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2008 Monticello Annual Financial ReportPreliminary Drat CITY OF MONTICELLO WRIGHT COUNTY, MINNESOTA Annual Financial Report Year Ended December 31, 2008 CITY OF MONTICELLO Table of Contents INTRODUCTORY SECTION City Council and Administration FINANCIAL SECTION 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 Governmental Funds Balance Sheet Reconciliation of the Balance Sheet to the Statement of Net Assets Statement of Revenue, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities Proprietary Funds Statement of Net Assets Statement of Revenue, Expenses, and Changes in Fund Net Assets Statement of Cash Flows Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION City of Monticello Other Post -Employment Benefits Plan Schedule of Funding Progress Budgetary Comparison Schedules Schedule of Revenue, Expenditures, and Changes in Fund Balances — Budget and Actual General Fund Community Center Fund Capital Outlay Revolving Fund Sanitary Sewer Access Fund Notes to the Required Supplementary Information COMBINING NONMAJOR FUND STATEMENTS Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Page 1 2-11 12 13 14-15 16 17-18 19 20 21 22 23-43 44 45-49 50 51 52 53 54-55 56-57 INTRODUCTORY SECTION Clint Herbst Wayne Mayer Tom Perrault Brian Stumpf Susie Wojchouski Jeff O'Neill Tom Kelly CITY OF MONTICELLO City Council and Administration as of December 31, 2008 CITY COUNCIL Term Expires 12/31/2008 12/31/2008 12/31/2008 12/31/2010 12/31/2010 ADMINISTRATION -i- Mayor Councilmember Councilmember Councilmember Councilmember City Administrator Finance Director FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT City Council and Residents City of Monticello, Minnesota We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Monticello, Minnesota (the City) as of and for the year ended December 31, 2008, which collectively comprise the City's basic financial 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 financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of ' America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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 1 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, each major fund, and the aggregate remaining fund information of the City as of December 31, 2008, and the respective changes in financial position and cash flows, where applicable thereof, for the year then ended in ' conformity with accounting principles generally accepted in the United States of America. As described in Note i of the notes to basic financial statements, the City has implemented Governmental Accounting Standards Board Statement No. 45, "Accounting and Financial Reporting by Employers for Post -Employment Benefits Other Than Pensions," during the year ended December 31, 2008. The Management's Discussion and Analysis, the Schedule of Funding Progress, and the budgetary comparison schedules, as listed in the table of contents, are not required parts of the basic financial statements, but are 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 required supplementary information. However, we did not audit the information and, accordingly, we express no opinion on it. Our audit was made for the purpose of forming an opinion on the financial statements that collectively comprise the City's basic financial statements. The introductory section and combining nonmajor fund statements, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. I INSERT DATE -1- CITY OF MONTICELLO Management's Discussion and Analysis Year Ended December 31, 2008 As management of the City of Monticello, Minnesota (the City), we offer the readers of these financial statements this narrative overview and analysis of the City's financial activities for the fiscal year ended December 31, 2008. FINANCIAL HIGHLIGHTS The assets of the City exceeded its liabilities at year-end by $114,029,490 (net assets). Of this amount, $32,975,060 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $35,194,348, a decrease of $3,710,555 from the prior year. Reserved and designated uses of fund balance totaled $23,281,868, leaving $11,912,480 available for spending at the City's discretion (unreserved and undesignated fund balance). At the end of the current fiscal year, unreserved — undesignated fund balance for the General Fund was $1,286,439 or 19 percent of total General Fund expenditures for 2008. The City targets 45 percent as the optimum fund balance level, providing a reserve for cash flow during the first five months of each subsequent year until property tax receipts are released from the county treasurer's office and distributed to the local levels of government. The amount that represents this 45 percent level is reported as designated for working capital in the General Fund. The City's total long-term liabilities increased by $20,849,169 (38.6 percent) during 2008. Principal payments made on outstanding debt totaled $20,945,592. The City issued new debt of $41,895,000 in 2008, which included refinancing of the Series 1997 General Obligation Wastewater Treatment Note, Series 2000A Public Project Revenue Bonds, and the financing of the Fiber Optics Project for the City. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements, which are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. The report also contains other required supplementary information, which can provide detailed information on the City's financial activity. Government -Wide Financial Statements — The government -wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private sector business. The Statement of Net Assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, the changes in net assets may serve as a useful indicator of the financial health of the City. The Statement of Activities presents information showing how the City's net assets changed during the year. All changes in net assets are reported as soon as the underlying event affecting the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods, such as uncollected taxes and earned but unused vacation leave. -2- Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenue (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 provided by the City include general government, public safety, public works, culture and recreation, sanitation, and economic development. Business -type activities include water, sewer, liquor, cemetery, and fiber optics activities. Fund Financial Statements — A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other units of government, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the City's funds can be divided into two categories: governmental funds and proprietary funds. Governmental Funds — Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental funds financial statements focus on near-term receipt and use of spendable resources, as well as on the balance of spendable resources available at the end of the fiscal year. This 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 statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenue, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison. The City maintains several individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenue, Expenditures, and Changes in Fund Balances for the General Fund, Community Center Special Revenue Fund, Capital Outlay Revolving Special Revenue Fund, Economic Development Authority Special Revenue Fund, Sanitary Sewer Access Special Revenue Fund, Debt Service Fund, and Capital Projects Fund, all of which are considered to be major funds. Data from the remaining 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 adopts an annual budget for its General Fund and several special revenue funds. A budgetary comparison schedule has been provided for the General Fund and budgeted major special revenue funds to demonstrate compliance with the adopted budgets. Proprietary Funds — The City maintains five enterprise funds which are considered proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its water and sewer service operations, liquor sales operation, cemetery maintenance, and fiber optics operation. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for each of the enterprise operations. Notes to Basic Financial Statements — The notes to basic financial statements provide additional information that is essential to obtaining a full understanding of the data provided in the government -wide and fund financial statements. Other Information — Additional information on nonmajor funds can be found in the combining nonmajor fund statements section of this report. -3- GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. The City's assets exceeded its liabilities by $114,029,490 at the end of 2008. A portion of the City's net assets (52 percent) reflects its investment in capital assets (e.g. land, buildings, machinery and equipment, and infrastructure) less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City'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 resources, since the capital assets themselves cannot be used to liquidate these liabilities. A portion of the City's net assets (28.9 percent) reflects its unrestricted net assets which may be used to meet the City's ongoing obligations to citizens and creditors. City of Monticello's Net Assets Net assets Governmental Activities Business -Type Activities Total Invested in capital assets, 2008 2007 2008 2007 2008 2007 Current and other assets $ 55,438,385 $ 61,404,850 $ 31,598,427 $ 7,037,454 $ 87,036,812 $ 68,442,304 Capital assets 74,668,977 64,855,170 32,897,745 34,892,612 107,566,722 99,747,782 Total assets 130,107,362 126,260,020 64,496,172 41,930,066 194,603,534 168,190,086 Long-term liabilities 47,426,533 52,970,319 27,404,404 1,011,449 74,830,937 53,981,768 Other liabilities 4,576,409 4,751,872 1,166,698 505,996 5,743,107 5,257,868 Total liabilities 52,002,942 57,722,191 28,571,102 1,517,445 80,574,044 59,239,636 Net assets Invested in capital assets, net of related debt 27,584,763 12,476,536 31,375,890 33,971,151 58,960,653 46,447,687 Restricted 22,074,427 31,517,792 19,350 — 22,093,777 31,517,792 Unrestricted 28,445,230 24,543,501 4,529,830 6,441,470 32,975,060 30,984,971 Total net assets $ 78,104,420 $ 68,537,829 $ 35,925,070 $ 40,412,621 $ 114,029,490 $ 108,950,450 At the end of 2008, the City was able to report positive balances in all three categories of net assets, both for the government as a whole and for its separate governmental and business -type activities. Governmental Activities — The net assets invested in capital assets, net of related debt in the City's governmental activities increased from the previous year due to significant infrastructure improvements and additions. A significant portion of the increase was related to the continuation of the City's Reconstruction Program and the additional improvements to the City's infrastructure, including reconstruction of Jerry Liefert and Kevin Longley Drives in 2008. The City also had a significant prior period adjustment in fiscal 2008 that was due to efforts by city management to properly account for land held for resale and capital assets of the City put in place over the last several years. Business -Type Activities — The net assets invested in capital assets, net of related debt in the City's business -type activities decreased during 2008 mainly due to the prior period adjustment in fiscal 2008 that was due to efforts by city management to properly account for land held for resale and capital assets of the City put in place over the last several years. The reason for the decrease of unrestricted net assets is related to the new bond taken out for the construction of the City's Fiber Optics Project. In 2008, the project included the construction of the central office building which will house the electronics for the system and fiber backbone within the City. 10 City of Monticello's Changes in Net Assets Expenses Governmental Activities Business -Type Activities Total 2008 2007 2008 2007 2008 2007 Revenues Public safety 1,792,351 1,693,116 - - 1,792,351 Program revenues Public works 4,634,167 4,559,460 - - 4,634,167 Charges for services $ 3,243,202 $ 3,804,959 $ 3,364,794 $ 3,096,619 $ 6,607,996 $ 6,901,578 Operating grants and contributions 159,192 160,147 - - 159,192 160,147 Capital grants and contributions 948,340 3,616,870 106,787 482,412 1,055,127 4,099,282 General revenues Interest 2,136,872 2,193,840 - - 2,136,872 Property taxes 8,450,599 7,242,838 - - 8,450,599 7,242,838 General grants and aids 158,340 288,940 - - 158,340 288,940 Investment earnings 1,461,658 2,170,025 547,703 326,356 2,009,361 2,496,381 Other 233,326 528,193 136,356 62,664 369,682 590,857 Total revenues 14,654,657 17,811,972 4,155,640 3,968,051 18,810,297 21,780,023 Expenses General government 1,572,389 1,844,320 - - 1,572,389 1,844,320 Public safety 1,792,351 1,693,116 - - 1,792,351 1,693,116 Public works 4,634,167 4,559,460 - - 4,634,167 4,559,460 Sanitation 514,208 509,208 - - 514,208 509,208 Culture and recreation 2,700,683 2,661,915 - - 2,700,683 2,661,915 Economic development 510,126 769,584 - - 510,126 769,584 Interest 2,136,872 2,193,840 - - 2,136,872 2,193,840 Water - - 975,846 973,375 975,846 973,375 Sewer - - 2,085,485 2,000,610 2,085,485 2,000,610 Liquor - - 620,743 644,857 620,743 644,857 Cemetery - - 29,267 41,312 29,267 41,312 Fiber optics - - 1,590,237 84,594 1,590,237 84,594 Total expenses 13,860,796 14,231,443 5,301,578 3,744,748 19,162,374 17,976,191 Increase in net assets before transfers 793,861 3,580,529 (1,145,938) 223,303 (352,077) 3,803,832 Transfers 371,245 997,929 (371,245) (997,929) Change in net assets 1,165,106 4,578,458 (1,517,183) (774,626) (352,077) 3,803,832 Beginning of year, as previously reported 68,537,829 63,959,371 40,412,621 41,187,247 108,950,450 105,146,618 Prior period adjustment 8,401,485 - (2,970,368) - 5,431,117 - Beginning of year, as restated 76,939,314 63,959,371 37,442,253 41,187,247 114,381,567 105,146,618 Net assets - ending $ 78,104,420 $ 68,537,829 $ 35,925,070 $ 40,412,621 $ 114,029,490 $ 108,950,450 511 u 11 11 11 11 11 GOVERNMENTAL ACTIVITIES — REVENUES Property Taxes 58% Revenues by Source — Governmental Activities Charges for General Grants Services --A A:A- 22% Capital Grants and Contributions 6% rating Grants contributions 1% Other 12% Revenues for the City's governmental activities decreased by $3,157,315 or 17.7 