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2005 Monticello Annual Financial ReportCITY OF MONTICELLO, MINNESOTA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED DECEMBER 31, 2005 CITY OF MONTICELLO, MINNESOTA TABLE OF CONTENTS YEAR ENDED DECEMBER 31, 2005 INTRODUCTORY SECTION OFFICIAL DIRECTORY 1 FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 2 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS 4 BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS STATEMENT OF NET ASSETS 13 STATEMENT OF ACTIVITIES 14 FUND FINANCIAL STATEMENTS BALANCE SHEET - GOVERNMENTAL FUNDS 16 RECONCILATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT -WIDE STATEMENT OF NET ASSETS - GOVERNMENTAL ACTIVITIES 18 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS 19 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMANTAL FUNDS TO THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES 21 STATEMENT OF NET ASSETS - PROPRIETARY FUNDS 22 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS 24 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS 26 NOTES TO FINANCIAL STATEMENTS 28 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD &A BUDGETARY COMPARISON SCHEDULE - GENERAL FUND 50 BUDGETARY COMPARISON SCHEDULE - COMMUNITY CENTER FUND 55 BUDGETARY COMPARISON SCHEDULE - CAPITAL OUTLAY REVOLVING FUND 56 BUDGETARY COMPARISON SCHEDULE - SANITARY SEWER ACCESS FUND 57 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 58 CITY OF MONTICELLO, MINNESOTA TABLE OF CONTENTS (CONTINUED) YEAR ENDED DECEMBER 31, 2005 FINANCIAL SECTION (CONTINUED) COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS 59 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS 63 STATISTICAL SECTION (UNAUDITED) BOND INDEBTEDNESS - GENERAL OBLIGATION BONDS 67 BOND INDEBTEDNESS - GENERAL OBLIGATION SPECIAL ASSESSMENT BONDS 68 BOND INDEBTEDNESS - GENERAL OBLIGATION TAX INCREMENT BONDS 70 BOND INDEBTEDNESS - GENERAL OBLIGATION NOTE - PROJECT 93 -14 WASTEWATER TREATMENT 71 BOND INDEBTEDNESS - PUBLIC PROJECT REVENUE BONDS BOND INDEBTEDNESS - CONTRACT FOR DEED 72 73 BOND INDEBTEDNESS - TAX LEVIES TO RETIRE BONDED INDEBTEDNESS 74 OTHER REPORT SECTION REPORT ON MINNESOTA LEGAL COMPLIANCE 76 INTRODUCTORY SECTION CITY OF MONTICELLO, MINNESOTA OFFICIAL DIRECTORY DECEMBER 31, 2005 Elected Officials Name Term Expires Mayor Clint Herbst December 31, 2006 Council Member Wayne Mayer December 31, 2008 Council Member Glen Posusta December 31, 2006 Council Member Tom Perrault December 31, 2008 Council Member Brian Stumpf December 31, 2006 Appointed Officials Administrator and Clerk- Treasurer Rick Wolfsteller U FINANCIAL SECTION Lars onAllen" INDEPENDENT AUDITORS' REPORT Honorable Mayor and City Council City of Monticello, Minnesota We have audited the accompanying financial statements of the governmental activities, the business - type activities, each major fund, and the aggregate remaining fund information of the City of Monticello, Minnesota as of and for the year ended December 31, 2005, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Monticello's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based upon our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Monticello as of December 31, 2005, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis and budgetary comparison schedules, as listed in the table of contents, are not a requried part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express to opinion on it. (2) Honorable Mayor and City Council City of Monticello, Minnesota Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Monticello's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures in the audit of the basic financial statements and, accordingly, we express no opinion on them. St. Cloud, Minnesota May 31, 2006 LARSON, ALLEN, WEISHAIR & CO., LLP (3) REQUIRED SUPPLEMENTARY INFORMATION CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 This section of the Annual Financial Report of the City of Monticello (the City) is intended to present a discussion and analysis of the City's financial performance during the fiscal year ended December 31, 2005. This analysis focuses on current year activities and should be read in conjunction with the City's basic financial statements following this section. Financial Highlights ♦ Assets of the City exceeded liabilities by $92.0 million. Of this amount, $49.9 million may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the City's fund designations and fiscal policies. ♦ For the current fiscal year, total governmental fund revenues including other financing sources, exceeded expenditures and other financing uses for the year by $19.7 million. ♦ The City's governmental funds reported combined ending fund balances of $47.6 million. Of this total amount, approximately 68% is available for spending at the City's discretion. ♦ At the end of the current fiscal year, unreserved fund balance for the general fund was $4.7 million, or 92% of the total general fund expenditures of $5.1 million. Report Layout In addition to the Management's Discussion and Analysis (MD &A), the report consists of government -wide statements, fund financial statements, notes to the financial statements, combining schedules of non -major funds and supplementary information. The first several statements are highly condensed and present a government -wide view of the City's finances. Within this summary, all City operations are categorized and reported as either governmental or business -type activities. Governmental activities include basis services such as police, fire, building inspection, public works, parks and recreation, library, community development and general government administration. The business -type activities include water, sewer, liquor and cemetery activities. These government -wide statements are designed to be more corporate -like in that all activities are consolidated into a total for the City. (4) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Statement of Net Assets and Statement of Activities The Statement of Net Assets (page 13) focuses on resources available for future operations. In basic terms, this statement presents a snapshot view of the assets the community owns, the liabilities it owes and the net difference. The net difference is further separated into amounts restricted for specific purposes and identifies unrestricted amounts. The Statement of Activities (page 14 and 15) focuses on gross and net cost of City programs and the extent to which such programs rely upon general tax and other revenues to support them. The statement summarizes and simplifies the users analysis to determine the extent to which programs are self - supporting and /or subsidized by general revenues. These two statements report the City's net assets and the changes in them. Over time, increases or decreases in the City's net assets are one indicator of whether the City's financial health is improving or deteriorating. You will need to consider other non - financial factors, however, to assess the overall health of the City of Monticello. Fund Financial Statements Fund Financial Statements (pages 16 to 27) focus separately on major governmental funds and proprietary funds. Governmental funds statements allow the more traditional presentation of financial statements. Most of the City of Monticello's basic services are reported in governmental funds. Governmental funds focus on how money flows into and out of these funds and the balances left at year end that are available for spending. The governmental fund statements provide a detailed short term view of the City's general government operations and the basic services it provides. Statements for the City's proprietary funds follow the governmental funds and include net assets, revenue, expenses and changes in net assets, and cash flow. Notes to the Financial Statements The Notes to the Financial Statements (pages 28 to 49) provide additional disclosures required by governmental accounting standards and provide information to assist the reader in understanding the City's financial condition. Other Information Readers desiring additional information on nonmajor funds can fit it in the combining statements of nonmajor funds section of this report. Completing the financial section of the report are schedules on capital assets and other financial schedules. (5) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Statement of Net Assets A condensed version of the Statement of Net Assets at December 31, 2005 follows: Table A -1 The City's Net Assets (6) Governmental Activities 2005 2004 Current and Other Assets $ 60,238,192 $ 41,779,914 Capital and Noncurrent Assets 52,529,709 39,841,337 Total Assets 112,767,901 81,621,251 Current Liabilities 7,769,647 5,366,628 Long -Term Liabilities 52,852,172 30,868,840 Total Liabilities 60,621,819 36,235,468 Net Assets Invested in Capital Assets Net of Related Debt 7,009,622 8,972,497 Unrestricted 45,136,460 36,413,286 Total Net Assets $ 52,146,082 $ 45,385,783 Business -Type Activities 2005 2004 Current and Other Assets $ 5,019,709 $ 4,441,103 Capital and Noncurrent Assets 35,077,391 32,355,086 Total Assets 40,097,100 36,796,189 Current Liabilities 279,218 184,257 Net Assets Invested in Capital Assets Net of Related Debt 35,077,391 32,355,086 Unrestricted 4,740,491 4,256,846 Total Net Assets $ 39,817,882 $ 36,611,932 Total 2005 2004 Current and Other Assets $ 65,257,901 $ 46,221,017 Capital and Noncurrent Assets 87,607,100 72,196,423 Total Assets 152,865,001 118,417,440 Current Liabilities 8,048,865 5,550,885 Long -Term Liabilities 52,852,172 30,868,840 Total Liabilities 60,901,037 36,419,725 Net Assets Invested in Capital Assets Net of Related Debt 42,087,013 41,327,583 Unrestricted 49,876, 951 40,670,132 Total Net Assets $ 91,963,964 $ 81,997,715 (6) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Governmental Activities The net assets of the City's governmental activities increased from the previous year due to significant infrastructure improvements and additions. A significant portion of the increase was the third phase of the Core Street Reconstruction Program. This reconstruction program will ultimately over the next four to five years replace a majority of the City's aging street improvements that were nearing their useful life. Additional infrastructure improvements included an extension of West Chelsea Road on the western -side of the City, extension of School Bulevard on the west -side of the City, extension of Meadow Oak Avenue to connect to County Road 18, and for the Library Expansion Project. 2005 also saw the start of a new $15 million interchange project on Interstate 94. Business -Type Activities The net assets of our business -type activities also increased during 2005. 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 Core Street Phase III Project, various new utility constructions in new development areas, an Interstate 94 sewer line crossing, and a one million gallon water tower project. (7) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Business -Type Activities (Continued) A condensed version of the Statement of Activities is as follows: Revenues Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Property Taxes Unrestricted State Aid Investment Earnings Other Total Revenues Governmental Activities Business -Type Activities Total 2005 2004 2005 2004 2005 2004 5,425,225 $ 4,459,422 381,420 337,688 2,135,687 4,059,034 $ 5,244,748 $ 4,948,958 4,310,691 1.303.527 $ 10,669,973 $ 9,408,380 381,420 337,688 6,446,378 5,362,561 7,476,106 7,670,666 - - 7,476,106 7,670,666 200,000 99,667 - - 200,000 99,667 985,497 728,274 89,987 125,245 1,075,484 853,519 2,799,703 2,860,728 (25,576) 23,770 2,774,127 2,884,498 19,403,638 20,215,479 9,619,850 6,401,500 29,023,488 26,616,979 Expenses 4,860,103 11,006,078 3,455,950 336,943 8,316,053 11,343,021 General Government 1,907,352 1,528,281 - - 1,907,352 1,528,281 Public Safety 1,551,098 1,649,090 - - 1,551,098 1,649,090 Highways and Streets 5,990,719 438,413 - - 5,990,719 438,413 Sanitation 492,446 410,768 - - 492,446 410,768 Culture and Recreation 2,210,729 2,798,883 - - 2,210,729 2,798,883 Economic Development 657,258 969,229 - - 657,258 969,229 Debt Service 1,733,933 1,414,737 - - 1,733,933 1,414,737 Liquor - - 3,172,741 3,083,062 3,172,741 3,083,062 Cemetery - - 33,717 32,275 33,717 32,275 Water - - 939,449 865,379 939,449 865,379 Sewer - - 2,017,993 2,083,841 2,017,993 2,083,841 Total Expenses 14,543,535 9,209,401 6,163,900 6,064,557 20,707,435 15,273,958 Changes in Net Assets Before Special Items and Transfers 4,860,103 11,006,078 3,455,950 336,943 8,316,053 11,343,021 Transfers 250,000 (1,326,569) (250,000) 1,326,569 - - Change in Net Assets 5,110,103 9,679,509 3,205,950 1,663,512 8,316,053 11,343,021 Net Assets - Begjnning of Year 47,035,979 35,706,274 36,611,932 34,948,420 83,647,911 70,654,694 Net Assets - End of Year $ 52,146,082 $ 45,385,783 $ 39,817,882 $ 36,611,932 $ 91,963,964 $ 81,997,715 H CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Governmental Activities Figure A -3 Sources of City's Revenues for Fiscal 2005 i Charges for El Investment ®Other Services Earnings 4% 28% 5% �\ Revenues for the City's Governmental Activities increased by $2.4 million, or 9 %. The major components of this increase are explained as follows: Charges for services revenue increased $792,000 or 24 %. This increase was due to an increase in fees collected for inspection services of $55,000, increasing user fees at the Community Center of $100,000, utility fee charges from new developments of $703,000 and Deputy Registrar fee increases of $17,000. The City's property tax revenues decreased $194,000 or 2.5 %. Part of this decrease was due to the elimination of homestead and agricultural credit -aid from the state of Minnesota. BE CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Governmental Activities (Continued) Special assessment revenue for the City increased $1.2 