economic development 438,192 438,192
Debt service:
I Principal 1,249,266 1,249,266
Interest and service charges 616,306 616,306
Capital outlay:
General govermnent 11,758 46,077 57,835
I Public safety 339,510 374,975 714,485
Public works 538,540 297,975 836,515
Culture and recreation 570,345 570,345
I Infrastructure/development projects 1,500,015 1,500,015
Total expenditures 3,274,285 1,865,572 2,779,206 7,919,063
I Revenues over (under) expenditures 329,203 (713,212) (1,915,921) (2,299,930)
OTHER FINANCING SOURCES (USES)
I Transfers in 461,519 812,934 530,629 1,805,082
Transfers out (1,463,052) (195,801) (1,658,853)
Issuance of debt 1,715,000 1,715,000
I Discount on debt issued (8,560) (8,560)
Sale of capital assets 718,166 718,166
Total other financing sources (uses) (283,367) 812,934 2,041,268 2,570,835
I Net change in fund balances 45,836 99,722 125,347 270,905
I Fund balances - January 1 10,287,395 1,402,497 2,539,007 14,228,899
Fund balances - December 31 $ 10,333,231 $ 1,502,219 $ 2,664,354 $ 14,499,804
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NONMAJOR SPECIAL REVENUE FUNDS
Library Maintenance - This fund accounts for any library maintenance costs which are not paid by the Great River
Regional Library System.
Ice Arena - This fund accounts for the operation and maintenance of the ice arena which is funded by user fees.
Senior Citizen Special Account - This fund is used to account for Senior Citizen program costs funded by revenues
generated from Senior Citizen activities.
Park Dedication - This fund accounts for park dedication fees from developers and expenditures for park land
acquisitions and park capital improvements.
Landfill - This fund was established to segregate solid waste surcharge revenues to be used for landfill abatement
and other environmental issues.
Landfill Construction Debris - This fund was established to account for the tax collected on construction debris
deposited in the landfill and is to be used for related environmental issues.
Revolving Loan - This fund was established to account for the City's portion of state economic development grant
repayments which are used to fund other economic development projects.
DTED GrantILoan - This fund was established to account for the Department of Trade and Economic Development
grant repayments which are used to fund economic development projects.
Development Fund - This fund was established to attract businesses to develop within the City's business park.
Capital Outlav Reserve - This fund was established to help build reserves for the purchase of capital equipment. The
major source of revenue is from defeased bond issues and related special assessments.
Emergency/Insurance Reserve - This fund was opened to account for insurance deductibles and litigation costs not
covered by insurance. The major source of revenue is from insurance premium refunds.
Government Buildings Reserve - This fund was established to account for the revenues and expenditures of
preliminary studies of the construction of a new City Hall.
Dru~ Forfeiture Reserve - This fund was established to account for revenues received as a result of drug related
crimes. These funds must be used for drug education and prevention.
Severance Pay Reserve - This fund was established to account for resources earmarked for severance pay
expenditures.
NSPIRDF Reserve - This fund was established to account for revenues received from the license agreement between
the City and Northern States Power.
Economic Development Authority - This fund was established to account for a special tax levy authorized to help
encourage development in the City.
EDA DTED Loan - This fund was established to account for the Department of Trade and Economic Development
grant repayments of the Economic Development Authority (EDA) which are used to fund economic development
projects.
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CITY OF ELK RIVER, MINNESOTA I
SUBCOMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31,2005 I
Senior I
Library Citizen Park
Maintenance Ice Arena Account Dedication
ASSETS I
Cash and investments $ 448,610 $ $ 10,879 $ 1,614,957
Receivables:
Interest 1,562 37 5,742 I
Taxes 3,362
Accounts 6,945 158,607
Notes I
Due from other governments
Due from other funds
Prepaid items I
Total assets $ 460,4 79 $ 158,607 $ 10,916 $ 1,620,699
LIABILITIES AND FUND BALANCES I
Liabilities: I
Accounts payable $ 10,245 $ 29,580 $ 64 $ 20,670
Salaries payable 155 4,451
Due to other governments I
Due to other funds 108,018
Deferred revenue 1,883 8,695
Total liabilities 12,283 150,744 64 20,670 I
Fund balances: I
Reserved for:
Capital projects
Landfill mitigation I
Notes
Prepaid items
Unreserved: I
Designated for:
Working capital 1,600,029
Future debt requirements I
Undesignated 448,196 7,863 10,852
Total fund balances 448,196 7,863 10,852 1,600,029 I
Total liabilities and fund balances $ 460,479 $ 158,607 $ 10,916 $ 1,620,699
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59 I
I
CITY OF ELK RIVER, MINNESOTA I
SUBCOMBINING BALANCE SHEET
NONMAJOR SPECIAL REVENUE FUNDS
DECEMBER 31,2005 I
Emergency/ Government Drug Severance I
Insurance Buildings Forfeiture Pay
Reserve Reserve Reserve Reserve
ASSETS I
Cash and investments $ 539,303 $ 867,398 $ 20,321 $ 120,557
Receivables:
Interest 1,851 3,047 75 414 I
Taxes
Accounts 513 34,725
Notes I
Due from other governments 130
Due from other funds 28,140
Prepaid items 72,907 I
Total assets $ 642,714 $ 905,170 $ 20,526 $ 120,971
LIABILITIES AND FUND BALANCES I
Liabilities: I
Accounts payable $ 19,459 $ 101,506 $ $
Salaries payable
Due to other governments I
Due to other funds
Deferred revenue
Total liabilities 19,459 101,506 I
Fund balances: I
Reserved for:
Capital projects 428,664
Landfill mitigation I
Notes
Prepaid items 72,907
Umeserved: I
Designated for:
Working capital 20,526 120,971
Future debt requirements 375,000 I
Undesignated 550,348
Total fund balances 623,255 803,664 20,526 120,971 I
Total liabilities and fund balances $ 642,714 $ 905,170 $ 20,526 $ 120,971
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61 I
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I Economic Total Nonmajor
NSPIRDF Development EDA DTED Special Revenue
Reserve Authority Loan Funds
I $ 546,406 $ 341,465 $ 71,498 $ 9,617,602
I 1,875 34,939
12,825 17,041
462,844
I 134,090 529,923
42,467
19,759 2,553 324,118
I 72,907
$ 548,281 $ 374,049 $ 208,141 $ 11,101,841
I
I $ $ 5,964 $ $ 220,674
1,380 6,108
I 214,544
127,777
6,872 199,507
I 14,216 768,610
I 359,833 74,051 2,512,905
I 2,160,268
134,090 134,090
72,907
I
3,291,256
I 375,000
548,281 1,786,805
I 548,281 359,833 208,141 10,333,231
$ 548,281 $ 374,049 $ 208,141 $ 11,101,841
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I 62
I
CITY OF ELK RIVER, MINNESOTA I
SUBCOMBINING STATEMENT OF REVENUE, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS I
YEAR ENDED DECEMBER 31,2005
Senior I
Library Citizen Park
Maintenance Ice Arena Account Dedication I
REVENUES
General property taxes $ 65,124 $ $ $
Intergovernmental revenue 3,640 I
Charges for services 4,825 628,315 5,553 661,917
Fines and forfeits
Interest income 10,418 334 43,715 I
Miscellaneous
Landfill host fee 99,409
Other 41,909 3,841 7,100 I
Total revenues 183,416 670,224 9,728 712,732
EXPENDITURES I
Current:
General government I
Public safety
Public works
Culture and recreation 62,632 526,416 11,504 198,700 I
Economic development
Capital outlay:
General government I
Public safety
Public works
Culture and recreation 70,290 466,754 I
Total expenditures 62,632 596,706 11,504 665,454
Revenues over (under) expenditures 120,784 73,518 (1,776) 47,278 I
OTHER FINANCING SOURCES (USES)
Transfers in 133,005 9,687 I
Transfers out (198,660)
Sale of capital assets
Total other fmancing sources (uses) (65,655) 9,687 I
Net change in fund balances 120,784 7,863 (1,776) 56,965
Fund balances - January 1 327,412 12,628 1,543,064 I
Fund balances - December 31 $ 448,196 $ 7,863 $ 10,852 $ 1,600,029 I
63 I
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CITY OF ELK RIVER, MINNESOTA I
SUBCOMBINING STATEMENT OF REVENUE, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR SPECIAL REVENUE FUNDS I
YEAR ENDED DECEMBER 31,2005
Emergency/ Government Drug Severance I
Insurance Buildings Forfeiture Pay
Reserve Reserve Reserve Reserve I
REVENUES
General property taxes $ $ $ $
Intergovernmental revenue 2,000 I
Charges for services
Fines and forfeits 25,846
Interest 14,040 33,598 507 4,420 I
Miscellaneous
Landfill host fee 497,049
Other 51,478 45,739 I
Total revenues 67,5 I 8 576,386 26,353 4,420
EXPENDITURES I
Current:
General government 24,533 2,000 I
Public safety 54,391 10,566
Public works 113,125
Culture and recreation I
Economic development
Capital outlay:
General government 11,758 I
Public safety 176,235
Public works 468,491
Culture and recreation I
Total expenditures 36,291 814,242 10,566
Revenues over (under) expenditures 31,227 (237,856) 15,787 4,420 I
