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2007 Monticello Annual Financial Report 1 u 1 1 1 CITY OF MONTICELLO WRIGHT COUNTY, MINNESOTA Annual Financial Report Year Ended December 3l, 2007 1 CITY OF MONTICELLO Table of Contents Page SECTION I -INTRODUCTORY SECTION City Council and Administration i SECTION II -FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS 2-11 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets 12 Statement of Activities 13 Fund Financial Statements Governmental Funds Balance Sheet 14-1 S Reconciliation of the Balance Sheet to the Statement of Net Assets 16 Statement of Revenue, Expenditures, and Changes in Fund Balances 17-18 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities 19 Proprietary Funds Statement of Net Assets 20 Statement of Revenue, Expenses, and Changes in Fund Net Assets 21 Statement of Cash Flows 22 Notes to Basic Financial Statements 23-41 BUDGETARY COMPARISON SCHEDULES Schedule of Revenue, Expenditures, and Changes in Fund Balances - Budget and Actual General Fund 427 Community Center Fund 48 Capital Outlay Revolving Fund 49 Sanitary Sewer Access Fund SO Notes to the Required Supplementary Information S 1 COMBINING NONMAJOR FUND STATEMENTS Nonmajor Governmental Funds Combining Balance Sheet S2-S3 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances S4-SS 1 1 i 1 INTRODUCTORY SECTION 1 1 LI i Y 1 1 i 1 1 1 1 1 1 1 1 Clint Herbst Wayne Mayer Tom Perrault Brian Stumpf Susie Wojchouski Jeff O'Neill Tom Kelly CITY OF MONTICELLO City Council and Administration as of 12/31/2007 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 CITY OF MONTICELLO Management's Discussion and Analysis Year Ended December 31, 2007 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, 2007. FINANCIAL HIGHLIGHTS The assets of the City exceeded its liabilities at year-end by $108,950,450 (net assets). Of this amount, $30,984,971 (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 $39,558,564, an increase of $3,085,162 from the prior year. Reserved and designated uses of fund balance totaled $33,238,606, leaving $6,319,958 available for spending at the City's discretion (unreserved and undesignated fund balance). At the end of the current fiscal year, unreserved and designated fund balance for the General Fund was $189,358, or 2.6 percent of total General Fund expenditures for 2007. 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 $2,618,933 (5.1 percent) during 2007. Principal payments made on outstanding debt totaled $3,388,381. The City issued new debt of $6,045,000 in 2007, which included refinancing of the 2000A Improvement Bonds which will be refunded on February 1, 2008 and the financing of street and utility projects within 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 fund 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 fund 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 obtain 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- 1 1 1 1 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 $108,950,450 at the end of 2007. The largest portion of the City's net assets (42 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. City of Monticello's Net Assets 1 1 1 1 1 1 1 1 1 II 1 1 Governmental Activities Business-Type Activities Total 2007 2006 2007 2006 2007 2006 Current and other assets $ 61,404,850 $ 59,789,175 $ 7,037,454 $ 6,041,817 $ 68,442,304 $ 65,830,992 Capital assets 64,855,170 61,480,506 34,892,612 35,749,380 99,747,782 97,229,886 Total assets 126,260,020 121,269,681 41,930,066 41,791,197 168,190,086 163,060,878 Long-term liabilities 52,970,319 48,449,246 1,011,449 - 53,981,768 48,449,246 Other liabilities 4,751,872 8,861,064 505,996 603,950 5,257,868 9,465,014 Total liabilities 57,722,191 57,310,310 1,517,445 603,950 59,239,636 57,914,260 Net assets Invested in capital assets, net ofrelated debt 12,476,536 7,009,622 33,971,151 35,749,380 46,447,687 42,759,002 Restricted 31,517,792 - - - 31,517,792 - Unrestricted 24,543,501 56,949,749 6,441,470 5,437,867 30,984,971 62,387,616 Total net assets $ 68,537,829 $ 63,959,371 $ 40,412,621 $ 41,187,247 $ 108,950,450 $105,146,618 At the end of 2007, 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 portions of Cedar Street and Chelsea Road and the construction of Dundas Road. -4- Business-Type Activities -The net assets of our business-type activities decreased during 2007 due to transfers to other City funds. The utility funds continue to invest in capital assets to accommodate the growth of the City in various new subdivisions and also to maintain an aging infrastructure system. Some of the most significant improvements made this year include infrastructure replacements in conjunction with the City's Reconstruction Program and utility improvements included in the construction and reconstruction projects listed within the governmental activities. City of Monticello's Changes in Net Assets Governmental Activities Business-Ty pe Activities Total 2007 2006 2007 2006 2007 2006 Revenues Program revenues Charges for services $ 3,804,959 $ 4,455,657 $ 3,096,619 $ 2,765,926 $ 6,901,578 $ 7,221,583 Operating grants and contributions 160,147 281,531 - - 160,147 281,531 Capital grants and contributions 3,616,870 12,153,185 482,412 2,188,675 4,099,282 14,341,860 General revenues Property taxes 7,242,838 7,253,560 - - 7,242,838 7,253,560 General grants and aids 288,940 130,000 - - 288,940 130,000 Investment earnings 2,170,025 2,093,877 326,356 334,623 2,496,381 2,428,500 Gain on sale of land - 3,437,959 - - - 3,437,959 Other 528,193 1,181,670 62,664 27,100 590,857 1,208,770 Total revenues 17,811,972 30,987,439 3,968,051 5,316,324 21,780,023 36,303,763 Expenses General government 1,844,320 3,639,497 - - 1,844,320 3,639,497 Public safety 1,693,116 2,856,573 - - 1,693,116 2,856,573 Public works 4,559,460 5,318,865 - - 4,559,460 5,318,865 Sanitation 509,208 474,045 - - 509,208 474,045 Culture and recreation 2,661,915 2,694,970 - - 2,661,915 2,694,970 Economic development 769,584 2,061,331 - - 769,584 2,061,331 Interest 2,193,840 2,378,871 - - 2,193,840 2,378,871 Water - - 973,375 913,638 973,375 913,638 Sewer - - 2,000,610 2,095,124 2,000,610 2,095,124 Liquor - - 644,857 617,153 644,857 617,153 Cemetery - - 41,312 71,044 41,312 71,044 Fiber optic - - 84,594 - 84,594 - Total expenses 14,231,443 19,424,152 3,744,748 3,696,959 17,976,191 23,121,111 Increase in net assets before transfers 3,580,529 11,563,287 223,303 1,619,365 3,803,832 13,182,652 Transfers 997,929 250,000 (997,929) (250,000) - - Change in net assets 4,578,458 11,813,287 (774,626) 1,369,365 3,803,832 13,182,652 Netassets-beginning 63,959,371 52,146,084 41,187,247 39,817,882 105,146,618 91,963,966 Net assets -ending $ 68,537,829 $ 63,959,371 $ 40,412,621 $ 41,187,247 $108,950,450 $105,146,618 -$ - 1 1 1 1 n C~ 1 i 1 1 L.~ GOVERNMENTAL ACTIVITIES -REVENUES Revenues by Source -Governmental Activities Charges for General Grants Services and Aids 21% Property Taxes 41% rating Grants contributions 1% Other 15% Revenues for the City's governmental activities decreased by $13.18 million, or 43 percent. The major components of this decrease are explained as follows: • Capital grants and contributions decreased by $8.5 million, or 70 percent. This decrease was due to assessing new special assessments of $8 million in 2007 and recording revenue from Wright County for the I-94 Interchange Project completed in 2006. • Charges for services decreased by $651,000, or 14.6 percent. This decrease was primarily due to a reduction in sanitary sewer access fees collected of $346,000, a reduction in storm sewer access fees of $107,000, and a reduction in water access fees of $70,000, due to a decrease in new developments. • In 2006, the City sold land for $3.4 million, whereas in 2007 no such land sale took place. • Investment earnings increased by $76,000, primarily due to holding long-term investments at higher rates than current short-term rates. Expenses -City expenses for governmental activities decreased by $5.2 million, or 27 percent. The decrease is primarily due to decreased engineering costs due to less construction projects for highways and streets. -6- Capital Grants and Contributions 20% n GOVERNMENTAL ACTIVITIES -BUSINESS-TYPE ACTIVITIES Revenues by Source -Business-Type Activities Capital Grants and Contributions 12% Charges for Services 78% 1 t t 1 1 [J Business-type activities decreased the City's net assets by $774,626. 