million or 57% over the previous year. This was mainly due to additional projects being completed and assessed along with prepayments of assessments. License and permit fees increased by $159,000 or 20 %. Miscellaneous revenues included land sales of $1.6 million. Expenses — The City expenses for governmental activities increased by $5.3 million or 57 %. The increase is primarily due increased mainenance projects for highways and streets. In regards to debt service payments, debt expenditures were $319,000 more than the previous year. Business -Type Activities The City's business -type operating revenues increased by over $295,000 or 95.9 %, primarily due to increased sales from the liquor store operation of $127,000 and additional revenue from sewer and water charges of $167,000. Business -type expenses increased from previous year by approximately $100,000, due in part to general increases in personnel services for all Proprietary Funds operations of $38,000 with the balance related to gerneral operational increases. Financial Analysis of the City's Funds The General Fund - The change in the City's general fund balance was $354,147 for 2005. This was the result of additional property tax collections of $250,000. Community Center Fund — The increase in the Community Center Fund balance was the result of additional revenue generated through membership fee increases and lower repair and maintenance costs. Sanitary Sewer Access Fund — The Sanitary Sewer Access Fund increased by over $4.7 million due to bond proceed revenues that will be used for various construction projects. Capital Project Funds — The fund resources increased in the current year primarily from proceeds form the sale of bonds. (10) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 General Budgetary Highlights The City of Monticello Council did not make any revisions to the City's original budget document during 2005. In total, the general fund revenues were approximately $435,000 more than budgeted due to additional state aid for fire relief and additional development cost reimbursements. Inspection fees increased due to increased building permit fees and additional market value credit -aid. Expenditures within the general fund were less than budgeted by approximately $458,000, resulting in an excess of revenue over expenditures of over $756,000. Capital Assets At December 31, 2005, the City of Monticello had $87.6 million invested in capital assets including fire and public works equipment, park and recreation facilities, buildings, roads, sewer, water and storm sewer utilities. The City of Monticello's fiscal 2006 capital budget calls for another $2.8 million in capital projects and equipment expenditures. Land Construction in progress Infrastructure Buildings Improvements other than buildings Machinery, Equipment, and Vehicles Less: Accumulated Depreciation Total Governmental Business -Type Activities Activities Total 2005 2004 2005 2004 2005 2004 $ 6,084,918 $ 3,840,918 $ 1,209,580 $ 1,209,580 $ 7,294,498 $ 5,050,498 12,513,141 3,441,816 4,507,456 1,430,733 17,020,597 4,872,549 33,513,517 30,733,889 27,736,251 26,576,813 61,249,768 57,310,702 13,018,486 13,203,486 5,156,471 5,271,220 18,174,957 18,474,706 3,044,913 2,497,824 17,791,202 17,791,252 20,836,115 20,289,076 3,080,142 2,809,947 1,259,049 1,184,468 4,339,191 3,994,415 (18,725,408) (16,686,543) (22,582,618) (21,108,980) (41,308,026) (37,795,523) $ 52,529,709 $ 39,841,337 $ 35,077,391 $ 32,355,086 $ 87,607,100 $ 72,196,423 Additional information on the City's capital assets can be found in the notes to the financial statements. (11) CITY OF MONTICELLO, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2005 Long -Term Debt At year -end, the City of Monticello had $54.3 million in bonds and notes outstanding compared to $31.0 million in 2004. Payments of $1.9 million and new debt issues of $25.2 million make up the changes from prior year. 2005 2004 GOVERNMENTAL ACTIVITIES General Obligation Bonds $ 2,420,000 $ 2,420,000 General Obligation Tax Increment Bonds 970,000 1,100,000 Special Assessment Bonds 31,065,000 6,715,000 WWTP Note 10,835,699 11,456,825 Public Project Revenue 6,910,000 7,170,000 Contract For Deed 2,085,222 2,185,222 Total $ 54,285,921 $ 31,047,047 Economic Factors and Next Years Budget The City of Monticello considered many factors when setting the fiscal year 2006 budget, rates and fees that will be charged for business -type activities. In addition to the normal inflationary increase in expenditures and revenues anticipated, the City anticipates being affected by the loss of local government aid and market value homestead credit cuts of $277,000. With the City's property tax levy for 2006 remaining the same as 2005 at $6.75 million, budgeted expenditures were reduced because of the City's continued growth in new residential and commercial developments. The market values and resulting tax capacity values are projected to be up by an estimated 11 %. The City Council will continue to be monitoring the level services it provides to stay within the City's financial resources for future budget years. Financial Contact The City's financial statements are designed to provide our citizens, customers, and creditors with a general overview of the City of Monticello'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 1, Monticello, MN 55362. (12) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF MONTICELLO, MINNESOTA STATEMENT OF NET ASSETS DECEMBER 31, 2005 (WITH COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2004) ASSETS CURRENT ASSETS Cash and Investments Accounts Receivable Loans Receivable Land Held for Resale Prepaid Items Deferred Bond Issuance Cost Inventory Special Assessments Receivable Capital Assets Not Being Depreciated Land Construction in Progress Capital Assets Being Depreciated Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Building Infrastructure Total Assets LIABILITIES CURRENT LIABILITIES Accounts Payable Due to Other Governments Other Accrued Liabilities Contracts Payable Accrued Interest Payable Deferred Revenue Escrow Deposits Contract for Deed - Due Within One year General Obligation Bonds Payable - Due Within One Year Compensated Absences Payable Due in More Than One Year Contract for Deed - Due in More Than One Year General Obligation Bonds Payable - Due Within More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted TOTAL NET ASSETS See accompanying Notes to the Financial Statements. 50,495,271 - 50,495,271 28,957,714 60,621,819 279,218 60,901,037 36,419,725 7,009,622 35,077,391 42,087,013 41,327,583 45,136,460 4,740,491 49,876,951 40,670,132 $ 52,146,082 $ 39,817,882 $ 91,963,964 $ 81,997,715 (13) Totals Governmental Business -Type Activities Activities 2005 2004 $ 45,762,495 $ 3,961,922 $ 49,724,417 $ 29,868,693 297,991 474,307 772,298 743,249 1,634,579 - 1,634,579 1,343,672 4,277,948 - 4,277,948 4,581,682 68,375 15,373 83,748 72,713 192,598 - 192,598 137,185 - 568,107 568,107 555,975 8,004,206 - 8,004,206 8,917,848 6,084,918 1,209,580 7,294,498 5,050,498 12,513,141 4,507,456 17,020,597 4,872,549 10,496,944 3,139,200 13,636,144 14,382,787 149,502 66,798 216,300 175,133 611,116 37,302 648,418 631,318 522,987 103,812 626,799 639,056 1,218,452 8,780,524 9,998,976 9,991,966 20,932,649 17,232,719 38,165,368 36,453,116 112,767,901 40,097,100 152,865,001 118,417,440 671,244 104,520 775,764 568,664 68,261 6,792 75,053 57,920 86,138 150,052 236,190 219,672 1,261,089 - 1,261,089 870,604 901,768 - 901,768 544,912 - 17,170 17,170 2,699 2,386,407 684 2,387,091 2,926,212 100,000 - 100,000 - 2,294,740 - 2,294,740 1,911,126 371,679 - 371,679 360,202 1,985,222 - 1,985,222 - 50,495,271 - 50,495,271 28,957,714 60,621,819 279,218 60,901,037 36,419,725 7,009,622 35,077,391 42,087,013 41,327,583 45,136,460 4,740,491 49,876,951 40,670,132 $ 52,146,082 $ 39,817,882 $ 91,963,964 $ 81,997,715 (13) CITY OF MONTICELLO, MINNESOTA STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2005 Functions /Programs Expenses Primary Government: Governmental Activities General Government $ 1,907,352 Public Safety 1,551,098 Public Works 5,990,719 Culture and Recreation 2,210,729 Sanitation 492,446 Economic Development 657,258 Interest 1,733,933 Total Governmental Activities 14,543,535 Business -Type Activities Water 939,449 Sewer 2,017,993 Liquor 3,172, 741 Cemetery 33,717 Total Business -Type Activities 6,163,900 Program Revenues Operating Capital Grants Charges for Grants and and Services Contributions Contributions $ 683,599 $ 90,059 $ - 912,300 150,207 - 2,692,336 122,151 1,819,341 863,857 - 316,346 126,418 10,201 - 146,715 8,802 - 5,425,225 381,420 2,135,687 701,346 - 2,323,034 969,996 - 1,987,657 3,540,572 - - 32,834 - - 5,244,748 - 4,310,691 Total $ 20,707,435 $ 10,669,973 $ 381,420 $ 6,446,378 General Revenues Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Sale of Land Rental Gain /Loss on Capital Assets Miscellaneous Transfers Total General Revenues and Transfers Change in Net Assets Net Assets - Beginning of Year Prior Period Adjustment Net Assets - Beginning of Year NET ASSETS - END OF YEAR See accompanying Notes to the Financial Statements. (14) Net (Expense) Revenue and Changes in Net Assets Governmental Business -Type Activities Activities Total $ (1,133,694) (488,591) (1,356,891) (1,030,526) (355,827) (501,741) (1,733,933) (6,601,203) 9 $ (1,133,694) (488,591) (1,356,891) (1,030,526) (355,827) (501,741) (1,733,933) (6,601,203) 2,084,931 2,084,931 939,660 939,660 367,831 367,831 (883) (883) 3,391,539 3,391,539 (6,601,203) 3,391,539 (3,209,664) 7,476,106 - 7,476,106 200,000 - 200,000 985,497 89,987 1,075,484 1,892,838 - 1,892,838 - 21,730 21,730 - (47,306) (47,306) 906,865 - 906,865 250,000 (250,000) - 11,711,306 (185,589) 11,525,717 5,110,103 3,205,950 8,316,053 45,385,783 36,611,932 81,997,715 1,650,196 - 1,650,196 47,035,979 36,611,932 83,647,911 $ 52,146,082 $ 39,817,882 $ 91,963,964 (15) CITY OF MONTICELLO, MINNESOTA BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2005 (WITH COMPARATIVE TOTALS AS OF DECEMBER 31, 2004 Community Capital ASSETS AND OTHER DEBITS General Center Outlay Revolving Cash and Investments Special Assessments Receivable Delinquent Deferred Accounts Receivable Loans Receivable Due from Other Funds Land Held for Resale Prepaid Items TOTAL ASSETS LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Other Accrued Liabilities Contracts Payable Due to Other Governmental Units Due to Other Funds Deferred Revenue Escrow Deposits Total Liabilities Fund Balances Reserved Noncurrent Loans Receivable Debt Retirement Prepaid Insurance Assets Held for Resale Unreserved, Designated Subsequent Year's Expenditures Contingencies Unreserved, Undesignated Reported in: General Fund Special Revenue Funds Capital Projects Funds Total Equity and Other Credits TOTAL LIABILITIES AND FUND BALANCES See accompanying Notes to the Financial Statements. (16) $ 7,065,772 $ 247,853 $ 2,859,179 8,205 - 35,225 2,066 - 496,141 184,593 17,303 899 337,237 - - 236,934 - - - - 3,921,411 51,290 16,943 - $ 7,886,097 $ 282,099 $ 7,312,855 $ 268,261 $ 10,773 $ 78,770 48,519 28,717 - - - 116,433 68,249 12 - 10,270 1,858 531,366 2,366,407 - 20,000 2,761,706 41,360 746,569 337,237 - - 51,290 16,943 - - - 3,921,411 2,759,807 - - 551,961 - - 1,424,096 - - - 223,796 2,644,875 5,124,391 240,739 6,566,286 $ 7,886,097 $ 282,099 $ 7,312,855 Sanitary Debt Capital Sewer Access Service Project $ 8,625,358 $ 9,146,408 $ 10,551,984 31,758 322,570 - 1,189,479 3,745,364 - 39,302 16,139 13,761 - 356,537 - $ 9,885,897 $ 13,587,018 $ 10,565,745 $ 4,610 $ - $ 194,325 - - 1,110,232 1,221,237 4,067,933 - 1,225,847 4,067,933 1,304,557 Other - 1,297,342 1,634,579 Governmental Total Governmental Funds Funds 2005 2004 $ 7,265,941 $ 45,762,495 $ 26,428,221 82,910 480,668 338,592 2,090,488 7,523,538 8,579,256 25,994 297,991 312,815 1,297,342 1,634,579 1,343,672 - 236,934 323,126 - 4,277,948 4,581,682 142 68,375 58,491 $ 10,762,817 $ 60,282,528 $ 41,965,855 114,505 671,244 551,217 8,902 86,138 437,260 34,424 1,261,089 855,742 - 68,261 51,949 236,934 236,934 323,126 2,173,396 8,006,060 8,920,119 - 2,386,407 2,925,548 2,568,161 12,716,133 14,064,961 - - - 1,297,342 1,634,579 1,343,672 - 9,162,548 - - 9,162,548 8,355,235 - - - 142 68,375 58,491 - 356,537 - - 4,277,948 4,581,682 - - - - 2,759,807 2,759,807 - - - - 551,961 551,961 - - - - 1,424,096 1,264,304 8,660,050 - - 6,897,172 18,425,893 9,080,687 - - 9,261,188 - 9,261,188 (94,945) 8,660,050 9,519,085 9,261,188 8,194,656 47,566,395 27,900,894 $ 9,885,897 $ 13,587,018 $ 10,565,745 $ 10,762,817 $ 60,282,528 $ 41,965,855 (17) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY. CITY OF MONTICELLO, MINNESOTA GOVERNMENTAL FUNDS RECONCILATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT - WIDE STATEMENT OF NET ASSETS - GOVERNMENTAL ACTIVITIES DECEMBER 31, 2005 Total Fund Balances for Governmental Funds $ 47,566,395 Total net assets reported for governmental activities in the statement of net assets is different because: Capital assets used in governmental funds are not financial resources and therefore are not reported in the funds. Those assets consist of: Land 6,084,918 Construction in Progress 12,513,141 Buildings, Net of $2,193,106 Accumulated Depreciation 10,496,944 Office Equipment and Furniture, Net of $75,794 Accumulated Depreciation 149,502 Vehicles, Net of $987,647 Accumulated Depreciation 611,116 Machinery and Shop Equipment, Net of $475,336 Accumulated Depreciation 522,987 Improvements, Net of $1,716,763 Accumulated Depreciation 1,218,452 Infrastructure, Net of $11,237,897 Accumulated Depreciation 20,932,649 Some of the City's property taxes and special assessments 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. 