OTHER FINANCING SOURCES (USES)
Transfers in I
Transfers out (199,584) (6,064) (65,000)
Sale of capital assets
Total other financing sources (uses) (199,584) (6,064) (65,000) I
Net change in fund balances 31,227 (437,440) 9,723 (60,580)
Fund balances - January I 592,028 1,241,104 10,803 181,551 I
Fund balances - December 31 $ 623,255 $ 803,664 $ 20,526 $ 120,971 I
65 I
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CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - LIBRARY MAINTENANCE FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2005
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Budget Variance with
Original Final Actual Final Budget
$ 69,000 $ 69,000 $ 65,124 $ (3,876)
3,640 3,640
5,100 5,100 4,825 (275)
5,000 5,000 10,418 5,418
100,000 100,000 99,409 (591)
179,100 179,100 183,416 4,316
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REVENUES
General property taxes
Intergovernmental revenue
Charges for services
Interest income
Miscellaneous revenue
Landfill host fee
Total revenues
I
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EXPENDITURES
I
Culture and recreation:
Current
62,700
62,700
62,632
68
Revenues over expenditures
116,400
116,400
120,784
4,384
I
Fund balance - January 1
327,412
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Fund balance - December 31
$ 448,196
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CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ICE ARENA FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2005
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Budget Variance with
Original Final Actual Final Budget
REVENUES
Charges for services $ 599,000 $ 599,000 $ 628,315 $ 29,315
Miscellaneous revenue
Vending machines 32,000 32,000 29,935 (2,065)
Other 2,400 2,400 11,974 9,574
Total revenues 633,400 633,400 670,224 36,824
EXPENDITURES
Culture and recreation:
Current 498,800 508,800 526,416 (17,616)
Capital outlay 8,000 8,000 70,290 (62,290)
Total expenditures 506,800 516,800 596,706 (79,906)
Revenues over (under) expenditures 126,600 116,600 73,518 (43,082)
OTHER FINANCING SOURCES (USES)
Transfers in 72,100 132,100 133,005 905
Transfers out (198,700) (198,700) (198,660) 40
Total other financing sources (uses) (126,600) (66,600) (65,655) 945
Net increase (decrease) in fund balance $ $ 50,000 7,863 $ (42,137)
Fund balance - January 1
Fund balance - December 31 $ 7,863
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I
68
Net increase (decrease) in fund balance
$ (66,400)
$ (66,400)
(59,076)
$
7,324
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CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - LANDFILL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31, 2005
Budget Variance with
Original Final Actual Final Budget
REVENUES
Interest $ 20,000 $ 20,000 $ 46,135 $ 26,135
EXPENDITURES
Current:
Public works 43,600 43,600 61,731 (18,131)
Revenues over (under) expenditures (23,600) (23,600) (15,596) 8,004
OTHER FINANCING SOURCES (USES)
Transfers out (42,800) (42,800) (43,480) (680)
Fund balance - January 1
1,776,812
Fund balance - December 3 I
$ 1,717,736
69
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CITY OF ELK RIVER, MINNESOTA
SPECIAL REVENUE FUND - ECONOMIC DEVELOPMENT AUTHORITY FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
YEAR ENDED DECEMBER 31,2005
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Budget Variance with
Original Final Actual Final Budget
REVENUES
General property taxes $ 261,400 $ 261,400 $ 262,876 $ 1,476
Intergovernmental revenue 14,651 14,651
Interest 2,000 2,000 5,491 3,491
Miscellaneous 18,500 18,500 14,652 (3,848)
Total revenues 281,900 281,900 297,670 15,770
EXPENDITURES
Current:
Economic development 224,300 224,300 188,423 35,877
Revenues over expenditures 57,600 57,600 109,247 51,647
OTHER FINANCING SOURCES (USES)
Transfers in 16,500 16,500 16,900 400
Transfers out (17,000) (17,000) (17,000)
Total other financing sources (uses) (500) (500) (100) 400
Net increase in fund balance $ 57,100 $ 57,100 109,147 $ 52,047
Fund balance - January 1 250,686
Fund balance - December 31 $ 359,833
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70
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NONMAJOR DEBT SERVICE FUNDS
I
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 a City Hall and Public Safety facility.
I
Equipment Certificates - This fund is used to account for the accumulation of resources and payment of
principal and interest to fmance the purchase of public safety and street and other equipment as authorized
by Minnesota Statutes.
I
PIR Bonds - This fund is used to account for the accumulation of resources and payment of principal and
interest to fmance public improvements.
I
Tax Increment Financing Bonds - This fund is used to account for the accumulation of resources and
payment of principal and interest to finance administrative and development costs within the various TlF
districts.
I
Storm Sewer Revenue Bonds - This fund is used to account for the accumulation of resources and payment
of principal and interest to finance repair and construction of various storm drainage projects.
I
Ice Arena Bonds - This fund is used to account for the accumulation of resources and payment of principal
and interest to finance the construction of the ice arena.
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NONMAJOR CAPITAL PROJECTS FUNDS
I
Street Improvement - This fund is funded by solid waste surcharge revenues which are set aside to repair road
damage caused by large garbage trucks.
I
Equipment Certificates - This fund was established to account for equipment certificate proceeds used to fund capital
equipment purchases as authorized by Minnesota Statutes.
I
Improvement Proiects - This fund is used to account for the construction of various street and utility improvements
within the City.
Public Safety/City Hall Expansion - This fund is used to account for the construction of a new public safety facility
and the addition to city hall.
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CITY OF ELK RIVER, MINNESOTA I
SUBCOMBINING BALANCE SHEET
NONMAJOR CAPITAL PROJECTS FUNDS
DECEMBER 31,2005 I
Public Safety/ Total Nonmajor I
Street Equipment Improvement City Hall Capital Projects
Improvement Certificates Projects Expansion Funds
ASSETS
Cash and investments $ 2,628,302 $ 216,850 $ $ $ 2,845,152 I
Receivables:
Interest 9,020 9,020
Taxes 5,988 5,988 I
Accounts 10,417 10,417
Due from other funds 220,450 220,450
Total assets $ 2,874,177 $ 216,850 $ $ $ 3,091,027 I
LIABILITIES AND FUND BALANCES I
Liabilities:
Accounts payable $ 61,057 $ 216,850 $ 67,261 $ $ 345,168
Due to other funds 78,638 78,638
Deferred revenue 2,867 2,867 I
T otalliabilities 63,924 216,850 145,899 426,673
Fund balances (deficit): I
Unreserved -
Designated for capital projects 2,810,253 2,810,253 I
Undesignated (145,899) (145,899)
Total fund balances (deficit) 2,810,253 (145,899) 2,664,354
Total liabilities and fund balances $ 2,874,177 $ 216,850 $ $ $ 3,091,027 I
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I CITY OF ELK RIVER, MINNESOTA
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (DEFICIT)
NONMAJOR CAPITAL PROJECTS FUNDS
YEAR ENDED DECEMBER 31,2005
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Public Safety/ Total Nonmajor
I Street Equipment Improvement City Hall Capital Projects
Improvement Certificates Projects Expansion Funds
REVENUES
General property taxes $ 139,714 $ $ $ $ 139,714
I Intergovernmental revenue 7,879 266,366 274,245
Special assessments 97,000 97,000
Interest income 79,832 6,736 2,697 89,265
I Miscellaneous revenue
Landfill host fee 149,114 149,114
Other 112,922 1,025 113,947
I Total revenues 586,461 6,736 270,088 863,285
EXPENDITURES
I Current:
General government 8,638 8,638
Public works 340,762 2,500 208,264 551,526
Capital outlay:
I General government 46,077 46,077
Public safety 374,975 374,975
Public works 297,975 297,975
I Infrastructure/development projects 842,790 657,225 1,500,015
Total expenditures 1,183,552 675,450 865,489 54,715 2,779,206
I Revenues over (under) expenditures (597,091) (668,714) (595,401) (54,715) (1,915,921)
OTHER FINANCING SOURCES (USES)
I Transfers in 23,714 452,200 54,715 530,629
Transfers out (21,984) (173,817) (195,801)
Issuance of debt 1,070,000 645,000 1,715,000
Discount on debt issued (8,560) (8,560)
I Total other financing sources (uses) 1,039,456 668,714 278,383 54,715 2,041,268
I Net change in fund balances 442,365 (317,018) 125,347
Fund balances - January 1 2,539,007
2,367,888 171,119
I Fund balances (deficit) - December 31 $ 2,810,253 $ $ (145,899) $ $ 2,664,354
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AGENCY FUNDS
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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:
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Developer Fee Escrow - This fund is used to account for the collection and distribution of funds relating to
private development projects.