percent. The major components of this decrease are explained as follows: • Capital grants and contributions decreased by $2,668 or 73.8 percent. This decrease was due to a decline of capital project activity in fiscal 2008. • Charges for services decreased by $561,757 or 14.8 percent. This decrease was primarily due to a reduction in sanitary sewer access fees collected of $177,830, a reduction in storm sewer access fees of $50,272, a reduction in water access fees of $55,688, and a reduction in planning and engineering fees of $481,946, all due to a decrease in new development and construction activities. • Investment earnings decreased by $708,367 due to a decrease in interest rates and available cash to invest from the prior year. Expenses — City expenses for governmental activities decreased by $370,647 or 2.6 percent. This decline is primarily due to a decline in overall general government costs. -6- GOVERNMENTAL ACTIVITIES — BUSINESS -TYPE ACTIVITIES Capital Grants and Contributions 3% Revenues by Source — Business -Type Activities Unrestricted Investment Charges for Services 81% Business -type activities decreased the City's net assets by $1,517,183. The rates for each of the City's utility services operated as enterprise funds are reviewed annually and adjusted by the City Council to assure operating revenues are independently sufficient to cover their own operating expenses and provide for their own capital equipment replacement needs. Capital grants and contributions may be necessary for the future replacement of facility needs as the current and projected future rates will not be sufficient for their ultimate replacement. The City's business -type charges for services increased by $268,175 or 8.6 percent primarily due to increased sales from the liquor store operation of $56,546 and additional revenue from sewer and water charges of $215,984. Capital grants and contributions decreased by $375,625 due to a decrease in capital asset contributions from governmental funds. Business -type expenses increased from the previous year by approximately $1,550,000 due to increased costs related to the Fiber Optics Fund of $1,505,643. -7- FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental Funds — The focus of the City's governmental funds is to provide information on near-term receipts, uses, 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 $35,194,348, a decrease of $3,710,555 from the prior year. Approximately 51.5 percent of this total amount ($11,912,480) constitutes unreserved and undesignated fund balance, which is available for spending at the City's discretion. The remainder of fund balance is designated to indicate that, although it is available for spending, it has been internally committed: 1) to liquidate contracts and purchase orders of the prior period; 2) to pay debt service, or 3) for a variety of other designated purposes. The City's General Fund increased $617,065 during the current fiscal year. Increased licenses and permits, and property taxes provided additional revenues in 2008. The City also implemented a new revenue source, the rental housing inspection fees, which generated an additional $5,545 in General Fund revenue in 2008. Each of the main activities of the General Fund were completed efficiently and effectively as authorized within the adopted budget, without using reserve balances. This resulted in total General Fund expenditures being under budget by $614,969 for the year. Community Center Special Revenue Fund — The increase in the Community Center Special Revenue Fund balance was the result of additional revenue generated through increases in memberships, an increase in property tax revenues, and a decrease in the transfer to the debt service funds for the 2008 debt payment for the facility, which was refinanced in 2008. Sanitary Sewer Access Special Revenue Fund — The Sanitary Sewer Access Special Revenue Fund decreased by $971,515 due to reduced revenues because of less new development activity taking place in the City and the transfer of funds for the Sanitary Sewer Access Special Revenue Fund's share of debt service payments. Capital Projects Fund — This fund's resources decreased in the current year primarily from previous proceeds from the sale of bonds being used for completion of various public improvement projects. 12 Proprietary Funds — The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net assets at the end of the year totaled $4,423,371 for the Water Fund and Sewer Fund, $2,373,751 for the Liquor and Cemetery Funds, and a deficit ($2,267,292) for the Fiber Optics Fund. Capital assets, net of related debt, account for approximately 87.3 percent of total enterprise fund net assets. The City is in the process of installing a fiber optic network to every premise in the City to provide phone, high-speed Internet, and cable television services. The City will pay for the cost of operation and maintenance of the system from user fees. Since the City is in the very early stages of implementing this system, this enterprise fund has no capital assets currently. The City also operates a municipal liquor operation with some of the profits used to reduce the property tax levies required to operate other city activities. Other factors concerning the finances of these funds have been presented in the discussion of the business -type activities. The expenses exceeded revenues in the Water Fund and Sewer Fund during 2008 by $526,598. The Water Fund and Sewer Fund expended $813,813 in infrastructure improvements in 2008 to accompany the ongoing street improvement projects. These costs were not offset by the 2008 water rates and revenue flow of the water utility. The debt service interest and depreciation amounts impact the net income position of these funds. The City's liquor operations ended the year with increases in net assets from operations, while the City's cemetery operations saw a decrease in net assets. The Cemetery Fund sets its charges and fees at a level to breakeven or have a slight increase. The City's Liquor Fund had operating net income of over $441,000 and transferred $171,619 to other funds to reduce property taxes. In 2007, the City started its Fiber Optics Project, which will run a fiber optic system to every premise in the City to provide customers with phone, high-speed Internet, and cable television services as a self-supporting system with competitive pricing which will act as an economic development tool for the City. The project was still in the startup phase as of the year ended 2008. -9- GENERAL FUND BUDGETARY HIGHLIGHTS General Fund revenues for 2008 exceeded budget by $149,885 in total. Licenses and permits collected were $325,244 higher than anticipated due to a hail storm that affected the City, causing the majority of the homes and business to need permits for replacing damaged roofing and siding. General Fund expenditures for 2008 were $614,969 less than budgeted. The cost reductions included an unfilled position in general government, lower than anticipated legal fees, and less funds spent on consulting engineering due to fewer new development and construction projects. In addition, there were funds budgeted for equipment purchases, such as a new fire truck, that were not used because the purchases were delayed until future years. These funds will be designated equipment purchases in the future. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets — The City's investment in capital assets for its governmental and business -type activities amounts to $107,566,722 as of December 31, 2008, net of accumulated depreciation. This investment in capital assets includes fire and public works equipment, park and recreation facilities, buildings, roads, sewer, water, and storm sewer utilities. This amount represents a net increase (including additions and deductions) of $7,818,940 over last year. City of Monticello's Capital Assets Additional information on the City's capital assets is located in Note 3 of the notes to basic financial statements. Long -Term Debt — At the end of 2008, the City has total bonded debt outstanding in the amount of $73,972,307, of which $24,075,000 are special assessment bonds outstanding. The City has pledged revenue streams from general property taxes; redevelopment district tax increments; the community center; water and sewer utility; and sewer, water, and storm sewer access funds for the principal and interest payments due on these bonds. The City issued $41,895,000 in new bonds in 2008. These bonds will finance the construction the Fiber Loop Project, the refunding of the Series 1997 General Obligation Wastewater Treatment Note, and the refunding of the Series 2000A Public Project Revenue Bonds. -10- Governmental Activities Business -Type Activities Total 2008 2007 2008 2007 2008 2007 Land $ 8,457,484 $ 7,162,826 $ 1,751,945 $ 1,217,845 $ 10,209,429 $ 8,380,671 Construction in progress 33,451,897 24,927,847 2,986,104 6,191,218 36,438,001 31,119,065 Infrastructure 36,783,454 35,043,517 28,847,331 28,510,507 65,630,785 63,554,024 Buildings 13,102,213 13,135,936 5,156,471 5,156,471 18,258,684 18,292,407 Improvements other than buildings 4,331,791 4,115,256 19,720,949 18,056,314 24,052,740 22,171,570 Machinery, equipment, and vehicles 3,617,456 3,266,866 1,524,866 1,380,772 5,142,322 4,647,638 Less accumulated depreciation (25,075,318) (22,797,078) (27,089,921) (25,620,515) (52,165,239) (48,417,593) Net total $ 74,668,977 $ 64,855,170 $ 32,897,745 $ 34,892,612 $107,566,722 $ 99,747,782 Additional information on the City's capital assets is located in Note 3 of the notes to basic financial statements. Long -Term Debt — At the end of 2008, the City has total bonded debt outstanding in the amount of $73,972,307, of which $24,075,000 are special assessment bonds outstanding. The City has pledged revenue streams from general property taxes; redevelopment district tax increments; the community center; water and sewer utility; and sewer, water, and storm sewer access funds for the principal and interest payments due on these bonds. The City issued $41,895,000 in new bonds in 2008. These bonds will finance the construction the Fiber Loop Project, the refunding of the Series 1997 General Obligation Wastewater Treatment Note, and the refunding of the Series 2000A Public Project Revenue Bonds. -10- City of Monticello's Outstanding Debt Total $ 47,132,196 $ 52,627,788 $ 27,352,097 $ 907,097 $ 74,484,293 $ 53,534,885 The City's total debt increased by $20,949,408 or approximately 39 percent during 2008. State statutes limit the amount of general obligation debt a governmental entity may issue to 3.0 percent of its taxable market value. The current debt limit is $37,306,764, which is significantly in excess of the City's outstanding net general obligation debt of $16,645,000, which is subject to the limitation. Additional information on the City's debt is located in Note 4 of the notes to basic financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The City considered many factors when setting the fiscal year 2009 budget, rates, and fees that will be charged in the business -type activities. With the City Council's decision to increase the previous year's tax levy by $150,000, they used the electric utility franchise fee of 3 percent, which is expected to generate $250,000 in revenue for streetlight improvements. Budgeted revenues for permits and charges for services were reduced to reflect less new development activity taking place in 2009. Budgeted sewer and water user fees were increased by 5 percent to be used to fund operational costs for their departments that were previously covered by the General Fund. Finally, reserve funds of $509,643 from the debt service funds and $150,000 from enterprise funds were included to balance the budget. The City's property tax levy for 2009 will amount to $7,750,000, which is $150,000 more than 2008. REQUESTS FOR INFORMATION The City's financial statements are designed to provide our citizens, customers, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of Monticello, Finance Department at 505 Walnut Street, Suite No. 1, Monticello, Minnesota 55362. -11- Governmental Business -Type Activities Activities Total 2008 2007 2008 2007 2008 2007 General obligation bonds $ 6,907,903 $ 7,132,903 $ 907,097 $ 907,097 $ 7,815,000 $ 8,040,000 Tax increment bonds 575,000 680,000 — — 575,000 680,000 Special assessment bonds 24,075,000 28,415,000 — — 24,075,000 28,415,000 General obligation notes 8,830,000 9,515,592 — — 8,830,000 9,515,592 Revenue bonds 6,180,000 6,220,000 26,445,000 — 32,625,000 6,220,000 Contract for deed 5649293 664,293 — — 564,293 664,293 Total $ 47,132,196 $ 52,627,788 $ 27,352,097 $ 907,097 $ 74,484,293 $ 53,534,885 The City's total debt increased by $20,949,408 or approximately 39 percent during 2008. State statutes limit the amount of general obligation debt a governmental entity may issue to 3.0 percent of its taxable market value. The current debt limit is $37,306,764, which is significantly in excess of the City's outstanding net general obligation debt of $16,645,000, which is subject to the limitation. Additional information on the City's debt is located in Note 4 of the notes to basic financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The City considered many factors when setting the fiscal year 2009 budget, rates, and fees that will be charged in the business -type activities. With the City Council's decision to increase the previous year's tax levy by $150,000, they used the electric utility franchise fee of 3 percent, which is expected to generate $250,000 in revenue for streetlight improvements. Budgeted revenues for permits and charges for services were reduced to reflect less new development activity taking place in 2009. Budgeted sewer and water user fees were increased by 5 percent to be used to fund operational costs for their departments that were previously covered by the General Fund. Finally, reserve funds of $509,643 from the debt service funds and $150,000 from enterprise funds were included to balance the budget. The City's property tax levy for 2009 will amount to $7,750,000, which is $150,000 more than 2008. REQUESTS FOR INFORMATION The City's financial statements are designed to provide our citizens, customers, and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of Monticello, Finance Department at 505 Walnut