8,006,060 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. (901,768) 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 activities: General Obligation Bonds Payable (52,200,699) Contract For Deed Payable (2,085,222) Deferred Bond Issuance Cost 192,598 Unamortized Bond Discounts 154,459 Umamortized Bond Premium (743,771) Compensated Absences (371,679) Total Net Assets of Governmental Activities $ 52,146,082 See accompanying Notes to the Financial Statements. (18) CITY OF MONTICELLO, MINNESOTA GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED DECEMBER 31, 2004) REVENUE General Property Taxes Special Assessments Licenses and Permits Intergovernmental Charges for Services Fines and Forfeitures Investment Earnings 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 Capital Projects Culture and Recreation Debt Service Principal Interest and Fiscal Charges Total Expenditures Revenue Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfer In Transfer 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 FUND BALANCE - END OF YEAR See accompanying Notes to the Financial Statements. General Community Capital Center Outlay Revolving $ 4,315,338 $ 970,149 $ 99,160 - - 146,030 956,300 - - 284,090 1,311 - 514,420 841,304 - 4,000 - - 310,832 4,026 51,486 370,130 1,628 1,832,237 6,755,110 1,818,418 2,128,913 1,464, 075 1,428,208 - 238,661 1,870,102 - - 492,446 - - 814,121 1,217,437 73,446 - - 32,705 - - 7,916 - 85,365 81,044 27,920 - 6,264,063 1,245,357 324,026 491,047 573,061 1,804,887 - 250,000 - (136,900) (685,000) (254,839) (136,900) (435,000) (254,839) 354,147 138,061 1,550,048 4,770,244 102,678 5,016,238 $ 5,124,391 $ 240,739 $ 6,566,286 (19) Sanitary Debt Sewer Access Service Capital Project Other Governmental Total Governmental Funds Funds 2005 2004 $ - $ 759,175 $ - $ 1,332,284 $ 7,476,106 7,670,666 665,152 1,061,130 - 1,469,225 3,341,537 2,098,499 - - - - 956,300 797,458 - - - 88,528 373,929 689,891 1,542,632 - - 1,116,600 4,014,956 3,223,012 - - - - 4,000 - 136,566 163,465 137,937 181,185 985,497 728,274 - - 13,761 947,616 3,165,372 1,979,075 2,344,350 1,983,770 151,698 5,135,438 20,317,697 17,186,875 - - - 80,371 1,544,446 1,656,207 - - - - 1,666,869 1,608,652 2,687,453 - - 77,964 4,635,519 2,332,202 - - - - 492,446 410,768 - $ 8,660,050 329,744 2,361,302 2,395,015 - - - 564,331 637,777 969,229 - - 32,705 - - - - 20,118 - 11,902,790 - 11,996,071 371,603 - 2,033,033 - - - - 108,964 224,562 - 1,811,126 - 100,000 1,911,126 4,096,539 - 1,295,254 - 131,113 1,426,367 1,460,183 2,687,453 3,106,380 11,902,790 1,283,523 26,813,592 17,578,111 (343,103) (1,122,610) (11,751,092) 3,851,915 (6,495,895) (391,236) 766,916 1,391,855 1,582,339 136,900 4,128,010 5,859,535 (521,200) - (766,916) (1,513,155) (3,878,010) (5,609,535) 4,700,535 538,068 19,697,622 213,775 25,150,000 3,130,222 159,949 - 594,180 7,267 761,396 - 5,106,200 1,929,923 21,107,225 (1,155,213) 26,161,396 3,380,222 4,763,097 807,313 9,356,133 2,696,702 19,665,501 2,988,986 3,896,953 8,711,772 (94,945) 5,497,954 27,900,894 24,911,908 $ 8,660,050 $ 9,519,085 $ 9,261,188 $ 8,194,656 $ 47,566,395 $ 27,900,894 (20) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY CITY OF MONTICELLO, MINNESOTA RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE GOVERNMENT -WIDE STATEMENT OF ACTIVITIES GOVERNMENTAL ACTIVITIES YEAR ENDED DECEMBER 31, 2005 Net Change in Fund Balance - Total Governmental Funds $ 19,665,501 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital assets changed: Fixed Asset Acquistions and Disposals 13,269,941 Loss on Disposal of Capital Assets (170,284) Depreciation Expense (2,061,481) 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: General Obligation Bond Proceeds (25,150,000) Bond Issuance Costs 78,744 Bond Premium (761,396) Repayment of Bond Principal 1,811,126 Repayment of Contract for Deed 100,000 Change in Accrued Interest Expense for General Obligation Bonds (356,856) Amortization of Bond Issuance Costs (23,331) Amortization of Bond Discount (23,748) Amortization of Bond Premium 17,625 Change in Compensated Absences (371,679) Delinquent and deferred property taxes and special assessments receivable will be collected subsequent to year -end, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the governmental funds. Change in Deferred Revenue for Special Assessments (914,059) Change in Net Assets of Governmental Activities $ 5,110,103 See accompanying Notes to the Financial Statements. (21) CITY OF MONTICELLO, MINNESOTA STATEMENT OF NET ASSETS PROPRIETARY FUNDS DECEMBER 31, 2005 (WITH COMPARATIVE TOTALS AS OF DECEMBER 31, 2004) ASSETS CURRENT ASSETS Cash and Cash Equivalents Accounts Receivable Due From Other Funds Inventory Prepaid Items Total Current Assets CAPITAL ASSETS Land Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other Than Buildings Infrastructure Construction in Progress Total Fixed Assets Less: Allowance for Depreciation Total Capital Assets, net Total Assets LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts Payable Other Accrued Liabilities Contracts Payable Due to Other Governments Due to Other Funds Deferred Revenue Escrow Deposits Total Liabilities NET ASSETS NET ASSETS Invested in Capital Assets, Net of Related Debt Unreserved Total Net Assets See accompanying Notes to the Financial Statements. (22) Water Sewer $ 1,297,855 $ 1,504,812 221,763 247,375 14 30 5,813 3,819 1,525,445 1,756,036 208,143 848,445 15,695 66,200 161,027 51,951 13,376,288 2,437,620 17,165,369 (5,785,596) 11,379,773 12,905,218 975,937 3,570,119 41,019 479,613 394,295 17,609,984 14,359,963 2,069,836 39,500,766 (16,471,613) 23, 029,153 24, 785,189 25,418 71,428 33,946 1,158 6,332 - 14,958 - 200 - 80,854 72,586 11,364,815 23,029,153 1,459,549 1,683,450 $ 12,824,364 $ 24,712,603 Totals Liquor Cemetery 2005 2004 $ 1,081,738 $ 77,517 $ 3,961,922 $ 3,440,472 5,169 - 474,307 430,434 - - 44 - 568,107 - 568,107 555,975 5,741 - 15,373 14,222 1,660,755 77,517 5,019,753 4,441,103 5,600 19,900 1,209,580 1,209,580 737,907 - 5,156,471 5,271,220 36,949 - 93,663 36,899 - - 545,813 527,996 64,251 - 619,573 619,573 81,040 48,227 17,791,202 17,791,252 - - 27,736,251 26,576,813 - - 4,507,456 1,430,732 925,747 68,127 57,660,009 53,464,065 (311,584) (13,825) (22,582,618) (21,108,979) 614,163 54,302 35,077,391 32,355,086 2,274,918 131,819 40,097,144 36,796,189 6,474 1,200 104,520 17,447 114,926 22 150,052 142,614 - - - 14,862 460 - 6,792 5,971 44 - 44 2,212 - 17,170 2,699 484 - 684 664 124,600 1,222 279,262 184,257 611,951 54,302 35,060,221 32,352,387 1,538,367 76,295 4,757,661 4,259,545 $ 2,150,318 $ 130,597 $ 39,817,882 $ 36,611,932 (23) CITY OF MONTICELLO, MINNESOTA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE TOTALS AS OF DECEMBER 31, 2004) Water Sewer OPERATING REVENUES Sales $ - $ - Costs of Goods Sold - Charges for Services 701,346 969,996 Total Gross Profit and Operating Revenue 701,346 969,996 OPERATING EXPENSES Personal services 165,480 89,175 Telephone 1,751 2,329 Utilities 77,391 3,631 Supplies and materials 141,722 17,094 Repairs and maintenance 21,285 48,040 Depreciation 446,567 1,014,081 Insurance 9,939 24,418 Professional fees 12,053 754,653 Advertising - - Miscellaneous 63,261 64,572 Total Operating Expenses 939,449 2,017,993 Net Income (Loss) from Operations (238,103) (1,047,997) OTHER INCOME (EXPENSE) Interest Income (Expense) 26,389 34,799 Contributions of Capital Assets 2,323,034 1,987,657 Rental Income - 21,730 Total Other Income (Expense) 2,349,423 2,044,186 Net Income (Loss) before Operating Transfers 2,111,320 996,189 OPERATING TRANSFERS Gain /(Loss) on sale of Capital Assets - (47,306) Transfer Out - - Total Operating Transfers - (47,306) NET INCOME Net Assets - Beginning of Year NET ASSETS - END OF YEAR See accompanying Notes to the Financial Statements. (24) 2,111,320 948,883 10,713,044 23,763,720 $ 12,824,364 $ 24,712,603 Liquor Cemetary Totals 2005 2004 $ 3,540,572 $ - $ 3,540,572 $ 3,412,809 (2,614,197) - (2,614,197) (2,535,281) - 32,834 1,704,176 1,536,149 926,375 32,834 2,630,551 2,413,677 356,780 9,015 620,450 592,800 3,958 - 8,038 8,328 20,932 - 101,954 102,254 13,643 1,413 173,872 161,246 3,669 - 72,994 22,108 56,003 1,929 1,518,580 1,769,083 14,050 - 48,407 50,364 17,452 21,312 805,470 691,657 2,272 - 2,272 6,281 69,785 48 197,666 125,155 558,544 33,717 3,549,703 3,529,276 367,831 (883) (919,152) (1,115,599) 26,948 1,851 89,987 125,245 - - 4,310,691 2,880,096 - - 21,730 23,770 26,948 1,851 4,422,408 3,029,111 394,779 968 3,503,256 1,913,512 - - (47,306) - (250,000) - (250,000) (250,000) (250,000) - (297,306) (250,000) 144,779 968 3,205,950 1,663,512 2,005,539 129,629 36,611,932 34,948,420 $ 2,150,318 $ 130,597 $ 39,817,882 $36,611,932 (25) CITY OF MONTICELLO, MINNESOTA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE TOTALS FOR THE YEAR ENDED DECEMBER 31, 2004) CASH FLOWS FROM OPERATING ACTIVITIES Cash Receipts from Customers Cash Paid to Suppliers Cash Paid to Employees Net Cash Flows from Operating Activities CASH FLOWS FROM NONCAPITAL FINANCIAL ACTIVITIES Rental Receipts Transfers Out Proceeds from Sale of Capital Assets Net Cash Flows Provided (Used) by Noncapital Financing Activities Water $ 834,696 (477,006) (165,247) 192,443 CASH FLOWS FROM CAPITAL RELATED FINANCING ACTIVITIES Purchases of Capital Assets - CASH FLOWS FROM INVESTING ACTIVITIES Interest Received on Investments 26,389 Net Increase (Decrease) in Cash and Cash Equivalents 218,832 Cash and Cash Equivalents - Beginning of Year 1,079,023 CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,297,855 CASH FLOWS FROM OPERATING ACTIVITIES Operating Income (Loss) $ (238,103) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 446,567 Loss on Disposal of Capital Assets - Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (33,748) (Increase) Decrease in Due from Other Funds (14) (Increase) Decrease in Inventory - (Increase) Decrease in Prepaid Expenses 678 Increase (Decrease) in Accounts Payable 15,751 Increase (Decrease) in Accrued Expenses 233 Increase (Decrease) in Contracts Payable (14,862) Increase (Decrease) in Due to Other Governments 933 Increase (Decrease) in Due to Other Funds - Increase (Decrease) in Deferred Revenue 14,958 Increase (Decrease) in Escrow Deposits 50 Net Cash Provided by Operating Activities $ 192,443 NONCASH TRANSACTIONS Contributions of Capital Assets $ 2,323,034 See accompanying Notes to the Financial Statements. (26) Sewer Liquor Cemetery $ 960,664 $ 925,065 $ 32,834 (847,784) (156,251) (21,923) (88,954) (349,806) (9,005) 23,926 419,008 1,906 21,729 - - (250,000) 22,500 - 44,229 (250,000) (49) Totals 2005 2004 $ 2,753,259 $ 2,434,540 (1,502,964) (1,201,217) (613,012) (599,123) 637,283 634,200 - 21,729 23,770 - (250,000) (250,000) - 22,500 - (205,771) (226,230) (49) (21,740) (27) 34,799 26,948 1,851 89,987 125,245 102,954 195,907 3,757 521,450 511,475 1,401,858 885,831 73,760 3,440,472 2,928,997 $ 1,504,812 $ 1,081,738 $ 77,517 $ 3,961,922 $ 3,440,472 $ (1,047,997) $ 367,831 $ (883) $ (919,152) $ (1,115,599) 1,014,081 56,003 1,929 1,518,580 1,769,083 - - 50 50 - (9,302) (823) - (43,873) 18,164 (30) - - (44) - - (12,132) - (12,132) 43,052 (29) (1,800) - (1,151) (2,635) 66,982 3,540 800 87,073 (80,876) 221 6,974 10 7,438 (6,323) - - - (14,862) - - (112) - 821 5,971 - 44 - 44 - - (487) - 14,471 2,699 - (30) - 20 664 $ 23,926 $ 419,008 $ 1,906 $ 637,283 $ 634,200 $ 1,987,657 $ - $ - $ 4,310,691 $ 2,880,096 (27) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY. NOTES TO FINANCIAL STATEMENTS CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Monticello have been prepared in conformity with U.S. generally accepted accounting principles as applied to governmental units by the Governmental Accounting Standards Board (GASB). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. Although the City has the option to apply FASB pronouncements issued after that date to its business -type activities and enterprise funds, the City has chosen not to do so. The following is a summary of the significant accounting policies: Financial Reporting Entity As required by generally accepted accounting principles, these financial statements include the City of Monticello (the primary government) and its component units. A component unit is a legally separate entity for which the 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 include whether or not the primary government appoints the voting majority of the potential component unit's board, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. The Housing and Redevelopment authority (HRA) is fiscally dependent upon the City of Monticello, and its governing body consists of City council members. Therefore, the HRA is included as a component unit of the City. The HRA's financial data has been blended with that of the City (i.e. reported as though its funds were funds of the City) and reported as a special revenue fund. Entities excluded from the financial statements: Monticello Volunteer Fire Relief Association (Association) The Association is organized as a nonprofit organization by its members to provide pension and other benefits to such members in accordance with Minnesota Statutes. The Association's board of directors is elected by the membership of the Association. All funding is obtained in accordance with Minnesota Statutes whereby state aids flow to the Association and tax levies are determined by the Association and reviewed by the City. The Association pays benefits directly to its members. Basic Financial Statements Government -Wide Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) display information about the primary government and its component units. These statements include the financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize the double- counting of internal activities. 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 to external parties for support. (28) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basic Financial Statements (Continued) Government -Wide Statements (Continued) In the government -wide statement of net assets, both the governmental and business -type activities columns: (a) are presented on a consolidated basis by column; and (b) are reported on a full accrual, economic resource basis, which recognizes all long -term assets and receivables as well as long -term debt and obligations. 