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CITY OF ELK RIVER, MINNESOTA
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
DEVELOPER ESCROW AGENCY FUND
YEAR ENDED DECEMBER 31,2005
Beginning Ending
Balance Additions Deductions Balance
ASSETS
Cash $ 250,838 $ 888,331 $ 858,649 $ 280,520
Accounts receivable 89,600 290,069 285,810 93,859
Total assets $ 340,438 $ 1,178,400 $ 1,144,459 $ 374,379
LIABILITIES
Accounts payable
Refundable deposits payable
$ 51,304
289,134
$ 876,411
1,005,848
$ 858,845
989,473
$ 68,870
305,509
Total liabilities
$ 340,438
$ 1,882,259
$ 1,848,318
$ 374,379
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STATISTICAL SECTION
(UNAUDITED)
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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 fmancial statements, note
disclosures, and required supplementary information says about the government's overall
financial health.
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Contents Page
Financial Trends 76
These schedules contain trend information to help the reader understand how
the city's financial performance and well-being have changed over time.
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Revenue Capacity 83
These schedules contain information to help the reader assess the city's most
significant local revenue source, the property tax.
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Debt Capacity 88
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.
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Demographic and Economic Information 95
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the city's financial activities take
place.
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Operating Information 98
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.
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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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CITY OF ELK RIVER, MINNESOTA
NET ASSETS BY COMPONENT
LAST THREE FISCAL YEARS
(accrual basis of accounting)
Fiscal Year
2003 2004 2005
Governmental activities
Invested in capital assets, net of related debt $ 56,003,997 $ 67,061,167 73,150,041
Restricted 8,383,884 10,963,518 12,410,832
Unrestricted 22,441,594 19,452,247 21,267,772
Total governmental activities net assets $ 86,829,475 $ 97,476,932 $ 106,828,645
Business-type activities
Invested in capital assets, net of related debt $ 46,341,983 $ 52,377,687 54,577,074
Restricted 1,947,067 2,197,066 2,256,419
Unrestricted 11,224,115 10,480,815 11,956,851
Total business-type activities net assets $ 59,513,165 $ 65,055,568 $ 68,790,344
Primary government
Invested in capital assets, net of related debt $ 102,345,980 $ 119,438,854 127,727,115
Restricted 10,330,951 13,160,584 14,667,251
Unrestricted 33,665,709 29,933,062 33,224,623
Total primary government net assets $ 146,342,640 $ 162,532,500 $ 175,618,989
Note: Net assets are not available for years prior to 2003.
76
Fiscal Year
2003 2004 2005
$ 3,290,711 $ 2,440,200 $ 2,503,826
4,229,109 4,988,424 5,255,974
3,737,678 4,277,071 4,281,725
1,747,322 2,058,882 2,535,955
549,149 912,698 938,164
1,050,823 936,515 881,001
14,604,792 15,613,790 16,396,645
3,621,087 3,760,156 4,344,915
884,532 953,432 1,047,479
1,406,713 1,464,409 1,629,353
1,713,217 1,809,128 2,099,428
11,929,596 13,338,580 14,880,337
19,555,145 21,325,705 24,001,512
$ 34,159,937 $ 36,939,495 $ 40,398,157
$ 194,246 $ 308,781 $ 288,032
1,897,883 1,956,967 2,050,437
148,904 226,907 280,583
729,932 812,401 877,789
71,379 96,396 379,002
487,560 427,513 480,649
6,064,491 11,879,536 7,573,752
9,594,395 15,708,501 11,930,244
CITY OF ELK RIVER, MINNESOTA
CHANGES IN NET ASSETS
LAST THREE FISCAL YEARS
(accrual basis of accounting)
Expenses
Governmental activities:
General government
Public safety
Public works
Culture and recreation
Economic development
Interest on long-term debt
Total governmental activities expenses
Business-type activities:
Municipal Liquor
Garbage
Sewer
Water
Electric
Total business-type activities expenses
Total primary government expenses
Program Revenues
Governmental activities:
Charges for services:
General government
Public safety
Public works
Culture and recreation
Economic development
Operating grants and contributions
Capital grants and contributions
Total governmental activities program revenues
Business-type activities:
Charges for services:
Municipal Liquor
Garbage
Sewer
Water
Electric
Operating grants and contributions
Capital grants and contributions
Total business-type activities program revenues
Total primary government program revenues
4,156,276
820,278
1,808,817
1,807,334
13,774,777
10,530
1,053,994
23,432,006
$ 33,026,401
77
4,345,702
973,176
2,365,262
2,095,018
14,765,479
8,615
3,028,454
27,581,706
$ 43,290,207
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4,806,061
1,055,753
1,261,853
1,365,136
15,955,440
9,255
3,654,383
28,107,881
$ 40,038,125
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Fiscal Year
2003 2004 2005
~et(expense)/revenue
Governmental activities $ (5,010,397) $ 94,711 $ (4,466,401)
Business-type activities 3,876,861 6,256,00] 4,106,369
Total primary government net expense $ (1,133,536) $ 6,350,712 $ (360,032)
General Revenues and Other Changes in Net Assets
Governmental activities:
Property taxes $ 5,830,468 $ 6,425,933 $ 7,569,131
Tax increment 682,855 734,115 768,397
Unrestricted grants and contributions 2,237,750 2,141,152 2,427,605
Investment earnings 304,237 375,550 758,612
Miscellaneous 9,180 326,853
Transfers 639,924 866,816 677,516
Total governmental activities 9,695,234 10,552,746 12,528,114
Business-type activities
Investment earnings 155,802 153,218 305,923
Transfers (639,924) (866,816) (677,516)
T otalbusiness-type activities (484,122) (713,598) (371,593)
Total primary government $ 9,211,112 $ 9,839,148 $ 12,156,521
Change in Net Assets
Governmental activities $ 4,684,837 $ 10,647,457 $ 8,061,713
Business-type activities 3,392,739 5,542,403 3,734,776
Total primary government $ 8,077,576 $ 16,189,860 $ 11,796,489
~ote: Changes in net assets are not available for years prior to 2003.
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CITY OF ELK RIVER, MINNESOTA
FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
Fiscal Year
1996 1997 1998 1999
General fund
Reserved $ 20,507 $ 18,543 $ $ 51,000
Unreserved 1,588,887 1,928,396 1,973,208 2,261,880
Total general fund $ 1,609,394 $ 1,946,939 $ 1,973,208 $ 2,312,880
All other governmental funds
Reserved $ 4,904,173 $ 5,129,541 $ 6,346,623 $ 7,594,575
Unreserved, reported in:
Special revenue funds 2,758,630 3,920,118 4,555,966 4,610,213
Capital projects funds 1,091,324 1,432,975 579,088 543,945
Total all other governmental funds $ 8,754,127 $ 10,482,634 $ 11 ,481 ,677 $ 12,748,733
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Fiscal Year
2000 2001 2002 2003 2004 2005
$ $ 1,268 $ 1,268 $ 348,026 $ 115,746 $ 210,298
2,695,612 3,060,907 3,189,321 3,384,023 3,851,634 4,391,083
$ 2,695,612 $ 3,062,175 $ 3,190,589 $ 3,732,049 $ 3,967,380 $ 4,601,381
$ 8,527,474
6,439,607
480,466
$ 15,447,547
$ 7,046,474
8,772,346
(29,358)
$ 15,789,462
$ 14,272,266
2,219,157
8,133,831
$ 24,625,254
$ 12,598,358
3,742,244
4,585,550
$ 20,926, 152
80
$ 11,570,003
4,597,195
5,401,112
$ 21,568,310
$ 11,475,837
5,453,061
8,382,625
$ 25,311,523
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CITY OF ELK RIVER, MINNESOTA I
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting) I
Fiscal Year I
1996 1997 1998 1999
Revenues I
General property taxes $ 3,007,226 $ 3,378,076 $ 3,607,810 $ 3,916,590
Licenses and permits 439,001 492,321 540,826 511,306
Intergovernrnentalrevenue 2,345,844 2,415,613 1,997,619 2,360,153
Charges for services 480,047 877,078 899,788 953,496 I
Fines and forfeits 80,028 84,221 115,753 117,614
Special assessments 2,186,988 1,826,905 1,825,335 2,070,961
Interest 483,433 600,422 577,934 491,608 I
Miscellaneous 1,284,514 1,977,822 1,916,396 2,386,298
Total revenues 10,307,081 11,652,458 11,481,461 12,808,026
Expenditures I
General governrnent 1,032,737 1,091,675 1,155,809 1,185,907