Street, Suite No. 1, Monticello, Minnesota 55362. -11- BASIC FINANCIAL STATEMENTS Assets Cash and investments Receivables Delinquent taxes Deferred special assessments Delinquent special assessments Accounts Interest Due from other governmental units Notes Land held for resale Inventory Prepaid items Unamortized bond issuance costs Restricted assets Cash and investment held for fiber optics activity Capital assets, not being depreciated Land Construction in progress Capital assets, being depreciated Buildings Furniture and equipment Vehicles Machinery and equipment Improvements other than buildings Infrastructure Less accumulated depreciation Total capital assets, net of depreciation Total assets Liabilities Current liabilities Accounts and contracts payable Other accrued liabilities Due to other governmental units Accrued interest payable Unamortized premiums Unearned revenues Net OPEB obligation Escrow deposits Long-term liabilities Due within one year Due within more than one year Total long-term liabilities Total liabilities Net assets Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total net assets Total liabilities and net assets See notes to basic financial statements CITY OF MONTICELLO Statement of Net Assets as of December 31, 2008 -12- Governmental Business -Type Activities Activities Totals $ 30,853,978 $ 4,322,408 $ 35,176,386 290,783 - 290,783 14,01 l ,932 151,844 14,163,776 699,433 19,803 719,236 275,995 608,395 884,390 347,178 53,149 400,327 10,692 - 10,692 2,585,439 - 2,585,439 5,994,312 - 5,994,312 - 569,537 569,537 107,021 30,121 137,142 261,622 1,084,492 1,346,114 24,758,678 24,758,678 8,457,484 1,751,945 10,209,429 33,451,897 2,986,104 36,438,001 13,102,213 5,156,471 18,258,684 335,393 118,373 453,766 2,042,324 608,139 2,650,463 1,239,739 798,354 2,038,093 4,331,791 19,720,949 24,052,740 36,783,454 28,847,331 65,630,785 (25,075,318) (27,089,921) (52,165,239) 74,668,977 32,897,745 107,566,722 $ 130,107,362 $ 64,496,172 $ 194,603,534 $ 541,508 $ 1,017,237 $ 1,558,745 133,204 19,195 152,399 732,230 41,262 773,492 933,512 - 933,512 213,640 12,928 226,568 - 73,193 73,193 53,680 - 53,680 1,968,635 2,883 1,971,518 6,826,912 81,498 6,908,410 40,599,621 27,322,906 67,922,527 47,426,533 27,404,404 74,830,937 52,002,942 28,571,102 80,574,044 27,584,763 31,375,890 58,960,653 22,074,427 19,350 22,093,777 28,445,230 4,529,830 32,975,060 78,104,420 35,925,070 114,029,490 $ 130,107,362 $ 64,496,172 $ 194,603,534 CITY OF MONTICELLO Statement of Activities Year Ended December 31, 2008 Business -type activities Water Sewer Liquor Cemetery Fiber optics Total business -type activities Total governmental and business -type activities 975,846 973,776 - - - (2,070) Program Revenues Net (Expense) Revenue and Changes in Net Assets 1,307,064 - 15,413 - (763,008) (763,008) Operating Capital Business - 438,736 29,267 24,475 Charges for Grants and Grants and Governmental Type - 91,374 - (1,498,863) Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals Governmental activities General government $ 1,572,389 $ 523,228 $ - $ - $ (1,049,161) $ - $ (1,049,161) Public safety 1,792,351 99,812 128,871 139,239 (1,424,429) - (1,424,429) Public works 4,634,167 1,544,140 14,020 717,216 (2,358,791) - (2,358,791) Sanitation 514,208 - - - (514,208) - (514,208) Culture and recreation 2,700,683 1,060,147 16,301 91,885 (1,532,350) - (1,532,350) Economic development 510,126 15,875 - - (494,251) - (494,251) Interest 2,136,872 - - - (2,136,872) - (2,136,872) Total governmental activities 13,860,796 3,243,202 159,192 948,340 (9,510,062) - (9,510,062) Business -type activities Water Sewer Liquor Cemetery Fiber optics Total business -type activities Total governmental and business -type activities 975,846 973,776 - - - (2,070) (2,070) 2,085,485 1,307,064 - 15,413 - (763,008) (763,008) 620,743 1,059,479 - - - 438,736 438,736 29,267 24,475 - - - (4,792) (4,792) 1,590,237 - - 91,374 - (1,498,863) (1,498,863) (1,517,183) (352,077) 5,301,578 3,364,794 - 106,787 - (1,829,997) (1,829,997) $ 19,162,374 $ 6,607,996 $ 159,192 $ 1,055,127 General revenues Property taxes General aids and grants - unrestricted Investment earnings Other general revenues Transfers Total general revenues and transfers Change in net assets Beginning of year, as previously reported Prior period adjustment Beginning of year, as restated Net assets - ending ISee notes to basic financial statements -13- (9,510,062) (1,829,997) (11,340,059) 8,450,599 - 8,450,599 158,340 - 158,340 1,461,658 547,703 2,009,361 233,326 136,356 369,682 371,245 (371,245) - 10,675,168 312,814 10,987,982 1,165,106 (1,517,183) (352,077) 68,537,829 40,412,621 108,950,450 8,401,485 (2,970,368) 5,431,117 76,939,314 37,442,253 114,381,567 $ 78,104,420 $ 35,925,070 $114,029,490 Assets Cash and investments Receivables Delinquent taxes Deferred special assessments Delinquent special assessments Accounts Accrued interest Due from other governmental units Notes receivable Due from other funds Land held for resale Prepaid items Total assets Liabilities and Fund Balances Liabilities Accounts and contracts payable Other accrued liabilities Due to other governmental units Due to other funds Deferred revenue Escrow deposits Total liabilities Fund balances Reserved Notes receivable Debt retirement Prepaid items Land held for resale Unreserved - designated Unreserved - undesignated reported in General Fund Special revenue funds Capital Projects Fund Total fund balances Total liabilities and fund balances See notes to basic financial statements CITY OF MONTICELLO Balance Sheet Governmental Funds as of December 31, 2008 General Special Revenue Funds Economic Community Capital Outlay Development Center Revolving Authority $ 7,872,522 $ 756,063 $ 522,172 $ 1,680,999 210,604 50,658 48 13,316 187 - 432,661 - 7,696 - 3,718 - 134,707 2,751 8,289 2,938 66,436 6,756 20,507 15,259 10,692 - - - 279,687 - - 705,752 - - 1,607,609 - - - 3,149,426 2,844,886 79,616 25,105 - - $ 8,662,147 $ 841,333 $ 5,744,430 $ 5,263,150 $ 187,954 $ 7,296 102,639 25,238 36,973 4,747 197,924 54,307 1,958,105 3,030 2,483,595 94,618 $ 32,595 $ 77,938 436,379 12,556 - 7,500 468,974 97,994 279,687 - - 705,752 - - - 564,293 79,616 25,105 - - - - 3,149,426 2,844,886 4,532,810 63,000 932,434 - 1,286,439 - - - - 658,610 1,193,596 1,050,225 6,178,552 746,715 5,275,456 5,165,156 $ 8,662,147 $ 841,333 $ 5,744,430 $ 5,263,150 -14- Sanitary Sewer Access Debt Service Capital Projects Nonmajor Funds Totals $ 4,964,417 $ 9,232,827 $ - $ 5,824,978 $ 30,853,978 - 275 - 15,882 290,783 897,139 11,197,565 - 1,484,380 14,011,932 86,507 252,474 - 349,038 699,433 4,602 18,285 - 104,423 275,995 56,483 142,220 (11,324) 50,841 347,178 - - - - 10,692 - 1,600,000 - - 2,585,439 - - - - 1,607,609 - - - - 5,994,312 131 435 - 1,734 107,021 35,194,348 $ 6,009,279 $ 22,444,081 $ (11,324) $ 7,831,276 $ 56,784,372 $ 605 $ - $ 220,545 $ 14,575 $ 541,508 - - - 5,327 133,204 - 690,510 732,230 - - 1,607,609 - 1,607,609 983,646 13,071,607 - 1,850,419 16,606,838 - - - - 1,968,635 984,25I 13,071,607 1,828,154 2,560,831 21,590,024 - - - - 985,439 - 9,372,039 - - 9,936,332 131 435 - 1,734 107,021 - - - - 5,994,312 - - - 730,520 6,258,764 - - - - 1,286,439 5,024,897 - - 4,538,191 12,465,519 - - (1,839,478) - (1,839,478) 5,025,028 9,372,474 (1,839,478) 5,270,445 35,194,348 $ 6,009,279 $ 22,444,081 $ (11,324) $ 7,831,276 $ 56,784,372 -15- CITY OF MONTICELLO Reconciliation of the Balance Sheet to the Statement of Net Assets Governmental Funds as of December 31, 2008 Total fund balances — governmental funds $ 35,194,348 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. These assets consist of: Land 8,457,484 Construction in progress 33,451,897 Buildings 13,102,213 Furniture and equipment 335,393 Vehicles 2,042,324 Machinery and equipment 1,239,739 Improvements other than buildings 4,331,791 Infrastructure 36,783,454 Less accumulated depreciation (25,075,318) Some of the City's property taxes, special assessments, and notes receivable will be collected after year-end, but are not available soon enough to pay for the current period's expenditures, and, therefore, are reported as deferred revenue in the governmental funds. 16,606,838 Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. Accrued interest for general obligation bonds is included in the Statement of Net Assets. (933,512) Net other post -employment benefit obligations payable reported in the Statement of Net Assets do not require the use of current financial resources and are not reported as liabilities in governmental funds until actually due. (53,680) Long-term liabilities that pertain to governmental funds, including bonds payable, are not due and payable in the current period and, therefore, are not reported as fund liabilities. All liabilities, both current and long-term, are reported in the Statement of Net Assets: Bonds payable (46,567,903) Contract for deed payable (564,293) Unamortized bond issuance costs 261,622 Unamortized bond premiums (213,640) Compensated absences (294,337) Total net assets — governmental activities $ 78,104,420 See notes to basic financial statements -16- CITY OF MONTICELLO Statement of Revenue, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended December 31, 2008 Special Revenue Funds Economic Community Capital Outlay Development General Center Revolving Authority Revenue Property taxes $ 5,460,542 $ 1,360,350 $ 263 $ 1,172,447 Special assessments 5,970 - 139,498 - Licenses and permits 917,539 - - - Intergovernmental 368,938 25,290 - 9,231 Charges for services 324,378 1,067,038 - 15,875 Fines 2,216 - - - Interest earnings (charges) 328,195 36,334 100,340 120,896 Miscellaneous 178,066 13,381 - 745 Total revenue 7,585,844 2,502,393 240,101 1,319,194 Expenditures Current General government 1,579,164 - - - Public safety 1,736,962 - - _ Public works 1,892,566 - 55,952 - Sanitation 514,208 - - - Culture and recreation 627,154 1,550,878 - - Economic development 79,647 - - 446,136 Capital outlay General government 5,400 - - - Public safety 15,747 - - - Public works 232,311 - - - Culture and recreation 123,781 5,224 - - Economic development - - - - Debt service Principal - - - 100,000 Interest and fiscal charges - - - 58,751 Total expenditures 6,806,940 1,556,102 55,952 604,887 Excess (deficiency) of revenues over expenditures 778,904 946,291 184,149 714,307 Other financing sources (uses) Transfer in 46,390 - - 20,703 Transfer out (210,804) (690,000) (794,545) (468,767) Proceeds from sale of assets 2,575 - - - Proceeds on sale of land held for resale - - - 74,650 Principal payment to refunding escrow account - - _ - Deferred amortized gain on refunding - _ Proceeds from sale of bonds - - Total other financing sources (uses) (161,839) (690,000) (794,545) (373,414) Net change in fund balances 617,065 256,291 (610,396) 340,893 Fund balances (deficit) Beginning of year, as previously reported 5,561,487 490,424 8,470,819 2,536,420 Prior period adjustment - - (2,584,967) 2,287,843 Beginning of year, as restated 5,561,487 490,424 5,885,852 4,824,263 End of year $ 6,178,552 $ 746,715 $ 5,275,456 $ 5,165,156 See notes to basic financial statements -17- Sanitary Sewer Access Debt Service Capital Projects Nonmajor Funds Totals $ - $ 2,113 $ - $ 410,314 $ 8,406,029 257,896 1,784,941 - 378,627 2,566,932 - - - - 917,539 - - - 146,824 550,283 270,753 - - 612,047 2,290,091 - - - - 2,216 254,622 421,307 (44,554) 244,518 1,46I,658 - - - 5,796 197,988 783,271 2,208,361 (44,554) 1,798,126 16,392,736 1,579,164 1,736,962 18,455 - - 414,020 2,380,993 - 514,208 - 42,336 2,220,368 - - - - 525,783 5,400 15,747 - - 1,708,844 37,073 1,978,228 - - - 1,203,456 1,332,461 - - - 190,360 190,360 - 4,937,028 - - 5,037,028 - 2,133,312 - - 2,192,063 18,455 7,070,340 1,708,844 1,887,245 19,708,765 764,816 (4,861,979) (1,753,398) (89,119) (3,316,029) 203,708 14,117,459 1,409,566 1,020,264 16,818,090 (1,940,039) (10,899,801) (865,432) (577,457) (16,446,845) 2,575 - - - = 74,650 - (15,908,564) - - (15,908,564) - (384,432) - - (384,432) - 15,450,000 - - 15,450,000 (1,736,331) 2,374,662 544,134 442,807 (394,526) (971,515) (2,487,317) (1,209,264) 353,688 (3,710,555) 5,996,543 12,216,328 (630,214) 4,916,757 39,558,564 - (356,537) - - (653,661) 5,996,543 11,859,791 (630,214) 4,916,757 38,904,903 $ 5,025,028 $ 9,372,474 $ (1,839,478) $ 5,270,445 $ 35,194,348 -18- CITY OF MONTICELLO ' Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Activities Year Ended December 31, 2008 Total net change in fund balances — governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: $ (3,710,555) Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over the estimated useful lives as depreciation expense. This is the amount by which capital assets changed: Capital outlays 3,178,174 Depreciation expense (2,308,050) A gain or loss on the disposal of capital assets, including the difference between the carrying value and any related sale proceeds, is included in the change of net assets. However, only the sale proceeds are included in the change in fund balances. The governmental funds report bond proceeds as financing sources, while repayment of bond principal is reported as an expenditure. In the Statement of Net Assets, however, issuing debt increases long-term liabilities and does not affect the Statement of Activities: Proceeds from bonds issued Repayment of bond principal Repayment of note principal Repayment of contract for deed Change in accrued interest payable Deferred gain on bond refunding Net amortization of bond issuance Amortization of bond premium Change in compensated absences Net other post -employment benefit obligations payable reported in the Statement of Activities do not require the use of current financial resources and are not reported as expenditures in governmental funds until actually due. Certain revenues (including delinquent taxes and special assessments) are included in the change in net assets, but are excluded from the change in fund balances until they are available to liquidate liabilities of the current period. Change in deferred revenue Change in net assets — governmental activities See notes to basic financial statements -19- (111,463) (15,450,000) 11,330,000 9,515,592 100,000 (39,205) 384,432 63,056 31,340 48,194 (53,680) (1,812,729) $ 1,165,106 Assets Current assets Cash and investments - unrestricted Receivables Deferred special assessments Delinquent special assessments Accounts Accrued interest Inventory Due from other funds Prepaids Total current assets Noncurrent assets Cash and investments - restricted Capital assets Land Buildings Furniture and equipment Vehicles Machinery and equipment Improvements other than buildings Infrastructure Construction in progress Less accumulated depreciation Capital assets, net of depreciation Other assets Unamortized discounts and issuance costs Total assets Liabilities Current liabilities Accounts and contracts payable Other accrued liabilities Due to other governmental units Due to other funds Unamortized premiums Unearned revenue Escrow deposits Bonds payable due within one year Total current liabilities Long-term liabilities Bonds payable Compensated absences payable Total long-term liabilities Total liabilities Net assets Invested in capital assets, net of related debt Restricted Unrestricted Total net assets See notes to basic financial statements CITY OF MONTICELLO Statement of Net Assets Proprietary Funds as of December 31, 2008 Business -Type Activities - Enterprise Funds Water Sewer Liquor Cemetery Fiber Optics Totals 1 $ 2,123,494 $ 1,871,893 $ 287,679 $ 39,342 $ - $ 4,322,408 . 