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 each function of the City's governmental activities and different business -type activity are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or activity. Program revenues include: (1) fees, fines, and charges paid by the recipients of goods, services, or privileges provided by a given function or activity; and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or activity. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the City's funds, including its fiduciary funds and blended component unit. Separate statements for each fund category-- governmental and proprietary are presented. The emphasis of governmental and proprietary fund financial statements is on major individual governmental and enterprise funds, with each displayed as separate columns in the fund financial statements. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or incidental activities. (29) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basic Financial Statements (Continued► Maior Governmental Funds The City reports the following major governmental funds: General Fund The general fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Community Center Fund The community center funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Capital Outlay Revolving Fund The capital outlay revolving fund is used to account for revenues and expenses related to capital outlay. Sanitary Sewer Access Fund The sanitary sewer access fund is used to account for revenues and expenses 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, general long -term debt principal, interest and related costs. Capital Projects Fund Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Major Propietary Funds The City reports the following proprietary funds: Water Utility Funds These funds are used to account for the provisions of water services to the City's residents. Sewer Utility Funds These funds are used to account for the provisions of sewer services to the City's residents. Liquor Fund The liquor fund is used to account for the operations of the City's liquor store. (30) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basic Financial Statements (Continued) Major Proprietary Funds (Continued) Cemetery Fund The cemetary fund is used to account for the operations of the City's cemetary. Measurement Focus and Basis of Accounting The government -wide and proprietary funds 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 are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. The City considers all revenues to be available if they are collected within 60 days after the end of the current period. Property and other taxes, licenses, and interest are all considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long -term debt, compensated absences, and claims and judgments, which are recognized as expenditures to the extent that they have matured. Proceeds of general long -term debt and acquisitions under capital leases are reported as other financing sources. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Proprietary funds distinquish operating revenues and expenses from nonoperating items. Operating revenues generally result from providing services or delivering goods in connection with the proprietary fund's principal ongoing operations. Operating expenses include the cost of sales and providing the service, administrative expenses and depreciation. All other income and expenses are reported as nonoperating items. Budgets Budgets are adopted on a basis consistent with U.S. generally accepted accounting principles. Annual appropriated budgets are adopted for the General Fund, the Community Center, Capital Outlay Revolving, the Sanitary Sewer Access Fund, and the Debt Service Fund. Budgeted amounts are reported as originally adopted, or as amended by the City Council. Individual amendments were not material in relation to the original appropriations, which were adjusted. Budgeted expenditure appropriations lapse at year -end. (31) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Legal Compliance — Budgets The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. 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. 2. Public hearings are conducted to obtain taxpayer comments, and the final tax levy and budget are adopted. 3. The City Administrator is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. 4. Formal budgetary integration is employed as a management control device during the year for the general fund, special revenue funds and enterprise funds. Formal budgetary integration is not employed for the capital projects and debt service funds. 5. Budgets are adopted on a basis consistent with generally accepted accounting principles. Budgeted amounts are as originally adopted, or as amended by the City Council. Cash and Investments Cash balances from all funds are combined and invested to the extent available in certificates of deposit and other allowable investments. Earnings from investments are allocated to the respective funds on the basis of applicable cash balance participation by each fund. For purposes of the statements of cash flows, all highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. State and local ordinances authorize the City to invest (short -term and long -term) in certificates of deposit (considered deposits for risk categorization purposes), U.S. Treasury obligations, U.S. agency issues, high -grade commercial paper, Banker's Acceptances, Repurchase Agreements and certain corporate bonds. 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. (32) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property Tax Credits Property taxes on homestead property (as defined by state statutes) are partially reduced by property tax credits. These credits are paid to the City by the state in lieu of taxes levied against homestead property. The state remits these credits through installments each year. These credits are recognized as revenue by the City at the time of collection. Property Tax Revenue Recognition Property tax levies are set by the City Council in December of each year, and are certified to the County Auditor for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. Such taxes become a lien on property on January 1 and are recorded as receivables by the City at that date. Real property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and June 30. The County provides tax settlements to cities and other taxing districts three times a year. 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. Special Assessment Revenue Recognition Special assessments are levied against benefited properties for the cost or a portion of the cost of special assessment improvement projects in accordance with State Statutes. These assessments are collectible by the City over a term of years usually consistent with the term of the related bond issue. Collection of annual installments (including interest) is handled by the County Auditor in the same manner as property taxes. Property owners are allowed to (and often do) prepay future installments without interest or prepayment penalties. Within the fund financial statements, the revenue from special assessments is recognized by the City when it becomes measurable and available to finance expenditures of the current fiscal period. In practice, current and delinquent special assessments received by the City are recognized as revenue for the current year. Special assessments are collected by the County and remitted by December 31. Assessments remitted to the City the following January are also recognized as revenue for the current year. All remaining delinquent, deferred and special deferred assessments receivable in governmental funding are completely offset by deferred revenues. Deferred revenue in governmental activities is susceptible to full accrual on the government -wide and proprietary fund statements. (33) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Special Assessment Revenue Recognition (Continued) Once a special assessment roll is adopted, the amount attributed to each parcel is a lien upon that property until full payment is made or the amount is determined to be excessive by the City Council or court action. If special assessments are allowed to go delinquent, the property is subject to tax forfeit sale and the first proceeds of that sale (after costs, penalties and expenses of sale) are remitted to the City in payment of delinquent special assessments. Generally, the City will collect the full amount of its special assessments not adjusted by City Council or court action. Pursuant to state statutes, a property shall be subject to a tax forfeit sale after three years unless it is homesteaded, agricultural or seasonal recreational land in which event the property is subject to such sale after five years. Inventories Inventories are valued at lower of cost (average cost) or market. Short -Term Interfund Receivables /Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables are classified as "due from other funds" or "due to other funds" on the balance sheets of the fund financial statements. Land Held For Resale These assets are recorded in the governmental fund which purchased them 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. Capital Assets Capital assets are capitalized at historical cost, estimated historical cost, or in the case of contributions, at their estimated fair market value at the time received. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets are recorded in the entity -wide statements, but are not reported in the fund financial statements. Capital assets are depreciated using the straight -line method over their estimated useful lives. Since surplus assets are generally sold for an immaterial amount when declared as no longer needed for City purposes, no salvage value is taken into consideration for depreciation purposes. Useful lives vary from 10 to 40 years for Infrastructure, 5 to 20 years for Vehicles and Office Furniture and Equipment, 12 to 40 years for Buildings, and 10 to 20 years for improvements. Capital assets not being depreciated include land and construction in progress. Property, plant and equipment used by proprietary funds are stated at cost or estimated historical cost. Contributed fixed assets are recorded at estimated fair market value at the time received. Net interest costs are capitalized on projects during the construction period. (34) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Compensated Absences 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 5 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. Long -Term Obligations In the entity -wide financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight -line method. Bond issue costs, if material, are reported as deferred assets and amortized over the term of the related debt using the straight -line method. In the governmental fund financial statements, bond premiums and discounts, as well as bond issue costs are recognized during the current period. The face amount of the debt issue is reported as on other financing source. Premiums received on debt issuances are reported as other financing sources while discounts are reported as other financing uses. Issue costs are reported as debt service expenditures. Fund Balance 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. Interfund Transactions Quasi - external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures /expenses initially made from it that are properly applicable to another fund, are recorded as expenditures /expenses in the reimbursing fund and as reductions of expenditures or expenses in the fund that is reimbursed. (35) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Interfund Transactions (Continued) All other interfund transactions, except quasi - external transactions and reimbursements, are reported as transfers. All other interfund transfers are reported as operating transfers. All Interfund transactions are eliminated except for activity between governmental activities and business -type activities for presentation in the entity -wide statements of net assets and statements of activities. NOTE 2 DEPOSITS AND INVESTMENTS Deposits The City maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the combined balance sheet as "Cash and Temporary Investments." In accordance with Minnesota Statutes the City maintains deposits at financial institutions which are authorized by the City Council. Custodial Credit Risk — Custodial credit risk for deposits is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a specific deposit policy for custodial credit risk but rather follows Minnesota Statutes for deposits. Minnesota Statutes require that all deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or corporate surety bonds. Authorized collateral include: U.S. government treasury bills, notes, or bonds; issues of a U.S. government agency; general obligations of a state or local government rated "A" or better; revenue obligations of a state or local government rated "AA" or better; irrevocable standby letter of credit issued by a Federal Home Loan Bank; and time deposits insured by a federal agency. Minnesota Statutes require securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or at an account at a trust departments of a commercial bank or other financial institution not owned or controlled by the depository. The City's deposits in banks at December 31, 2005 were: Bank Balance $ 137,266 Insured 3,892,556 Uninsured and Uncollateralized $ 4,029,822 Total Deposits (36) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) Investments The City may also invest idle funds as authorized by Minnesota Statutes as follows: • 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 and received the highest credit