Public safety 2,176,041 2,424,612 2,796,509 2,806,627 I
Public works 829,282 838,555 982,102 980,714
Culture and recreation 575,931 993,794 859,515 903,364
Economic development 146,272 327,158 323,256 264,484
Capital outlay 5,154,440 2,960,116 4,103,775 8,739,415 I
Debt service
Principal 2,141,823 1,891,360 1,403,619 1,611,592
Interest and service charges 885,943 983,485 912,141 930,671 I
Total expenditures 12,942,469 11,510,755 12,536,726 17,422,774
Excess of revenues I
over (under) expenditures (2,635,388) 141,703 (1,055,265) (4,614,748)
Other financing sources (uses) I
Transfers in 2,162,271 2,622,113 1,849,667 1,958,829
Transfers out (1,733,057) (2,166,439) (1,397,565) (979,258)
Proceeds of long-term debt 2,676,750 3,744,168 1,477,424 6,395,045
Payment to refunded bond escrow agent (2,275,493) (1,153,140) I
Discount on long-term debt issued
Sale of capital assets
Total other fmancing sources (uses) 3,105,964 1,924,349 1,929,526 6,221,476 I
Net change in fund balances $ 470,576 $ 2,066,052 $ 874,261 $ 1,606,728
Debt service as a percentage of I
noncapital expenditures I
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I Debt service percentages are not available prior to 2003. I
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I Fiscal Year
2000 2001 2002 2003 2004 2005
I $ 4,232,545 $ 5,067,317 $ 5,462,585 $ 6,507,578 $ 7,118,568 $ 8,283,983
749,888 989,052 715,852 1,143,612 1,249,844 1,240,336
4,969,056 1,687,430 3,978,999 2,141,277 1,544,485 1,979,405
I 1,129,834 1,503,350 1,743,948 2,042,391 2,381,670 2,571,767
119,421 89,221 134,840 190,911 164,800 190,062
2,395,473 2,598,484 2,049,519 2,433,939 2,375,902 3,414,090
I 1,007,444 766,599 612,224 304,237 375,548 758,612
3,657,258 3,018,207 2,409,430 2,159,373 1,799,736 2,004,286
18,260,919 15,719,660 17,107,397 16,923,318 17,010,553 20,442,541
I 1,337,745 1,592,027 2,200,458 2,265,779 2,161,356 2,204,626
3,129,669 3,389,370 3,583,232 4,145,996 4,163,345 4,649,010
I 935,650 1,427,274 1,429,018 1,814,818 1,850,281 2,192,336
1,102,577 1,133,090 1,325,118 1,635,806 1,655,298 2,088,505
357,299 339,660 312,387 649,463 703,591 785,584
I 8,152,240 3,103,306 6,704,948 8,389,740 2,997,696 4,191,817
1,669,624 2,203,112 1,948,275 2,355,800 2,494,483 2,174,266
1,048,545 949,235 794,511 1,102,548 965,984 881,305
I 17,733,349 14,137,074 18,297,947 22,359,950 16,992,034 19,167,449
I 527,570 1,582,586 (1,190,550) (5,436,632) 18,519 1,275,092
I 1,291,949 2,250,518 2,578,131 4,654,396 4,666,581 2,888,975
(830,378) (1,556,626) (2,119,863) (4,003,800) (3,799,765) (2,211,459)
3,647,233 202,000 9,696,488 1,612,100 331,000 1,715,000
I (1,554,828) (1,770,000)
(5,566) (8,560)
34,562 9,180 718,166
2,553,976 (874,108) 10,154,756 2,291,692 1,206,996 3,102,122
I $ 3,081,546 $ 708,478 $ 8,964,206 $ (3,144,940) $ 1,225,515 $ 4,377,214
I 25.3% 24.1% 21.0%
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CITY OF ELK RIVER, MINNESOTA
TAX CAPACITY, MARKET VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
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Source: Sherburne County Assessor
Note: Property in the county is reassessed annually. The county assesses property at approximately 87 percent
of actual value for all types of real and personal property.
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2000 2001 2002 2003 2004 2005
$ 6,878,156 $ 7,981,635 $ 7,339,736 $ 8,476,233 $ 9,978,963 $ 11,994,024
6,210,730 6,669,140 4,622,229 5,258,501 5,408,829 5,844,504
261,248 255,557 203,919 258,501 215,581 237,262
13,350,134 14,906,332 12,165,884 13,993,235 15,603,373 18,075,790
(141,898) (338,069) (426,854) (588,732) (608,609) (654,325)
$ 13,208,236 $ 14,568,263 $ 11,739,030 $ 13,404,503 $ 14,994,764 $ 17,421,465
30.248% 30.596% 43.600% 44.614% 43.782% 43.763%
$ 530,109,100 $ 602,632,678 $ 711,908,700 $ 832,141,600 $ 981,551,900 1,152,083,150
239,438,499 256,929,400 274,651,700 309,775,400 318,140,038 376,171,000
7,870,100 7,628,000 10,347,400 13,112,800 10,934,000 12,020,800
$ 777,417,699 $ 867,190,078 $ 996,907,800 $ 1,155,029,800 $ 1,310,625,938 $ 1,540,274,950
$ 883,478,872 $ 985,576,523 $ 1,145,691,994 $ 1,382,785,926 $ 1,567,581,017 $ 1,805,774,228
88.00%
87.99%
87.01%
83.53%
83.61%
85.30%
84
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CITY OF ELK RIVER, MINNESOTA
PRINCIPAL TAXPAYERS
DECEMBER 31,2005
2005
Percentage
Net Tax of Total Net
Taxpaver Capacity Rank Tax Capacity
United Power Association $ 557,372 3.08%
NRG Energy 270,900 2 1.50
Walmart Stores 204,492 3 1.13
Bradley Operating L.P. 164,599 4 0.91
Phoenix Enterprises 129,677 5 0.72
Menards, Inc 127,874 6 0.71
Home Depot 125,408 7 0.69
CenterPoint Energy 110,970 8 0.61
B & G Realty, Inc. 107,104 9 0.59
Target Corp. 106,430 10 0.59
Scherer L TD Partnership
Kraus Anderson of Elk River
AUtool Manufacturing
Evans Meadows Apts.
Tescom Corporation
Anoka Electric Cooperative
First National Bank
TOTAL $ 1,904,826 10.98%
Source: Sherburne County Assessor
86
1996
Percentage
Net Tax of Total Net
Capacity Rank Tax Capacity
$ 1,053,215 11.30%
556,742 2 5.97
95,290 10 1.02
146,929 3 1.58
145,862 4 1.56
133,079 5 1.43
124,664 6 1.34
107,714 7 1.16
104,254 8 1.12
97,091 9 1.04
$ 2,564,840 27.52%
CITY OF ELK RIVER, MINNESOTA
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
Collected within the
Fiscal Year of the Levy Collections in Total Collections to Date
Fiscal Total Year's Percentage Subsequent Percentage
Year Tax Levy 1 Amount of Levy Years Amount of Levy
1996 $ 2,570,439 $ 2,541,953 98.89% $ 28,063 $ 2,570,016 99.98%
1997 2,943,309 2,900,122 98.53 40,657 2,940,779 99.91
1998 3,251,109 3,188,831 98.08 60,060 3,248,891 99.93
1999 3,629,214 3,577,934 98.59 32,230 3,610,164 99.48
2000 3,995,469 3,922,043 98.16 70,985 3,993,028 99.94
2001 4,457,247 4,402,150 98.76 53,781 4,455,931 99.97
2002 4,754,431 4,690,876 98.66 54,132 4,745,008 99.80
2003 5,594,944 5,513,105 98.54 61,193 5,574,298 99.63
2004 6,160,102 6,051,358 98.23 77,239 6,128,597 99.49
2005 7,224,669 7,078,832 97.98 7,078,832 97.98
1 Total tax levy for years 2002-2005 does not include Market Value Homestead Credit received from the State.
87
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CITY OF ELK RIVER, MINNESOTA
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
Less
Amount Percentage Net
General in Debt Net of Net Bonded Bonded
Fiscal Bonded Service Bonded Debt to Tax Debt per
Year Debe Funds Debt C . 2 C . 3
apaclty aplta
1996 $ 568,825 $ 189,144 $ 379,681 3.55 $ 27
1997 748,750 189,274 559,476 4.69 38.15
1998 700,675 241,900 458,775 3.70 29.20
1999 645,425 282,300 363,125 2.93 21.95
2000 612,450 282,300 330,150 2.50 20.07
2001 559,925 199,967 359,958 2.47 20.71
2002 8,661,650 584,853 8,076,797 66.39 446.68
2003 8,612,950 704,885 7,908,065 56.51 421.58
2004 8,420,967 791,375 7,629,592 48.90 376.96
2005 8,455,201 813,832 7,641,369 43.86 354.62
Note: Details regarding the city's outstanding debt can be found in the notes to the financial
statements.
I Only includes debt supported by tax levy.
2 See the Schedule of Tax Capacity, Market Value and Estimated Actual Value of Taxable
Property on page 83-84 for property value data.
3 Population data can be found in the Schedule of Demographic and Economic Statistics on page 95.
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CITY OF ELK RIVER, MINNESOTA
COMPUTATION OF DIRECT AND OVERLAPPING DEBT
DECEMBER 31, 2005
I
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Percent
of Debt City's
Outstanding Applicable Share
Debt to Cityl of Debt
Direct Debt:
City of Elk River $ 35,650,927 100.00% $ 35,650,927
Overlapping Debt:
Sherburne County 28,375,000 25.05 7,106,859
School District #728 220,765,000 37.33 82,409,146
Total overlapping debt 249,140,000 89,516,005
Total direct and overlapping debt $ 284,790,927 $ 125,166,932
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Debt Ratios:
Ratio of debt per capita (21,548 population)
Ratios of debt to estimated taxable market value of$I,540,274,950
$5,809
8.13%
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Source: Sherburne County and School District #728
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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.