151,844 - - - - 151,844 19,803 - - - - 19,803 181,739 356,479 9,985 - 60,192 608,395 20,059 21,927 16,777 424 (6,038) 53,149 - - 569,537 - - 569,537 - - 1,580,243 - - 1,580,243 6,950 7,555 13,509 - 2,107 30,121 , 2,503,889 2,257,854 2,477,730 39,766 56,261 7,335,500 - - - - 24,758,678 24,758,678 208,143 984,202 5,600 554,000 - 1,751,945 848,445 3,570,119 737,907 - - 5,156,471 15,695 52,942 49,736 - - 118,373 81,553 526,586 - - - 608,139 , 166,267 567,836 64,251 - - 798,354 1,944,034 17,609,984 81,040 85,891 - 19,720,949 13,897,343 14,949,988 - - - 28,847,331 - 1,114,710 - - 1,871,394 2,986,104 17,161,480 39,376,367 938,534 639,891 1,871,394 59,987,666 (7,092,950) (19,512,058) (462,162) (22,751) - (27,089,921) 10,068,530 19,864,309 476,372 617,140 1,871,394 32,897,745 - - - - 1,084,492 1,084,492 $ 12,572,419 $ 22,122,163 $ 2,954,102 $ 656,906 $ 27,770,825 $ 66,076,415 $ 30,337 $ 186,358 $ 56,432 $ 800 $ 743,310 $ 1,017,237 4,967 2,661 11,502 65 - 19,195 2,572 - 38,690 - - 41,262 - - - - 1,580,243 1,580,243 - 12,928 - - - 12,928 , 71,809 - 1,384 - - 73,193 1,500 875 508 - - 2,883 - 69,026 - - - 69,026 111,185 271,848 108,516 865 2,323,553 2,815,967 ' - 838,071 - - 26,445,000 27,283,071 37,293 - 15,014 - - 52,307 37,293 838,071 15,014 - 26,445,000 27,335,378 ' 148,478 1,109,919 123,530 865 28,768,553 30,151,345 10,068,530 18,944,284 476,372 617,140 1,269,564 31,375,890 - - - 19,350 - 19,350 2,355,411 2,067,960 2,354,200 19,551 (2,267,292) 4,529,830 $ 12,423,941 $ 21,012,244 $ 2,830,572 $ 656,041 1 (997,728) $ 35,925,070 -20- i iCITY OF MONTICELLO Statement of Revenue, Expenses, and Changes in Fund Net Assets ' Proprietary Funds Year Ended December 31, 2008 Business -Type Activities - Enterprise Funds Water Sewer Liquor Cemetery Fiber Optics Totals ' Operating revenue Sales $ - $ - $ 4,085,682 $ - $ - $ 4,085,682 Cost of goods sold - - (3,026,203) - - (3,026,203) Charges for services 973,776 1,307,064 - 24,475 - 2,305,315 Other revenue 18,656 31,135 2,999 2,308 81,258 136,356 Total operating revenue 992,432 1,338,199 1,062,478 26,783 81,258 3,501,150 Operating expenses Personal services 240,259 167,108 374,610 5,338 - 787,315 Utilities 102,552 16,110 26,894 - 330 145,886 Supplies and maintenance 116,839 15,002 9,945 - 471 142,257 Repairs and maintenance 33,752 18,668 15,152 92 1,612 69,276 Depreciation 422,634 1,007,336 45,811 3,436 1,479,217 Insurance 13,144 24,707 30,781 - 3,200 71,832 Professional fees 5,632 792,058 12,713 20,401 777,075 1,607,879 Advertising - - 1,960 - - 1,960 Miscellaneous 41,034 24,371 102,877 1,160 169,442 Total operating expenses 975,846 2,065,360 620,743 29,267 783,848 4,475,064 ' Operating income (loss) 16,586 (727,161) 441,735 (2,484) (702,590) (973,914) Nonoperating revenues (expenses) Investment earnings (charges) 97,283 106,819 82,710 2,024 258,867 547,703 ' Interest expense - (20,125) - - (806,389) _ (826,514) Total nonoperating revenues (expenses) 97,283 86,694 82,710 2,024 (547,522) (278,811) Income (loss) before contributions and transfers 113,869 (640,467) 524,445 (460) (1,250,112) (1,252,725) Contributions and transfers Capital contributions - 15,413 - - 9I,374 106,787 Transfers in 21,561 21,561 Transfers (out) (221,187) (171,619) - (392,806) Total contributions and transfers (221,187) 36,974 (171,619) - 91,374 (264,458) Change in net assets (107,318) (603,493) 352,826 (460) (1,158,738) (1,517,183) Net assets Beginning of year, as previously reported 14,445,319 23,464,837 2,464,958 122,401 (84,894) 40,412,621 ' Prior period adjustment (1,914,060) (1,849,100) 12,788 534,100 245,904 (2,970,368) Beginning of year, as restated 12,531,259 21,615,737 2,477,746 656,501 161,010 37,442,253 1 End of year $ 12,423,941 $ 21,012,244 $ 2,830,572 $ 656,041 $ (997,728) $ 35,925,070 See notes to basic financial statements -21- Cash flows from capital and related financing activities Acquisition and construction of capital assets CITY OF MONTICELLO - (1,534,116) (2,347,929) Proceeds from sale of bonds - - - i 25,332,811 Interest received on investments 91,670 97,827 78,037 1,942 264,905 534,381 Interest paid on bonds - (21,561) - - (806,389) Statement of Cash Flows Net cash provided (used) by capital and (55,494) 800 686,113 712,110 related financing activities 91,670 (737,547) 78,037 Proprietary Funds 22,691,313 - (67,486) (16,552) (134) 1,859 ' - (14,827) Year Ended December 31, 2008 - 84 - - (17,960) (130) Business -Type Activities - Enterprise Funds (1,609) - (1,746) i Water Sewer Liquor Cemetery Fiber Optics Totals $ 447,261 Cash flows from operating activities $ (78,776) $ 1,084,159 Cash received from customers $ 966,240 $ 1,300,204 $ 1,059,934 $ 26,054 $ 21,066 $ 3,373,498 Cash payments to suppliers (399,457) (867,447) (303,134) (19,694 99,842 ( ) (1,689,574) Cash payments to employees (167,599) (117,295) (309,539) (5,332) - (599,765) Net cash provided (used) by operating activities 399,184 315,462 447,261 1,028 (78,776) 1,084,159 Cash flows from noncapital financing activities Interfund borrowing (1,552,546) - - - 1,580,243 27,697 Transfers in (out) (221,187) 21,561 (171,619) - -(371,245) Net cash provided (used) by noncapital financing activities (1,773,733) 21,561 (171,619) - 1,580,243 (343,548) Cash flows from capital and related financing activities Acquisition and construction of capital assets - (813,813) - - (1,534,116) (2,347,929) Proceeds from sale of bonds - - - - 25,332,811 25,332,811 Interest received on investments 91,670 97,827 78,037 1,942 264,905 534,381 Interest paid on bonds - (21,561) - - (806,389) (827,950) Net cash provided (used) by capital and (55,494) 800 686,113 712,110 related financing activities 91,670 (737,547) 78,037 1,942 23,257,211 22,691,313 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents Beginning of year End of year Cash and cash equivalents comprised of Unrestricted Restricted Total Reconciliation ofoperating income (loss) to net cash provided (used) by operating activities Operating income (loss) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities Depreciation Changes in assets and liabilities (Increase) decrease in accounts receivable (Increase) decrease in special assessments receivable (Increase) decrease in inventory (Increase) decrease in prepaid expenses Increase (decrease)in accounts and contracts payable Increase (decrease)in accrued expenses Increase (decrease) in due to other governments Increase (decrease) in unearned revenue Increase (decrease) in escrow deposits Net cash provided (used) by operating activities Noncash capital and related financing activities Contributions of capital assets See notes to basic financial statements (1,282,879) (400,524) 353,679 2,970 24,758,678 23,431,924 1,826,130 2,272,417 1,514,243 36,372 - 5,649,162 $ 543,251 $ 1,871,893 $ 1,867,922 $ 39,342 $ 24,758,678 $ 29,08],086 $ 543,251 $ 1,871,893 $ 1,867,922 $ 39,342 $ - $ 4,322,408 - - - - 24,758,678 24,758,678 $ 543,251 $ 1,871,893 $ 1,867,922 $ 39,342 $ 24,758,678 $ 29,081,086 $ 16,586 $ (727,161) $ 441,735 $ (2,484) $ (702,590) $ (973,914) 422,634 1,007,336 45,811 3,436 - 1,479,217 (22,660) (37,993) (2,621) 880 (60,192) (122,586) 14,643 - - - - 14,643 - - 82,704 - - 82,704 2,466 (1,654) (4,701) - (2,107) (5,996) 6,591 74,100 (55,494) 800 686,113 712,110 (6,350) 968 (62,109) 5 - (67,486) (16,552) (134) 1,859 - - (14,827) (18,044) - 84 - - (17,960) (130) - (7) (1,609) - (1,746) $ 399,184 $ 315,462 $ 447,261 $ 1,028 $ (78,776) $ 1,084,159 $ - $ 15,413 $ - $ - $ 91,374 $ 106,787 -22- CITY OF MONTICELLO Notes to Basic Financial Statements December 31, 2008 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization The financial statements of the City of Monticello, Minnesota (the City) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies of the City are described as follows: B. Reporting Entity The accompanying financial statements include all funds, departments, agencies, boards, commissions, and other organizations that comprise the City, along with any component units. Component units are legally separate entities for which the City (primary government) is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit includes whether or not the primary government appoints the voting majority of the potential component unit's governing body, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. The Monticello Economic Development Authority (EDA) is fiscally dependent upon the City, and its governing body consists of City Council members. Therefore, the EDA is included as a component unit of the City. The EDA's financial data has been blended with that of the City (i.e. reported as though its funds were funds of the City) and reported as a special revenue fund. C. Government -Wide Financial Statement Presentation The government -wide financial statements (Statement of Net Assets and Statement of Activities) display information about the reporting government as a whole. These statements include all of the financial activities of the City. 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. The City's net assets are reported in three parts: 1) invested in capital assets, net of related debt; 2) restricted net assets; and 3) unrestricted net assets. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; 2) operating grants and contributions; and 3) capital grants and contributions, including special assessments that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other internally directed revenues are reported as general revenues. The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes and special assessments are recognized as revenues in the fiscal year for which they are levied. Grants and similar items are recognized as revenue when all eligibility requirements imposed by the provider have been met. -23- NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Generally, the effect of interfund activity has been removed from the government -wide financial statements. However, charges between functions for certain interfund services provided are not eliminated, as that would distort the direct costs and program revenues reported in those functions. The City applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available. Depreciation expense is included in the direct expenses of each function. Interest on long-term debt is considered an indirect expense and is reported separately on the Statement of Activities. D. Fund Financial Statement Presentation Separate fund financial statements are provided for governmental and proprietary funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. Aggregated information for the remaining nonmajor funds are reported in single columns in the respective fund financial statements. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's enterprise funds are charges to customers for sales and services. The operating expenses for the enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Governmental funds financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this basis of accounting transactions are recorded in the following manner: 1. Revenue Recognition — Revenue is recognized when it becomes measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met. Major revenue that is susceptible to accrual includes property taxes, intergovernmental revenue, charges for services, and interest earned on investments. 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. Major revenue that is not susceptible to accrual includes licenses and permits, fees, and miscellaneous revenue. Such revenue is recorded only when received because it is not measurable until collected. 