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 over $330,000, or 12 percent, primarily due to increased sales from the liquor store operation of $52,000 and additional revenue from sewer and water charges of $342,000. Capital grants and contributions decreased by $1.7 million due to a decrease in capital asset contributions from governmental funds. Business-type expenses increased from the previous year by approximately $48,000 due to increased costs of bank charges at the liquor store of $18,000, $58,000 additional personnel costs in the Water Fund, and $84,500 in new costs associated with the City's new Fiber Optic Project. The charges for services generated by governmental activities include basic services such as licenses and permits, zoning and development fees, and recreation program fees. -7- v 1 1 1 Other Unrestricted r FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS 1 As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 1 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 $39,558,564, an increase of $3,085,162 from the prior year. Approximately 16 percent of this total amount ($6,319,958) 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 $141,574 during the current fiscal year. Increased licenses and permits, charges for services, and interest earnings provided additional revenues in 2007. The City also implemented two new revenue sources, rental housing inspection fees, which generated an additional $28,745 and a franchise fee on electric use, which generated an additional $146,045 in General Fund revenue in 2007. 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 $228,873 for the year. Community Center Special Revenue Fund -The increase in the Community Center Special Revenue 1 Fund balance was the result of additional revenue generated through increases in memberships and an increase in property tax revenues. Sanitary Sewer Access Special Revenue Fund -The Sanitary Sewer Access Special Revenue Fund decreased by $1.1 million 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 Fund's share of debt service payments. 1 Capital Projects Fund -The fund resources decreased in the current year primarily from previous proceeds from the sale of bonds being used for completion of various public improvement projects. 1 1 ~ d. 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 $4,534,875 for the Water Fund and Sewer Fund, $1,991,489 for the Liquor and Cemetery Funds, and ($84,894) for the Fiber Optic Fund. Capital assets, net of related debt, account for approximately 84 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 properly 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 2007 by $625,219. The r Water Fund and Sewer Fund expended over $482,000 in infrastructure improvements in 2007 to accompany the ongoing street improvement projects. These costs were not offset by the 2007 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 break even or have a slight increase. The City's Liquor Fund had operating net income of over $460,000 and transferred $330,000 to other funds to reduce property taxes. In 2007, the City started its Fiber Optic 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. 4. ~ ~] GENERAL FUND BUDGETARY HIGHLIGHTS ' General Fund revenues for 2007 exceeded budget by $351,318 in total. Licenses and permits collected were $255,9491ower than anticipated due to decreased activity in building permits, both commercial and residential, as well as the delay in several projects which will be undertaken in 2008. General Fund expenditures for 2007 were $228,873 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. 1 r~ 1 1 1 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets -The City's investment in capital assets for its governmental and business-type activities amounts to $99,747,782 as of December 31, 2007, 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 $2,517,896 over last year. City of Monticello's Capital Assets Governmental Activities Business-Ty pe Activities Total 2007 2006 2007 2006 2007 2006 Land $ 7,162,826 $ 6,363,420 $ 1,217,845 $ 1,209,580 $ 8,380,671 $ 7,573,000 Construction in progress 24,927,847 20,523,835 6,191,218 5,845,433 31,119,065 26,369,268 Infrastructure 35,043,517 35,043,517 28,510,507 28,510,509 63,554,024 63,554,026 Buildings 13,135,936 13,018,486 5,156,471 5,156,471 18,292,407 18,174,957 Improvements other than buildings 4,115,256 4,015,218 18,056,314 17,828,867 22,171,570 21,844,085 Machinery, equipment, and vehicles 3,266,866 3,139,200 1,380,772 1,313,180 4,647,638 4,452,380 Less accumulated depreciation (22,797,078) (20,623,170) (25,620,515) (24,114,660) (48,417,593) (44,737,830) Net total $ 64,855,170 $ 61,480,506 $ 34,892,612 $ 35,749,380 $ 99,747,782 $ 97,229,886 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 2007, the City has total bonded debt outstanding in the amount of $52,870,592, of which $28,415,000 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 Sanitary Sewer, Water, and Storm Sewer Access Funds for the principal and interest payments due on these bonds. The City issued $6,045,000 in new bonds in 2007. These bonds will finance the reconstruction of Cedar Street and Chelsea Road, the Construction of Dundas Road, the 2007 Street Reconstruction Project, refinance the 2000A Improvement Bonds, and finance improvements at the Waste Water Treatment Plant. 1 ' -10- City of Monticello's Outstanding Debt Governmental Business-Type Activities Activities Total 2007 2006 2007 2006 2007 2006 General obligation bonds $ 7,132,903 $ 2,210,000 $ 907,097 $ - $ 8,040,000 $ 2,210,000 Tax increment bonds 680,000 810,000 - - 680,000 810,000 Special assessment bonds 28,415,000 30,255,000 - - 28,415,000 30,255,000 General obligation notes 9,515,592 10,188,973 - - 9,515,592 10,188,973 Revenue bonds 6,220,000 6,650,000 - - 6,220,000 6,650,000 Contract for deed 664,293 764,293 - - 664,293 764,293 Total $ 52,627,788 $ 50,878,266 $ 907,097 $ - $ 53,534,885 $ 50,878,266 The City's total debt increased by $2,656,619, or approximately 5.2 percent, during 2007. State statutes limit the amount of general obligation debt a governmental entity may issue to 2 percent of its taxable market value. The current debt limit is $23,203,682, which is significantly in excess of the City's outstanding net general obligation debt of $8,040,000, 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 2008 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 $1,100,000, they used the electric utility franchise fee of 3 percent, which is expected to generate $280,000 in revenue for street light improvements. Budgeted revenues for permits and charges for services were reduced to reflect less new development activity taking place in 2008. Budgeted sewer and water user fees were increased by 15 percent to be used to fund operational costs for their departments that were previously covered by the General Fund. Finally, reserve funds of $751,105 from the debt service funds and $171,619 from enterprise funds were included to balance the budget. The City's property tax levy for 2008 will amount to $7.6 million, $1.1 million more than 2007. 