I
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1 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.
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90
CITY OF ELK RIVER, MINNESOTA
LEGAL DEBT MARGIN INFORMATION
LAST TEN FISCAL YEARS
1996 1997 1998 1999
Debt limit $ 10,382,114 $ 11,311,798 $ 12,918,329 $ 14,245,424
Bonds 568,825 748,750 700,675 645,425
Reserves 189,144 189,274 241,900 282,300
Total net debt applicable to limit 379,681 559,476 458,775 363,125
Legal debt margin $ 10,002,433 $ 10,752,322 $ 12,459,554 $ 13,882,299
Total net debt applicable to the
limit as a percentage of debt limit 3.66% 4.95% 3.55% 2.55%
Note: Under state law, the City of Elk River's outstanding general obligation debt should not exceed
2 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.
91
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2000 2001 2002 2003 2004 2005
$ 15,548,354 $ 17,343,802 $ 19,938,156 $ 23,100,596 $ 26,212,519 $ 30,805,499
612,450 559,925 10,356,650 10,307,950 10,060,967 10,040,201
328,605 199,967 717,180 837,754 925,148 950,793
283,845 359,958 9,639,470 9,470,196 9,135,819 9,089,408
$ 15,264,509 $ 16,983,844 $ 10,298,686 $ 13,630,400 $ 17,076,700 $ 21,716,091
1.83% 2.08% 48.35% 41.00% 34.85% 29.51%
Legal Debt Margin Calculation for Fiscal Year 2005
Estimated taxable market value $1,540,274,950
Debt limit (2% of market value) $ 30,805,499
Debt applicable to limit:
G.O. equipment certificates 1,035,201
2002 lease revenue bonds 9,005,000
Less: Cash and investments in related
debt service funds (950,793)
Total net debt applicable to limit 9,089,408
Legal debt margin $ 21,716,091
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CITY OF ELK RIVER, MINNESOTA
SPECIAL ASSESSMENT LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
Percentage
Collection Percentage Collections of Total
Total of Current of Levy in Subsequent Total Collections
Year Levy Year's Levy Collected Years Collections To Levy
1996 $ 1,345,870 $ 1,237,131 91.92 $ 108,370 $ 1,345,501 99.97
1997 1,044,927 994,552 95.18 50,375 1,044,927 100.00
1998 1,248,370 1,176,468 94.24 71,902 1,248,370 100.00
1999 1,205,017 1,158,992 96.18 46,025 1,205,017 100.00
2000 1,628,510 1,590,930 97.69 37,580 1,628,510 100.00
2001 1,545,974 1,531,686 99.08 14,288 1,545,974 100.00
2002 1,506,889 1,422,575 94.40 84,314 1,506,889 100.00
2003 1,547,973 1,344,806 86.88 202,724 1,547,530 99.97
2004 1,255,080 1,205,284 96.03 45,518 1,250,802 99.66
2005 1,455,356 1,425,985 97.98 1,425,985 97.98
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Fiscal Per Capita Median School Unemployment
Year Population] Income2 3 Enrollment4 RateS
Age
1996 14,019 $ 21,371 29 8,820 4.1%
1997 14,667 22,306 29 9,115 3.3%
1998 15,714 24,286 29 9,377 2.5%
1999 16,542 24,507 29 9,687 2.7%
2000 16,447 25,597 32 10,002 3.2%
2001 17,380 26,276 32 10,587 3.9%
2002 18,082 25,998 32 11,100 5.1%
2003 18,758 26,084 32 11,257 5.8%
2004 20,240 na 32 11,749 5.0%
2005 21,548 na 32 12,259 4.7%
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CITY OF ELK RIVER, MINNESOTA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
Data Sources:
1
State Demographer
2 Bureau of Economic Analysis
3 US Census Bureau
4 School District
5 MN Dept. of Employment and Economic Development
na - not available
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CITY OF ELK RIVER, MINNESOTA
PRINCIPAL EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
2005 1996
EmDlover EmDlovees Rank Employees Rank
Independent School District 728 1,350 1 600 1
Sherburne County 525 2 270 4
Walmart 406 3
Great River Energy 351 4 442 2
Guardian Angels of Elk River 319 5 230 5
Cub Foods 200 6
Tescom Corporation 185 7 317 3
Menards 179 8
Coborns 172 9
First National Financial Services 158 10
Target 190 6
Sax Food & Drug 181 7
Alltool Manufacturing 180 8
E & 0 Tool & Plastics 125 9
Elk River Machine 110 10
Source: Minnesota Department of Employment and Economic Development
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March 17, 2006
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
Board of Trustees and Plan Participants
Elk River Fire Department Relief Association
Elk River, Minnesota
We have audited the fInancial statements of the Elk River Fire Department Relief Association (the Association) for the year
ended December 31, 2005 and have issued our report thereon dated March 17, 2006. Professional standards require that we
provide you with the following information related to our audit.
Our Responsibility Under Auditing Standards Generally Accepted in the United States of America
As stated in our engagement letter, our responsibility, as described by professional standards, is to plan and perform our audit
to obtain reasonable, but not absolute, assurance that the fInancial statements are free of material misstatement and are fairly
presented in accordance with accounting principles generally accepted in the United States of America. Because of the
concept of reasonable assurance and because we did not perform a detailed examination of all transactions, there is a risk that
material errors, fraud, or other illegal acts may exist and not be detected by us.
As part of our audit, we considered the internal control of the Association. Such considerations were solely for the purpose of
determining our audit procedures and not to provide any assurance concerning such internal control. However, we noted
certain matters involving internal control and its operation that we consider to be reportable conditions under standards
established by the American Institute of CertifIed Public Accountants. Reportable conditions involve matters coming to our
attention relating to signifIcant defIciencies in the design or operation of internal control that, in our judgment, could
adversely affect the Association's ability to record, process, summarize and report fmancial data consistent with the assertions
of management in the fmancial statements.
A material weakness is a reportable condition in which the design or operation of one or more of the internal control
components does not reduce to a relatively low level the risk that errors or irregularities in a amounts that would be material
in relation to the fInancial statements being audited may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions.
Our consideration of internal control would not necessarily disclose all matters in internal control that might be reportable
conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be a material
weakness, as defIned above. However, we noted the following reportable condition that we believe is not a material
weakness.
Segregation of Duties
Our study and evaluation disclosed that because of the limited size of your office staff, the Association has limited
segregation of duties. Good internal control contemplates an adequate segregation of duties so that no one individual
handles a transaction from inception to completion. While we recognize that the Association is not large enough to
permit an adequate segregation of duties in all respects, it is important that you be aware of this condition.
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
Elk River Fire Department Relief Association
March 17, 2006
Page Two
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we
performed tests of compliance with certain provisions oflaws, regulations, contracts and grants. However, the objective of
our tests was not to provide an opinion on compliance with such provisions. We noted one instance of non-compliance with
Minnesota statutes. It is described below:
Collateral Coverage
In accordance with Minnesota statute, section 118A.03, the Association is required to have pledged collateral equal to
110 percent of the deposits not covered with insurance. At December 31,2005, the Association was required to have
$66,853 pledged, of which the association had no collateral pledged.
Management Response
Management agrees that bank deposits need to be insured. They will more closely monitor the bank balance and
collateral coverage in 2006.
Significant Accounting Policies
Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of
our engagement letter, we will advise management about the appropriateness of accounting policies and their application.
The significant accounting policies used by the Association are described in Note 1 to the financial statements. The
Association implemented the requirements of GASB Statement No. 40 - Deposit and Investment Risk Disclosures - an
amendment ofGASB Statement No.3 during 2005. We noted no transactions entered into by the Association during the year
that were both significant and unusual, and of which, under professional standards, we are required to inform you, or
transactions for which there is a lack of authoritative guidance or consensus.
Accounting Estimates
Accounting estimates are an integral part of the combined 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.
Audit Adjustments
For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the combined
fmancial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit
adjustment mayor may not indicate matters that could have a significant effect on the Association's fmancial reporting
process (that is, cause future fmancial statements to be materially misstated). We noted no uncorrected misstatements.
Disagreements with Management
For purposes of this letter, professional standards defme a disagreement with management as a matter, whether or not
resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the
fmancial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of
our audit.
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
.
Elk River Fire Department Relief Association
March 17, 2006
Page Thee
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 principal to the
Association's fInancial statements or a determination of the type of auditor's opinion that may be expressed on those
statements, our professional standards require the consulting accountant to check with us to determine that the consultant has
all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Issues Discussed Prior to Retention of Independent Auditors
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with
management each year prior to retention as the Association's auditors. However, these discussions occurred in the normal
course of our professional relationship and our responses were not a condition to our retention.
Difficulties Encountered in Performing the Audit
We encountered no difficulties in dealing with management in performing our audit.
952.835.9090 . Fax 952.835.3261
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.
.