2. Recording of Expenditures — Expenditures are generally recorded when a liability is incurred, except for principal and interest on long-term debt and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as capital outlay expenditures in the governmental funds. Proceeds of long-term debt are reported as other financing sources. Proprietary funds financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as described earlier in these notes. Private sector standards of accounting and financial reporting issued prior to December 1, 1989 are generally followed in both the government -wide and proprietary funds financial statements to the extent those standards do not conflict with or contradict guidance of GASB. Governments have the option of following subsequent private sector guidance for their business -type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private sector guidance. -24- NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Description of Funds Each fund is accounted for as an independent entity as follows: Major Governmental Funds A description of the funds included in this report is General Fund — The General Fund is used to account for all financial resources except those required to be accounted for in another fund. Community Center Fund — The Community Center Fund accounts for the revenues and expenditures related to the community center. Capital Outlay Revolving Fund — The Capital Outlay Revolving Fund is used to account for the revenues and expenditures related to capital outlay. Economic Development Authority (EDA) Fund — The EDA Fund is used to account for revenues and expenditures related to the blended component unit. Sanitary Sewer Access Fund — The Sanitary Sewer Access Fund is used to account for revenues and expenditures related to sanitary sewer connections. Debt Service Fund — Debt service funds are used to account for the accumulation of resources for and the payment of long-term debt principal, interest, and related costs. Capital Projects Fund — The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). Major Proprietary Funds Water Fund — The Water Enterprise Fund is used to account for all activities necessary to provide water services to the residents and businesses of the City. Sewer Fund — The Sewer Enterprise Fund is used to account for all activities necessary to provide sewer services to the residents and businesses of the City. Liquor Fund — The Liquor Fund is used to account for the operations of the City's liquor store. Cemetery Fund — The Cemetery Fund is used to account for the operation of City's cemetery. Fiber Optics Fund — The Fiber Optics Fund is used to account for all activities necessary to provide fiber optic services to the residents and businesses of the City. E. Cash and Investments Cash and investments include balances from all funds that are combined and invested to the extent available in savings accounts, certificates of deposit, U.S. government obligations, and other securities authorized by state statutes. Earnings from investments are allocated to the respective funds on the basis of applicable participation by each fund. Short-term highly liquid debt instruments (including commercial paper, banker's acceptances, and U.S. treasury and agency obligations) purchased with a remaining maturity of one year or less are reported at amortized cost. Other investments are reported at fair value. -25- NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Receivables and Payables Any outstanding balances between funds that are not lending or borrowing arrangements are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." When necessary, the City utilizes an allowance for uncollectible accounts to value its receivables. However, the City considers all of its current receivables to be collectible. G. Notes Receivable Notes receivable consist primarily of loans made by the City to area businesses for development or redevelopment purposes. The terms and interest rates of the individual loans vary. The notes receivable in the governmental funds are not offset by deferred revenue. The City has one note receivable totaling $1,600,000 with another local government. This note has an interest rate of 3.95 percent and will mature at various dates through January 2016. This note receivable in the governmental funds is offset by deferred revenue. H. Property Taxes Property tax levies are set by the City Council each year, and are certified to Wright County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. A portion of the property taxes levied is paid by the state of Minnesota through various tax credits, which are included in intergovernmental revenue in the financial statements. Wright County spreads all levies over taxable property. Such taxes become a lien on January 1 and are recorded as receivables by the City on that date. Property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Wright County provides tax settlements to cities and other taxing districts several times throughout the year. Taxes which remain unpaid at December 31 are classified as delinquent taxes receivable and are offset by deferred revenue in the governmental funds financial statements. Within the governmental funds financial statements, the City recognizes property tax revenue when it becomes both measurable and available to finance expenditures of the current period. The portion of delinquent taxes not collected by the City in January is fully offset by deferred revenue because it is not available to finance current expenditures. Deferred revenue in governmental activities is susceptible to full accrual on the government -wide statements. I. Special Assessments Special assessments represent the financing for public improvements paid for by benefiting property owners. These assessments are recorded as delinquent (levied, but unremitted) and deferred (certified, but not yet levied) special assessments receivable, and are offset by deferred revenue in the governmental fund financial statements. J. Inventories The inventories of the proprietary funds are stated at cost on the first -in, first -out basis. -26- NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Prepaid Items Payments to vendors for services that will benefit future accounting periods are recorded as prepaid. Prepaid items are accounted for using the consumption method. L. Land Held for Resale Land held for resale is recorded in the governmental fund which purchased it at the lower of cost or market. Fund balance is reserved in an amount equal to the land's carrying value as the related funds are not available for appropriation. M. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Such assets are capitalized at historical cost, or estimated historical cost for assets where actual historical cost is not available. Donated assets are recorded as capital assets at their estimated fair market value at the date of donation. The City maintains a threshold level of $5,000 or more for capitalizing capital assets. The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend asset lives is not capitalized. The City has elected to retroactively capitalize the infrastructure capital assets of its governmental activities. Capital assets are recorded in the government -wide and proprietary funds financial statements, but are not reported in the governmental funds financial statements. Interest incurred during the construction phase of capital assets for business -type activities is included as part of the capitalized value of the assets constructed. Capital assets are depreciated using the straight-line method over their estimated useful lives. Since surplus assets are generally sold for an immaterial amount when declared as no longer needed for city purposes, no salvage value is taken into consideration for depreciation purposes. Useful lives vary from 10 to 40 years for infrastructure; 5 to 20 years for vehicles, machinery, and furniture and equipment; 12 to 40 years for buildings; and 10 to 20 years for improvements other than buildings. Capital assets not being depreciated include land and construction in progress. N. Long -Term Liabilities In the government -wide and proprietary funds financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, if material, are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs, if material, are also reported as deferred charges and amortized over the term of the related debt. 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. -27- NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Compensated Absences Payable City employees earn vacation days based upon the number of completed years of service. The City compensates employees for unused vacation upon termination of employment. Employees are entitled to paid sick leave at various rates for each month of full-time service. Full-time employees who resign or leave city employment voluntarily and in good standing, after giving proper notice, shall be compensated for up to 50 days of unused sick leave under the following guidelines: For union employees, one-fourth of the unused sick leave times the hourly rate at the time of giving notice is paid. After five years of non-union employment, one-fourth of the unused sick leave times the hourly rate at the time of giving notice is paid. After 10 years of employment, all employees accrue one-half of the unused sick leave, times the hourly rate at the time of giving notice. Compensated absences payable are paid by the respective fund in which the employee is employed. P. Budget Budgets for the General Fund and certain special revenue funds are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Reported budget amounts are as originally adopted or as amended by City Council -approved supplemental appropriations and budget transfers. No supplemental budget amendments were adopted during the year. Budget appropriations lapse at year-end. Q. Risk Management The City is exposed to various risks of loss related to torts: theft of, damage to, or destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City manages these various risks of loss as follows: The City participates in the League of Minnesota Cities Insurance Trust (LMCIT) property and liability insurance program, a joint self-insurance plan designed and administered by American Business Risk Services and structured to operate through local insurance agents. Approximately 140 cities currently participate in the program. The City has the following coverage with LMCIT: a basic package of property, inland marine, automotive physical damage and liability; comprehensive general liability; public officials errors and omissions; umbrella liability; boiler and machinery; and workers' compensation. The City pays an annual premium to LMCIT, which in turn pays the local agent's commission and pays an administrative fee to American Business Risk Services. The remaining premium is split between LMCIT and its reinsurers. The reinsurers in turn reimburse LMCIT for a corresponding share of each loss. A profit sharing agreement also provides for a return to LMCIT of a share of the reinsurers' portion of the premium if the loss experience is favorable. To protect against the possibility that LMCIT's share of the losses will exceed its share of the premium, LMCIT also purchases aggregate reinsurance. The loss experience has been favorable the last three years and the City has received a return of part of the premiums paid. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three calendar years. There were no reductions in coverage from the prior year. 904-11! I NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ' R. Statement of Cash Flows For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an ' original maturity from the time of purchase by the City of three months or less to be cash equivalents. The proprietary fund's equity in the government -wide cash and investment management pool is considered to be cash equivalent. S. Net Assets and Fund Balance ' Net assets represent the difference between assets and liabilities in the government -wide financial statements. Net assets invested in capital assets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or ' acquire the capital assets. Net assets are reported as restricted in the government -wide financial statements when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. In the governmental fund financial statements, reservations of fund balance represent those portions of fund balance not appropriable for expenditure or legally segregated for a specific future use. Designated M fund balances represent tentative plans for future use of financial resources. NOTE 2 — CASH AND INVESTMENTS A. Components of Cash and Investments Cash and investments at year-end consist of the following: Deposits Investments Cash on hand Total cash and investments — Statement of Net Assets Cash and investments are reflected on the Statement of Net Assets as follows: Cash and investments — Statement of Net Assets Cash and investments — restricted — Statement of Fiduciary Net Assets Total B. Deposits $ 4,591,732 55,334,182 9,150 $ 59,935,064 $ 35,176,386 24,758,678 $ 59,935,064 In accordance with applicable Minnesota Statutes, the City maintains deposits at depository banks authorized by the City Council, including checking accounts and non-negotiable certificates of deposit. -29- NOTE 2 — CASH AND INVESTMENTS (CONTINUED) The following is considered the most significant risk associated with deposits: Custodial Credit Risk — In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City has no additional deposit policies addressing custodial credit risk. At year-end, the carrying amount of the City's deposits was $4,591,732 while the balance on the bank records was $4,808,278. At December 31, 2008, all deposits were fully covered by federal depository insurance, surety bonds, or by collateral held by the City's agent in the City's name. C. Investments The City has the following investments at year-end: Investments are subject to various risks, the following of which are considered the most significant: Custodial Credit Risk — For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have a formal investment policy addressing this risk, but typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. -30- Credit Risk Interest Risk — Maturity Duration in Years Investment Type Rating Agency Less Than 1 I to 5 5 to 10 More Than 10 Total U.S. agency securities AAA S&P $ 27,160,620 $ 2,011,508 $ 5,570,597 $ 11,725,290 $ 46,468,015 Negotiable certificates of deposit N/R N/R 299,034 738,734 — — 1,037,768 Repurchase agreement N/R N/R 412,869 — — — 412,869 Money market funds AAA S&P 7,363,473 — — — 7,363,473 4M Fund N/R N/R 52,057 — — 52,057 Total investments $ 35,288,053 $ 2,750,242 $ 5,570,597 $ 11,725,290 $ 55,334,182 N/R — Not Rated Investments are subject to various risks, the following of which are considered the most significant: Custodial Credit Risk — For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker-dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have a formal investment policy addressing this risk, but typically limits its exposure by purchasing insured or registered investments, or by the control of who holds the securities. -30- NOTE 2 — CASH AND INVESTMENTS (CONTINUED) Credit Risk — This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Minnesota Statutes limit the City's investments to direct obligations or obligations guaranteed by the United States or its agencies; shares of investment companies registered under the Federal Investment Company Act of 1940 that receive the highest credit rating, are rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a final maturity of 13 months or less; general obligations rated "A" or better; revenue obligations rated "AA" or better; general obligations of the Minnesota Housing Finance Agency rated "A" or better; bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System; commercial paper issued by United States corporations or their Canadian subsidiaries, rated of the highest quality category by at least two nationally recognized rating