rating, is rated in one of the two highest rating categories by a statistical rating agency, and all of the investments have a finial maturity of thirteen months or less. • General obligations rated "A" or better; revenue obligations rated "AK or better. • General obligations of the Minnesota Housing Finance Agency rate "A" or better. • Bankers' acceptances of United States banks eligible for purchase by the Federal Reserve System. • Commercial paper issued by United States banks corporations or their Canadian subsidiaries, of highest quality category by a least two nationally recognized rating agencies, and maturing in 270 days or less. • Guaranteed investment contracts guaranteed by United States commercial banks or domestic branches of foreign banks or United States insurance companies if similar debt obligations of the issuer or the collateral pledged by the issuer is in the top two rating categories. • Repurchase or reverse purchase agreement and securities lending agreements 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, a primary reporting dealer in U.S. government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker - dealers. Investments Held with Brokers Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities to meet cash requirements for ongoing operations. Information about the sensitivity of the fair values of the City's investments to market interest rate risk fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: Type U.S. Government Securities Negotiable Certificates of Deposits Money Market 4M Fund 12 Months 13 to 24 Total or Less Months $ 36,806,910 $ 8,682,051 $ - 2,704,435 1,663,172 287,310 3,544,089 3,544,089 - 2,627,778 2,627,778 - $ 45,683,212 $ 16,517,090 $ 287,310 (37) 25 to 60 More than Months 60 Months $ 3,474,049 $ 24,650,810 563,150 190,803 $ 4,037,199 $ 24,841,613 NOTE 2 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 DEPOSITS AND INVESTMENTS (CONTINUED) Investments (Continued) Investments Held with Brokers (Continued) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following chart summarizes year -end ratings for the City's investments as rated by Moody's Investors Service: Credit Type Quality Rating Amount U.S. Government Securities AAA $ 36,806,910 Negotiable Certificates of Deposits Not Rated 2,704,435 Money Market Not Rated 3,544,089 4M Fund Not Rated 2,627,778 Total $ 45,683,212 The Minnesota Municipal Money Market Fund (4M -Fund) Trust is a common law trust organized in accordance with the Minnesota Joint Powers Act, which invests only in investment instruments allowable under Minnesota Statutes as described on the previous page. 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 amortized cost method of valuation values a security at its cost on the date of purchase and thereafter assumes a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of instruments. The Minnesota Municipal Money Market Trust Fund does not have its own credit rating. MBIA, Inc., who administers the Minnesota Municipal Money Market Fund Trust holds an organization credit rating of Aa2. Concentration of Credit Risk The City places no limit on the amount that it may invest in any one issuer. More than 5 percent of the City's investments are in Federal Home Loan Association and Federal National Mortgage Association. These investments are 44.62% and 30.17 %, respectively, of the City's total investments. (38) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 3 LONG -TERM RECEIVABLES The City maintains a revolving loan program to support economic development. Outstanding loans as of December 31, 2005 were as follows: In February of 1998, a loan of $87,500 was made to a local business. The loan requires monthly interest only payments at 6.5% through March 2000. Beginning in April 2000, the loan requires monthly payments of $1,716, including interest at 6.5 %. $27,887 of the loan has been forgiven. In June of 2000, a loan of $500,000 was made to a local business. The loan requires 83 monthly payments of $5,098, including interest at 4% and a balloon payment of $177,773, including interest 4% on June 1, 2007. This loan is funded by a Federal Community Development Block Grant. In July of 2002, a loan of $105,000 was made to a local business. The loan requires 178 monthly payments of $950, including interest at 7 %. In September of 2002, a loan of $30,000 was made to a local business. The loan requires 59 monthly payments of $194, including interest at 4.75% and a balloon payment of $25,131, including interest of 4.75% on September 1, 2006. In March of 2003, a loan of $200,000 was made to a local business. The loan requires 60 monthly payments of $1,084, including interest of 2.75% and a balloon payment of $160,151 including interest of 2.75% on March 1, 2008. In April of 2003, a loan of $290,000 was made to a local business. The loan requires 54 monthly payments of $1,607, starting October 1, 2003, including interest at 2.75% and a balloon payment of $238,369, including interest of 2.75% on April 1, 2008. In April of 2003, a loan of $55,000 was made to a local business. The loan requires 120 monthly payments of $525, including interest of 2.75 %. In December 31, 2003, a loan of $74,763 was made to a local business. The loan requires 120 monthly payments of $849, including interest at 6.50 %. In May 30, 2004, a loan of $350,000 was made to a local business. The loan requires 60 monthly payments of $1483, including interest at 2.0 %. In April of 2005, a loan of $200,000 was made to a local business. The loan requires 240 monthly payments of $1,433, including interest at 6.0 %. In November of 2005, a loan of $200,000 was made to a local business. The loan requires 240 monthly payments of $1,160 , including interest at 3.5 %. Total Long -Term Receivables (39) $ 2,697 251,558 84,133 25,768 177,891 265,590 41,777 56,629 332,638 196,475 199,423 $ 1,634,579 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 4 CAPITAL ASSETS Governmental Activities Capital asset activity for the year ended December 31, 2005 was as follows: Governmental Activities: Capital Assets, Not Being Depreciated Land Construction in Progress (1) Total Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Capital Assets, Being Depreciated Accumulated Depreciation for Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Governmental Activities Capital Assets, Net Beginning Ending Balance Increases Decreases Balance $ 3,840,918 $ 2,290,000 $ (46,000) $ 6,084,918 5,092,012 12,796,706 (5,375,577) 12,513,141 8,932,930 15,086,706 (5,421,577) 18,598,059 13,203,486 - (185,000) 13,018,486 230,465 11,238 - 241,703 1,588,084 160,803 - 1,748,887 991,398 106,054 (7,900) 1,089,552 2,497,824 547,089 - 3,044,913 30,733,889 2,779,628 - 33,513,517 49,245,146 3,604,812 (192,900) 52,657,058 (2,193,106) (343,152) 14,716 (2,521,542) (75,794) (16,407) - (92,201) (987,647) (150,124) - (1,137,771) (475,336) (99,129) 7,900 (566,565) (1,716,763) (109,698) - (1,826,461) (11,237,897) (1,342,971) - (12,580,868) (16,686,543) (2,061,481) 22,616 (18,725,408) 32,558,603 1,543,331 (170,284) 33,931,650 $ 41,491,533 $ 16,630,037 $ (5,591,861) $ 52,529,709 (1) See Note 11 regarding restatement of beginning balances. Depreciation expense was charged to governmental functions as follows: Governmental Activities: General Government $ 16,231 Public Safety 74,969 Public works 1,541,472 Parks, culture and recreation 428,809 Total Depreciation Expense, Governmental Activities $ 2,061,481 (40) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 4 CAPITAL ASSETS (CONTINUED) Business -Type Activities Capital asset activity for the year ended December 31, 2005 was as follows: Capital Assets, Being Depreciated Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Capital Assets, Being Depreciated Accumulated Depreciation for Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Business Activities Capital Assets, Net 5,271,220 Beginning Transfers/ Transfers/ Ending 56,764 Balance Additions Disposals Balance Business Activities: 545,813 619,573 - - Capital Assets, Not Being Depreciated 17,791,252 - (50) 17,791,202 Land $ 1,209,580 $ - $ - $ 1,209,580 Construction in Progress 1,430,733 4,165,537 (1,088,814) 4,507,456 Total Capital Assets, (2,017,271) (16,437) (10,428) - Not Being Depreciated 2,640,313 4,165,537 (1,088,814) 5,717,036 Capital Assets, Being Depreciated Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Capital Assets, Being Depreciated Accumulated Depreciation for Buildings Office Equipment and Furniture Vehicles Machinery and Shop Equipment Improvements Other than Buildings Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Business Activities Capital Assets, Net 5,271,220 1 (114,750) 5,156,471 36,899 56,764 - 93,663 527,996 17,817 - 545,813 619,573 - - 619,573 17,791,252 - (50) 17,791,202 26,576,813 1,159,438 - 27,736,251 50,823,753 1,234,020 (114,800) 51,942,973 (1,898,813) (163,402) 44,944 (2,017,271) (16,437) (10,428) - (26,865) (497,115) (11,396) - (508,511) (496,579) (19,182) - (515,761) (8,580,347) (430,331) - (9,010,678) (9,619,689) (883,843) - (10,503,532) (21,108,980) (1,518,582) 44,944 (22,582,618) 29,714,773 (284,562) (69,856) 29,360,355 $ 32,355,086 $ 3,880,975 $ (1,158,670) $ 35,077,391 Depreciation expense was charged to business functions as follows: Business -Type Activities: Water Sewer Liquor Cemetery Total Depreciation Expense, Governmental Activities (41) $ 446,568 1,014,081 56,004 1,929 1,518,582 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 5 INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS 1. Due To /From Other Fund Receivable Fund Payable Fund Amount Reason Major Governmental Funds General Transportation $ 4,094 Orderly Annexation 9,582 Housing and Redevelopment Authority 223,258 Total Due to General Fund $ 236,934 Operating funds Business -Type Activities Water Municipal Liquor $ 14 Utilities Sewer Municipal Liquor 30 Utilities Total Due To /From Other Funds $ 44 2. Interfund Transfers Interfund transfers for the year ended December 31, 2005, consisted of the following: Maior Governmental Funds Transfers to Community Center Fund from Municipal Liquor $ 250,000 Annual contribution Transfer to Sewer Access Fund from Capital Projects Fund 766,916 To close construction fund Transfers to Debt Service Fund from Housing and Redevelopment Authority 206,855 Annual TIF transfer Community Center Fund 685,000 Debt repayment Sewer Access Fund 500,000 Debt repayment Total Transfers to Debt Service Fund 1,391,855 Transfer to Capital Projects Fund from City Streets Reconstruction Fund 747,910 Construction costs Capital Outlay Revolving Fund 254,839 Construction costs Sewer Access Fund 21,200 Construction costs Storm Sewer Access Fund 56,700 Construction costs Water Access Fund 501,690 Construction costs Total Transfer to Capital Projects Fund 1,582,339 Total Transfers to Major Funds 3,991,110 Transfers to Nonmaior Governmental Funds Transfer to Library Fund from General Fund 71,900 Repay fund deficiency Transfer to Orderly Annexation Fund from General Fund 65,000 Repay fund deficiency Total Tranfers to Nonmajor Governmental Funds 136,900 Total Interfund Transfers $ 4,128,010 (42) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 6 OPERATING LEASES The City leases several pieces of office equipment under noncancelable operating leases. Total costs for such leases were $15,981 for the year ended December 31, 2005. The future minimum lease payments for these leases are as follows: Year Ending December 31, Amount 2006 $ 15,981 2007 15,981 2008 15,981 2009 1,332 Total $ 49,275 NOTE 7 CITY INDEBTEDNESS City indebtedness at December 31, 2005 is composed of the following: Initial Amount Maturity Description Issued Date General Obligation Bonds: 2003A GO Improvement Bonds General Obligation Tax Increment Bonds: $ 2,420,000 Feb. 2015 Net Interest Outstanding Rate Principal 3.71% $ 2,420,000 1985 Tax Increment Bonds $ 350,000 Feb. 2006 8.30% $ 35,000 1989A Tax Increment Bonds 260,000 Feb. 2007 7.25% 60,000 2004A Tax Increment Bonds 945,000 Feb. 2013 4.66% 875,000 Total General Obligation Tax Increment Bonds $ 1,555,000 $ 970,000 Special Assessments Bonds: 1999 Improvement Bonds $ 3,000,000 Feb. 2010 4.15% $ 1,550,000 2000A Improvement Bonds 2,015,000 Feb. 2016 5.38% 1,445,000 2000B Improvement Bonds 1,645,000 Feb. 2011 5.00% 870,000 2002 Improvement Bonds 2,420,000 Feb. 2014 3.67% 2,050,000 2005 Improvement Bonds 25,150,000 Feb. 2023 6.00% 25,150,000 Total Special Assessment Bonds $ 34,230,000 $ 31,065,000 General Obligation Notes: Project 93 -14C Wastewater Treatment Note $ 14,700,000 Aug. 2018 4.08% $ 10,835,699 Public Project Revenue Bonds 2000A $ 7,555,000 Feb. 2015 6.27% $ 6,910,000 Contract for Deed $ 2,185,222 Dec. 2009 6.00% $ 2,085,222 (43) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 7 CITY INDEBTEDNESS (CONTINUED) The following is a schedule of changes in City indebtedness for the year ended December 31, 2005: General Obligation Bonds Bond Premium (Discount) General Obligation Note Special Assessment Debt with Governmental Commitments General Obligation Tax Increment Bonds Public Project Revenue Bonds Contract For Deed Total Payable $ 2,186,726 $ 2,396,220 $ 4,582,946 2007 Beginning 2,318,372 5,706,754 End of Due Within of Year Additions Payments Year One Year $ 2,420,000 $ - $ - $ 2,420,000 $ 210,000 (178,207) 761,397 (6,122) 589,312 - 11,456,825 - 621,126 10,835,699 646,723 6,715,000 25,150,000 800,000 31,065,000 810,000 1,100,000 - 130,000 970,000 160,000 7,170,000 - 260,000 6,910,000 260,000 2,185,222 - 100,000 2,085,222 100,000 $ 30,868,840 $ 25,911,397 $ 1,905,004 $ 54,875,233 $ 2,186,723 Minimum annual principal and interest payments required to retire long -term debt, are as follows: Years General Long -Term Debt Principal n Fe —re s Totals 2006 $ 2,186,726 $ 2,396,220 $ 4,582,946 2007 3,388,382 2,318,372 5,706,754 2008 3,881,136 2,155,267 6,036,403 2009 6,510,256 1,956,614 8,466,870 2010 4,865,123 1,629,670 6,494,793 2011 -2015 