Elk River Fire Department Relief Association
March 17, 2006
Page Four
Other items
Investment return
A summary of the investment rate of return is summarized below:
Net Assets
Appreciation Total Held in
(Depreciation) Investment Trust for Investment
Investment of Income Pension Rate of
Year Income Investments (Loss ) Benefits Return
2003 $ 2,659 $ 179,890 $ 182,549 $ 1,354,325 13.48 %
2004 2,159 119,871 122,030 1,646,533 7.41
2005 3,168 75,276 78,444 1,886,585 4.16
Investment Rate of Return
16.00%
13.48%
14.00%
8.00%
7.41%
12.00%
10.00%
6.00%
4.16%
4.00%
2.00%
2003
2004
2005
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
.
.
Elk River Fire Department Relief Association
March 17, 2006
Page Five
* * * * *
This report is intended solely for the information and use of management, Board of Trustees and Plan Participants and the
Minnesota Office of the State Auditor and is not intended to be and should not be used by anyone other than these specified
parties.
Our audit would not necessarily disclose all weaknesses in the system because it was based on selected tests of the accounting
records and related data. The comments and recommendations in the report are purely constructive in nature, and should be
read in this context.
If you have any questions or wish to discuss any of the items contained in this letter, please feel free to contact us at your
convenience. We wish to thank you for the opportunity to be of service and for the courtesy and cooperation extended to us
by your staff.
March 17, 2006
Minneapolis, Minnesota
I
ClWv ~ ~,~)LL,p
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
ELK RIVER FIRE DEPARTMENT
RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
YEARS ENDED
DECEMBER 31, 2005 AND 2004
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
TABLE OF CONTENTS
DECEMBER 31, 2005
Page No.
INTRODUCTORY SECTION
Organization
I
FINANCIAL SECTION
Independent Auditor's Report
Management's Discussion and Analysis (Unaudited)
Individual Fund Statements
Statements of Fiduciary Net Assets - Fiduciary Fund - Special Pension Trust Fund
Statements of Changes in Fiduciary Net Assets - Fiduciary Fund - Special Pension Trust Fund
Notes to Financial Statements
II
III - VII
1
2
3-7
SUPPLEMENTARY INFORMATION
Required Supplementary Information
Schedule of Funding Progress
Schedule of Employer Contnbution
Notes to Required Supplementary Information
9
9
9
COMPLIANCE SECTION
Report on Minnesota Legal Compliance
Report on Internal Control Over Financial Reporting
Based on an Audit of Financial Statements
Schedule of Findings
10
11
12
INTRODUCTORY SECTION
ELK RNER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RNER, MINNESOTA
YEAR ENDED
DECEMBER 31, 2005 AND 2004
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
ORGANIZATION
DECEMBER 31, 2005
Board of Trustees
Name
Title
Robert Dreissig
Cliff Skogstad
Robert Pearson
Rich Niemala
Dennis Anderson
Keith Thorson
President
Vice President
Secretary
Treasurer
Trustee
Trustee
Ex-Officio Trustees
Stephanie Klinzing
Lori Johnson
Bruce West
Mayor
Finance Director
Fire Chief
-1-
FINANCIAL SECTION
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEAR ENDED
DECEMBER 31,2005 AND 2004
Grandview Square
5201 Eden Avenue
Suite 370
Edina, MN 55436
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Elk River Fire Relief Association
Elk River, Minnesota
We have audited the accompanying financial statements of the fiduciary activities of the Elk River Fire Relief Association (the
Association) as of and for the years December 31,2005 and 2004, which collectively comprise the Association's basic financial
statements as listed in the table of contents. These financial statements are the responsibility of the Association's management.
Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Association as of December 31, 2005 and 2004, and the results of its operations for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The management's discussion and analysis on pages III through VII is not a required part of the basic financial statements but is
supplementary information required by accounting principles generally accepted in the United States of America. We have
applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement
and presentation of the supplementary information. However we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose offorming opinions on the financial statements that comprise the Association's basic
financial statements. The supplementary information listed in the table of contents is presented for the purposes of additional
analysis but is a required part of the basic financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
March 17,2006
Minneapolis, Minnesota
().fxk/U ~. ) LLf
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
Management's Discussion and Analysis (Unaudited)
The discussion and analysis of the Elk River Fire Relief Association's (the Association) financial performance provides an
overview of the financial activities and funding conditions for the fiscal years ended December 31,2005 and 2004.
Using the Annual Report
The financial statements, which reflect the activities of the Special Pension Trust (the Plan), are reported in the Statements of
Fiduciary Net Assets (see page 1) and the Statements of Changes in Fiduciary Net Assets (see page 2). These statements are
presented on a full accrual basis and reflect all trust activities as incurred.
Financial Highlights
. The Plan's net assets increased by $240,052 as a result of the fiscal year's activities.
. The contributions from City and State decreased by $8,860.
. Net investment income decreased by $43,586 from fiscal year 2004 and the average rate ofretum went from 7.4 to 4.2
percent.
Plan Highlights
The Plan's investment income was not as high as last year and contributions from the State and City decreased but the Plan's
funding level increased from 98.9 percent to 105.9 percent. The fund remains in a reasonably well funded financial condition.
Plan Net Assets
December 31,
2005 2004
$ 213,340 $ 48,850
1,673,245 1,597,683
$ 1,886,585 $ 1,646,533
Cash and cash equivalents
Investments
Total restricted net assets
For the current fiscal year 2005 there is a net increase of $240,052 from the previous fiscal year 2004. The previous fiscal year
2004 had an increase of $292,208 from fiscal year 2003.
-ill-
Management Discussion and Analysis - Continued
March 17, 2006
Changes in Plan Net Assets
The following comparative summary of the changes in net assets reflects the activities of the Plan:
December 31
2005 2004
Revenues
Contributions $ 164,529 $ 173,389
Investment income (net) 78,444 122,030
Other 40 39
Total revenues 243,013 295,458
Expenditures
Administrative expenses 2,961 3,250
Change in net assets 240,052 292,208
Net assets - January 1, 1,646,533 1,354,325
Net assets - December 31, $ 1,886,585 $ 1,646,533
The Association's funding policy provided for contributions from the State of Minnesota (the State) and the City of Elk River in
amounts sufficient to accumulate sufficient assets to pay benefits when due. The annual contributions are the sum of the normal
cost, the State contribution payment and the provision for administrative expenses.
Plan Membership
The following table reflects the Association's Plan membership as of the beginning and ending of the year:
December 31, Increase
2005 2004 (Decrease )
Active participants
Vested 26 28 (2)
Non-vested 14 11 3
Retirees and beneficiaries 5 4 1
Total Membership 45 43 2
-IV-
Elk River Fire Department Relief Association
March 17, 2006
Funding Status
The amount of the total accrued pension liability is based on a standardized measurement established by the Governmental
Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations for financial statement
presentations. This standardized measurement is based on Minnesota statute 69.772. This pension valuation method reflects the
present value of estimated pension benefits that will be paid in future years as a result of service years performed by the members
of the Association. A standardized measure of the accrued pension liability was adopted by GASB to enable the readers of relief
association financial statements to (a) assess the relief association's funding status on a going-concern basis, (b) assess progress
being made in accumulating sufficient assets to pay benefits when due, and (c) make comparisons among relief associations.
Because the standardized measure is used only for disclosure purposes by the Association, the measurement is independent of an
actuarial computation made to determine contributions to the Association. The following represents the percentage funded trend
for the last six years.
Funding
Year Assets Liabilities Percentage
2000 $ 1,273,996 $ 1,305,344 97.6 %
2001 1,093,828 1,223,881 89.4
2002 1,037,180 1,267,510 81.8
2003 1,354,326 1,378,916 98.2
2004 1,646,533 1,664,129 98.9
2005 1,886,585 1,781,082 105.9
Prior Six Years Funding Process
$3,000,000
$2,500,000
$2,000,000
105.9%
$1,664,129
$1,500,000
$1,305,344
$1 267,510
$1,378,916
$1,781,082
m;;i!~imiiiiii!i!i!iiii;i!;I;;!;!;!!im!!*;"~ffi'';'':''
$1,223,881
$1,000,000
97.6%
.:i<minl''&'''i!!5il;lliitl!tilliilill!lillj;,Ulil;:I;i:i:i;;"
89.4%
81.8%
$500,000
$- .
2000
2001
2002
2003
2004
2005
I,.,.,.,...,.'....>."-'"As t """.,.,....,".'''N.L. b'l'ti' I
"""""'''~~- se s ,.,.,.,,,,,,, ',...,,,.,.,,, la lIes
-v-
Elk River Fire Department Relief Association
March 17, 2006
Asset Allocation
The following table and graph indicates the asset allocation for December 31,2005 and 2004.