agencies, and maturing in 270 days or less; Guaranteed Investment Contracts guaranteed by a United States commercial bank, domestic branch of a foreign bank, or a United States insurance company, and with a credit quality in one of the top two highest categories; repurchase or reverse purchase agreements and securities lending agreements with financial institutions qualified as a "depository" by the government entity, with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000; that are a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York; or certain Minnesota securities broker-dealers. The City does not have an investment policy that further addresses credit risk. Concentration Risk — This is the risk associated with investing a significant portion of the City's investment (considered 5 percent or more) in the securities of a single issuer, excluding U.S. guaranteed investments (such as treasuries), investment pools, and mutual funds. The City does not have an investment policy that addresses the duration of investment limits on the amount that it may be invested in any one issuer. More than 5 percent of the City's investments are in Federal Home Loan Association, Federal National Mortgage Association, Federal Farm Credit Bureau, and Federal Home Loan Mortgage Corporation. These investments are 34 percent, 11 percent, 7 percent, and 16 percent, respectively, of the City's total investments. Interest Rate Risk — This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). The City does not have an investment policy that addresses the duration of investments. The Minnesota Municipal Money Market Fund (4M Fund) is a common law trust organized in accordance with the Minnesota Joint Powers Act, which invests only in investment instruments allowable under Minnesota Statutes. Its investments are valued at amortized cost, which approximates fair value in accordance with Rule 2a-7 of the Investment Company Act of 1940. The 4M Fund does not have its own credit rating. MBIA, Inc., who administers the 4M Fund, holds an organization credit rating of Aa2. -31- NOTE 3 - CAPITAL ASSETS Capital asset activity for the year ended December 31, 2008 was as follows: A. Governmental Activities Net capital assets $ 64,855,170 $ 9,055,146 $ 73,910,316 $ 870,124 $ (111,463) $ $ 74,668,977 B. Business -Type Activities Capital assets, not depreciated Land Construction in progress Capital assets, depreciated Buildings Furniture and equipment Vehicles Machinery and equipment Improvements other than buildings Infrastructure Total capital assets Less accumulated depreciation on Buildings Vehicles Machinery and equipment Furniture and equipment Infrastructure Improvements other than buildings Total accumulated depreciation Net capital assets Balance - Balance - (See Note 12) Balance - Beginning Prior Period of Year Completed Balance - of Year Adjustment as Restated Additions Construction End of Year 2,323,408 Balance - (See Note 12) Beginning 5,156,471 - - 51156,471 93,663 12,788 Beginning Prior Period of Year 561,166 - Completed Balance - - 608,139 of Year Adjustment as Restated Additions Deletions Construction End of Year Capital assets, not depreciated - 1,624,605 19,720,949 28,510,509 (29,940) 28,480,569 - 366,762 28,847,331 Land $ 7,162,826 $ 88,867 $ 7,251,693 $ 1,205,791 $ - $ - $ 8,457,484 Construction in progress 24,927,847 8,867,555 33,795,402 1,586,354 - (1,929,859) 33,451,897 Capital assets, depreciated Buildings 13,135,936 - 13,135,936 11,616 (117,450) 72,111 13,102,213 Furniture and equipment 301,991 - 301,991 33,402 - - 335,393 Vehicles 1,879,681 - 1,879,681 181,016 (18,373) - 2,042,324 Machinery and equipment 1,085,194 - 1,085,194 159,995 (5,450) - 1,239,739 Improvements other than buildings 4,115,256 98,724 4,213,980 - - 117,811 4,331,791 Infrastructure 35,043,517 - 35,043,517 - - 1,739,937 36,783,454 Total capital assets 87,652,248 9,055,146 96,707,394 3,178,174 (141,273) - 99,744,295 Less accumulated depreciation on Buildings (3,193,024) - (3,193,024) (336,601) 5,987 - (3,523,638) Vehicles (1,389,769) - (1,389,769) (126,727) 18,373 - (1,498,123) Machinery and equipment (623,716) - (623,716) (102,361) 5,450 - (720,627) Furniture and equipment (130,630) - (130,630) (29,942) - - (160,572) Infrastructure (15,422,157) - (15,422,157) (1,566,299) - _ (16,988,456) Improvements other than buildings (2,037,782) - (2,037,782) (146,120) - (2,183,902) Total accumulated depreciation (22,797,078) - (22,797,078) (2,308,050) 29,810 (25,075,318) Net capital assets $ 64,855,170 $ 9,055,146 $ 73,910,316 $ 870,124 $ (111,463) $ $ 74,668,977 B. Business -Type Activities Capital assets, not depreciated Land Construction in progress Capital assets, depreciated Buildings Furniture and equipment Vehicles Machinery and equipment Improvements other than buildings Infrastructure Total capital assets Less accumulated depreciation on Buildings Vehicles Machinery and equipment Furniture and equipment Infrastructure Improvements other than buildings Total accumulated depreciation Net capital assets $ 1,217,845 Balance - Balance - (See Note 12) Beginning Beginning Prior Period of Year Completed Balance - of Year Adjustment as Restated Additions Construction End of Year $ 1,217,845 $ 534,100 $ 1,751,945 $ - $ - $ 1,751,945 6,I91,216 (3,537,153) 2,654,063 2,323,408 (1,991,367) 2,986,104 5,156,471 - 5,156,471 - - 51156,471 93,663 12,788 106,451 11,922 - 118,373 561,166 - 561,166 46,973 - 608,139 725,943 - 725,943 72,411 - 798,354 18,056,314 40,030 18,096,344 - 1,624,605 19,720,949 28,510,509 (29,940) 28,480,569 - 366,762 28,847,331 60,513,127 (2,980,175) 57,532,952 2,454,714 - 59,987,666 (2,333,581) (549,393) (558,534) (60,639) (12,248,026) - (2,333,581) - (549,393) - (558,534) - (60,639) 9,808 (12,238,218) (153,226) (9,067) (32,179) (17,045) (834,357) - (2,486,807) - (558,460) - (590,713) - (77,684) - (13,072,575) (9,870,342) - (9,870,342) (433,340) - (10,303,682) (25,620,515) 9,808 (25,610,707) (1,479,214) - (27,089,921) $ 34,892,612 $ (2,970,367) d $ 31,922,245 $ 975,500 $ - $ 32,897,745 -32- NOTE 3 — CAPITAL ASSETS (CONTINUED) C. Depreciation Depreciation expense for the year ended December 31, 2008 was charged to the following functions: Governmental activities General government $ 24,818 Public safety 56,389 Public works 1,782,275 Culture and recreation 440,577 Economic development 3,991 Total depreciation expense — governmental activities $ 2,308,050 Business -type activities: Water $ 422,633 Sewer 1,007,335 Liquor 45,811 Cemetery 3,435 Total depreciation expense — business -type activities $ 1,479,214 NOTE 4 — LONG-TERM LIABILITIES A. Description The City has the following types of long-term liabilities outstanding at December 31, 2008: special assessment improvement bonds with governmental commitment, tax increment bonds, general obligation bonds and notes, revenue bonds, and contracts for deed. Special assessment bonds are payable primarily from special assessments. Tax increment bonds are payable primarily from tax increments. General obligation bonds, notes, and contracts for deed are payable solely from general property taxes. Revenue bonds are payable from enterprise fund revenue. Any deficiency in funding for the repayment of special assessment or tax increment bonds would be provided for by general property taxes. -33- NOTE 4 — LONG-TERM LIABILITIES (CONTINUED) Long-term liabilities at year-end are summarized as follows: Final Balance - Original Issue Interest Rate Issue Date Maturity Date End of Year Governmental activities General obligation bonds 2003A Improvement Bonds $ 2,420,000 2.00-4.00% 09/01/2003 02/01/2015 $ 1,770,000 2007 Improvement Bonds $ 5,137,903 4.00% 12/27/2007 02/01/2018 5,137,903 2008A Sewer Revenue Refunding Bond $ 9,270,000 3.40% 04/17/2008 08/01/2018 8,830,000 Tax increment bonds 2004A Tax Increment Bonds $ 945,000 3.00-5.60% 06/30/2004 02/01/2013 575,000 Special assessments bonds 2002 Improvement Bonds $ 2,420,000 1.70-4,00% 2005 General Obligation Improvement Bonds $ 25,150,000 4.00-4.75% Revenue bonds 2008A Public Project Revenue Refunding Bonds $ 6,180,000 Contract for deed $ 2,185,222 Total governmental activity long-term liabilities Business -type activities General obligation bonds 2007 Improvement Bonds $ 907,097 Revenue bonds 12/30/2002 02/01/2014 1,365,000 08/17/2005 02/01/2023 22,710,000 3.20% 02/20/2008 02/01/2015 6,180,000 6.00% 12/22/2004 12/01/2009 564,293 $ 47,132,196 4.00°/a 12/27/2007 02/01/2018 $ 907,097 2008 Telecommunications Revenue Bonds $ 26,445,000 6.50-6.75% 06/05/2008 06/01/2031 26,445,000 Total business -type activity long-term liabilities $ 27,352,097 -34- NOTE 4 — LONG-TERM LIABILITIES (CONTINUED) B. Minimum Debt Payments Minimum annual principal and interest payments to maturity for bonds payable are as follows: Governmental Activities: Year Ending December 31, Principal Interest 2009 $ 6,750,267 $ 1,728,312 2010 4,640,966 1,504,554 2011 5,079,964 1,303,178 2012 5,154,467 1,095,037 2013 5,295,716 885,080 2014-2018 18,095, 816 1,901, 812 2019-2023 2,115,000 232,156 2024-2028 $ 47,132,196 $ 8,650,129 Business -Type Activities: Year Ending December 31, Principal Interest 2009 $ 69,026 $ 905,585 2010 90,034 1,797,060 2011 93,036 1,793,398 2012 85,533 1,789,827 2013 174,284 1,786,331 2014-2018 2,870,184 8,607,501 2019-2023 5,405,000 7,410,013 2024-2028 9,225,000 5,143,163 2029-2031 9,340,000 1,371,598 $ 27,352,097 $ 30,604,476 C. Current Refunding In 2008, the City issued $9,270,000 of General Obligation Sewer Revenue Refunding Bonds, Series 2008A. These bonds were issued to refund in advance of their stated maturities the General Obligation Wastewater Treatment Note, Series 1997 totaling $9,168,564. The refunding was undertaken to provide a cash flow savings of $342,852 and a net present value savings on debt service payments of $270,404. D. Current Refunding In 2008, the City's EDA issued $6,180,000 of Public Project Revenue Refunding Bonds, Series 2008A. ' These bonds were issued to refund in advance of their stated maturities the Public Project Revenue Bonds, Series 2000A totaling $6,124,432. The refunding was undertaken to provide a cash flow savings of $286,247 and a net present value savings on debt service payments of $258,569. -35- NOTE 4 — LONG-TERM LIABILITIES (CONTINUED) E. Changes in Long -Term Liabilities F. Conduit Debt The City has issued Senior Housing Refunding Revenue Bonds to provide financial assistance to private sector entities for the acquisition and construction of senior housing facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issuance. The City is not obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2008, there was one series of Senior Housing Refunding Revenue Bonds outstanding. The original issue amounts totaled $3,000,000 with an interest rate of 4.75 percent maturing on October 1, 2012. This balance has been reduced through annual payments and partial call prepayments. The outstanding balance as of December 31, 2008 is undetermined. NOTE 5 — DEFINED BENEFIT PENSION PLANS — STATE-WIDE A. Plan Description All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees' Retirement Association (PERA) of Minnesota. 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 or 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, firefighters, and peace officers who qualify for membership by statute are covered by PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. -36- December 31, December 31, Due Within 2007 Additions Retirements 2008 One Year Governmental activities General obligation bonds $ 7,132,903 $ 9,270,000 $ 665,000 $ 15,737,903 $ 2,160,974 Tax increment bonds 680,000 — 105,000 575,000 105,000 Special assessment bonds 28,415,000 — 4,340,000 24,075,000 2,540,000 General obligation notes 9,515,592 — 9,515,592 — 755,000 Revenue bonds 6,220,000 6,180,000 6,220,000 6,180,000 625,000 Contracts for deed 664,293 — 100,000 564,293 564,293 Compensated absences 342,531 — 48,194 294,337 76,645 Total $ 52,970,319 __LI5,450,000 $ 20,993,786 $ 47,426,533 $ 6,826,912 Business -type activities General obligation bonds $ 907,097 $ — $ — $ 907,097 $ 69,026 Revenue bonds — 26,445,000 — 26,445,000 — Compensated absences 104,352 — 52,045 52,307 12,472 Total $ 1,011,449 $ 26,445,000 $ 52,045 $ 27,404,404 $ 81,498 F. Conduit Debt The City has issued Senior Housing Refunding Revenue Bonds to provide financial assistance to private sector entities for the acquisition and construction of senior housing facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private sector entity served by the bond issuance. The City is not obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of December 31, 2008, there was one series of Senior Housing Refunding Revenue Bonds outstanding. The original issue amounts totaled $3,000,000 with an interest rate of 4.75 percent maturing on October 1, 2012. This balance has been reduced through annual payments and partial call prepayments. The outstanding balance as of December 31, 2008 is undetermined. NOTE 5 — DEFINED BENEFIT PENSION PLANS — STATE-WIDE A. Plan Description All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the Public Employees' Retirement Association (PERA) of Minnesota. 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 or 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, firefighters, and peace officers who qualify for membership by statute are covered by PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. -36- NOTE 5 – DEFINED BENEFIT PENSION PLANS – STATE-WIDE Two methods are used to compute benefits for PERF's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years of service 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 percent for each year of service. For all PEPFF members and for 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 PERF Basic and Coordinated Plan members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated Plan 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 web at mnpera.org; by writing to PERA at Public Employees' Retirement Association, Retirement Systems of Minnesota Building, 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103-2088; or by calling (651) 296-7460 or (800) 652-9026. B. Funding Policy Minnesota Statute, 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 and Coordinated Plan members were required to contribute 9.1 percent and 6.0 percent, respectively, of their annual covered salary in 2008. PEPFF members were required to contribute 8.6 percent of their annual covered salary in 2008. That rate will increase to 9.4 percent in 2009. The City was required to contribute the following percentages of annual covered payroll in 2008: 11.78 percent for Basic Plan PERF members, 6.5 percent for Coordinated Plan PERF members, and 12.9 percent for PEPFF members. Employer contribution rates for the Coordinated Plan and PEPFF will increase to 6.75 percent and 14.1 percent, respectively, effective January 1, 2009. The City's contributions for the years ending December 31, 2008, 2007, and 2006 were $194,943, $178,303, and $161,068, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statutes. -37- NOTE 6 — CITY OF MONTICELLO FIRE RELIEF ASSOCIATION A. Plan Description The City contributes to the City of Monticello Fire Relief Association (the Association), a single employer retirement system that acts as a common investment manager and administrator for the City's firefighters. All active members of the fire department are members of the Association. The Association issues a publicly available financial report that includes financial statements and required supplementary information. A copy of the report may be obtained at Monticello City Hall. Upon approval by the Board of Trustees, lump sum retirement benefits are either paid or deferred as follows: 1. Benefits accrue and vest to members based on $3,950 per year of active service in the fire department and Association with 100 percent vesting at 20 years. 2. Members retiring with less than 10 years of service forfeit their accrued benefits. 3. Members who separate from service and have at least 10 years of active service and membership, but are less than 50 years of age, are entitled to a deferred service pension payable upon reaching the age of 50. 4. The Association also provides death benefits, whereby upon approval of application, the beneficiaries of each deceased active member would receive $3,950 per year of service. B. Funding Policy Minnesota Statutes § 69.772 sets the minimum contribution requirement for the City on an annual basis, including state aid passed through the City. These statutes are established and amended by the State Legislature. The Association is comprised of volunteers, and no member contribution is required. C. Annual Pension Cost and Net Pension Obligation The City's annual pension cost and net pension obligation to the Association for the year ended December 31, 2008 is as follows: Annual required contribution $ 74,110 Interest on net pension obligation — Adjustment to annual required contribution — Annual pension cost 74,110 Less contribution made (74,110) Increase (decrease) in net pension obligation Net pension obligation — beginning of year — Net pension obligation — end of year $ -38- NOTE 6 — CITY OF MONTICELLO FIRE RELIEF ASSOCIATION (CONTINUED) The annual required contribution for the current year was determined as part of the August 1, 2007 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included: (a) 5 percent investment rate of return and (b) age and service retirement was assumed to occur at the age of 50. The assumptions did not include post-retirement benefit increases, which are funded by state statute when granted. Three-year trend information for the pension plan is as follows: Three -Year Trend Information 2008 2007 2006 Annual pension cost $ 74,110 $ 86,740 $ 98,518 Contribution made City — _ — State aid — pass-through aid 74,110 86,740 98,518 Net pension obligation _ _ — NOTE 7 — OTHER POST -EMPLOYMENT BENEFITS PLAN A. Plan Description The City provides post -employment insurance benefits to certain eligible employees through the City's Other Post -Employment Benefits (OPEB) Plan, a single -employer defined benefit plan administered by the City. All post -employment benefits are based on contractual agreements with employee groups. These contractual agreements do not include any specific contribution or funding requirements. These benefits are summarized as follows: Post -Employment Insurance Benefits — All retirees of the City have the option under state law to continue their medical insurance coverage through the City from the time of retirement until the employee reaches the age of eligibility for Medicare. For members of all employee groups, the retiree must pay the full premium to continue coverage for medical and dental insurance. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees, whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an "implicit rate subsidy." This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City's younger and statistically healthier active employees. B. Funding Policy The required contribution is based on projected pay-as-you-go financing requirements, with additional amounts to pre -fund benefits as determined annually by the City. -39- NOTE 7 — OTHER POST -EMPLOYMENT BENEFITS PLAN (CONTINUED) C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost (expense) is calculated based on annual required contributions (ARC) of the City, an amount determined on an actuarially determined basis in accordance with the parameters of GASB Statement Nos. 43 and 45. The ARC represents a level funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and the changes in the City's net OPEB obligation to the plan: Annual required contribution $ 58,514 Interest on net OPEB obligation — Adjustment to annual required contribution — Annual OPEB cost (expense) 58,514 Less contribution made (4,834) Increase in net OPEB obligation 53,680 Net OPEB obligation — beginning of year Net OPEB obligation — end of year 1 $ 53,680 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the year are as follows: Fiscal Year Ended Annual Employer OPEB Cost Contribution Percentage of Annual OPEB Cost Contributed Net OPEB Obligation January 1, 2008 $ 58,514 $ 4,834 8.3% $ 53,680 D. Funded Status and Funding Progress As of January 1, 2008, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $809,459, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $809,459. The covered payroll (annual payroll of active employees covered by the plan) was $2,751,614, and the ratio of the UAAL to the covered payroll was 29.4 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and ARCs of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress immediately following the notes to basic financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. -40- NOTE 7 — OTHER POST -EMPLOYMENT BENEFITS PLAN (CONTINUED) In the January 1, 2008 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included: a 4.0 percent investment rate of return (net of administrative expenses) based on the City's own investments; an annual healthcare cost trend rate of 10.0 percent initially, reduced by decrements to an ultimate rate of 5.0 percent after 10 years for medical insurance. The UAAL is being amortized on a level dollar basis over a closed period. The remaining amortization period at January 1, 2008 was 30 years. NOTE 8 — DESIGNATED FUND BALANCE Designated fund balances at December 31, 2008 were as follows: General Fund Designated for Streets equipment Snow removal equipment Fire department equipment Building department equipment Data processing equipment Parks department buildings Parks department improvements Planning department Streetlight improvements Working capital Contingencies Community Center Fund Designated for Community center improvements Capital Outlay Revolving Fund Designated for Street equipment Fire department equipment Building improvements 7th street extension Nonmajor Fund City streets reconstruction Designated for Future Edmundson Street Future 85th Street Elk Street Fenning Avenue Fallon Avenue Haug and 95th Avenue -41- $ 270,750 37,000 295,000 34,500 27,921 154,700 33,690 50,000 48,329 3,220,920 360,000 4,532,810 63,000 25,637 119,114 187,683 600,000 932,434 187,991 135,637 10,300 202,077 72,015 122,500 730,520 $ 6,258,764 NOTE 9 — INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS A. Due To/From Other Fund Receivable Fund Payable Fund Amount Major governmental funds Capital Outlay Revolving Capital Projects $ 1,607,609 This interfund loan was made to provide adequate cash flow, B. Interfund Transfers Interfund transfers for the year ended December 31, 2008 consisted of the following: These transfers were made to finance general operations, capital projects, and debt service payments NOTE 10 — STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY Deficit Fund Balances The City has deficit fund balances at December 31, 2008 as follows: Capital Projects Fund $ (1,839,478) Fiber Optics Fund $ (997,728) The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, transfers from other funds, and various other sources. -42- Transfers In Sanitary Nonmajor Sewer Debt Service Capital Governmental Transfers Out General Fund EDA Fund Access Fund Funds Projects Funds Funds Sewer Fund Total General Fund S — $ — $ — $ — $ 125,000 S 85,804 S — S 210,804 Community Center Fund 20,000 20,000 — 650,000 — — — 690,000 Capital Outlay Revolving Fund — — — — 794,545 — — 794,545 EDA Fund — — 1,953 457,672 — 9,142 — 468,767 Sanitary Sewer Access Fund — — — 1,940,039 — — — 1,940,039 Debt Service Fund — 59 21,200 9,808,571 490,021 558,389 21,561 10,899,801 Capital Projects Fund — — 180,555 684,364 — 513 — 865,432 Nonmajor governmental funds — 644 — 576,813 — — — 577,457 Water Fund — — — — — 221,187 — 221,187 Liquor Fund 26,390 — — — 145,229 171,619 $ 46,390 S 20,703 S 203,708 $ 14,117,459 $ 1,409,566 S 1,020,264 $ 21.561 $ 16.839.651 These transfers were made to finance general operations, capital projects, and debt service payments NOTE 10 — STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY Deficit Fund Balances The City has deficit fund balances at December 31, 2008 as follows: Capital Projects Fund $ (1,839,478) Fiber Optics Fund $ (997,728) The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, transfers from other funds, and various other sources. -42- NOTE 11— COMMITMENTS ' A. Construction Contracts During fiscal 2008, the City awarded contracts for various construction and remodeling projects. The City's commitment for uncompleted work on these contracts at December 31, 2008 is approximately $1,300,000. B. Legal Claims The City has the usual and customary type of miscellaneous legal claims pending at year-end. Although the lawsuits are not presently determinable, the City's management believes that the City will not incur any material monetary loss resulting from these claims. No loss has been recorded on the City's financial statements relating to these claims. C. Potential Arbitrage Payable The City has issued several bond issues that are subject to arbitrage regulations contained in the Tax Reform Act of 1986. Typically, bond proceeds are invested until they are needed for construction projects or cash flow. Arbitrage exists when interest earnings on these investments exceed the interest cost of the related bonds. Any excess earnings must be paid to the Internal Revenue Service. At December 31, 2008, the City did not perform calculations to determine if there is an arbitrage liability on one of these issues. The City has not accrued an arbitrage rebate liability at December 31, 2008. The City expects the liability, if any, to be immaterial. NOTE 12 — PRIOR PERIOD ADJUSTMENT Adjustments to capital assets reflect a change in interpreting the amount of assets carried in construction in progress that were either duplicated or not capitalized as capital assets in the year of project completion. -43- REQUIRED SUPPLEMENTARY INFORMATION ICITY OF MONTICELLO i City of Monticello Other Post -Employment Benefits Plan Schedule of Funding Progress -44 Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Liability as a Valuation Accrued Value of Accrued Funded Covered Percentage of Date Liability Plan Assets Liability Ratio Payroll Payroll January 1, 2008 $ 809,459 $ — $ 809,459 — $2,751,614 29.4% -44 CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2008 (continued) -45- Over (Under) Original Budget Final Budget Actual Budget Revenue Property taxes $ 5,743,929 $ 5,743,929 $ 5,460,542 $ (283,387) Special assessments - - 5,970 5,970 Licenses and permits 592,295 592,295 917,539 325,244 Intergovernmental revenue Market value and other tax credits - - 109,493 109,493 Fire department aid 99,000 99,000 74,110 (24,890) State police aid 47,500 47,500 54,761 7,261 State highway aid 78,550 78,550 93,512 14,962 County/regional grants 28,000 28,000 30,321 2,321 Other grants and aids 6,740 6,740 6,741 I Total intergovernmental revenue 259,790 259,790 368,938 109,148 Charges for services Animal impound fees 19,000 19,000 32,442 13,442 Engineering fees 100,000 100,000 17,504 (82,496) Garbage charge 117,000 117,000 115,344 (1,656) Development cost reimbursement 25,000 25,000 1,592 (23,408) Inspection fees 40,000 40,000 40,391 391 Township contract 53,150 53,150 53,346 196 Other 118,550 118,550 63,759 (54,791) Total charges for services 472,700 472,700 324,378 (148,322) Fines 150 150 2,216 2,066 Miscellaneous revenue Interest earnings 309,185 309,185 328,195 19,010 Rents 39,810 39,810 41,630 1,820 Other 18,100 18,100 136,436 118,336 Total miscellaneous revenue 367,095 367,095 506,261 139,166 Total revenue 7,435,959 7,435,959 7,585,844 149,885 Expenditures General government Mayor and City Council Personal services 26,875 26,875 24,061 (2,814) Other services and charges 13,900 13,900 10,529 (3,371) Total mayor and City Council 40,775 40,775 34,590 (6,185) (continued) -45- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2008 Expenditures (continued) General government (continued) Administrative Personal services Other services and charges Total administrative Elections Personal services Other services and charges Total elections Finance Personal services Other services and charges Total finance Audit Assessing Legal Planning and zoning Personal services Other services and charges Professional services Total planning and zoning Data processing City hall Personal services Other services and charges Professional services Total city hall Deputy registrar Other services and charges Human resources Personal services Other services and charges Total human resources Over (Under) Original Budget Final Budget Actual Budget 287,227 287,227 223,673 (63,554) 15,275 15,275 36,949 21,674 302,502 302,502 260,622 (41,880) 10,000 10,000 3,081 (6,919) 6,200 6,200 11,284 5,084 16,200 16,200 14,365 (1,835) 356,553 356,553 392,411 35,858 29,950 29,950 36,223 6,273 386,503 386,503 428,634 42,131 36,250 36,250 43,375 7,125 53,675 53,675 51,413 (2,262) 50,088 50,088 73,556 23,468 131,242 131,242 81,057 (50,185) 1,100 1,100 5,877 4,777 180,650 180,650 118,229 (62,421) 312,992 312,992 205,163 (107,829) 120,550 120,550 107,392 (13,158) 51,599 51,599 43,002 (8,597) 50,040 50,040 49,165 (875) 87,850 87,850 90,419 2,569 189,489 189,489 182,586 (6,903) 204 15,698 - - 32 15,730 -46- 204 15,698 32 15,730 (continued) CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2008 (continued) -47- Over (Under) Original Budget Final Budget Actual Budget Expenditures (continued) General government (continued) Insurance 187,405 187,405 161,534 (25,871) Capital outlay 22,500 22,500 5,400 (17,100) Total general government 1,718,929 1,718,929 1,584,564 (134,365) Public safety Law enforcement 1,000,173 1,000,173 990,621 (9,552) Fire relief association 100,476 100,476 74,110 (26,366) Fire Personal services 104,740 104,740 113,979 9,239 Supplies 35,250 35,250 29,868 (5,382) Other services and charges 44,115 44,115 38,999 (5,116) Repairs and maintenance 28,300 28,300 18,589 (9,711) Total fire 212,405 212,405 201,435 (10,970) Building inspections Personal services 297,139 297,139 343,442 46,303 Other services and charges 86,425 86,425 62,338 (24,087) Total building inspections 383,564 383,564 405,780 22,216 Civil defense Personal services 12,940 12,940 3,570 (9,370) Other services and charges 35,850 35,850 566 (35,284) Total civil defense 48,790 48,790 4,136 (44,654) Animal control 45,875 45,875 48,273 2,398 National guard 24,620 24,620 12,607 (12,013) Capital outlay 173,500 173,500 15,747 (157,753) Total public safety 1,989,403 1,989,403 1,752,709 (236,694) Public works Administration Personal services 208,810 208,810 236,103 27,293 Other services and charges 23,380 23,380 39,735 16,355 Total administration 232,190 232,190 275,838 43,648 (continued) -47- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2008 Shop and garage Personal services 79,549 79,549 78,355 Over (Under) Other services and charges Original Budget Final Budget Actual Budget Expenditures (continued) 184,849 184,849 163,410 (21,439) Engineering 162,300 162,300 232,731 70,431 Personal services 97,006 97,006 119,150 22,144 Other services and charges 155,025 155,025 199,001 43,976 Total engineering 252,031 252,031 318,151 66,120 Inspections 517,063 517,063 448,964 (68,099) Personal services 146,383 146,383 117,580 (28,803) Other services and charges 21,850 21,850 17,596 (4,254) Total inspections 168,233 168,233 135,176 (33,057) Streets Personal services 395,457 395,457 402,200 6,743 Other services and charges 132,950 132,950 225,486 92,536 Total streets 528,407 528,407 627,686 99,279 Ice and snow Personal services 58,213 58,213 77,024 18,811 Other services and charges 47,750 47,750 62,550 14,800 Total ice and snow 105,963 105,963 139,574 33,611 Shop and garage Personal services 79,549 79,549 78,355 (1,194) Other services and charges 105,300 105,300 85,055 (20,245) Total shop and garage 184,849 184,849 163,410 (21,439) Parking lots 162,300 162,300 232,731 70,431 Capital outlay 537,200 537,200 232,211 (304,989) Total public works 2,171,173 2,171,173 2,124,777 (46,396) Sanitation Personal services 12,070 12,070 9,152 (2,918) Other services and charges 502,350 502,350 505,156 2,806 Total sanitation 514,420 514,420 514,308 (112) Culture and recreation Parks Personal services 378,113 378,113 332,406 (45,707) Other services and charges 138,950 138,950 116,558 (22,392) Total parks 517,063 517,063 448,964 (68,099) Community celebrations 8,500 8,500 2,252 (6,248) (continued) -48- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2008 -49- Over (Under) Original Budget Final Budget Actual Budget Expenditures (continued) Museum Personal services - - 54 54 Other services and charges - - 25 25 Total museum - - 79 79 Senior center Personal services 1,715 1,715 133 (1,582) Other services and charges 94,305 94,305 57,999 (36,306) Total senior center 96,020 96,020 58,132 (37,888) Community education 12,740 12,740 12,740 - Park improvements 21,000 21,000 13,285 (7,715) NSP Ball Fields 19,200 19,200 16,702 (2,498) Transit -River Rider 5,000 5,000 - (5,000) Ice arena 75,000 75,000 75,000 - Capital outlay 230,000 230,000 123,781 (106,219) Total culture and recreation 984,523 984,523 750,935 (233,588) Economic development Personal services 34,561 34,561 73,948 39,387 Other services and charges 8,900 8,900 5,699 (3,201) Total economic development 43,461 43,461 79,647 36,186 Total expenditures 7,421,909 7,421,909 6,806,940 (614,969) Excess (deficiency) of revenues over expenditures 14,050 14,050 778,904 764,854 Other financing sources (uses) Transfer in 46,390 46,390 46,390 - Transfer (out) - - (210,804) (210,804) Proceeds from sale of assets 100 100 2,575 2,475 Total other financing sources (uses) 46,490 46,490 (161,839) (208,329) Net change in funds balances $ 60,540 $ 60,540 617,065 $ 556,525 Fund balances Beginning of year 5,561,487 End of year $ 6,178,552 -49- CITY OF MONTICELLO Community Center Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2008 Revenue Property taxes Intergovernmental Charges for services Membership dues and fees Interest earnings (charges) Miscellaneous Total revenue Expenditures Current Culture and recreation Personal services Supplies Professional services Advertising Repairs and maintenance Insurance Utilities Telephone Equipment and other rental Other Capital outlay Total expenditures Excess of revenues over expenditures Other financing sources (uses) Transfers out Net change in fund balances Fund balance Beginning of year End of year Original Budget Final Budget Actual Over (Under) Budget $ 1,439,150 $ 1,439,150 $ 1,360,350 $ (78,800) - - 25,290 25,290 1,071,200 1,071,200 1,067,038 (4,162) 9,000 9,000 36,334 27,334 800 800 13,381 12,581 2,520,150 2,520,150 2,502,393 (17,757) 860,001 860,001 887,123 27,122 232,900 232,900 191,101 (41,799) 42,900 42,900 66,775 23,875 17,500 17,500 17,919 419 149,000 149,000 108,098 (40,902) 25,300 25,300 22,704 (2,596) 221,000 221,000 200,310 (20,690) 10,000 10,000 9,820 (180) 18,800 18,800 14,350 (4,450) 25,700 25,700 32,678 6,978 43,000 43,000 5,224 (37,776) 1,646,101 1,646,101 1,556,102 (89,999) 874,049 874,049 946,291 72,242 (883,950) (883,950) (690,000) 193,950 $ (9,901) $ (9,901) 256,291 $ 266,192 -50- 490,424 $ 746,715 CITY OF MONTICELLO Capital Outlay Revolving Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2008 Revenue Property taxes Special assessments Interest earnings Total revenue Expenditures Capital outlay Public works Professional services Other Total expenditures Excess of revenues over expenditures Other financing sources (uses) Transfers out Net change in fund balances Fund balance Beginning of year, as previously reported Prior period adjustment Beginning of year, as restated End of year Over (Under) Original Budget Final Budget Actual Budget $ — $ — $ 263 $ 263 130,555 130,555 139,498 8,943 88,550 88,550 100,340 11,790 219,105 219,105 240,101 20,996 55,608 55,608 344 344 55,952 55,952 219,105 219,105 184,149 (34,956) — — (794,545) (794,545) $ 219,105 $ 219,105 (610,396) $ (829,501) -51- 8,470, 819 (2,584,967) 5,885,852 $ 5,275,456 CITY OF MONTICELLO Sanitary Sewer Access Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2008 Revenue Special assessments Charges for services Access fees Interest earnings Total revenue Expenditures Current Public works Professional services Other Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balance Beginning of year End of year 17,948 17,948 507 507 18,455 18,455 793,304 793,304 764,816 (28,488) 203,708 203,708 (1,712,013) (1,712,013) (1,940,039) (228,026) (1,712,013) (1,712,013) (1,736,331) (24,318) $ (918,709) $ (918,709) (971,515) $ (52,806) -52- 5,996,543 $ 5,025,028 Over (Under) Original Budget Final Budget Actual Budget $ 223,154 $ 223,154 S 257,896 $ 34,742 336,250 336,250 270,753 (65,497) 233,900 233,900 254,622 20,722 793,304 793,304 783,271 (10,033) 17,948 17,948 507 507 18,455 18,455 793,304 793,304 764,816 (28,488) 203,708 203,708 (1,712,013) (1,712,013) (1,940,039) (228,026) (1,712,013) (1,712,013) (1,736,331) (24,318) $ (918,709) $ (918,709) (971,515) $ (52,806) -52- 5,996,543 $ 5,025,028 CITY OF MONTICELLO Notes to the Required Supplementary Information December 31, 2008 Budgetary Information The City follows these procedures in establishing the budgetary data reflected in the financial statements: A. Prior to September 1, the city administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. The City Council adopts the proposed budget as amended and adjusted by the City Council and certifies the proposed property tax levy to the county auditor according to Minnesota Statutes. B. Public hearings are conducted at the City Council's chambers in the Municipal Building. C. On or before December 28, the final budget is legally enacted by City Council resolutions and the final property tax levy is certified to the county auditor. D. Management is authorized to transfer budgeted amounts between departments within a fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. E. The City has legally adopted budgets for the General Fund, certain special revenue funds, and the Debt Service Fund. Expenditures may not legally exceed budgeted appropriations at the total fund level. Monitoring of budgets is maintained at the expenditure category level (i.e. personal services, supplies, charges for services, and capital outlay) within each program. All amounts over budget have been approved by the City Council through the disbursement process. The City is not legally required to adopt an annual budget for the Capital Projects Fund. Project -length financial plans are adopted for the Capital Projects Fund. F. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Budgeted amounts are as originally adopted or amended by the City Council. All annual appropriations lapse at year-end. 51911 COMBINING NONMAJOR FUND STATEMENTS CITY OF MONTICELLO Nonmajor Governmental Funds Combining Balance Sheet as of December 31, 2008 Special Revenue Funds -54- Central Orderly Minnesota Economic Shade Tree Annexation Library Water Access Initiative Recovery Grant Assets Cash and investments $ 49,355 $ 7,861 $ 9,186 $ 830,323 $ — $ — Receivables Delinquent taxes 1,087 159 1,292 — Deferred special assessments — — — 213,583 — — Delinquent special assessments — — — 41,013 — — Accounts 1,214 — — 2,606 — — Accrued interest 431 47 54 2,741 — — Prepaid items — — 136 82 — — Total assets $ 52,087 $ 8,067 $ 10,668 $ 1,090,348 $ Liabilities and Fund Balances Liabilities Accounts and contracts payable $ 314 $ — $ 419 $ — $ Other accrued liabilities 70 — 241 Due to other governmental units 68 — — — Deferred revenue 980 124 1,273 254,596 — Total liabilities 1,432 124 1,933 254,596 — — Fund balances (deficit) Reserved for prepaid items — — 136 82 — — Unreserved — designated — — — _ Unreserved — undesignated 50,655 7,943 8,599 835,670 — — Total fund balances 50,655 7,943 8,735 835,752 — — Total liabilities and fund balances $ 52,087 $ 8,067 $ 10,668 $ 1,090,348 -54- Park City Street Storm Sewer Minnesota Pathway Streets Deputy Grant Lighting Access Investment Dedication Reconstruction Registrar Funding Improvement Totals $ 11711,104 $ 881,722 $ 548,072 $ 1,441,699 $ 141,522 $ - $ 204,134 $ 5,824,978 - - 13,344 - - - 15,882 641,621 - 320,748 308,428 - - - 1,484,380 145,641 - 125,879 36,505 - - - 349,038 8,262 - 2,271 - 22,827 - 67,243 104,423 16,845 8,802 9,923 10,421 864 - 713 50,841 89 - - - 1,427 - _ 1,734 $ 2,523,562 $ 890,524 $ 1,006,893 $ 1,810,397 $ 166,640 $ - $ 272,090 $ 7,831,276 $ 13,618 $ - $ - $ - $ 224 $ _ $ - $ 14,575 - - - - 5,016 - - 5,327 - - 650,000 - 40,442 - - 690,510 787,262 - 446,627 359,557 - - - 1,850,419 800,880 - 1,096,627 359,557 45,682 - - 2,560,831 89 - - - 1,427 - - 1,734 - - 730,520 - 730,520 1,722,593 890,524 (89,734) 720,320 119,531 - 272,090 4,538,191 1,722,682 890,524 (89,734) 1,450,840 120,958 - 272,090 5,270,445 $ 2,523,562 $ 890,524 $ 1,006,893 $ 1,810,397 $ 166,640 $ - $ 272,090 $ 7,831,276 -55- CITY OF MONTICELLO Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended December 31, 2008 Revenue Property taxes Special assessments Intergovernmental Charges for services Other Investment earnings (charges) Miscellaneous Total revenue Expenditures Current Public works Culture and recreation Capital outlay Public works Culture and recreation Economic development Total expenditures Excess (deficiency) of revenue over expenditures Other financing sources (uses) Transfers in Transfers (out) Total other financing sources (uses) Change in fund balances Fund balances (deficit) Beginning of year End of year Special Revenue Funds Central Orderly Minnesota Economic Shade Tree Annexation Library Water Access Initiative Recovery Grant $ 32,112 $ 4,885 $ 36,021 $ - $ - $ - - - - 74,272 - - 601 94 668 - - - 7,129 - 90 35,320 - - 2,019 230 198 11,271 - - 5,796 - - - - - 47,657 5,209 36,977 120,863 - - 41,725 - - - - - - - 39,104 - - - - - - 1,459 - - - 360 - - - - 41,725 360 39,104 1,459 - - 5,932 4,849 (2,127) 119,404 - - - - - 723,852 - - - - - (311,220) (100) (544) - - - 412,632 (100) (544) 5,932 4,849 (2,127) 532,036 (100) (544) 44,723 3,094 10,862 303,716 100 544 $ 50,655 $ 7,943 $ 8,735 $ 835,752 $ - $ - -56- Park City Street Storm Sewer Minnesota Pathway Streets Deputy Grant Lighting Access Investment Dedication Reconstruction Registrar Funding Improvement Totals $ - $ - $ - $ 337,296 $ - $ - $ - $ 410,314 155,900 - 91,885 56,570 - - - 378,627 - 6,222 - 139,239 - 146,824 24,959 - - - 276,919 - 267,630 612,047 77,550 43,933 47,197 52,105 5,555 - 4,460 244,518 -- 5,796 258,409 43,933 139,082 452,193 282,474 139,239 272,090 1,798,126 - - 222,252 150,043 - 414,020 - - 3,232 - - - - 42,336 21,350 - - - 14,264 - - 37,073 - - 1,203,456 - - - - 1,203,456 - 190,000 - - - 190,360 21,350 190,000 1,206,688 - 236,516 150,043 - 1,887,245 237,059 (146,067) (1,067,606) 452,193 45,958 (10,804) 272,090 (89,119) 65,379 - - 145,229 75,000 10,804 - 1,020,264 (264,776) - - (817) - - - (577,457) (199,397) - - 144,412 75,000 10,804 - 442,807 37,662 (146,067) (1,067,606) 596,605 120,958 - 272,090 353,688 1,685,020 1,036,591 977,872 854,235 - - - 4,916,757 $ 1,722,682 $ 890,524 $ (89,734) $ 1,450,840 =L==120,958 $ - $ 272,090 $ 5,270,445 -57-