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- 1 fl 1 fi 1 1 1 BASIC FINANCIAL STATEMENTS CITY OF MONTICELLO Statement of Net Assets as of December 31, 2007 Governmental Business-Type Activities Activities Totals Assets Cash and investments $ 32,192,390 $ 5,649,162 $ 37,841,882 Receivables Delinquent taxes 227,526 - 227,526 Delinquent special assessments 542,512 19,520 562,032 Deferred special assessments 15,998,891 166,770 16,165,661 Interest 238,630 39,827 278,457 Accounts 608,659 485,809 1,094,468 Notes 3,038,875 - 3,038,875 Due from other governmental units 836,977 - 836,977 Land held for resale 7,390,067 - 7,390,067 Inventory - 652,241 652,241 Prepaid items 131,757 24,125 155,882 Unamortized bond issuance costs 198,566 - 198,566 Capital assets, not being depreciated Land 7,162,826 1,217,845 8,380,671 Construction in progress 24,927,847 6,191,216 31,119,063 Capital assets, being depreciated Buildings 13,135,936 5,156,471 18,292,407 Furniture and equipment 301,991 93,663 395,654 Vehicles 1,879,68] 561,166 2,440,847 Machinery and equipment 1,085,194 725,943 1,811,137 Improvements other than buildings 4,l ] 5,256 18,056,314 22,171,570 Infrastructure 35,043,517 28,510,509 63,554,026 Less accumulated depreciation (22,797,078) (25,620,515) (48,417,593) Total capital assets, net of depreciation 64,855,170 34,892,612 99,747,782 Total assets $ 126,260,020 $ 41,930,066 $ 168,190,086 Liabilities Current liabilities Accounts and contracts payable $ 963,037 $ 305,127 $ 1,268,164 Due to other governmental units 76,585 56,089 132,674 Other accrued liabilities 138,921 34,635 173,886 Accrued interest payable 894,307 - 894,307 Unamortized premium 629,412 14,364 643,776 Unearned revenues - 91,152 91,152 Escrow deposits 2,049,610 4,629 2,054,239 Long-term liabilities Due within one year 4,966,951 14,382 4,981,333 Due within more than one year 48,003,368 997,067 49,000,435 Total long-term liabilities 52,970,319 1,011,449 53,981,768 Total liabilities 57,722,191 1,817,445 59,239,636 Net assets Invested in capital assets, net of related debt 12,476,536 33,971,151 46,447,687 Restricted for debt service 31,517,792 - 31,517,792 Unrestricted 24,543,501 6,441,470 30,984,971 Total net assets 68,537,829 40,412,621 108,950,450 Total liabilities and net assets $ 126,260,020 $ 41,930,066 $ 168,190,086 See notes to basic fmancial statements -12- CITY OF MONTICELLO Statement of Activities Year Ended December 31, 2007 Program Revenues Net (Expense) Revenue and Changes in Net Assets Operating Capital Business- Charges for Grants and Grants and Governmental Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals Governmental activities General government $ 1,844,320 $ 695,117 $ - $ - $ (1,149,203) $ - $ (1,149,203) Public safety 1,693,116 93,138 133,802 - (1,466,176) - (1,466,176) Public works 4,559,460 1,994,067 14,318 3,486,230 935,155 - 935,155 Sanitation 509,208 - - - (509,208) - (509,208) Culture and recreation 2,661,915 1,015,869 12,027 130,640 (1,503,379) - (1,503,379) Economic development 769,584 6,768 - - (762,816) - (762,816) Interest 2,193,840 - - - (2,193,840) - (2,193,840} Total governmental activities 14,231,443 3,804,959 160,147 3,616,870 (6,649,467) - (6,649,467) Business-type activities 1 Water Sewer Liquor Cemetery Fiber optics Total business-type activities 973,375 867,873 2,000,610 1,196,983 644,857 1,002,933 41,312 28,830 84,594 - 3,744,748 3,096,619 - 303,284 - 197,782 197,782 - 179,128 - (624,499) (624,499) - - - 358,076 358,076 - - - (12,482) (12,482) _ - - (84,594) (84,594) _ 482,412 - (165,717) (165,717) Total govemmental and business-type activities $17,976,191 $ 6,901,578 $ 160,147 $ 4,099,282 General revenues Property taxes General aids and grants -unrestricted Investment earnings Gain on sale of assets Other general revenues Transfers Total general revenues and transfers Change in net assets Net assets -beginning Net assets -ending See notes to basic financial statements -13- (6,649,467) (165,717) (6,815,184) 7,242,838 - 7,242,838 288,940 - 288,940 2,170,025 326,356 2,496,381 16,267 - 16,267 511,926 62,664 574,590 997,929 (997,929) - 11,227,925 (608,909) 10,619,016 4,578,458 (774,626) 3,803,832 63,959,371 41, 187,247 105,146,618 $ 68,537,829 $40,412,621 $108,950,450 1 CITY OF MONTICELLO Balance Sheet Governmental Funds as of December 31, 2007 Special Revenue Funds Economic Community CapitalOutIay Development General Center Revolving Authority 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 Ball Feld lighting 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 $ 7,098,830 $ 508,331 $ 907,123 $ 1,440,903 162,737 43,635 - - 4,811 - 572,592 - 1,033 - 9,832 - 283,676 11,936 355 307 55,664 388 12,594 12,482 300,111 - - 898,824 100,000 - 1,112,842 - - - 6,528,123 505,407 108,183 23,250 - - $ 8,115,045 $ 587,540 $ 9,143,461 $ 2,857,923 $ 164,509 $ 23,250 121,166 17,183 72,401 4,120 168,581 47,354 2,026,901 5,209 2,553,558 97,116 $ 90,217 $ 203,511 - 492 - 100,000 582,425 - - 17,500 672,642 321,503 300,111 - - 898,824 - - - 664,293 108,183 23,250 - - - - 6,528,123 505,407 22,000 - - 4,941,835 63,000 - 189,358 - - - 404,174 1,942,696 467,896 5,561,487 490,424 8,470,819 2,536,420 $ 8,115,045 $ 587,540 $ 9,143,461 $ 2,857,923 -14- ' Sanitary Sewer Access Debt Service Capital Projects Nonmajor Funds Totals $ 6,057,520 $ 11,543,704 $ _ $ 4,635,979 $ 32,192,390 21,154 227,526 1,089,538 12,489,005 - 1,842,945 15,998,891 ' 67,095 198,993 265,559 542,512 4,139 285,249 = 22,997 608,659 54,084 78,798 (17,602) 42,222 238,630 = - 836,977 - 836,977 1 1,600,000 239,940 3,038,875 - - - - 1,212,842 = 356,537 75 = - 249 7,390,067 131,757 $ 7,272,376 $ 26,552,361 $ 819,375 $ 7,071,045 $ 62,419,126 $ 119,200 $ 1,119 $ 336,747 $ 24,484 $ 963,037 - - - 80 138,921 - - - 64 76,585 ' - - 1,112,842 - 1,212,842 1, 156,633 14,334,914 2, 129,660 18,419,567 - - - - 2,049,610 1 1,275,833 14,336,033 1,449,589 2,154,288 22,860,562 - - - 239,940 1,438,875 5,996,543 11,859,716 - - 18,520,552 - 75 - 249 131,757 = 356,537 = = 7,390,067 22,000 - - - 730,520 5,735,355 - - - - 189,358 - - - 3,946,048 6,760,814 - - (630,214) - (630,214} 5,996,543 12,216,328 (630,214) 4,916,75? 39,558,564 $ 7,272,376 $ 26,552,361 $ 819,375 $ 7,071,045 $ 62,419,126 -15- CITY OF MONTICELLO Reconciliation of the Balance Sheet to the Statement of Net Assets Governmental Funds as of December 31, 2007 Total fund balances -governmental funds $ 39,558,564 Amounts reported for governmental activities in the Statement ofNet 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 7,162,826 Construction in progress 24,927,847 Buildings 13,135,93b Furniture and equipment 301 991 Vehicles 1,879,681 Machinery and equipment 1,085,194 Improvements other than buildings 4,115,256 Infrastructure 35,043,517 Less accumulated depreciation (22,797,078) Same 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. 18,419,567 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. (894,307) 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 Notes payable (42,447,903) (9 515 592) Contract for deed payable (664,293) Deferred bond issuance costs 198,566 Unamortized bond premium (629,412) Compensated absences (342 531) ' Total net assets -governmental activities $ 68,537,829 u ' See notes to basic financial statements -I 6- CTIY OF MONTICELLO Statement of Revenue, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended December 31, 2007 Revenue Property taxes Special assessments Franchise fees Licenses and permits Intergovernmental Chazges for services Fines Interest earnings (charges) Miscellaneous Total revenue Expenditures Current General government Public safety Public works Sanitation Culture and recreation Economic development Capital outlay General government Public safety Public works Culture and recreation Economic development Debt service Principal Interest and fiscal chazges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer in Transfer out Proceeds from sale of assets Loss on disposal of land held for resale Proceeds from sate of bonds Premium on bonds issued Total other financing sources (uses) Net change in fund balances Fund balances (deficit) Beginning of year End of year See notes to basic financial statements Special Revenue Funds Economic Community Capital Outlay Development General Center Revolving Authority $ 4,433,359 $ 1,176,130 $ 146 $ 824,714 1,644 - 147,384 - 146,045 - - _ 627,751 - _ _ 436,588 48,207 - 19,490 1,210,751 1,011,147 - 6,368 5,027 - _ _ 487,186 (2,614) 99,916 136,107 124,807 812 6,000 400 7,473,158 2,233,682 253,446 987,079 1,899,097 - _ _ 1,603,331 - _ _ 1,656,937 - _ _ 504,208 - - _ 694,658 1,470,359 - _ 79,781 - - 693,071 12,230 - _ _ 5,454 - _ _ 719,686 - 476,274 - 90,785 - _ _ - - - 450,000 - - - 100,000 - - - 45,858 7,271,167 1,470,359 476,274 1,288,929 201,991 763,323 (222,828) (301,850} 80,939 250,000 79,215 110,735 (159,456) (857,750) (10,105) (137,900) 18,100 14,420 - _ - - - (103,084) - - 725,714 - - - 11,455 - (60,417) (588,330) 806,279 (130,249) 141,574 174,993 583,451 (432,099) 5,419,913 315,431 7,887,368 2,968,519 $ 5,561,487 $ 490,424 $ 8,470,819 $ 2,536,420 -17- 1 ' sanitary Sewer Access Debt Service Capital Projects Nonmajor Funds Totals $ - $ 8,953 $ $ 572,011 $ 7,015,313 260,097 2,181,136 _ 522,113 3,112,374 - - - - 146,045 627,751 ' - 400,000 836,977 23,371 1,764,633 448,583 - - 212,132 2,888,981 - - - - 5,027 467,103 823,921 (219,484) 377,890 2,170,025 ' 91,806 2,632 226,457 1,175,783 3,414,010 709,299 1,710,149 17,956,606 - - - - 1,899,097 _ 292,156 _ _ = 2,619 1,603,331 1,951,712 509,208 - - - 49,091 2,214,108 ' - 772,852 - - - - 12,230 - - - - 5,454 67,329 = 3,914,062 693,246 5,870,547 90,785 - - - 1,355 451,355 = 3,288,382 3,388,382 2,210,453 = = 2,256,311 359,485 5,498,835 3,414,062 746,311 21,025,422 ' 816,298 (2,084,825) (3,204,763) 963,838 (3,068,816) 4,038,149 632,908 10,105 5,202,051 = (1,879,009) (1,500) (262) (1,158,140) (4,204,122) - - - 37,520 - - - - (103,084) = 725,786 3,686,403 5,137,903 ' 11,383 60,872 = 83,710 (1,879,009) 4,773,818 4,379,92] (1,148,035) 6,153,978 ' (1,062,711) 2,688,943 1,175,158 (184,197) 3,085,162 7,059,254 9,527,335 (1,805,372) 5,100,954 36,473,402 ' $ 5 996 543 $ 12 216 328 $ 630 214 , , , , ( , ) $ 4,916,757 $ 39,558,564 -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, 2007 Total net change in fund balances - overnmental funds $ 3 085 162 g , Amounts reported for governmental activities in the Statement of Activities are different because: 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 5,733,217 Deletions of capital assets (21,253) Depreciation expense (2,337,300) 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 (5,137,903) Repayment of bond principal 2,6I5,000 Repayment of note principal 673,381 Repayment of contract for deed 100,000 Change in accrued interest payable 13,398 Amortization of bond issuance 28,238 Amortization of bond premium (62,874) Change in compensated absences 50,293 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 (160,901) Change in net assets -governmental activities See notes to basic financial statements $ 4,578,458 -19- Assets Current assets Cash and investments Receivables Accounts Accrued interest Deferred special assessments Delinquent special assessments Due from other funds Inventory Prepaids Total current assets 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 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 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 Unrestricted Total net assets See notes to basic fmancial statements CITY OF M ONTICELLO Statement of Net Assets Proprietary Funds as of December 31, 2007 Business-Type AcEivities -Enterprise Funds Water Sewer Liquor Cemetery Fiber Optics Totals $ 1,826,130 $ 2,272,417 $ 1,514,243 $ 36,372 $ - $ 5 649 162 , , 159,079 318,486 7,364 880 - 485,809 14,446 12,935 12,104 342 - 39,827 166,770 - - - - 166,770 19,520 - - - - 19,520 27,697 - - - - 27,697 - - 652,241 - - 652,241 9,416 5,901 8,808 - - 24,125 2,223,058 2,609,739 2,194,760 37,594 - 7,065,151 , 208,143 984,202 5,600 19,900 - 1,217,845 848,445 3,570,119 737,907 - - 5,156,471 15,695 41,019 36,949 - - 93,663 81,553 479,613 - - - 561,166 166,267 495,425 64,251 - - 725,943 279,399 17,609,984 81,040 85,891 - 18,056,314 13,917,828 14,592,681 - - - 28,510,509 3,568,017 2,623,199 - - - 6,191,216 19,085,347 40,396,242 925,747 105,791 - 60,513,127 (6,680,124) 12,405,223 (18,504,723) 21,891,519 (416,352) 509,395 (19,316) 86,475 - (25,620,515) - 34,892,612 $ 14,628,281 $ 24,501,258 $ 2,704,155 $ 124,069 $ - $ 41,957,763 $ 23,746 $ 112,258 $ 111,926 $ - $ 57,197 $ 305,127 4,772 1,693 28,111 S9 - 34,635 19,124 134 36,831 - - 56,089 - - - - 27,697 27,697 - 14,364 - - 14,364 84,852 - 1,300 - - 91,152 1,630 875 515 1,609 - 4,629 139,124 129,324 178,683 1,668 84,894 533,693 - 907,097 - - - 907,097 43,838 - 60,514 - - 104,352 43,838 907,097 60,514 - - 1,011,449 182,962 1,036,421 239,197 1,668 84,894 I,545,142 12,405,223 2,040,096 20,970,058 2,494,779 509,395 ],955,563 86,475 35,926 - (84,894) 33,971,151 6,441,470 S 14,445,319 $ 23,464,837 $ 2,464,958 $ 122,401 $ (84,894) $ 40,412,621 -20- 1 Iiii ILJ 1 1 1 1 1 Operating revenue Sales Cost of goods sold Charges for services Other revenue Total operating revenue Operating expenses Personal services Utilities Supplies and maintenance Repairs and maintenance Depreciation Insurance Professional fees Advertising Miscellaneous Total operating expenses Operating income (loss) Nonoperating revenues Investment earnings (chazges) Income (loss) before contributions and transfers Contributions and transfers Capital contributions Transfers in Transfers (out) Total contributions and transfers Change in net assets Net assets ' Beginning of yeaz End of year 1 1 1 See notes to basic financial statements CITY OF MONTICELLO Statement of Revenue, Expenses, and Changes in Fund Net Assets Proprietary Funds Year Ended December 31, 2007 Business-Ty pe Activities -Enterprise Funds Water Sewer Liquor Cemetery Fiber Optics Totals $ - $ - $ 3,769,077 $ - $ - $ 3,769,077 - - (2,766,144) - - (2,766,144) 867,873 1,196,983 - 28,830 - 2,093,686 34,034 28,497 133 - - 62,664 901,907 1,225,480 1,003,066 28,830 - 3,159,283 241,557 153,599 421,531 16,945 - 833,632 106,921 13,388 27,824 - - 148,133 121,487 10,550 9,876 585 295 142,793 3,337 15,415 9,924 614 - 29,290 431,342 1,022,312 48,765 3,436 - 1,505,855 11,603 23,699 9,377 - - 44,679 16,142 742,469 12,544 19,669 52,395 843,219 - - 2,410 - - 2,410 40,986 19,178 102,606 63 31,904 194,737 973,375 2,000,610 644,857 41,312 84,594 3,744,748 (71,468) (775,130) 358,209 (12,482) (84,594) (585,465) 121,388 99,491 102,297 2,980 (300) 326,356 49,920 (675,139) 460,506 (9,502) (84,894) (259,109) 303,284 179,128 - - - 482,412 - 262 - - - 262 (267,000) (400,300} (330,891) - - (998,191) 36,284 (220,910) (330,891) - - (515,517) 86,204 (896,049) 129,615 (9,502) (84,894) (774,626) 14,359,115 24,360,886 2,335,343 131,903 - 41,187,247 $ 14,445,319 $ 23,464,837 $ 2,464,958 $ 122,401 $ (84,894) $ 40,412,621 -21- CITY OF MONTICELLO Cash flows from operating activities Statement of Cash Flows Proprietary Funds Year Ended December 31, 2007 Business-Type Activities -Enterprise Funds Water Sewer Liquor Cemetery Fiber Optics Totals Cash received from customers $ 866,696 $1,178,134 $1,001,376 $ 28,400 $ Cash payments to suppliers (287,700) (948,943) (267,5]0) (20,922) Cash payments to employees (231,018) (152,787) (417,004) (16,886) _ Net cash provided (used) by operating activities 347,978 76,404 316,862 (9,408) Cash flows from noncapital fmancing activities li 1 i LI - $ 3,074,606 (27,397) (1,552,472) ' (817,695) (27,397) 704,439 Interfund borrowing (a/,6Y"/) - - - 27,697 - Transfers in - 262 - - - 262 Transfers out (267,000) (400,300) (330,891) - - (998,191) Net cash provided (used) by noncapital financing activities (294,697) (400,038) (330,891) - 27,697 (997,929) Cash flows from capital and related financing activities Acquisition and construction of capital assets - (166,675) - - - (166,675) Proceeds from sale of bonds - 92],461 - - - 921,461 Interest received on investments 106,942 87,056 90,193 2,638 (300) 286,529 Net cash provided (used) by capital and related financing activities 106,942 841,842 90,193 2,638 (300) 1,041,315 Net increase (decrease) in cash and cash equivalents 160,223 518,208 76,164 (6,770) - 747,825 Cash and cash equivalents Beginning of year 1,665,907 1,754,209 1,438,079 43,142 - 4,901,337 End of year $ 1,826,130 $ 2,272,417 $1,514,243 $ 36,372 $ - $ 5,649,162 Reconciliation of operating income (loss) to net cash provided (used) by operating activities Operating income (loss) $ (71,468) $ (775,130) $ 358,209 $ (12,482) $ (84,594) $ (585,465) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities Depreciation 