December 31,
2005 2004
Deposits $ 213,340 11.3 % $ 48,850 3.0 %
State Board ofInves1ments
Bond market 410,565 21.7 399,409 24.3
Connnon stock index 231,327 12.3 217,875 13.2
Growth share 184,059 9.8 173,017 10.5
Income share 838,011 44.4 798,385 48.5
Money market 9,283 0.5 8,997 0.5
Total cash and investments $ 1,886,585 100.0 % $ 1,646,533 100.0 %
2005 Asset Allocation
Money market
1%
Deposits
11.3%
Income share
44.4%
Bond market
21.7%
Growth share
.9.8%
Common stock index
12.3%
-VI-
Elk River Fire Department Relief Association
March 17, 2006
Investment Activities
The primary function of the Plan is to (a) appropriately award and pay benefits and (b) manage investments. Investment growth
and income is vital to the Plan's current and continued financial stability. Therefore, the Board of Trustees has a fiduciary
responsibility to act prudently and with diligence when making Plan investment decisions.
Contacting the Plan's Financial Management
The financial report is designed to provide citizens, taxpayers, plan participants and the marketplace's credit analysis with an
overview of the Plan's finances and the prudent exercise of the Board's oversight. If you have any questions regarding this report
or need additional financial information, please contact the Elk River Fire Relief Association, 13065 Orono Parkway, Elk River,
Minnesota 55330.
-VII-
flNAN~STATEMENTS
ELK RNER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RNER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2005 AND 2004
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
STATEMENTS OF FIDUCIARY NET ASSETS
FIDUCIARY FUND
DECEMBER 31,2005 AND 2004
Special Pension Trust Fund
2005 2004
ASSETS
Cash and cash equivalents $ 213,340 $ 48,850
Investments 1,673,245 1,597,683
TOTAL ASSETS $ 1.886.585 $ 1.646.533
NET ASSETS
Unreserved $ 1.886.585 $ 1.646.533
The notes to the financial statements are an integral part of this statement.
-1-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUND
YEARS ENDED DECEMBER 31,2005 AND 2004
Special Pension Trust Fund
2005 2004
REVENUES
Contributions
State of Minnesota $ 136,429 $ 147,589
10% supplemental reimbursement 1,000
City of Elk River 28,100 24,800
Inve sw 78,444 122,030
Other income 40 39
TOTAL REVENUES 243,013 295,458
EXPENDITURES
Salaries 2,145 2,065
Professional fees 355 600
Bond 348 298
Miscellaneous 113 287
TOTAL EXPENDITURES 2,961 3,250
CHANGE IN NET ASSETS 240,052 292,208
NET ASSETS, JANUARY 1 1,646,533 1,354,325
NET ASSETS, DECEMBER 31 $ 1,886.585 $ 1,646.533
The notes to the financial statements are an integral part of this statement.
-2-
.
ELK RIVER FIRE DEP AR1MENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
Note 1: PLAN DESCRIPTION
A. The Financial Reporting Entity
Firefighters of the City of Elk River (the City) are members of the Elk River Fire Relief Association (the
Association). The Association is the administrator of a single-employer defined benefit pension plan (the Plan)
available to firefighters. The Plan was established in 1922 under the provisions of Minnesota Laws 1965,
chapter 446 as amended and Minnesota statute, chapters 69 and 424. It is governed by a Board of Trustees
made up of six members elected by the members of the Association for three year terms, and the Mayor, Finance
Director and Fire Chief, who serve as ex-officio nonvoting members of the Board of Trustees.
For financial reporting purposes, the Association's financial statements are not included with the City financial
statements because the Association is not a component unit of the City. The Association does not have any
component units.
B. Membership Information
As of December 31,2005 and 2004, membership data related to the Association were:
Retirees and beneficiaries currently receiving
benefits and terminated employees entitled to
benefits but not yet receiving them
2005
2004
5
4
Active plan participants
Vested
Nonvested
26
14
28
11
Total
45
43
-3-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER. MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005 AND 2004
Note 1: PLAN DESCRIPTION - CONTINUED
C. Pension Benefits
The Association operates under a defined benefit plan. The pension liability is calculated by the number of
active service years multiplied by a set benefit level. The Association's current level is at $4,000 per active
year. According to the bylaws of the Association and pursuant to Minnesota statute 424A.02, subdivisions 2
and 4, members who retire with less than 20 years of service and have reached the age of 50 years and have
completed at least five years of active membership are entitled to a reduced service pension not to exceed the
amount calculated by multiplying the member's service pension for the completed years of service times the
applicable non-forfeitable percentage of pension as follows:
Completed years
of service
N on-forfeitable percentage
of pension amount
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20 and thereafter
40%
44
48
52
56
60
64
68
72
76
80
84
88
92
96
100
If a member of the Association shall become totally and permanently disabled, with a service related disability
(injured in the line of duty) to the extent that a physician or surgeon acceptable to the Board shall certify that
such disability will permanently prevent said member from performing said member's duties in the Department,
the Association shall pay to such member the sum of the current pension amount for each year and fractions of a
year that the member has served as an active member of the Department, without regard to rninim111D or partial
vesting requirements. If a member who has received such a disability pension should subsequently recover and
return to active duty in the Department, any amount paid to said member as a disability pension shall be
deducted from said member's service pension.
Upon the death of any member of the Association who is in good standing at the time of said member's death,
the Association shall pay to the surviving spouse, if any, and if there is no surviving spouse, to child or children,
if any, and if no child or children survive, to the estate of such deceased member, the credited sum of said
member's pension.
-4-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FrnANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PLAN ASSET MATTERS
A. Measurement Focus, Basis of Accounting and Basis of Presentation
The fiduciary fund financial statements are reported using the economic resources measurement focus and the
accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as
soon as all eligibility requirements imposed by the provider have been met.
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expense during the reporting period.
Actual results could differ from those estimates.
B. Description of Fund
The resources of the Association are accounted for in one fund. Each fund is accounted for as an independent
entity. Descriptions of the funds included in this report are:
The Fiduciary fund accounts for assets held by the Association in a trustee capacity for its members. The fund
is a special pension trust fund for the accumulation of resources to be used for retirement, dependency and
disability annuity payments of appropriate amounts and at appropriate times in the future. Resources are
contributed by the City at amounts determined by law (taxes), and from the two-percent insurance premium tax
and amortization aid from the State of Minnesota (the State).
C. Comparative Data
Comparative data for the prior year have been presented in the accompanying financial statements to provide an
understanding of changes in the Association's financial position and operations.
Note 3: DETAILED NOTES ON ACCOUNTS
Deposits and Investments
Deposits
Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Association's
deposits may not be returned or the Association will not be able to recover collateral securities in the possession of an
outside party. In accordance with Minnesota statutes and as authorized by the Board of Trustees, the Association
maintains deposits at those depository banks which are members of the Federal Reserve System.
Minnesota statutes require that all Association deposits be protected by insurance, surety bond, or collateral. The
market value of collateral pledged must equal 11 0 percent of the deposits not covered by insurance or bonds (140
percent in the case of mortgage notes pledged).
Authorized collateral includes the legal investments described below, as well as certain first mortgage notes, and
certain other State or local government obligations. Minnesota statutes require that securities pledged as collateral be
held in safekeeping by the Association or in a financial institution other than that furnishing the collateral.
-5-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIA nON
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,2005 AND 2004
Note 3: DETAILED NOTES ON ACCOUNTS - CONTINUED
At December 31,2005, the Association's bank deposits totaled $213,340, ofwbich $5,545 was cash deposits and
$207,795 was invested in certificates of deposit. Of the bank balance, $152,565 was covered by federal depository
insurance. The remaining balance of $60,775 was not insured.
Following is a summary of the deposits at December 31,2005 and 2004:
2005
Book
$ 213,340
Bank
$ 213,371
Investments
2004
$ 48,850
$ 48,850
Investments are carried at fair value. Investment and dividend income are recognized as revenue when earned.
As of December 31, 2005, the Association had the following investments that are insured or registered, or securities
held by the Association or its agent in the Association's name:
Type of Investment
Credit
Qua1ity/
Ratings (1)
Concentration
of
Credit Risk
Segmented
Time
Distribution (2)
Pooled investments
State Board of Investments
Bond Market
Common Stock Index
Growth Share
Income Share
N/A
N/A
N/A
N/A
25%
14%
11%
50%
less than 6 months
less than 6 months
less than 6 months
less than 6 months
Total pooled investments
Money Market
N/A
N/A
N/A
Total investments
Fair Value
and
Carrying
Amount
$ 410,565
231,327
184,059
838,011
1,663,962
9,283
$ 1,673,245
2. Interest rate risk is disclosed using the segmented time distribution method.
1. Ratings are provided by various credit rating agencies where applicable to indicate associated credit risk.
N/A indicates not applicable or available.
Concentration of credit risk - The Association is required to disclose debt investments greater than five percent of total
investments. N/A indicates that the calculation is not required.
The 2004 investments were reported under the requirements of the Governmental Accounting Standards Board
(GASB)Statement No.3. The disclosures are as follows:
-6-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
Note 3: DETAll..ED NOTES ON ACCOUNTS - CONTINUED
Minnesota statute, sections 69.77 and 11A.24 authorize and define the types of securities available to the Association
for investment. Accounting principles generally accepted in the United States of America have determined three
categories of credit risk for investments:
1. Investments that are insured or registered, or for which the investments are held by the Association or its agent
in the Association's name;
2. Investments that are uninsured and unregistered and are held by the counterparty's trust department or agent in
the Association's name; and
3. Investments that are uninsured and unregistered and are held by the counterparty, or by its trust department or
agent, but not in the Association's name.