24,452,192 4,668,346 29,120,538 2016 -2020 7,682,106 805,054 8,487,160 2021 -2023 1,320,000 85,850 1,405,850 Totals $54,285,921 $16,015,393 $70,301,314 From time to time, the City has issued Industrial Revenue Bonds and other similar type Revenue Bonds to provide financial assistance to private- sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The Bonds are secured by the property 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. Neither the City, the state nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. The issues are as follows: Issue Date 04/01/88 12/23/85 Commercial Business Clow Stamping Raindance Partnership Original Term Type Amount _ 22 Yrs Ind. Dev. Rev. Bonds $ 950,000 $ 25 Yrs Comm. Dev. Rev. Bonds 1,075,000 (44) Rnhnrc 410,000 533,913 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 8 DEFINED BENEFIT PENSION PLANS — STATE -WIDE Plan Description All full -time and certain part -time employees of the City of Monticello are covered by defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). The PERA administers the Public Employees Retirement Fund (PERF) which is a cost - sharing, multiple - employer retirement plan. This plan is established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. Public Employee Retirement Fund members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the Public Employees Police and Fire Fund ( PEPFF). The PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for Coordinated and Basic Plan members. The retiring member receives the higher of step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first ten years of service and 2.7 percent for each year thereafter. For the Coordinated Plan member, the annuity accrual rate is 1.2 percent of average salary for each of the first the years and 1.7 percent for each successive year. Using 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 the Public Employees Police and Fire Fund members, the annuity accrual rate is 3.0 percent of average salary for each year of service. For Public Employee Retirement Fund whose annuity is calculated using Method 1, and all Public Employees Police and Fire Fund members, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF member and 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. (45) NOTE 8 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 DEFINED BENEFIT PENSION PLANS — STATE -WIDE (CONTINUED) Plan Description (Continued) The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service. The PERA issues a publicly available financial report that includes financial statements and required supplementary information for Public Employee Retirement Fund and the Public Employees Police and Fire Fund. That report may be obtained on the web at mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103 -2088 or by calling (651) 296 -7460 or 1- 800 - 652 -9026. Funding Policy Pension benefits are funded from member and employer contributions and income from the investment of fund assets. Minn. Stat. ch. 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. Public Employees Retirement Fund Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 5.10% respectively, of their annual covered salary in 2005. Contributions rates in the Coordinated Plan will increase in 2006 to 5.5 %. Contribution rates in the Coordinated Plan will increase in 2006 to 5.5 %. Public Police and Fire Fund members were required to contribute 6.20% of there annual covered salary in 2005. That rate will increase to 7.0% in 2006. The City is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan PERF members, and 5.53% for Coordinated Plan PERF members. Employer contribution rates for the Coordinated Plan will increase to 6.0% effective January 1, 2006. The City's contributions to the Public Employees Retirement Fund for the years ending December 31, 2005, 2004, and 2003 were $135,315 $129,637, and $115,037, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. City of Monticello Fire Relief Association Plan Description The City contributes to the City of Monticello Fire Relief Association (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. 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 $2,175 per year of active service in the fire department and Association with 100% vesting at twenty years. 2. There is no maximum retirement benefit. 3. Members retiring with less than ten years of service forfeit their accrued benefits. (46) NOTE 8 CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 DEFINED BENEFIT PENSION PLANS — STATE -WIDE (CONTINUED) City of Monticello Fire Relief Association (Continued) Plan Description (Continued) 4. Members who separate from service and have at least ten years of active service and membership but are less than 50 years of age are entitled to a deferred service pension payable upon reaching the age of 50. The Association also provides death benefits, whereby upon approval of application, the beneficiaries of each deceased active member would receive $2,175 per year of service. The City passes through state aids allocated to the plan in accordance with enabling state statutes. Annual Pension Cost and and Net Pension Obligation The City's annual pension cost and net pension obligation to PERS for the year ended December 31, 2005 is as follows: Annual Required Contribution $ 3,050 Interest on Net Pension Obligation - Adjustment to Annual Required Contribution - Annual Pension Cost 3,050 Less Contribution Made (3,050) Increase (Decrease) in Net Pension Obligation Net Pension Obligaiton Beginning of Year Net Pension Obligation End of Year $ - The annual required contribution for the current year was determined as part of the December 31, 2005, actuarial valuation using the entry age actuarial cost method. The actuarial assumptions included (a) 5% investment rate of return and (b) age and service retirement was assumed to occur at the age of 50. The assumptions did not include post retirement benefit increases, which are funded by State Statute when granted. Net assets available for benefits exceeded the pension benefit obligation at December 31, 2005, 2004, and 2003. Three -Year Trend Information Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation (47) 2005 100% 0 100% 2003 100% CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 9 STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY Deficit Fund Balances The City has deficit fund balances at December 31, 2005 as follows: Special Revenue Funds Transportation Fund Orderly Annexation $ (9,295) (9,507) The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, transfers from other funds, and various other sources. Expenditures in Excess of Budget Actual expenditures exceeded 2005 budgets in the following funds: Special Revenue Funds Capital Outlay Revolving Fund Sanitary Sewer Access Fund NOTE 10 RISK MANAGEMENT Expenditures Budget Excess $ 1,332,573 $ 1,115,000 $ 217,573 2,687,453 1,816,000 871,453 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 coverages with LMCIT: a basic package of property, inland marine, automotive physical damage and liability; comprehensive general liability; public officials errors and omissions; umbrella liability; boiler and machinery; and workers' compensation. The City pays an annual premium to LMCIT, which in turn pays the local agent's commission and pays an administrative fee to American Business Risk Services. The remaining premium is split between LMCIT and its reinsurers. The reinsurers in turn reimburse LMCIT for a corresponding share of each loss. A profit- sharing agreement also provides for a return to LMCIT of a share of the reinsurers' portion of the premium if the loss experience is favorable. (48) CITY OF MONTICELLO, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE 10 RISK MANAGEMENT (CONTINUED) 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. NOTE 11 CONSTRUCTION COMMITMENTS The City entered into construction contracts for various construction projects started during the year. The following contracts had been entered into and were at various stages of completion at December 31, 2005: Contract Contract Amount* Expenses Recorded to Date for Work Completed Contract Amount Remaining for Uncompleted Work 2004 -06C Core St. #2 $ 946,307 $ 872,273 $ 74,034 2004 -36C LIBR Expansion 671,277 663,441 7,836 2005 -11C Chelse Road Ext. 2,721,368 2,443,516 277,852 2005 -34C 4th St. Rink Pkg. 18,400 - 18,400 2005 -02C School Blvd. Ext 1,050,956 930,515 120,441 2005 -05C Meadow Oak Ave. 1,922,964 1,465,991 456,973 2005 -01C Core St. #3 830,294 762,746 67,548 Totals * Including approved change orders. NOTE 12 PRIOR PERIOD ADJUSTMENT $ 8,161,566 $ 7,138,482 $ 1,023,084 The City's net assets for entity -wide governmental activities have been adjusted as of January 1, 2005 to record additional construction in progress which should have been reflected in its 2004 financial statements. The correction involves construction in progress of $1,650,196 which was omitted from the City's 2004 capital asset listing and was incorrectly included in expenses in 2004. This adjustment increased the previously reported net assets of $45,385,783 to $47,035,979 for a net increase of $1,650,196. Construction in progress as of January 1, 2005 increased from $3,441,816 to $5,092,012. The change in net assets on the statement of activities was incorrectly shown as $9,679,509, the correct change in net assets if properly shown should have been $11,329,705 a difference of $1,650,196. (49) REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD &A CITY OF MONTICELLO, MINNESOTA BUGETARY COMPARISION SCHEDULE GENERAL FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) REVENUE General Property Taxes Licenses and Permits Fines and Forfeitures Intergovernmental State Market Value Credit Mobile Home Market Value Credit Fire Department Aid State Police Aid State Highway Aid Recycling Incentive PERA Aid County /Regional Other Total Intergovernmental Charges for Services Animal Impound Fees Deputy Registrar Fees Inspection Fees Township Contract Other Total Charges for Services Investment Earnings Miscellaneous Development Cost Reimbursement Sale of City Property Rents Garbage Charge Other Total Miscellaneous Total Revenue The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (50) 2005 Original Final 2005 Variance with 2004 Budget Budget Actual Final Budget Actual $ 4,443,989 $ 4,443,989 $ 4,315,338 $ (128,651) $ 4,063,028 619,925 619,925 956,300 336,375 797,458 - - 4,000 4,000 - - - 16,962 16,962 10,771 - - 14,828 14,828 15,644 65,000 65,000 94,839 29,839 94,969 37,500 37,500 40,368 2,868 40,957 72,500 72,500 67,345 (5,155) 72,514 14,000 14,000 10,201 (3,799) 13,262 6,741 6,741 6,741 - 6,741 13,350 13,350 32,806 19,456 12,867 209,091 209,091 284,090 74,999 267,725 26,000 26,000 24,002 (1,998) 23,382 265,500 265,500 277,437 11,937 260,575 55,000 55,000 162,879 107,879 108,866 99,490 99,490 49,906 (49,584) 94,849 - - 196 196 - 445,990 445,990 514,420 68,430 487,672 204,605 204,605 310,832 106,227 52,664 225,000 225,000 1,763 (223,237) 55,000 - - 33,989 33,989 1,050 12,130 12,130 14,149 2,019 14,014 98,000 98,000 119,310 21,310 91,643 61,600 61,600 200,919 139,319 231,166 396,730 396,730 370,130 (26,600) 392,873 6,320,330 6,320,330 6,755,110 434,780 6,061,420 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (50) CITY OF MONTICELLO, MINNESOTA BUGETARY COMPARISION SCHEDULE (CONTINUED) GENERALFUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) Data Processing Other Services and Charges 144,615 2005 78,852 65,763 69,076 Capital Outlay Original Final 5,523 Variance with - Total Data Processing Budget Budget Actual Final Budget Actual EXPENDITURES 38,650 38,650 36,851 1,799 55,696 General Government 140,935 140,935 83,193 57,742 105,370 Mayor and Council 47,915 47,915 50,441 (2,526) 39,680 Current 97,195 97,195 95,222 1,973 86,571 Personal Services $ 26,935 $ 26,935 $ 26,668 $ 267 $ 25,425 Other Services and Charges 35,100 35,100 23,082 12,018 7,059 Total Mayor and Council 62,035 62,035 49,750 12,285 32,484 Administration 4,050 4,050 8,727 (4,677) 3,813 Current 105,400 105,400 230,386 (124,986) 270,140 Personal Services 273,945 273,945 179,154 94,791 280,818 Supplies 300 300 12,215 (11,915) 7,228 Other Services and Charges 14,325 14,325 12,476 1,849 31,470 Total Administration 288,570 288,570 203,845 84,725 319,516 Elections 21,375 21,375 15,654 5,721 12,762 Current 206,250 206,250 181,052 25,198 185,120 Personal Services - - 2,133 (2,133) 5,402 Supplies 5,000 5,000 - 5,000 2,224 Other Services and Charges - - 170 (170) 4,313 Total Elections 5,000 5,000 2,303 2,697 11,939 Finance Current Personal Services 214,510 214,510 189,063 25,447 187,528 Supplies 2,000 2,000 1,387 613 1,507 Other Services and Charges 14,200 14,200 19,183 (4,983) 17,236 Total Finance 230,710 230,710 209,633 21,077 206,271 Data Processing Other Services and Charges 144,615 144,615 78,852 65,763 69,076 Capital Outlay 5,500 5,500 5,523 (23) - Total Data Processing 150,115 150,115 84,375 65,740 69,076 Audit 38,650 38,650 36,851 1,799 55,696 Legal 140,935 140,935 83,193 57,742 105,370 Assessing 47,915 47,915 50,441 (2,526) 39,680 Insurance 97,195 97,195 95,222 1,973 86,571 Planning and Zoning Current Personal Services 118,245 118,245 65,422 52,823 92,157 Other Services and Charges 4,050 4,050 8,727 (4,677) 3,813 Professional Services 105,400 105,400 230,386 (124,986) 270,140 Total Planning and Zoning 227,695 227,695 304,535 (76,840) 366,110 Deputy Registrar Current Personal Services 184,875 184,875 165,398 19,477 172,358 Other Services and Charges 21,375 21,375 15,654 5,721 12,762 Total Deputy Registrar 206,250 206,250 181,052 25,198 185,120 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (51) CITY OF MONTICELLO, MINNESOTA BUGETARY COMPARISION SCHEDULE (CONTINUED) GENERAL FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (52) 2005 Original Final Variance with 2004 Budget Budget Actual Final Budget Actual EXPENDITURES (CONTINUED) General