431,342 1,022,312 48,765 3,436 - 1,505,855 Changes in assets and liabilities (Increase) decrease in accounts receivable 100,186 (47,346) (1,418) (430) 57,197 108,189 (Increase) decrease in special assessments receivable (186,290) - - - - (186,290) (Increase) decrease in inventory - - (70,267) - - (70,267) (Increase) decrease in prepaid expenses (2,112) 114 (422) - - (2,420} Increase (decrease) in accounts and contracts payable 11,340 (124,963) (24,490) (1,600) - (139,713) Increase (decrease)in accrued expenses 10,539 812 4,527 59 - 15,937 Increase (decrease) in due to other governments 1,918 (270) 2,244 - - 3,892 Increase (decrease) in defected revenue 50,893 - (272) - - 50,621 Increase (decrease) in escrow deposits 1,630 875 (14) 1,609 - 4,100 Net cash provided (used) by operating activities $ 347,978 $ 76,404 $ 316,862 $ (9,408) $ (27,397) $ 704,439 Noncash capital and related financing activities Contributions of capital assets $ 303,284 $ 179,128 $ - $ - $ - $ 482,412 See notes to basic financial statements -22- 1 L 1 CITY OF MONTICELLO Notes to Basic Financial Statements December 31, 2007 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING P LI O CIES 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 government 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 wilt 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 to 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 given functions or segments 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 fund 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 fund 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 fund 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- 1 l u LJ t f NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Description of Funds Each fund is accounted for as an independent entity. A description of the funds included in this report is as follows: Major Governmental Funds 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 - used for the acquisition proprietary funds). Major Proprietary Funds ~~ The Capital Projects Fund is used to account for financial resources to be ~r construction of major capital facilities (other than those financed by Water Fund -The Water Utility 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 Utility 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 1-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 fund 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 is 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 r 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 offset by deferred revenue in the governmental funds financial statements. Within the governmental fund 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 ~I 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 fund financial statements, but are not reported in the governmental fund 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 Iives 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 fund 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- L~ J NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Compensated Absences Payable ~i 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 Ioss related to torts: theft of, damage to, or destruction of assets; w 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 a s .~ PY 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. -28- 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 equivalents. 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 ~ 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 $ (105,244) Investments 37,937,871 Cash on hand 8,925 ,~ Total cash and investments -Statement of Net Assets $ 37,841,552 B. Deposits In accordance with applicable Minnesota Statutes, the City maintains deposits at depository hanks authorized by the City Council, including checking accounts and non-negotiable certificates of deposit. t -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 a deficit of ($105,244) while the balance on the bank records was $79,491. At December 31, 2007, 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: Credit Risk Interest Risk - Maturi ri Duration in Years Investment Type Rating AQency Less Than I 1 to 5 5 to 10 More Than 10 Total U.S.agencysecurities AAA S&P $ - $ 9,288,138 $ 13,241,036 $ 2,349,047 $ 24,878,221 Negotiable certificates of deposit N/R N/R 479,833 1,727,076 188,690 - 2,395,597 Repurchase agreement N/R N/R 1,719,581 - - - 1,719,581 Money market funds N/R N/R 8,893,631 - - - 8,893,631 4M Fund N/R N/R 50,841 - - - 50,841 Total investments $ 11,143,884 $ 11,015,214 $ 13,429,726 $ 2 349 047 $ 37 937 871 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 abroker-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. t -30- 1 1 1 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, and Federal Farm Credit Bureau, and Federal Home Loan Mortgage Corporation. These investments are 13 percent, 26 percent, 8 percent, and 20 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. 1 1 -31- NOTE 3 -CAPITAL ASSETS Capital asset activity for the year ended December 31, 2007 was as follows: A. Governmental Activities Capital assets, not depreciated Balance - Beginning of Year Additions Deletions Balance - End of Year Land $ 6,363,420 $ 799,406 $ - $ 7,162,826 Construction in progress 20,523,835 4,404,012 - 24,927,847 Capital assets, depreciated Buildings 13,018,486 117,450 - 13,135,936 Furniture and equipment 263,301 38,690 - 301,991 Vehicles 1,853,556 39,452 (13,327) 1,879,681 Machinery and equipment 1,022,343 164,133 (101,282) 1,085,194 Improvements other than buildings 4,015,218 170,074 (70,036) 4,115,256 Infrastructure 35,043,517 - - 35,043,517 Total capital assets 82,103,676 5,733,217 (184,645) 87,652,248 Less accumulated depreciation on Buildings (2,856,285) (336,739) - (3,193,024) Vehicles (1,257,230) (145,866) 13,327 (1,389,769) Machinery and equipment (630,017) (92,210) 98,511 (623,716) Furniture and equipment (105,416) (25,214) - (130,630) Infrastructure (13,847,339) (1,574,818) - (15,422,157) Improvements other than buildings (1,926,883) (162,453) 51,554 (2,037,782) Total accumulated depreciation (20,623,170) (2,337,300) 163,392 (22,797,078) Net capital assets $ 61,480,506 $ 3,395,917 $ (21,253) $ 64,855,170 1 1 1 -32- NOTE 3 -CAPITAL ASSETS (CONTINUED) B. Business-Type Activities Balance - Beginning Balance - ofYear Additions Deletions End of Year Capital assets, not depreciated Land $ 1,209,580 $ 8,265 $ - $ 1,217,845 Construction in progress 5,845,433 345,783 - 6,191,216 Capital assets, depreciated Buildings 5,156,471 - - 5,156,471 Furniture and equipment 93,663 - - 93,663 Vehicles 561,166 - - 561,166 Machinery and equipment 658,351 67,592 - 725,943 Improvements other than buildings 17,828,867 227,447 - 18,056,314 Infrastructure 28,510,509 - - 28,510,509 Total capital assets 59,864,040 649,087 - 60,513,127 Less accumulated depreciation on Buildings (2,180,354) (153,227) - (2,333,581) Vehicles (537,227) (12,166) - (549,393) Machinery and equipment (531,076) (27,458) - (558,534) Furniture and equipment (45,597) (15,042) - (60,639) Infrastructure (11,379,271) (868,755) - (12,248,026) Improvements other than buildings (9,441,135) (429,207) - (9,870,342) Total accumulated depreciation (24,114,660) (1,505,855) - (25,620,515) Net capital assets $ 35,749,380 $ (856,768) $ - $ 34,892,612 C. Depreciation Depreciation expense for the year ended December 31, 2007 was charged to the following functions: Governmental activities General government $ 10,579 Public safety 89,785 Public works 1,783,963 Culture and recreation 450,977 Economic development 1,996 Total depreciation expense -governmental activities $ 2,337,300 Business-type activities: Water $ 431,342 Sewer 1,022,312 Liquor 48,765 Cemetery 3,436 Total depreciation expense- business-type activities $ 1,505,855 -33- NOTE 4 -LONG-TERM LIABILITIES A. Description The City has the following types of long-term liabilities outstanding at December 31, 2007: special assessment improvement bonds with governmental commitment, tax increment bonds, general obligation bonds and notes, revenue bonds, and contract 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 contract 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. Long-term liabilities at year-end are summarized as follows: Final Interest Maturity Balance - OriAinal Issue Rate Issue Date Date End of Year Governmental activities General obligation bonds 2003A Improvement Bonds 2007 Improvement Bonds Tax increment bonds 2004A Tax Increment Bonds Special assessments bonds 1999 General Obligation Improvement Bonds 2000A Improvement Bonds 2000B Improvement Bonds 2002 Improvement Bonds 2005 General Obligation improvement Bonds General obligation notes Project 93-14C Wastewater Treatment Note Revenue bonds 2000A Public Project Revenue Bonds Contract for deed Total governmental activity long-term liabilities Business-type activities General obligation bonds 2007 Improvement Bonds $ 2,420,000 2.00-4.00% 09/01/03 02/01/15 $ 1,995,000 $ 5,137,903 4.00% 12/27/07 02/01/18 5,137,903 $ 945,000 3.00-5.60% 06/30/04 02/01/13 680,000 t 1 1 1 1 S 3,000,000 3.70-X3.10% 01/01/99 02/01/10 945,000 $ 2,015,000 4.40-5.80% 03/01 /00 02/01 /16 1,150,000 $ 1,645,000 4.50-5.00% 03/01/00 02/01/11 580,000 $ 2,420,000 1.70-4.00% 12/30/02 02/01/14 1,600,000 $ 25,]50,000 4.00-4.75% 08/17/05 02/01/23 24,140,000 $ 14,700,000 4.08% 02/06/97 08!20/18 9,515,592 $ 7,555,000 4.35-6.25% 03/01/00 02/01/15 6,220,000 $ 2,185,222 6.00% 12/22/04 12/01/09 664,293 $ 52,627,788 $ 907,097 4.00% 12/27/07 02/01/18 $ 907,097 i 1 -34- 1 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 2008 $ 4,881,136 $ 2,204,179 2009 5,525,301 2,030,942 2010 5,215,089 1,767,425 2011 5,363,416 1, 523,270 2012 5,323,540 1,274,107 2013-2017 21,871,790 2,961,444 2018-2022 3,987,516 371,071 2023 460,000 9,775 $ 52,627,788 $12,142,213 Business-Type Activities: Year Ending December 31, Principal Interest 2008 $ - $ 21,569 2009 69,026 34,903 2010 90,034 31,722 2011 93,036 28,061 2012 85,533 24,484 2012-2017 471,931 67,331 2018 97,537 1,951 $ 907,097 $ 210,026 C. Current Refunding In 2007, the City issued $6,045,000 of General Obligation Improvement Bonds, Series 2007. A portion of these bonds were issued to refund in advance of their stated maturities the General Obligation Improvement Bonds, Series 2000A totaling $1,000,000. On February 1, 2008, the proceeds of this issue will be used to refund this issue. The refunding was undertaken to reduce the net present value on debt service payments by $336,817. -35- NOTE 4 -LONG-TERM LIABILITIES (CONTINUED) D. Changes in Long-Term Liabilities December 31, December 31, Due Within 2006 Additions Retirements 2007 One Year Governmental activities Generatobligationbonds $ 2,210,000 $ 5,137,903 $ 215,000 $ 7,132,903 $ 225,000 Tax increment bonds 810,000 - 130,000 680,000 105,000 Special assessment bonds 30,255,000 - 1,84Q000 28,415,000 3,270,000 General obligation notes 10,188,973 - 673,381 9,515,592 701,136 Revenue bonds 6,650,000 - 430,000 6,220,000 480,000 Contract for deed 764,293 - 100,000 664,293 100,000 Compensated absences 392,824 257,053 307,346 342,531 85,815 Total $ 51,271,090 $ 5,394,956 $ 3,695,727 $ 52,970,319 $ 4,966,951 Business-type activities General obligation bonds $ - $ 907,097 $ - $ 907,097 $ - Compensated absences 91,745 12,607 - 104,352 14,382 Total $ 91,745 $ 919,704 $ - $ 1,011,449 $ 14,382 E. 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, 2007, 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, 2007 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 of Minnesota (PERA). PERA administers the Public Employees' Retirement Fund (PEKE) 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 disabili benefits to members and benefits to survivors ty , 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- Li 1 1 1 t 1 1 NOTE 5 -DEFINED BENEFIT PENSION PLANS -STATE-WIDE (CONTINUED) 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 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 i 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 of Minnesota, 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. 1 1 1 0 B. Funding Policy Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the State Legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic and Coordinated Plan members were required to contribute 9.10 percent and 5.75 percent, respectively, of their annual covered salary in 2007. The Coordinated Plan contribution increases to 6.0 percent in 2008. The City was required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members and 6.25 percent for Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan increases to 6.5 percent for 2008. The City's contributions, which were equal to the contractually required contributions for each year as set by statutes to PERF for the years ended December 31, 2007, 2006, and 2005 were $178,303, $161,068, and $135,313, 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 $3,275 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 aze 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 $3,275 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, 2007 is as follows: Annual required contribution $ 86,740 Interest on net pension obligation _ Adjustment to annual required contribution Annual pension cost 86,740 Less contribution made (86,740) Increase (decrease) in net pension obligation - Net pension obligation -beginning of year - Net pension obligation -end of year $ - 1 r_~ -3 8- NOTE 6 -CITY OF MONTICELLO FIRE RELIEF ASSOCIATION (CONTINUED) The annual required contribution for the current year was determined as part of the December 31, 2006, actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) S percent investment rate of return and (b) age and service retirement was assumed to occur at the age of S0. 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 Annual pension cost (APC) Contribution made City State aid -pass through aid Net pension obligation NOTE 7 -DESIGNATED FUND BALANCE 2007 2006 2005 $ 86,740 $ 98,518 $ 94,839 86,740 98,518 94,839 Designated fund balances at December 31, 2007 were as follows: General Fund Designated for Economic development department $ 12,400 Streets equipment 271,250 Snow removal equipment Fire department equipment 60,600 I SS,000 Building department equipment 6,000 Data processing equipment 12,421 Parks department equipment 30,000 Parks department buildings 79,700 Parks department improvements 52,990 Building improvements 160,600 Street light improvements 100,000 Working capital 3,334,062 Contingencies 666,812 4,941,83 S Community Center Designated for Community center improvements 63,000 Nonmajor Fund City streets reconstruction Designated for Future Edmundson Street 187,991 Future 8Sth Street 135,637 Elk Street 10,300 Fenning Avenue 202,077 Fallon Avenue 72,01 S ' Haug and 9Sth Avenue 122,500 730,520 $ 5,73S,3SS 1 -39- NOTE 8 - INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS A. Due To/From Other Fund Receivable Fund Payable Fund Amount Major governmental funds General Economic Development Authority $ 100,000 Capital outlay revolving Capital Project 1,112,842 Enterprise funds Water Fiber optics 27,697 $ 1,240,539 These interfund loans were made to provide adequate cash flow. B. Interfund Transfers Interfund transfers for the year ended December 31, 2007 consisted of the following: Transfers in Capital Outlay Nonmajor Community Revolving Debt Service Capital Governmental Sewer Transfers Out General Fund Center Fund Fund EDA Fund Funds Proiects Funds Funds Fuod Total General Fund $ - $ - $ - $ 88,548 $ - $ 70,908 $ - S - $ 159,456 Community Center Fund - - - - 857,750 - - - 857,750 Capital Outlay Revolving Fund - - - - - - 10,105 - 10,105 EDA Fund - - - - 137,900 - - - 137,900 Sanitary Sewer Access Fund - - 77,206 - 1,801,803 - - - 1,879,009 Debt Service Funds - - - 1,500 - - - - 1,500 Capital Projects Fund - - - - - - - 262 262 Nonmajorgovemmentalfunds 48 - 2,009 20,687 573,396 562,000 - - 1,!58,140 Water Fund - - - - 267,000 - - - 267,000 Sewer Fund - - - - 400,300 - - - 400,300 Liquor Fund 80,891 250,000 - - - - 330,89{ $ 80,939 $ 250,000 $79,215 $ 110,735 $4,038,149 S 632,908 $ 10,105 S 262 $5,202,313 These transfers were made to finance general operations, capital projects, and debt service payments. NOTE 9 -STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY Deficit Fund Balances The City has deficit fund balances at December 31, 2007 as follows: Capital Projects Fund $ (630,214) Fiber Optics Fund $ (84,894) The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, transfers from other funds, and various other sources. 1 ~~ -40- NOTE 10 -COMMITMENTS A. Construction Contracts During fiscal 2007, the City awarded contracts for various construction and remodeling projects. The City's commitment for uncompleted work on these contracts at December 31, 2007 is approximately $2,100,000. 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 1 1 1 1 f] 1 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, 2007 the City did not perform calculations to determine if there is an arbitrage liability on these issues. The City has not accrued an arbitrage rebate liability at December 31, 2007. The City expects the liability, if any, to be immaterial. NOTE 11-SUBSEQUENT EVENTS In January 2008, the City issued $6,180,000 of Public Project Revenue Refunding Bonds. The bonds bear an interest rate of 3.2 percent and mature in February 2015. In March 2008, the City issued $9,270,000 of General Obligation Sewer Revenue Refunding Bonds. The bonds bear an interest rate of 3.4 percent and mature in August 2018. In May 2008, the City issued $26,445,000 of Telecommunications Revenue Bonds. The bonds bear interest rates ranging from 6.5 to 6.75 percent and mature on various dates through June 1, 2031. -41- i ii 1 i n 1 t 1 1 i~ BUDGETARY COMPARISON SCHEDULES CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget Revenue Property taxes $ 4,661,600 $ 4,661,600 $ 4,433,359 $ (228,241) Special assessments - - 1,644 1 644 Franchise fee 275,000 275,000 146,045 (128,955) Licenses and permits 883,700 883,700 627,751 (255,949) Intergovernmentalrevenue Market value and other tax credits - - 191,131 191,131 Fire department aid 96,500 96,500 86,740 (9,760) State police aid 46,000 46,000 47,063 1,063 State highway aid 77,450 77,450 78,568 1,118 County/regional grants 22,500 22,500 26,345 3,845 Other grants and aids 21,740 21,740 6,741 (14,999) Total intergovernmental revenue 264,190 264,190 436,588 172,398 Charges for services Animal impound fees - - 28,044 28,044 Deputy registrar fees 285,000 285,000 270,257 (14,743) Engineering fees - - 441,683 441,683 Garbage charge 114,500 114,500 115,590 1,090 Development cost reimbursement - - 59,359 59,359 Inspection fees 90,000 90,000 134,804 44,804 Township contract 50,250 50,250 53,193 2,943 Parks 8,000 8,000 11,280 3,280 Other 136,700 136,700 96,541 (40,159) Total charges for services 684,450 684,450 1,210,751 526,301 Fines 24,000 24,000 5,027 (18,973) Miscellaneous revenue Interest earnings 252,740 252,740 487,186 234,446 Rents 42,260 42,260 45,205 2,945 Other 33,900 33,900 79,602 45,702 Total miscellaneous revenue 328,900 328,900 611,993 283,093 Total revenue 7,121,840 7,121,840 7,473,158 351,318 (continued) -42- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget Expenditures General government Mayor and City Council Personal services 26,060 26,060 26,180 120 Other services and charges 10,655 10,655 7,678 (2,977) Total mayor and City Council 36,715 36,715 33,858 (2,857) Administrative Personal services 241,150 241,150 240,792 (358) Other services and charges 29,860 29,860 41,901 12,041 Total administrative 271,010 271,010 282,693 11,683 Elections 1,000 1,000 140 (860) Finance Personal services 316,550 316,550 426,449 109,899 Other services and charges 24,975 24,975 27,999 3,024 Total finance 341,525 341,525 454,448 112,923 Audit 43,200 43,200 43,200 - Assessing 56,125 56,125 52,744 (3,381) Legal 76,915 76,915 96,701 19,786 Planning and zoning Personal services 162,435 162,435 67,751 (94,684) Other services and charges 1,200 1,200 34,771 33,571 Professional services 242,650 242,650 151,797 (90,853) Total planning and zoning 406,285 406,285 254,319 (151,966) Data processing 226,080 226,080 204,487 (21,593) City hall Personal services 8,630 8,630 3,012 (5,618) Other services and charges 46,540 46,540 44,541 (1,999) Professional services 86,800 86,800 82,620 (4,180) Total city hall 141,970 141,970 130,173 (11,797) (continued) -43- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget Expenditures (continued) General government (continued) Deputy registrar Personal services 198,130 198,130 165,273 (32,857) Other services and charges 19,175 19,175 15,947 (3,228) Total deputy registrar 217,305 217,305 181,220 (36,085} Insurance 182,470 182,470 165,114 (17,356) Capital outlay 82,700 82,700 12,230 (70,470) Total general government 2,083,300 2,083,300 1,911,327 (171,973) Public safety Law enforcement 996,205 996,205 917,659 (78,546) Fire Personal services 84,620 84,620 90,594 5,974 Supplies 42,100 42,100 60,699 18,599 Other services and charges 144,330 144,330 130,816 (13,514) Repairs and maintenance 28,300 28,300 14,018 (14,282) Total fire 299,350 299,350 296,127 (3,223) Building inspections Personal services 263,400 .263,400 274,797 11,397 Other services and charges 81,350 81,350 49,024 (32,326) Total building inspections 344,750 344,750 323,821 (20,929) Civil defense Personal services 12,445 12,445 237 (12,208) Other services and charges 4,300 4,300 7,786 3,486 Total civil defense 16,745 16,745 8,023 (8,722) Animal control 45,500 45,500 45,057 (443) National guard 23,870 23,870 12,644 (11,226) Capital outlay 227,600 227,600 5,454 (222,146) Total public safety 1,954,020 1,954,020 1,608,785 (345,235) (continued) -44- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) ' Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget ' Expenditures (continued) Public works Administration Personal services 191,500 191,500 198,703 7,203 Other services and charges 23,800 23,800 61,268 37,468 Total administration 215,300 215,300 259,971 44,671 Engineering Personal services 103,640 103,640 92,294 (11,346) Other services and charges 120,135 120,135 255,065 134,930 Total engineering 223,775 223,775 347,359 123,584 Inspections Personal services 139,040 139,040 114,197 (24,843) Other services and charges 17,600 17,600 10,166 (7,434) I Total inspections 156,640 156,640 124,363 (32,277) Streets Personal services 357,030 357,030 368,067 i 1,037 Other services and charges 103,200 103,200 120,568 17,368 Total streets 460,230 460,230 488,635 28,405 Ice and snow Personal services 47,565 47,565 83,147 35,582 Other services and charges 30,750 30,750 35,294 4,544 ' Total ice and snow 78,31 S 78,31 S 118,441 40,126 Shop and garage Personal services Other services and charges 80,900 92,550 80,900 92,550 68,380 93,326 (12,520) 776 Total shop and garage 173,450 173,450 161,706 (11,744) Parking lots 245,800 245,800 156,462 (89,338) Capital outlay 267,145 267,145 719,686 452,541 I Total public works 1,820,655 1,820,655 2,376,623 555,968 Sanitation Personal services 11,615 11,615 6,393 (5,222) I Other services and charges 498,460 498,460 502,81 S 4,355 Total sanitation 510,075 510,075 509,208 (867) (continued) -45- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget Expenditures (continued) Culture and recreation Parks Personal services 360,805 360,805 304,779 (56,026) Other services and charges 199,800 199,800 237,231 37,431 Total parks 560,605 560,605 542,010 (18,595) Community celebrations 10,700 10,700 3,110 (7,590) Museum Personal services - - 53 53 Other services and charges - - 73 73 Total museum - - 126 126 Senior center Personal services 1,715 1,715 4 (1,711) Other services and charges 93,200 93,200 56,208 (36,992) Total senior center 94,915 94,915 56,212 (38,703) Community education 12,740 12,740 12,740 - YMCA 5,460 5,460 5,460 - Transit-River Rider 23,500 23,500 - (23,500) Ice arena 75,000 75,000 75,000 - Capital outlay 270,000 270,000 90,785 (179,215) Total culture and recreation 1,052,920 1,052,920 785,443 (267,477) Economic development Personal services 32,670 32,670 55,070 22,400 Other services and charges 46,400 46,400 24,711 (21,689) Total economic development 79,070 79,070 79,781 711 Total expenditures 7,500,040 7,500,040 7,271,167 (228,873) Excess (deficiency) of revenues over expenditures (378,200) (378,200) 201,991 580,191 (continued) -46- CITY OF MONTICELLO General Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual (continued) Year Ended December 31, 2007 Over (Under) Original Budget Final Budget Actual Budget Other financing sources (uses} Transfer in 80,891 80,891 80,939 48 Transfer (out) - - (159,456) (159,456) Proceeds from sale of assets 1,000 1,000 18,100 17,100 Total other financing sources (uses) 81,891 81,891 (60,417) (142,308) Net change in funds balances $ (296,309) $ (296,309) 141,574 $ 437,883 Fund balances Beginning of year 5,419,913 End of year $ 5,561,487 -47- CITY OF MONTICELLO Community Center Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2007 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 in Transfers out Proceeds from sale of assets Total other financing sources (uses) Net change in fund balances Fund balance Beginning of year End of year Over (Under) Original Budget Final Budget Actual Budget $ 1,246,570 $ 1,246,570 991,000 991,000 8,945 8,945 300 300 2,246,815 2,246,815 $ 1,176,130 48,207 1,011,147 (2,614) (70,440) 48,207 20,147 (11,559) 807,610 807,610 827,643 20,033 229,150 229,150 218,234 (10,916) 41,800 41,800 32,366 (9,434) 17,500 17,500 20,149 2,649 170,500 170,500 85,053 (85,447) 47,770 47,770 22,969 (24,801) 215,000 215,000 205,170 (9,830) 11,000 11,000 10,031 (969) 17,000 17,000 18,386 1,386 23,400 23,400 30,358 6,958 46,000 46,000 - (46,000) 1,626,730 1,626,730 1,470,359 (]56,371) 620,085 620,085 763,323 143,238 250,000 250,000 250,000 - (857,750) (857,750) (857,750) - - - 19,420 19,420 (607,750) (607,'750) (588,330) 19,420 $ 12,335 $ 12,335 174,993 $ 162,658 315,431 $ 490,424 -48- CITY OF MONTICELLO Capital Outlay Revolving Fund Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2007 Revenue Property taxes Special assessments Interest earnings Miscellaneous Total revenue Expenditures Capital outlay Public works Professional services Other Total expenditures Excess of revenues over expenditures Other financing sources (uses) Transfers in Transfers out Proceeds from sale of bonds Premium on bonds issued Total other financing sources (uses) Net change in fund balances Fund balance Beginning of year End of year Over (Under) Original Budget Final Budget Actual Budget $ - $ - $ 146 $ 146 84,738 84,738 147,384 62,646 56,175 56,175 99,916 43,741 595,000 595,000 6,000 (589,000) 735,913 735,913 253,446 (482,467) 595,000 595,000 471,677 (123,323) 2,215,000 2,215,000 4,597 (2,210,403) 2,810,000 2,810,000 476,274 (2,333,726) (2,074,087) (2,074,087) (222,828) 1,851,259 - - 79,215 79,215 - - (10,105) (10,105) - - 725,714 725,714 - - 11,455 11,455 - - 806,279 806,279 $ (2,074,087) $ (2,074,087} 583,451 $ 2,657,538 7,887,368 $ 8,470,819 -49- CITY OF MONTICELLO Sanitary Sewer Access Fund Schedule ofRevenue, Expenditures, and Changes in Fund Balances Budget and Actual Year Ended December 31, 2007 Revenue Special assessments Charges for services Access fees Interest earnings Total revenue Expenditures Current Public works Professional services Other Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Bond proceeds Transfers out Total other financing sources (uses) Net change in fund balances Fund balance Beginning of year End of year Over (Under) Original Budget Final Budget Actual Budget $ 206,930 $ 206,430 $ 260,097 $ 53,167 920,000 920,000 448,583 (471,417) 239,050 239,050 467,103 228,053 1,365,980 1,365,980 1,175,783 (190,197) - - 284,456 284,456 - - 7,700 7,700 8,490,000 8,490,000 67,329 (8,422,671) 8,490,000 8,490,000 359,485 (8,130,515) (7,124,020) (7,124,020) 816,298 7,940,318 6,000,000 6,000,000 - (6,000,000) (1,082,300) (1,082,300) (1,879,009) (796,709) 4,917,700 4,917,700 (1,879,009) (6,796,709) $ (2,206,320) $ (2,206,320) (1,062,711) $ 1,143,609 7,059,254 $ 5,996,543 -s0- 1 CITY OF MONTICELLO Notes to the Required Supplementary Information December 31, 2007 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 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 as amended by the City Council. All annual appropriations lapse at year-end. 1 -51- i, 1 t 1 1 COMBINING NONMAJOR FUND STATEMENTS it CITY OF MONTICELLO Nonmajor Governmental Funds Combining Balance Sheet as of December 31, 2007 Assets Cash and investments Receivables Delinquent taxes Deferred special assessments Delinquent special assessments Accounts Accrued interest Notes receivable Prepaid items Total assets Liabilities and Fund Balances Liabilities Accounts and contracts payable Other accrued liabilities Due to other governmental units Deferred revenue Total liabilities Fund balances Reserved for notes receivable Reserved for prepaid items Unreserved -designated Unreserved - undesignated Total fund balances Total liabilities and fund balances Special Revenue Funds Central Orderly Minnesota Shade Tree Annexation Library Water Access Initiative $ 44,410 $ 3,814 $ 12,046 $ 297,177 $ 90 700 23 1,283 - - - - - 275,361 - - - - 32,569 - 426 30 310 2,138 - 295 34 8 4,392 ]0 - - 205 19 - $ 45,831 $ 3,901 $ 13,852 $ 611,656 $ 100 $ 404 $ 4 700 1,108 784 $ 1,567 $ 9 $ - 80 - - 60 - 23 1,283 307,931 _ 807 2,990 307,440 - - 205 19 - 44,723 3,094 10,657 303,697 100 44,723 3,094 10,862 303,716 100 $ 45,831 $ 3,901 $ 13,852 $ 611,656 $ 100 -52- 1 Park City ' Economic Storm Sewer Minnesota Pathway Streets Environmental Recovery Grant Access Investment Dedication Reconstruction Cleanup Totals $ 490 $ 1,680,570 $ 790,552 $ 967,081 $ 839,749 $ - $ 4,635,979 - - - - 19,148 - 21,154 - 793,762 - 415,480 358,342 - 1,842,945 = 113,212 = 96,186 23,592 = 265,559 ' 7,966 5,119 7,008 22,997 54 16,165 6,099 7,687 7,478 - 42,222 - - 239,940 - - - 239,940 ' - 25 - - - - 249 $ 544 $ 2,611,700 $ 1,036,591 $ 1,491,553 $ 1,255,317 $ - $ 7,071,045 $ _ $ 19,705 $ _ $ 2,015 $ _ $ _ $ 24,484 80 - - - - - - 64 = 906,975 = 511,666 401,082 2, I 29,660 ' 926,680 5 13,681 401,082 = 2,154,288 _ - 239,940 = - - 234,940 25 - - 249 - - - - 730,520 - 730,520 544 1,684,995 796,651 977,872 123,715 3,946,048 544 1,685,020 1,036,591 977,872 854,235 = 4,916,757 $ 544 $ 2,611,700 $ 1,036,591 $ 1,491,553 $ 1,255,317 $ - $ 7,071,045 ' -53- CITY OF MONTICELLO Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended December 31, 2007 Revenue Property taxes Special assessments Intergovernmental Charges for services Other Investment earnings (chazges) Miscellaneous Total revenue Expenditures Current Public works Culture and recreation Capital outlay Public works 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 Beginning of year End of year Special Revenue Funds Central Orderly Minnesota Shade Tree Annexation Library Water Access Initiative $ 19,175 $ 669 $ 34,668 $ - $ - - - - 72,918 - 773 25 1,418 - - 1,892 - 50 91,008 - 2,390 290 (48) 40,660 - 2,532 - - - 100 26,762 984 36,088 204,586 100 13,757 - 35,334 - - - - - 261,057 - - 1,355 - - - 13,757 1,355 35,334 261,057 - 13,005 (371) 754 (56,471) 100 - - - 10,105 - - - - (310,695) (3,203) - - - (300,590) (3,203) 13,005 (371) 754 (357,061) (3,103) 31,718 3,465 10,108 660,777 3,203 $ 44,723 $ 3,094 $ 10,862 $ 303,716 $ 100 -54- Park City Economic Storm Sewer Minnesota Pathway Streets Environmental Recovery Grant Access Investment Dedication Reconstruction Cleanup Totals ' $ - $ - $ - $ - $ 517,499 $ - $ 572,011 - 212,666 - 130,640 105,889 - 522,113 _ - _ = 21,155 23,371 75,231 43,951 = 212,132 544 141,321 62,380 64,849 65,504 = 377,890 2,632 544 424,218 62,380 195,489 753,998 - 1,710,149 - - - 2,619 - - 2,619 - - - - - - 49,091 - 432,189 - - - - 693,246 _ - _ - _ = 1,355 432,189 2,619 746,311 544 (2,971) 62,380 192,870 753,998 - 963,838 - - _ _ - - 10,105 ' (17,485} (262,700) (564,009) (48) (1,158,140) (17,485) (262,700) - - (564,009) (48) (1,148,035) ' (16,941) (265,671) 62,380 192,870 189,989 (48) (184,197) 17,485 1,950,691 974,211 785,002 664,246 48 5,100,954 $ 544 $ 1,685,020 $ 1,036,591 $ 977,872 $ 854,235 $ - $ 4,916,757 -55-