Following is a summary of the carrying values of the Association's securities, categorized into aforementioned levels of
risk, along with the cost of the securities, at December 31, 2004:
Fair
Value
Investments not subject to categorization:
Bond Market
Common Stock Index
Growth Share
Income Share
Money Market
$ 399,409
217,875
173,017
798,385
8,997
Total investments
$ 1,597.683
All investments are reported at fair value using published market quotes. Interest is recognized as revenue when
earned; dividends are recorded when received.
Note 4: FUNDING STATUS AND PROGRESS
The amount of the total accrued pension liability is based on a standardized measurement established by the
Governmental Accounting Standards Board (GASB) that, with some exceptions, must be used by the relief associations
for financial statement presentation. This standardized measurement is based on Minnesota statute 69.772. This
pension valuation method reflects the present value of estimated pension benefits that will be paid in future years as a
result of service years performed by the members of the Association. A standardized measure of the accrued pension
liability was adopted by GASB to enable the readers of relief association financial statements to ( a) assess the relief
association's funding status on a going-concern basis, (b) assess progress being made in accumulating sufficient assets
to pay benefits when due, and (c) make comparisons among relief associations.
Because the standardized measure is used only for disclosure purposes by the Association, the measurement is
independent ofan actuarial computation made to determine contributions to the Association.
-7-
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER., MINNESOTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004
Note 5: CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The Association's funding policy provided for contnbutions from the State and the City in amounts sufficient to
accumulate sufficient assets to pay benefits when due. The annual contnbution is the sum of the normal cost, the State
contribution payment and the provision for administrative expenses.
The Association is comprised of volunteers; therefore, there are no payroll expenditures or covered payroll percentage
calculations.
Required contributions of $136,429 were made in 2005 and $148,589 including $1,000 of supplemental
reimbursement in 2004 were made by the State in accordance with Minnesota statute.. Contributions of $28, 1 00 and
$24,800 were made by the City for the years ended December 31,2005 and 2004, respectively.
Note 6: RISK MANAGEMENT
The Association is exposed to various risks of loss related to theft of assets for which the Association carried
commercial insurance policies. There were no significant reductions in insurance from the previous year or settlements
in excess of insurance coverage for any part of the past three fiscal years. The Association invests in mutual funds that
are subject to market value fluctuations.
Note 7:
SUBSEQUENT EVENT
The Association approved an increase in pension benefit level from $4,000 to $4,175 effective January 1, 2006.
-8-
THIS PAGE IS LEFT BLANK
INTENTIONALLY
SUPPLEMENTARY INFORMATION
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RIVER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2005 AND 2004
THIS PAGE IS LEFT BLANK.
INTENTIONALLY
ELK RNER FIRE DEPARTMENT RELIEF ASSOCIATION
ELK RNER, MINNESOTA
REQUIRED SUPPLEMENTARY INFORMATION
DECEMBER 31, 2005 AND 2004
A. Scbedule of Funding Progress
Assets in
Excess of
Actuarial Actuarial Actuarial (Unfunded) Benefit
Valuation Value of Accrued Accrued Funded . per Year
Date Assets Liability Liability Rate of Service
12/31/05 $ 1,886,585 $ 1,781,082 $ 105,503 105.9 % $ 4,000
12/31/04 1,646,533 1,664,129 (17,596) 98.9 4,000
12/31/03 1,354,326 1,378,916 (24,590) 98.2 3,575
12/31/02 1,037,180 1,267,510 (230,330) 81.8 3,575
12/31/01 1,093,828 1,223,881 (130,053) 89.4 3,575
12/31/00 1,273,996 1,305,344 (31,348) 97.6 3,370
12/31/99 1,309,219 1,134,930 174,289 115.4 2,900
12/31/98 1,390,291 1,155,967 234,324 120.3 2,674
12/31/97 1,192,103 1,088,123 103,980 109.6 2,500
B. Schedule of Employer Contributions
Year
Ending
Annual Percentage
Required of APC
Contribution Contributed
$ 136,429 120.6 %
147,589 117.0
112,146 123.0
88,790 126.0
75,947 131.0
64,092 139.0
61,600 135.0
59,352 134.0
55,308 163.0
12/31/05
12/31/04
12/31/03
12/31/02
12/31/01
12/31/00
12/31/99
12/31/98
12/31/97
C. Notes to Supplementary Information
Valuation date
12/31/05
Actuarial cost method
Entry age normal
Amortization method
Level dollar closed
Remaining amortization period
Normal cost
Prior service cost
20 years
5 years
Asset valuation method
Market
Actuarial assumptions
Investment rate of return
Projected salary increases
Inflation rate
Cost of living adjustments
5%
N/A
N/A
None
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INTENTIONALLY
COMPLIANCE SECTION
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
ELKRNER, MINNESOTA
YEARS ENDED
DECEMBER 31, 2005 AND 2004
Grandview Square
5201 Eden Avenue
Suite 370 '
Edina., MN 55436
Edina, MN 55436
REPORT ON MINNESOTA LEGAL COMPLIANCE
Board of Trustees
Elk River Fire Relief Association
Elk River, Minnesota
We have audited the fInancial statements of the Elk River Fire Relief Association (the Association) as of and for the years ended
December 31,2005 and 2004, and have issued our report thereon dated, March 17, 2006.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the
provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Minnesota Office of the
State Auditor pursuant to Minnesota statute 6.65. Accordingly, the audits included such tests of accounting records and such other
auditing procedures as we considered necessary in the circumstances.
The Minnesota Legal Compliance Audit Guide for Local Government covers three main categories of compliance to be tested in
audits of relief associations: deposits and investments, conflicts of interest, and public relief associations. Our study included all
of the listed categories.
The results of our tests indicate that for the items tested, the City complied with the material terms and conditions of applicable
legal provisions, except as described in the Schedule of Findings.
This report is intended solely for the information and use of the Board of Trustees, City of Elk River, members, and the Minnesota
Office of the State Auditor, and is not intended to be and should not be used by anyone other than these specifIed parties.
March 17, 2006
Minneapolis, Minnesota
~ Zuh- ~ ~JLLF
ABDO, EICK & MEYERM, LLP
Certified Public Accountants
-10-
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
Grandview Square
5201 Eden Avenue
Suite 370
Edina,MN 55436
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
BASED ON AN AUDIT OF FINANCIAL STATEMENTS
Board of Trustees
Elk River Fire Relief Association
Elk River, Minnesota
We have audited the financial statements of the major funds and remaining fund information of the Elk River Fire Relief
Association, Minnesota (the Association), as of and for the year ended December 31, 2005 which collectively comprise the
Assopiation's basic fmancial statements and have issued our report thereon dated March 17, 2006. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America
In planning and performing our audit, we considered the Association's internal control over financial reporting in order to
determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an
opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over
financial reporting and its operation that we consider to be reportable conditions, reported as finding 2005-2 in the Schedule of
Findings. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or
operation of the internal control over financial reporting that, in our judgment, could adversely affect the Association's ability to
record, process, summarize and report financial data consistent with the assertions of management in the financial statements.
A material weakness is a condition in which the design or operation of one or more of the internal control components does not
reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements
being audited may occur and not be detected within a timely period by employees in the normal course of performing their
assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in
the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions
that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a
material weakness.
This report is intended solely for the information and use of the Board of Trustees, City of Elk River, members, and the Minnesota
Office of the State Auditor, and is not intended to be and should not be used by anyone other than these specified parties.
March 17, 2006
Minneapolis, Minnesota
C1hk 7.itk ~~) LLf
ABDO, EICK & MEYERS, LLP
Certified Public Accountants
-11-
952.835.9090 . Fax 952.835.3261
www.aemcpas.com
THIS PAGElS LEFT BLANK
lNTENTIONALL Y
Finding
2005-1
2005-2
ELK RIVER FIRE DEPARTMENT RELIEF ASSOCIATION
SCHEDULE OF FINDINGS
DECEMBER 31, 2005
Description
Collateral Coverage
In accordance with Minnesota statute, section 118A.03, the Association is required to have pledged collateral
equal to 110 percent of the deposits not covered with insurance. At December 31,2005, the Association was
short $66,653 of collateral coverage.
~anagement~esponse
Management agrees that bank deposits need to be insured. They will more closely monitor the bank balance and
collateral coverage in 2006.
Segregation of Duties
Our study and evaluation disclosed that because of the limited size of your office staff, the City has limited
segregation of duties. A good internal control structure contemplates an adequate segregation of duties so that
no one individual handles transactions from inception to completion. While we recognize that the City is not
large enough to permit an adequate segregation of duties in all respects, it is important that you be aware of this
reportable condition.
~anagement ~esponse
Management recognizes that it is not economically feasible to correct this finding, is aware of the condition and
is relying on oversight by management and the Council to monitor this condition. In addition, the City has
implemented specific internal control policies to address segregation of duties issues.
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