Government (Continued) City Hall Current Personal Services $ 8,900 $ 8,900 $ 6,815 $ 2,085 $ 3,079 Supplies 22,775 22,775 32,924 (10,149) 13,837 Utilities 15,660 15,660 19,476 (3,816) 16,748 Professional Services 4,800 4,800 18,125 (13,325) 7,351 Telephone 22,900 22,900 22,629 271 20,422 Other Services and Charges 46,105 46,105 54,258 (8,153) 39,698 Capital Outlay - - 32,705 (32,705) - Total City Hall 121,140 121,140 186,932 (65,792) 101,135 Severance Benefits 29,000 29,000 8,648 20,352 5,542 Total General Government 1,645,210 1,645,210 1,496,780 148,430 1,584,510 Public Safety National Guard 21,625 21,625 23,857 (2,232) 9,106 Police Current Contractual Services 836,580 836,580 838,632 (2,052) 801,566 Fire Department Current Personal Services 147,300 147,300 77,826 69,474 78,851 Supplies 32,575 32,575 33,594 (1,019) 23,434 Other Services and Charges 38,200 38,200 128,958 (90,758) 135,185 Repairs and Maintenance 28,350 28,350 29,845 (1,495) 37,417 Capital Outlay - - - - 20,118 Total Fire Department 246,425 246,425 270,223 (23,798) 295,005 Building Inspections Personal Services 222,150 222,150 195,925 26,225 226,118 Other Services and Charges 20,700 20,700 56,671 (35,971) 30,254 Total Building Inspections 242,850 242,850 252,596 (9,746) 256,372 Animal Control 43,425 43,425 42,224 1,201 42,265 Civil Defense Current Personal Services 10,590 10,590 32 10,558 124 Other Services and Charges - 3,300 644 2,656 3,740 Total Civil Defense 10,590 13,890 676 13,214 3,864 Total Public Safety 1,401,495 1,404,795 1,428,208 (23,413) 1,408,178 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (52) CITY OF MONTICELLO, MINNESOTA BUGETARY COMPARISION SCHEDULE (CONTINUED) GENERALFUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) Streets Current Personal Services Supplies Other Services and Charges Capital Outlay Total Streets Snow and Ice Current Personal Services Supplies Other Services and Charges Total Snow and Ice Inspections Street Lighting- Parking Lots Shop and Garage Total Public Works 2004 Actual $ 149,226 23,903 1,134,836 1,307,965 340,030 340,030 2005 83,499 300,374 84,250 Original Final 6,297 Variance with 22,000 Budget Budget Actual Final Budget EXPENDITURES (CONTINUED) 159,200 7,916 151,284 209,277 Public Works 605,480 360,541 244,939 587,252 Administration and Engineering 47,180 47,843 (663) 38,844 Current 26,750 23,764 2,986 35,187 Personal Services $ 156,875 $ 156,875 $ 153,964 $ 2,911 Other Services and Charges 24,500 24,500 23,498 1,002 Professional Service 462,850 462,850 902,407 (439,557) Capital Outlay 8,850 8,850 - 8,850 Total Administration and Engineering 653,075 653,075 1,079,869 (426,794) Streets Current Personal Services Supplies Other Services and Charges Capital Outlay Total Streets Snow and Ice Current Personal Services Supplies Other Services and Charges Total Snow and Ice Inspections Street Lighting- Parking Lots Shop and Garage Total Public Works 2004 Actual $ 149,226 23,903 1,134,836 1,307,965 340,030 340,030 256,531 83,499 300,374 84,250 84,250 77,953 6,297 67,938 22,000 22,000 18,141 3,859 9,663 159,200 159,200 7,916 151,284 209,277 605,480 605,480 360,541 244,939 587,252 47,180 47,180 47,843 (663) 38,844 26,750 26,750 23,764 2,986 35,187 2,500 2,500 779 1,721 1,310 - - - - 7,005 76,430 76,430 72,386 4,044 82,346 155,785 155,785 103,411 52,374 118,009 113,700 113,700 121,434 (7,734) 125,489 180,845 180,845 140,377 40,468 145,272 1,785,315 1,785,315 1,878,018 (92,703) 2,366,333 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (53) CITY OF MONTICELLO, MINNESOTA BUGETARY COMPARISION SCHEDULE (CONTINUED) GENERAL FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR 4,770,244 5,387,377 $ 5,124,391 $ 4,770,244 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (54) 2005 Original Final Variance with 2004 Budget Budget Actual Final Budget Actual EXPENDITURES (CONTINUED) Culture and Recreation Parks and Recreation Current Personal Services $ 349,940 $ 349,940 $ 285,896 $ 64,044 $ 317,388 Supplies 137,825 137,825 89,982 47,843 105,742 Other Services and Charges 61,950 61,950 59,980 1,970 66,893 Capital Outlay 259,500 259,500 81,044 178,456 136,779 Total Parks and Recreation 809,215 809,215 516,902 292,313 626,802 Senior Citizens /Museum Current Personal Services 1,500 1,500 1,503 (3) 61 Other Services and Charges 76,535 76,535 84,047 (7,512) 40,035 Total Senior Citizens /Museum 78,035 78,035 85,550 (7,515) 40,096 Information Center - - 28 (28) 32 YMCA/Community Education 18,200 18,200 18,200 - 30,940 Ice Arena 75,000 75,000 75,000 - 75,000 Historical Church /School 400,000 400,000 199,485 200,515 - Total Culture and Recreation 1,380,450 1,380,450 895,165 485,285 772,870 Sanitation Current Refuse Collection 447,820 447,820 492,446 (44,626) 410,768 Economic Development 59,240 59,240 73,446 (14,206) 70,008 Total Expenditures 6,719,530 6,722,830 6,264,063 458,767 6,612,667 EXCESS OF REVENUES OVER EXPENDITURES (399,200) (402,500) 491,047 893,547 (551,247) OTHER FINANCING SOURCES (USES) Transfer In - - - - 158,000 Transfer Out - - (136,900) (136,900) (223,886) Total Other Financing Sources (Uses) - - (136,900) (136,900) (65,886) NET CHANGE IN FUND BALANCES $ (399,200) $ (402,500) 354,147 $ 756,647 (617,133) Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR 4,770,244 5,387,377 $ 5,124,391 $ 4,770,244 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (54) CITY OF MONTICELLO, MINNESOTA BUDGETARY COMPARISION SCHEDULE COMMUNITY CENTER FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) REVENUES Taxes Intergovernmental Membership Dues and Fees Interest Earnings Rent Miscellaneous Total Revenue EXPENDITURES Culture and Recreation Salaries and Employee Benefits Supplies Professional Services Advertising Repair and Maintenance Insurance Utilities Telephone Equipment and Other Rental Other Capital Outlay Total Expenditures EXCESS OF REVENUES OVER EXPENDITURE Original Final 2005 Variance with 2004 Budget Budget Actual Final Budget Actual $ 1,007,235 $ 1,007,235 $ 970,149 $ (37,086) $ 985,611 - - 1,311 1,311 - 809,500 809,500 840,928 31,428 740,830 1,650 1,650 4,026 2,376 3,691 - - 376 376 - 3,450 3,450 1,628 (1,822) 33,837 1,821,835 1,821,835 1,818,418 (3,417) 1,763,969 712,000 712,000 727,918 (15,918) 711,825 168,900 168,900 148,002 20,898 143,103 39,400 39,400 44,347 (4,947) 38,831 28,200 28,200 17,534 10,666 21,431 13,000 13,000 20,266 (7,266) 104,544 51,885 51,885 26,607 25,278 33,508 151,000 151,000 187,627 (36,627) 146,765 12,000 12,000 10,877 1,123 10,770 16,600 16,600 16,071 529 15,962 22,950 22,950 18,188 4,762 7,342 170,900 170,900 27,920 142,980 87,783 1,386,835 1,386,835 1,245,357 141,478 1,321,864 435,000 435,000 573,061 138,061 442,105 OTHER FINANCING SOURCES (USES) Transfers In 250,000 250,000 250,000 - 296,846 Transfers Out (685,000) (685,000) (685,000) - (662,455) Total Other Financing Sources (Uses) (435,000) (435,000) (435,000) - (365,609) NET CHANGE IN FUND BALANCES $ - $ - 138,061 $ 138,061 76,496 Fund Balance - Beginning of Year 102,678 26,182 FUND BALANCE - END OF YEAR $ 240,739 $ 102,678 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (55) CITY OF MONTICELLO, MINNESOTA BUDGETARY COMPARISION SCHEDULE CAPITAL OUTLAY REVOLVING FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) OTHER FINANCING SOURCES (USES) Proceeds from Contract for Deed Transfers In Transfers Out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR - - - - 2,185,222 - 1,145,929 - (254,839) (254,839) (700,000) - (254,839) (254,839) 2,631,151 $ (529,200) $ (529,200) 1,550,048 $ 2,079,248 3,895,371 5,016,238 1,120,867 $ 6,566,286 $ 5,016,238 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (56) Original Final 2005 Variance with 2004 Budget Budget Actual Final Budget Actual REVENUES Taxes $ 45,000 $ 45,000 $ 99,160 $ 54,160 $ 1,905 Special Assessments 22,800 22,800 146,030 123,230 138,910 Interest Earnings 18,000 18,000 51,486 33,486 68,268 Miscellaneous 500,000 500,000 1,832,237 1,332,237 1,438,055 Total Revenue 585,800 585,800 2,128,913 1,543,113 1,647,138 EXPENDITURES Public Works Supplies - - 30,807 (30,807) 15,692 Professional Services - - 166,661 (166,661) 189,590 Other - - 41,193 (41,193) 15,308 Capital Outlay 1,115,000 1,115,000 85,365 1,029,635 162,328 Total Expenditures 1,115,000 1,115,000 324,026 790,974 382,918 EXCESS OF REVENUES OVER EXPENDITURE (529,200) (529,200) 1,804,887 2,334,087 1,264,220 OTHER FINANCING SOURCES (USES) Proceeds from Contract for Deed Transfers In Transfers Out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR - - - - 2,185,222 - 1,145,929 - (254,839) (254,839) (700,000) - (254,839) (254,839) 2,631,151 $ (529,200) $ (529,200) 1,550,048 $ 2,079,248 3,895,371 5,016,238 1,120,867 $ 6,566,286 $ 5,016,238 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (56) CITY OF MONTICELLO, MINNESOTA BUDGETARY COMPARISION SCHEDULE SANITARY SEWER ACCESS FUND YEAR ENDED DECEMBER 31, 2005 (WITH COMPARATIVE ACTUAL AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2004) OTHER FINANCING SOURCES (USES) Bond Proceeds - - 4,700,535 4,700,535 - Bond Premium - - 159,949 159,949 - Transfers In - - 766,916 766,916 182,640 Transfers Out (500,000) (500,000) (521,200) (21,200) (500,000) Total Other Financing Sources (Uses) (500,000) (500,000) 5,106,200 5,606,200 (317,360) NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR $ (1,236,205) $ (1,236,205) 4,763,097 $ 5,999,302 3,896,953 $ 8,660,050 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (57) 1,472,785 2,424,168 $ 3,896,953 Original Final 2005 Variance with 2004 Budget Budget Actual Final Budget Actual REVENUES Special Assessments $ 158,795 $ 158,795 $ 665,152 $ 506,357 $ 225,302 Hook -up Fees 825,000 825,000 1,542,632 717,632 1,509,509 Interest 96,000 96,000 136,566 40,566 117,254 Total Revenue 1,079,795 1,079,795 2,344,350 1,264,555 1,852,065 EXPENDITURES Public Works Professional Services - - 2,684,240 (2,684,240) 9,332 Capital Improvements 1,816,000 1,816,000 3,138 1,812,862 52,588 Other - - 75 (75) - Total Expenditures 1,816,000 1,816,000 2,687,453 (871,453) 61,920 EXCESS OF REVENUES OVER EXPENDITURES (736,205) (736,205) (343,103) 393,102 1,790,145 OTHER FINANCING SOURCES (USES) Bond Proceeds - - 4,700,535 4,700,535 - Bond Premium - - 159,949 159,949 - Transfers In - - 766,916 766,916 182,640 Transfers Out (500,000) (500,000) (521,200) (21,200) (500,000) Total Other Financing Sources (Uses) (500,000) (500,000) 5,106,200 5,606,200 (317,360) NET CHANGE IN FUND BALANCES Fund Balance - Beginning of Year FUND BALANCE - END OF YEAR $ (1,236,205) $ (1,236,205) 4,763,097 $ 5,999,302 3,896,953 $ 8,660,050 The Notes to the Required Supplementary Information are an Integral Part of this Schedule. (57) 1,472,785 2,424,168 $ 3,896,953 CITY OF MONTICELLO, MINNESOTA NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2005 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 Council and certifies the proposed proptery tax levy to the County Auditor according to Minnesota Statues. b. Public hearings are conducted at the Council's chambers in the Municipal Building. c. On or before December 28, the final budget is legally enacted by Council resolutions and the final property tax levy certified to the County Auditor. d. Management is authorized to transfer budgeted amounts between departments within any 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. Project - length financial plans are adopted for the Capital Projects Funds. Budgets for the General, certain Special Revenue Funds, and Debt Service Fund are adopted on a basis consistent with generally accepted accounting principals (GAAP). Budgeted amounts are as originally adopted, or as amended by the City Council. All annual appropriations lapse at fiscal year end. II. EXCESS OF EXPENDITURES OVER APPROPRIATIONS Expenditures exceeded budgeted amounts in the following funds: Expenditures Budget Excess Special Revenue Funds Capital Outlay Revolving Fund $ 1,332,573 $ 1,115,000 $ 217,573 Sanitary Sewer Access Fund 2,687,453 1,816,000 871,453 The above overages were considered by City management to be the result of necessary expenditures critical to operations and were approved by the Council. These overages were financed by greater than anticipated revenues. (58) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY COMBINING FINANCIAL STATEMENTS CITY OF MONTICELLO, MINNESOTA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2005 (WITH COMPRATIVE AMOUNTS AS OF DECEMBER 31, 2004) ASSETS Cash and Investments Accounts Receivable (Net of Allowance for Estimated Uncollectibles) Special Assessments Receivable Delinquent Deferred Prepaid Items Loans Receivable Total Assets LIABILITIES AND FUND BALANCE LIABILITIES Accounts Payable Escrow Deposits Accrued Expenses Contracts Payable Due to Other Funds Due to Other Governments Deferred Revenue Total Liabilities FUND BALANCE (DEFICIT) Reserved for Prepaid Items Reserved for Loans Receivable Unreserved Undesignated Total Fund Balance (Deficit) Total Liabilities and Fund Balance (59) Orderly Shade Tree Transportation Annexation $ 25,278 $ - $ - 697 2,279 31 - - 44 $ 25,975 $ 2,279 $ 75 $ 225 $ 7,429 $ - 851 51 - 4,094 9,582 1,076 11,574 9,582 44 24,899 (9,295) (9,551) 24,899 (9,295) (9,507) $ 25,975 $ 2,279 $ 75 Housing and Economic Central Redevelopment Development Water Minnesota Library Authority Authority Access Initiative $ 13,533 $ 1,831,115 $ 692,073 $ 762,547 $ 2,973 360 3,660 5,469 3,967 - - - - 15,703 - - - - 339,045 - 98 - - - - - - 780,194 - $ 13,991 $ 1,834,775 $ 1,477,736 $ 1,121,262 $ 2,973 $ 994 $ 104,351 $ 100 7,900 - 223,258 1,094 335,509 $ 1,291 $ 30,926 354,747 _ 386,964 98 - - - - - 780,194 - - 12,799 1,499,266 697,542 734,298 2,973 12,897 1,499,266 1,477,736 734,298 2,973 $ 13,991 $ 1,834,775 $ 1,477,736 $ 1,121,262 $ 2,973 M CITY OF MONTICELLO, MINNESOTA COMBINGING BALANCE SHEET (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2005 (WITH COMPRATIVE AMOUNTS AS OF DECEMBER 31, 2004) ASSETS Cash and Investments Accounts Receivable (Net of Allowance for Estimated Uncollectibles) Special Assessments Receivable Delinquent Deferred Prepaid Items Loans Receivable Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Accrued Expenses Contracts Payable Due to Other Funds Due to Other Governments Deferred Revenue Total Liabilities FUND BALANCE (DEFICIT) Reserved for Prepaid Items Reserved for Loans Receivable Unreserved Undesignated Total Fund Balance (Deficit) Total Liabilities and Fund Balance Economic Storm Recovery Sewer Minnesota $ 16,231 $ 2,268,259 $ 406,137 - 2,287 - 43,981 - 1,035,702 - - - 517,148 $ 16,231 $ 3,350,229 $ 923,285 $ - $ 215 $ - 1,079,682 - - 1,079,897 - - - 517,148 16,231 2,270,332 406,137 16,231 2,270,332 923,285 $ 16,231 $ 3,350,229 $ 923,285 (61) Park Pathway Dedication $ 608,450 2,015 20,819 439,700 City Streets Environmental Reconstruction Clean -up $ 638,678 5,229 2,407 276,041 $ 1,070,984 $ 922,355 $ Totals 2005 2004 667 $ 7,265,941 $ 4,787,819 - 25,994 22,998 - 82,910 30,775 - 2,090,488 2,089,985 - 142 178 - 1,297,342 1,191,320 667 $ 10,762,817 $ 8,123,075 $ - $ - $ - $ 114,505 $ 93,044 - - - 8,902 8,193 3,498 - - 34,424 78,889 - - - 236,934 323,126 - - - - 1,109 460,519 278,448 - 2,173,396 2,120,760 464,017 278,448 - 2,568,161 2,625,121 - - - 142 178 - - - 1,297,342 1,191,320 606,967 643,907 667 6,897,172 4,306,456 606,967 643,907 667 8,194,656 5,497,954 $ 1,070,984 $ 922,355 $ 667 $ 10,762,817 $ 8,123,075 (62) CITY OF MONTICELLO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2005 (WITH COMPRATIVE ACTUAL AMOUNTS AS OF THE YEAR ENDED DECEMBER 31, 2004) REVENUES General Property Taxes Intergovernmental Special Assessments Charges for Services Investment Earnings Miscellaneous Total Revenue EXPENDITURES Current General Government Culture and Recreation Public Works Capital Projects Economic Development Debt Service: Principal Interest and Fiscal Charges Total Expenditures REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Bond Proceeds Bond Premium Transfer In Transfer Out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Fund Balance (Deficit) - Beginning of Year FUND BALANCE (DEFICIT) - END OF YEAR Orderly Shade Tree Transportation Annexation $ 56,797 $ - $ 4,530 - 51,528 - 2,392 7,725 - 26 - - 59,215 59,253 4,530 - 80,371 - 48,054 - - 19,264 48,054 80,371 19,264 11,161 (21,118) (14,734) 65,000 11,161 (21,118) 50,266 13,738 11,823 (59,773) $ 24,899 $ (9,295) $ (9,507) (63) (64) Housing and Economic Central Redevelopment Development Water Minnesota Library Authority Authority Access Initiative $ 35,634 $ 753,713 $ - $ - $ - - - - 234,479 - 858 - 200 382,728 - 577 26,825 34,781 20,849 68 - 947,616 - - - 37,069 1,728,154 34,981 638,056 68 37,858 - - - - - - - 77,964 - - 542,586 409 - - - 100,000 - - - - 131,113 - - - 37,858 773,699 409 77,964 - (789) 954,455 34,572 560,092 68 - (206,855) - (501,690) - - (206,855) - (501,690) - (789) 747,600 34,572 58,402 68 13,686 751,666 1,443,164 675,896 2,905 $ 12,897 $ 1,499,266 $ 1,477,736 $ 734,298 $ 2,973 (64) CITY OF MONTICELLO, MINNESOTA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (CONTINUED) NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2005 (WITH COMPRATIVE ACTUAL AMOUNTS AS OF THE YEAR ENDED DECEMBER 31, 2004) REVENUES General Property Taxes Intergovernmental Special Assessments Charges for Services Investment Earnings Miscellaneous Total Revenue EXPENDITURES Current General Government Culture and Recreation Public Works Economic Development Debt Service: Principal Interest and Fiscal Charges Total Expenditures REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Bond Proceeds Bond Premium Operating Transfer In Operating Transfer Out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES Fund Balance (Deficit) - Beginning of Year FUND BALANCE (DEFICIT) - END OF YEAR Economic Storm Recovery Sewer Minnesota Grant Access Investment - 639,901 - - 690,954 - 783 37,014 27,508 783 1,367,869 27,508 239,708 - - 239,708 - 783 1,128,161 27,508 213,775 - 7,267 - (56,700) - - 164,342 - 783 1,292,503 27,508 15,448 977,829 895,777 $ 16,231 $ 2,270,332 $ 923,285 (65) Park City Pathway Streets Environmental Totals Dedication Reconstruction Clean -up 2005 2004 $ - $ 481,610 $ - $ 1,332,284 $ 1,454,555 - 37,000 - 88,528 145,492 281,509 313,336 - 1,469,225 246,214 31,743 - - 1,116,600 481,310 8,934 23,374 446 181,185 221,958 - - - 947,616 55,756 322,186 855,320 446 5,135,438 2,605,285 - - - 80,371 71,697 - - - 77,964 113,226 4,122 2 - 329,744 524,843 - - 2,072 564,331 899,221 - - - 100,000 - - - - 131,113 - 4,122 2 2,072 1,283,523 1,608,987 318,064 855,318 (1,626) 3,851,915 996,298 - - - 213,775 - - - - 7,267 - 71,900 - - 136,900 78,319 - (747,910) - (1,513,155) (1,184,388) 71,900 (747,910) - (1,155,213) (1,106,069) 389,964 107,408 (1,626) 2,696,702 (109,771) 217,003 536,499 2,293 5,497,954 5,607,725 $ 606,967 $ 643,907 $ 667 $ 8,194,656 $ 5,497,954 .. THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY STATISTICAL SECTION (UNAUDITED) CITY OF MONTICELLO, MINNESOTA BOND INDEBTEDNESS GENERAL OBLIGATION BONDS DECEMBER 31, 2005 (UNAUDITED) General Obligation Improvement Bond Series 2003A Year Payable Principal 2006 $ 210,000 2007 215,000 2008 225,000 Total Original Amount Average rate of interest Payment dates Interest $ 77,833 73,045 67,095 2009 230,000 60,325 2010 235,000 52,999 2011 245,000 44,892 2012 250,000 36,042 2013 260,000 26,605 2014 270,000 16,465 2015 280,000 5,600 $ 2,420,000 $ 460,901 2.420.000 3.7144% February 1 (67) February 1 August 1 CITY OF MONTICELLO, MINNESOTA BOND INDEBTEDNESS GENERAL OBLIGATION SPECIAL ASSESSMENT BONDS DECEMBER 31, 2005 (UNAUDITED) (68) General Obligation General Obligation General Obligation Improvement Bond Improvement Bond Improvement Bond Series 1999B Series 2000A Series 2000B Year Payable Principal Interest Principal Interest Principal Interest 2006 $ 300,000 $ 56,175 $ 145,000 $ 72,808 $ 145,000 $ 38,969 2007 305,000 44,301 150,000 65,505 145,000 32,045 2008 310,000 32,078 150,000 57,930 145,000 25,049 2009 315,000 19,499 155,000 50,114 145,000 17,980 2010 320,000 6,560 160,000 41,923 145,000 10,839 2011 - - 160,000 33,443 145,000 3,625 2012 - - 95,000 26,574 - - 2013 - - 100,000 21,235 - - 2014 - - 105,000 15,571 - - 2015 - - 110,000 9,578 - - 2016 - - 115,000 3,249 - - 2017 - - - - - - 2018 - - - - - - 2019 - - - - - - 2020 - - - - - - 2021 - - - - - - 2022 - - - - - - 2023 - - - - - - Totals $ 1,550,000 $ 158,613 $ 1,445,000 $ 397,930 $ 870,000 $ 128,507 Original Amount 3.000.000 2.015.000 1.645.000 Average Rate of Interest 4.1569% 5.3826% 4.9990% Payment Dates February 1 February 1 February 1 February 1 February 1 February 1 August 1 August 1 August 1 (68) General Obligation General Obligation Improvement Bond Improvement Bond Series 2002 Series 2005A Total Principal Interest Principal Interest Principal Interest $ 220,000 $ 67,378 $ - $ 1,059,842 $ 810,000 $ 1,295,172 230,000 61,630 1,010,000 1,085,150 1,840,000 1,288,631 235,000 54,825 1,430,000 1,027,200 2,270,000 1,197,082 245,000 47,079 2,295,000 938,731 3,155,000 1,073,403 255,000 38,385 2,350,000 828,412 3,230,000 926,119 265,000 28,760 2,405,000 715,481 2,975,000 781,309 275,000 18,362 2,450,000 603,238 2,820,000 648,174 285,000 7,300 2,520,000 491,413 2,905,000 519,948 40,000 800 2,575,000 383,212 2,720,000 399,583 - - 2,255,000 286,613 2,365,000 296,191 - - 2,310,000 195,313 2,425,000 198,562 - - 705,000 135,013 705,000 135,013 - - 730,000 105,400 730,000 105,400 - - 390,000 81,600 390,000 81,600 - - 405,000 64,706 405,000 64,706 - - 420,000 47,175 420,000 47,175 - - 440,000 28,900 440,000 28,900 - - 460,000 9,775 460,000 9,775 $ 2,050,000 $ 324,519 $ 25,150,000 $ 8,087,174 $ 31,065,000 $ 9,096,743 3.6682% 4.2500% February 1 February 1 February 1 February 1 August 1 August 1 (69) CITY OF MONTICELLO, MINNESOTA BONDINDEBTEDNESS GENERAL OBLIGATION TAX INCREMENT BONDS DECEMBER 31, 2005 (UNAUDITED) Original Amount $350.000 $260.000 Average Rate of Interest 8.2893% 7.2532% Payment Dates February 1 February 1 February 1 February 1 August 1 August 1 (70) $945.000 4.6600% February 1 February 1 August 1 General Obligation General Obligation General Obligation Tax Increment Tax Increment Refunding Tax Increment Year Bond of 1985 Bond of 1989A Bond of 2004A Total Payable Principal Interest Principal Interest Principal Interest Principal Interest 2006 $ 35,000 $ 1,470 $ 30,000 $ 3,982 $ 95,000 $ 41,133 $ 160,000 $ 46,585 2007 - - 30,000 1,328 100,000 37,232 130,000 38,560 2008 - - - - 105,000 32,870 105,000 32,870 2009 - - - - 105,000 27,883 105,000 27,883 2010 - - - - 110,000 22,508 110,000 22,508 2011 - - - - 115,000 16,739 115,000 16,739 2012 - - - - 120,000 10,360 120,000 10,360 2013 - - - - 125,000 3,500 125,000 3,500 $ 35,000 $ 1,470 $ 60,000 $ 5,310 $ 875,000 $ 192,225 $ 970,000 $ 199,005 Original Amount $350.000 $260.000 Average Rate of Interest 8.2893% 7.2532% Payment Dates February 1 February 1 February 1 February 1 August 1 August 1 (70) $945.000 4.6600% February 1 February 1 August 1 CITY OF MONTICELLO, MINNESOTA BOND INDEBTEDNESS GENERAL OBLIGATION NOTE — PROJECT 93 -14 WASTEWATER TREATMENT DECEMBER 31, 2005 (UNAUDITED) Year Payable Principal Interest Total 2006 $ 646,726 $ 435,567 $ 1,082,293 2007 673,382 408,911 1,082,293 2008 701,136 381,157 1,082,293 2009 730,034 352,259 1,082,293 2010 760,123 322,169 1,082,292 2011 791,452 290,840 1,082,292 2012 824,073 258,219 1,082,292 2013 858,038 224,254 1,082,292 2014 893,403 188,889 1,082,292 2015 930,226 152,067 1,082,293 2016 968,567 113,726 1,082,293 2017 1,008,487 73,806 1,082,293 2018 1,050,052 32,241 1,082,293 Total $ 10,835,699 $ 3,234,105 $ 14,069,804 (71) CITY OF MONTICELLO, MINNESOTA BOND INDEBTEDNESS PUBLIC PROJECT REVENUE BONDS DECEMBER 31, 2005 (UNAUDITED) Year Payable 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Original Amount Average Rate of Interest Payment Dates (72) Temporary Public Project Revenue Bonds Series 2000A Principal Interest $ 260,000 $ 409,950 430,000 390,112 480,000 363,950 505,000 335,631 530,000 305,875 870,000 263,994 920,000 209,175 950,000 151,906 970,000 92,500 995,000 31,094 $ 6,910,000 $ 2,554,187 $7.555.000 6.268% February 1 February 1 August 1 CITY OF MONTICELLO, MINNESOTA BONDINDEBTEDNESS CONTRACT FOR DEED DECEMBER 31, 2005 (UNAUDITED) Year Payable 2006 2007 2008 2009 Original Amount Average Rate of Interest Payment Dates (73) Contract For Deed Principal Interest $ 100,000 $ 131,113 100,000 119,113 100,000 113,113 1,785,222 107,113 $ 2,085,222 $ 470,452 2.185.222 6.000% December 31 December 31 CITY OF MONTICELLO, MINNESOTA BOND INDEBTED NESS TAX LEVIES TO RETIRE BONDED INDEBTEDNESS DECEMBER 31, 2005 (UNAUDITED) (74) General General General General Obligation Obligation Obligation Obligation Tax Increment Improvement Improvement Improvement Year of Bond Series Refunding Bonds Bond Series Bond Series Levy Collection 1989A* 1999 2000A 2000B 2005 2006 $ 34,288 $ 180,800 $ 136,300 $ 23,400 2006 2007 - 182,200 133,300 24,200 2007 2008 - 183,300 135,400 25,000 2008 2009 - 184,100 137,100 25,700 2009 2010 - - 133,200 26,300 2010 2011 - - 130,400 - 2011 2012 - - 130,200 - 2012 2013 - - 129,700 - 2013 2014 - - 128,800 - 2014 2015 - - 127,600 - 2015 2016 - - - 2016 2017 - - - 2017 2018 - - - 2018 2019 - - - 2019 2020 - - - 2020 2021 - - - 2021 2022 - - - - $ 34,288 $ 730,400 $ 1,322,000 $ 124,600 * This tax levy is for tax increment financing projects. The levy has not been made in the past and will only be made in the future if tax increment revenue is insufficient to meet principal and interest payments. Note: The Project 93 -14C Wastewater Treatment General Obligation Note requires annual levies of $1,082,293 from 1998 to 2016, and $541,146 in 2017. (74) General General Obligation Obligation Improvement Improvement Bond Series Bond Series 2002 2005A Total $ 176,000 $ 900,500 $ 1,451,288 174,600 1,159,800 1,674,100 177,500 2,061,600 2,582,800 179,300 2,003,900 2,530,100 180,200 1,950,700 2,290,400 180,100 1,046,800 1,357,300 179,400 1,851,200 2,160,800 (2,200) 1,794,400 1,921,900 - 1,367,600 1,496,400 - 1,329,600 1,457,200 - 854,200 854,200 - 851,000 851,000 - 479,900 479,900 - 478,300 478,300 - 476,100 476,100 - 478,300 478,300 - 479,600 479,600 $ 1,244,900 $ 19,563,500 $ 18,922,288 (75) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY OTHER REPORT SECTION Lars onAllen" REPORT ON MINNESOTA LEGAL COMPLIANCE Members of the Council City of Monticello, Minnesota We have audited the basic financial statements of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information which collectively compse the City's basic financial statements, of the City of Monticello, Minnesota, as of and for the year ended December 31, 2005, and have issued our report thereon dated May 31, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the State Auditor pursuant to Minnesota Statute 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Government covers seven main categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, tax increment financing, and city and county miscellaneous provisions. Our study included all of the listed categories. The results of our tests indicate that for the items tested, the City of Monticello, Minnesota, complied with the material terms and conditions of applicable legal provisions, except for broker certification form was not obtained from the 4M -Fund prior to completing transactions with them in 2005, the City did not have a perfected security interest in collateral at Wells Fargo and First Minnesota Banks, this also resulted in the City being uncollateralized at December 31, 2005 and at various time throughout 2005. This report is intended solely for the information and use of the City of Monticello, Minnesota, management and Office of the State Auditor and is not intended to be and should not be used by anyone other than those specified parties. St. Cloud, Minnesota May 31, 2006 LARSON, ALLEN, WEISHAIR & CO., LLP (76) THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY