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Home My WebLink AboutItem 09June 26, 2014 Item No. ACKNOWLEDGE RECEIPT OF LAKEVILLE COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2013 Proposed Action Staff recommends adoption of the following motion: Move to acknowledge receipt of City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31 2013 Overview The City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31, 2013 is attached for City Council review and approval. The certified public accounting firm of Malloy, Montague, Karnowski, Radosevich & Co., P.A. (MMKR) has audited the financial report. In their opinion, the financial statements, as presented, represent the financial position of City of Lakeville as of December 31, 2013 and the results of operations for the year ended. Mr. William Lauer, Partner with MMKR, will present an overview of the financial report at the July 7 Council meeting. Primary Issues to Consider • Financial condition of the City of Lakeville. An overview of the financial operations is provided in the Letter of Transmittal and Management's Discussion and Analysis. MMKR has submitted the attached Management Report regarding their observations during the course of the audit. Supporting Information A. City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31, 2013 B. Management Report C. Special Purpose Audit Reports — Internal Controls, and Compliance with Laws and Regulations 772�� D -Feller Finance Director Financial Impact: N/A Budgeted: N/A Source: Related Documents (CIP, ERP, etc.): Notes: COMPREHENSIVE ANNUAL FINANCIAL REPORT a0W Year Ended December 31, 2013 City of Lakeville, Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT Minnesota For the Year Ended December 31, 2013 ISSUED BY THE FINANCE DEPARTMENT Dennis Feller, Finance Director City of INTRODUCTORY SECTION CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2013 TABLE OF CONTENTS Page Table of Contents 1-3 Elected and Appointed Officials 4 Organizational Structure 5 Letter of Transmittal 6-14 Certificate of Achievement 15 FINANCIAL SECTION Independent Auditors' Report 16-18 Management's Discussion and Analysis 19-35 Basic Financial Statements Government -wide Financial Statements Statement of Net Position 36 Statement of Activities 37 Fund Financial Statements Balance Sheet - Governmental Funds 38-39 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 40 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 41-42 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 43 Statement of Net Position - Proprietary Funds 44 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 45 Statement of Cash Flows - Proprietary Funds 46 Statement of Fiduciary Net Position - Agency Fund 47 Notes to Basic Financial Statements 48-84 Required Supplementary Information other than MD &A General Fund - Schedule of Revenues, Expenditures and Changes in Fund Balances - Budgetary Comparison 85-91 Notes to Required Supplementary Information 92 Other Post - Employment Benefits Plan - Schedule of Funding Progress 93 1 CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2013 TABLE OF CONTENTS (CONTINUED) Page FINANCIAL SECTION (continued) Combinine and Individual Fund Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 95 Combining Governmental Funds Special Revenue Funds ( Nonmajor) Combining Balance Sheet 96 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 97 Debt Service Funds ( Nonmajor) 124-125 Combining Balance Sheet 98 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 99 Capital Projects Funds ( Nonmajor) 130-131 Combining Balance Sheet 100-101 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 102-103 Special Revenue Funds - Budgetary Comparison Schedules Communications 104 Economic Development 105 Downtown Special Service District 106 Agency Fund - Statement of Changes in Assets and Liabilities 107 Suuolemental Information Schedule of Changes in Bonded Indebtedness 108 Schedule of Bonded Indebtedness and Annual Interest Payable 109-117 Combined Schedule of Bonded Indebtedness 118- 119 STATISTICAL SECTION Financial Trends Net Position by Component - Government -wide 120-121 Changes in Net Position - Governmental Activities 122-123 Changes in Net Position - Business -type Activities 124-125 Changes in Net Position - Total Governmental and Business -type Activities 126- 127 Fund Balances - Governmental Funds 128-129 Changes in Fund Balances - Governmental Funds 130-131 CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2013 TABLE OF CONTENTS (CONTINUED) Page STATISTICAL SECTION (continued) Revenue Cauacity Tax Capacity Valuation and Assessor's Taxable Market Value of Taxable Property 132- 133 Property Tax Rates - Direct and Overlapping Governments 134 Principal Property Taxpayers 135 Property Tax Levy and Collections 136 Debt Capacity Ratio of Outstanding Debt by Type 137 Ratio of Net Bonded Debt Outstanding 138 Direct and Overlapping Governmental Debt 139 Legal Debt Margin 140 Pledged Revenue Coverage 141 Demographic and Economic Information Demographic and Economic Statistics 142 Principal Employers 143 Commercial and Industrial Building Permits Issued 144 Operating Information Employees by Function/Program (Full -Time Equivalent) 145 Operating Indicators by Function 146 Capital Assets Statistics by Function 147 CITY OF LAKEVILLE, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2013 ELECTED OFFICIALS MAYOR Matt Little COUNCIL MEMBERS: Doug Anderson Bart Davis Colleen Ratzlaff LaBeau Kerrin Swecker APPOINTED OFFICIALS City Administrator Steven C. Mielke Finance Director/Treasurer Dennis Feller City Clerk Charlene Friedges Term of Office Expires December 31, 2014 December 31, 2016 December 31, 2014 December 31, 2014 December 31, 2016 4 CITY OF LAKEVILLE, MINNESOTA Organizational Structure December 31. 2013 Citizens of Lakeville Mayor and City Council City Attorney L covmmpsm J Finance planning Committee Commission C Community Human Planning and Finance Police Fire Resources Economic Housing and Redevelopment Authority ks, Recreation & Natural Resources Committee Communications Cable TV Board Lakeville Area Arts Center Board Public Works I I Parks and I I Off Sale Recreation Liquor Engineering Development Labor Building Accounting Communication Inspection LF Planning Plan Review Maintenance Relations Inspection Accounts Investigation Prevention Zoning Design Planning Compensation Economic Receivable Patrol Suppression Benefits Inspection Recreation Development Accounts Animal Recruitment Payable Control Survey Hedtage Special Center Utility Billing ent Information Assessments Ads Center Systems G.I.S. Environmental Resources and Recycling 5 This page intentionally left blank. City of Lakeville Positioned to Thrive May 30, 2014 The Honorable Mayor and Council Members 20195 Holyoke Avenue Lakeville, Minnesota 55044 Honorable Mayor, Members of the City Council and Citizens of the City of Lakeville The Comprehensive Annual Financial Report is hereby presented for the purpose of providing you, the reader, with a thorough overview of the financial affairs of the City for the year ended December 31, 2013. The Report was prepared in accordance with Minnesota Statutes and Generally Accepted Accounting Principals (GAAP). This report was prepared by the City's Finance Department and consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management of the City has established internal controls designed to protect the City's assets from loss, theft or misuse and to provide sufficient reliable information for the preparation of these financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City's internal controls have been designed to provide reasonable rather than absolute assurance, that the financial statements will be free from material misstatements. As management, we assert that to the best of our knowledge and belief this report is complete and reliable in all material respects. The City of Lakeville's financial statements have been audited by Malloy, Montague, Kamowski, Radosevich & Co., P.A., a professional firm of certified public accountants. The independent auditors report is included in the Financial Section of this report. The auditors have given this report an unmodified ( "clean") opinion, meaning that the financial statements fairly present the City's financial position at December 31, 2013 and the changes in financial position for the year then ended. Management's discussion and analysis (MD &A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD &A complements this letter of transmittal and should be read in conjunction with it. 20195 Holyoke Avenue, Lakeville, MN 55044 952- 985 - 4400.952- 985 -4499 fax www.lakevillemn.gov 6 Profile of Government The City of Lakeville is a suburban community located 20 miles south of downtown Minneapolis in the southeast corner of the Twin Cities metropolitan area within Dakota County. Lakeville continues to be one of the fastest growing cities in Minnesota with a population that has grown from 43,128 in 2000 to 57,789 in 2013. The City of Lakeville operates under the Mayor - Council form of organization. The governing City Council consists of the Mayor and four other Council members. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing members to the various committees and commissions; and hiring the City Administrator, heads of various departments and City employees. The City Administrator is responsible for carrying out the policies, directions and ordinances of the City Council and for overseeing the day -to -day operations of the City. The City Council is elected on a non - partisan at large basis. The Mayor is elected to serve a two -year term, while Council members serve four -year staggered terms, with two Council Members elected every two years. The City provides its residents and businesses with a full range of municipal services consisting of public safety (police and fire), public works, parks and recreation, and general government administration. The City also operates two enterprises: utilities (public water, sanitary sewer, street lights and environmental resources) and off -sale liquor stores. Sewage treatment and disposal is operated on a regional basis by the Metropolitan Council Environmental Services (MCES) and refuse collection and disposal are handled on a private basis through contractual arrangements by City residents with private haulers. Further information regarding city services can be obtained from the City's website at www.lakevillemn pov The City is financially accountable for the Housing and Redevelopment Authority (HRA), which is included in the City's financial statement. Additional information on the HRA can be found in Note 1A. — Summary of Significant Accounting Policies of the Notes to Basic Financial Statements. The annual budget serves as the foundation for the City of Lakeville's financial planning and control. The budgetary process is outlined in the notes within the required supplementary information section of this report. The City applies budgetary controls to ensure compliance with legal provisions of the laws of Minnesota. Budgets are adopted on a basis consistent with GAAP. Annual appropriated budgets are adopted for the general fund and special revenue funds. Budget to actual comparisons are provided in this report for each individual governmental fund for which an annual budget has been adopted. The general fixed budgetary comparison schedules are presented within the required supplementary information section and the special revenue funds budgetary comparison schedules are presented in the nonmajor governmental funds subsection of this report. IrA Factors Affecting Financial Condition The City of Lakeville is committed to maintaining a strong financial condition, while continuing to provide quality public services to its residents and businesses. The City's financial position, as reflected in the financial statements presented in this report, is perhaps best understood when it is considered from the broader perspective of the environment within which the City operates. Local Economy Our community has persevered through the economic struggles of the past five years. The City responded in 2008 and 2009 to the economic challenges by downsizing its operations and reducing personnel. The City has grown by almost 2,000 new residents or approximately 3.6% since 2009, while the number of City employees has decreased by 2.6 %. According to the Bureau of Labor Statistics, Lakeville's unemployment rate is favorable compared to the State and National rates. Unemployment Rate 12.0% 10.0% I 8.0% United States Minnesota 'o. 4.0% Lakeville 2.0% i 2008 2009 2010 2011 2012 2013 Source: www.positivelyminnesota.com Building permit activity for single family homes and the number of newly platted lots or applications from developers for new residential lots is on the rise. Building permits for single family homes increased to 374 in 2013 compared to 280 permits for single family homes in 2012. The 2014 budget is premised on an assumed steady growth of new single family homes in the coming year. Actual Residential Units Estimated Residential Units Actual Single Family Estimated Single Family The residential real estate markets have finally started to improve after four consecutive years of valuation declines. According to the Dakota County Assessor's office, the median value home increased by 3.7% as of January 2013 (for taxes payable 2014). The trend of improving market values is expected to continue as the number of foreclosures and regional unemployment becomes more favorable. The improving housing market is also strengthen with the current low inflation and interest rate environment. Major Initiatives The City has, through it's budget and financial management planning process, embraced the Positioned to Thrive theme. The 2013 goals and major initiatives were focused on long term community planning to prepare for the future, investments in technology to maximize efficiencies, developing effective partnerships to capitalize on opportunities and multi- agency resources, infrastructure improvements to promote economic and community development and service continuity through staffing enhancements to meet the expectations of community residents and businesses. 0 RESIDENTIAL PERMITS Community Planning. The City retained a consultant to facilitate a community visioning process. The City Council assembled a task force drawn from diverse perspectives from throughout the community. The task force was responsible for reviewing data and input from various sources and also considered current and future trends regarding housing, development, demographics, and various potential changes that could occur throughout the community over the next 25 years. With input from the community and with the help of the consultant the task force worked through this data and developed a unified community vision report called Envision Lakeville. The community vision report presents a vision of the City Lakeville's future, a set of community values, a list of strategic priorities for guiding the implementation of the key initiatives outlined in the report over the next 25 years. Investment in Technology. The City endeavored to maximize service efficiencies with it's the expanded application of technology for the Inspections Department field reporting system, Police computer forensics, Fire Department computers in frontline firefighting apparatus and automated employment application system. Developing Partnerships Enhanced economic development initiatives where achieved with the City participating in Metropolitan Consortium of Developers. The City along with the neighboring cities of Burnsville, Eagan and Apple Valley collaborated in the shared construction of a fire training center. . Infrastructure Improvements. The City is committed to maintaining its investment in the community's infrastructure. The most significant 2013 projects included: ➢ Dodd Boulevard improvements from 183` Street to Hayes Avenue 10 ➢ Kenrick Avenue round -about at 205` Street ➢ Kenrick Avenue Trail from 187` to 205' Street ➢ Water Treatment Facility meeting room ➢ Arts Center irrigation system Service Continuity. Meeting the expectations of residents was achieved with hiring for 15 fire fighters, Engineering Department interns, Heritage Center attendants, a new Administrative Services Director and expanded staff professional development. Long -term Financial Planning There is an interrelationship between a community's physical development and its long- term financial plan. A comprehensive plan provides the guidance for current and future land use and public infrastructure decisions to provide managed growth throughout the community. The City of Lakeville completed an update of its Comprehensive Plan in 2008. A Capital Improvement Plan (CIP) has been approved by the City which is a flexible, five -year plan that identifies the City's infrastructure, development objectives and allocation of financial resources. It provides policy makers and the community with a strategic (documented) approach to implementation and administration of improvement projects. The City will invest $145 million in transportation, utility, equipment, facilities and Parks in course of the next five years to achieve program objectives. 2014 - 2018 PROJECTS $144,736,029 tation 1,858 t t, Equipment $14,715,615 10% Utility 18% Facilities $9,801,849 $2,367,411 7% 2% As of December 31, 2013, the City of Lakeville had approximately $108.445 million of debt outstanding including $22.450 million of (cross -over) refunding debt in August 2012 to refinance the G.O. Street Reconstruction Bonds Series 2003 A and G.O. Capital Improvement Bonds series 2004 A. The City will issue approximately $65 million general obligation improvement bonds in the coming years to finance street reconstruction projects. COMPARISON WITH DE $140,000,000 $120,000,000 $100,000,000 Z $80,000,000 a m $60,000,000 W C ? $40,000,000 $20,000,000 , Actual Estimated Relevant Financial Policies Indebtedness ti� 1� AS OF DECEMBER 31 The City has a number of policies which are utilized in the management of its fiscal affairs. The primary policies include, but not limited to, operating budget policy, budget amendment process, revenue, debt, investment and fund balance. Operating Budgets. The City's operating budget policy sets forth guidance with respect to balanced operating budgets, with an overriding goal of achieving structural balance over a longer -term period, while recognizing that in certain periods, revenues and expenditures may not be equal. A balanced budget for the General Fund is defined as revenues and other sources equal to or exceeding operating expenditures and other uses. Other sources can include that portion of General Fund balance that is allowed to be budgeted for use per the City's fund balance policy. The budget will provide for adequate maintenance of capital facilities and equipment and for their orderly replacement. 12 Balanced budgets for the proprietary enterprise funds are defined as providing sufficient revenues to support the operations of those funds, without subsidy from the General Fund or property taxes. Charges from the Proprietary Internal Service Funds shall be sufficient to support such activities, with no trend of operating deficits. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is at the department level for the General Fund and total expenditures level for Special Revenue Funds. The City Administrator has authorization to expend funds in excess of the appropriation for individual line items. Budgeted expenditure appropriations lapse at year -end. Supplementary appropriations can be carried forward to the following year if approved by the City Council. • Revenue Policies. The City will project its annual revenues by a conservative objective and thorough analytical process. The City will endeavor to maintain a diversified and stable revenue system to shelter it from annual fluctuations in any one revenue source. All existing and potential revenue sources will be reexamined annually. New sources of non - property -tax revenue should be actively explored at all times. Where appropriate and not contrary to accepted public policy or statutes, emphasis will be directed toward full cost recovery through user fees. User fees and cost allocation formulas will be updated periodically (annually if needed). Ongoing, the City will review the full cost of activities supported by user fees to identify the impact of inflation and other factors. The fees along with the resulting net property tax costs will be reviewed with the City Council during the budget process. Sensitivity to market rates will also be considered in setting fees. Intergovernmental grant requests are subject to fiscal review before the application is submitted. This review is to ensure that the grants do not create an obligation for unfunded expenditures by the City relating to the grant's purpose and to provide an overall budgetary review of grant proposals. • Debt The City's debt policy provides guidance to ensure that long -term debt is utilized appropriately and in a fiscally prudent manner. Limiting long -term borrowing to capital improvements or other long -term projects which cannot, and appropriately should not, be financed from current revenues. Final maturity of bonds and notes should not exceed the expected useful life of the underlying project for which it is being issued. Where possible, the City will endeavor to pledge special assessments, State -aid or other non -tax revenues to debt service payments. • Investments The City's policy is to invest all available monies at competitive interest rates, coordinated with projections of the City's operating and program cash flow needs. Interest earnings will be distributed to the funds based on the average cash balances. Investments will take into consideration safety, liquidity and yield as well as complying with State regulations. • Fund Balance. Fund balance or net position are terms used to define the difference between a fund's assets, deferred outflows of financial resources, liabilities and 13 deferred inflows of financial resources. Fund balance is used in governmental fund types and net position is used in proprietary fund types. Awards and Acknowledgements The Government Finance Officers Association (GFOA) of the United States awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Lakeville, Minnesota, for its comprehensive annual financial report for the fiscal year ended December 31, 2012. This is the twenty-fifth consecutive year that the City of Lakeville has received this prestigious award. In order to be awarded a Certificate of Achievement for Excellence, a government must publish an easily readable and efficiently organized comprehensive annual financial report, and the contents must conform to the program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. We believe our current comprehensive annual financial report continues to conform to the Certificate of Achievement for Excellence program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the City also received the GFOA's Distinguished Budget Presentation Award for its fiscal year 2013 annual budget document. In order to qualify for the Distinguished Budget Presentation Award, the City's budget document was judged to be proficient in a number of categories, including a policy document, a financial plan, an operations guide, and a communications device. The City of Lakeville has received GFOA's Distinguished Budget Presentation Award for five consecutive years; the fiscal year 2014 annual budget document has been submitted for another award and is currently under review. The preparation of this report could not have been accomplished without the professional, efficient and dedicated services of the entire staff of the Finance Department. We would like to express our appreciation to all members of the department, with special recognition to Senior Accountants David Lang, Tom Nesseth, and Julie Werner. We would also like to express our sincere gratitude to the City Council for its sincere commitment and progressive leadership in the financial affairs of our community. Respectfully submitted, Steven Mielke City Administrator E .,.t.. Dennis Feller Finance Director 14 15 FINANCIAL SECTION OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 30, 2014 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. W , WOX;6t �, 4444A46V4A ; Minneapolis, Minnesota May 30, 2014 co ., P. A . iD This page has been left intentionally blank. CITY OF LAKEVILLE, MINNESOTA MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion and analysis presents an overview of the financial activities and financial position for the City of Lakeville (the "City") for the year ended December 31, 2013. Please read the information presented here in conjunction with our letter of transmittal. Financial Highlights • The assets of the City exceeded liabilities by $268,841,525 at the close of the most recent fiscal year. Of this amount, $16,216,216 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net position increased by $10,317,012. • The City's governmental funds reported combined ending fund balances of $64,782,416. Of this total amount, $25,939,736 or 40% is unrestricted and available for spending at the government's discretion. • As of the end of the current fiscal year, the City's unrestricted fund balance for the general fund was $9,495,546 or 44.6% of total general fund expenditures of $21,312,688. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private- sector business. The statement of net position presents information on all of the City's assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. 19 The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, public works, and parks and recreation. The business -type activities of the City include the enterprise activities of the liquor operation, and utility operation. The government -wide financial statements include not only the City itself (known as the primary government), but also a legally separate housing and redevelopment authority (HRA) for which the City is considered to be financially accountable or for which the nature and significance of their relationship with the City is such that the exclusion would cause the City's financial statements to be misleading or incomplete. Financial information for this component unit is blended within the financial information presented for the primary government itself. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government - wide financial statements. By doing so, readers may better understand the long -term impact of the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 20 The City maintains 22 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, general obligation (debt service) fund, G.O. improvement (debt service) fund, building (capital projects) fund, and the improvement construction (capital projects) fund, all of which are considered to be major funds. Data from the other governmental funds is combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements following the required supplementary information. The City adopts annual appropriated budgets for its general fund and special revenue funds. A budgetary comparison schedule has been provided as required supplementary information for the general fund to demonstrate compliance with this budget. Special revenue funds budgetary comparison schedules can be found in the nonmajor governmental funds subsection of the report after the capital projects funds. Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The internal service fund is an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses enterprise funds to account for its off -sale liquor, and utility (water, sanitary sewer, street light, and environmental resources) operations. The City uses internal service fund to account for its risk management insurance liability program. These services benefit the governmental and business -type functions; therefore, they have been included within governmental and business -type activities in the government -wide financial statements. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for each of the enterprise funds, all of which are considered to be major funds of the City. The internal service fund is presented in a single aggregated presentation in the proprietary fund financial statements. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government - wide financial statement because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. 21 This section includes a budgetary comparison schedule and related notes for the general fund, and a schedule of funding progress for the other post - employment benefits plan of the City. The combining statements referred to earlier in connection with nonmajor governmental and internal service funds are presented immediately following the required supplementary information. Government -wide Financial Analysis As presented on the following table, the City's governmental and business -type assets exceeded liabilities by $268,841,525 at the close of the fiscal year ending December 31, 2013. By far the largest portion or 87.3% of net position is reflected in its net investment in capital assets (e.g. land, buildings and improvements, machinery and equipment, infrastructure, and construction in process) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's net investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The City's total restricted net position of $17,970,069 comprises 6.7% of total net position at the close of the fiscal year ending December 31, 2013. These assets are subject to external restrictions on how they may be used. The 2013 remaining balance of $16,216,216 (6.0% of total net position), in unrestricted net position may be used to meet the government's ongoing obligations to citizens and creditors. Certain balances within unrestricted net position have internally imposed commitments or limitations, which may further limit the purpose for which such net position may be used. 22 Govercmiental Activities Business -type Activities Total 2013 2012 2013 2012 2013 2012 Current and other assets $ 75,950,861 $ 72,353,175 $ 16,159,618 $ 18,153,265 $ 92,110,479 $ 90,506,440 Capital assets 190,143,507 185,030,218 108,310,808 105,426,488 298,454,315 290,456,706 Total assets $266,094,368 $ 257,383,393 $124,470,426 $ 123,579,753 $390,564,794 $ 380,963,146 Current and other liabilities $ 4,740,243 $ 4,175,645 $ 1,776,002 $ 1,810,188 $ 6,516,245 $ 5,985,833 Long -tens iabllies 111,596,752 112,677,018 3,610,272 3,775,782 115,207,024 116,452,800 Totalfiabli6es 116,336,995 116,852,663 5,386,274 5,585,970 121,723,269 122,438,633 Net position: Net investment in capital assets 129,599,494 125,051,058 105,055,746 102,009,893 234,655,240 227,060,951 Restricted 17,645,944 17,403,167 324,125 325,750 17,970,069 17,728,917 Unrestricted 2,511,935 (1,923,495 13,704,281 15,658,140 16,216,216 13,734,645 Total net position 149,757,373 140,530,730 119,084,152 117,993,783 268,841,525 258,524,513 Total liabilities and net position $266,094368 $257,383,393 $124,470,426 $123,579,753 $390,564,794 $380,963,146 The City's total restricted net position of $17,970,069 comprises 6.7% of total net position at the close of the fiscal year ending December 31, 2013. These assets are subject to external restrictions on how they may be used. The 2013 remaining balance of $16,216,216 (6.0% of total net position), in unrestricted net position may be used to meet the government's ongoing obligations to citizens and creditors. Certain balances within unrestricted net position have internally imposed commitments or limitations, which may further limit the purpose for which such net position may be used. 22 Change in net position. The City's 2013 total net position during the current fiscal year increased by $10,317,012 as shown in the following table. This increase is primarily attributed to economic conditions and increase in community growth. Additional details that account for the change in net position are provided in the following analysis of the governmental and business -type activities. General government 2013 2012 2013 2012 2013 2012 8evenues 11,784,109 11,202,018 - - 11,784,109 11,202,018 Program revenues 11,241,434 10,849,213 - - 11,241,434 10,849,213 Charges for services $ 10,460,900 $ 9,126,942 $ 13,075,437 $ 13,382,007 $ 23,536,337 $ 22,508,949 Operating grants and contobutons 2,317,530 2,236,183 73,730 107,287 2,391,260 2,343,470 Capital grams and contributions 7,843,284 6,051,234 3,414,738 2,903,043 11,258,022 8,954,277 General revenues - - 10,863,625 10,365,651 10,863,625 10,365,651 Propertytaxes 23,947,968 24,221,741 - 12,758,596 23,947,968 24,221,741 Investment mcorue(charges) (28,949) 176,409 (42,114) 78,611 (71,063) 255,020 Gam on sale of capital assets - 214,004 3,184,428 3,712,352 - 214,004 Total revenues 44,540,733 42,026,513 16,521,791 16,470,948 61,062,524 58,497,461 General government 5,363,354 5,258,319 - - 5,363,354 5,258,319 Public safety 11,784,109 11,202,018 - - 11,784,109 11,202,018 Public works 11,241,434 10,849,213 - - 11,241,434 10,849,213 Parks and recreation 5,154,919 4,780,666 - - 5,154,919 4,780,666 Interest on long-term debt 3,864,333 3,496,878 - - 3,864,333 3,496,878 Ltimr - - 2,473,738 2,392,945 2,473,738 2,392,945 Utility - - 10,863,625 10,365,651 10,863,625 10,365,651 Total expenses 37,408,149 35,587,094 13,337,363 12,758,596 50,745,512 48,345,690 Change in act position before transfers 7,132,584 6,439,419 3,184,428 3,712,352 10,317,012 10,151,771 Transfers 2,094,059 3,101,350 (2,094,059 (3,101,350 - Change 0r net position 9,226,643 9,540,769 1,090,369 611,002 10,317,012 10,151,771 Net position - begirmmg 140,530,730 130,989,961 117,993,783 117,382,781 258,524,513 248,372,742 Net posfion - endug $149,757,373 $140,530,730 $119,084,152 $117,993,783 $268,841,525 $258,524,513 Governmental activities. Governmental activities change in net position before transfers were an increase of $7,132,584. As previously discussed, this increase is primarily due to community growth. The governmental revenue increase in charges for services is directly related to the increase in construction activity. 23 Revenues — The City's 2013 total revenues for governmental activities increased by $2,514,220. Charges for services increased a total of $1,333,958 primarily due to recent growth in the community as evidenced by an increase in building permit fees, connection and area charges, and park dedication fees. A summary of the various increases are shown as follows: Operating grants and contributions experienced an overall increase of $81,347. The increase is composed of state -aid provided for street reconstruction bonds debt service payments. A summary of the various operating grants and contributions are shown as follows: State -aid for street maintenance State -aid for street revenue bonds Federal street reconstruction bonds payment Other grants, contributions and donations Total operating grants and contributions 2013 $ 374,335 847,628 71,780 1,023,787 $ 2,317,530 Increase/ 2012 (Decrease 76,866 (4,087) 8,568 $ 81,347 $ 374,335 770,762 75,867 1,015,219 $2,236,183 24 Increase / Charges for services 2013 2012 Decrease Licenses and building permit fees $ 2,727,494 $ 2,429,951 $ 297,543 Connection and area charges 3,244,126 2,474,810 769,316 Park dedication fees 1,201,812 970,360 231,452 Other 3,287,468 3,251,821 35,647 Total charges for services $10,460,900 $ 9,126,942 $ 1,333,958 Operating grants and contributions experienced an overall increase of $81,347. The increase is composed of state -aid provided for street reconstruction bonds debt service payments. A summary of the various operating grants and contributions are shown as follows: State -aid for street maintenance State -aid for street revenue bonds Federal street reconstruction bonds payment Other grants, contributions and donations Total operating grants and contributions 2013 $ 374,335 847,628 71,780 1,023,787 $ 2,317,530 Increase/ 2012 (Decrease 76,866 (4,087) 8,568 $ 81,347 $ 374,335 770,762 75,867 1,015,219 $2,236,183 24 Capital grants and contributions increased by $1,792,050. Municipal state -aid increased by $268,780 for the bridge replacement on 168 Street and Gannon Avenue. Special assessments decreased by ($744,869) primarily due to a major street reconstruction project that was levied against the benefitting property owners in 2012. Contributed infrastructure from private land developers increased by $1,292,609; the infrastructure consists of street, storm sewer, and park and trail capital assets. The summary of capital grants and contributions is shown as follows: Capital grants and contributions Kenrick Trail grant Minnesota municipal state -aid Safe Routes to School grant Special assessments Contributed infrastructure from developers Other grants and contnbutions Total capital grants and contributions Increase/ 2013 2012 Decrease $ 826,400 $ $ 826,400 268,780 268,780 - 14,084 (14,084) 2,185,460 2,930,329 (744,869) 4,138,329 2,845,720 1,292,609 424,315 261,101 163,214 $ 7,843,284 $ 6,051,234 $ 1,792,050 The City experienced higher than normal property tax delinquencies in 2008 thru 2011. A significant amount of delinquent tax settlements were received in 2012. Delinquent tax settlements resumed at normal levels in 2013. Property tax revenue decreased $273,773 or 1.1% primarily due to decrease in the overall tax levy and changes in delinquent tax collections. Investments are based on current market values. Market value changes are inversely related to the prevailing conditions; as yields rise, valuations decline. As of December 31, 2013, yields on benchmark 2 year treasury were 33% higher than the previous year. Investment income earnings decreased by ($205,358) due to low yields consistent with prevailing market conditions. Gain on sale of capital assets is related to the sale of the former Senior Center in 2012. General revenues Property taxes Investment income (charges) Gain on sale of capital assets Total general revenues Increase / 2013 2012 Decrease $ 23,947,968 $ 24,221,741 $ (273, (28,949) 176,409 214,004 214,004 $23,919,019 $24,398,150 $ 479,131 `46i A summary of 2013 revenues by source for governmental activities are shown as follows: Revenue by Source - Governmental Activities Total Revenues $44,540,733 Charges for Services $10A60,900 (23.5 %) Property Taxes $23,947,968 (53.8 %)� Grants and Contributions - Restricted Investment Charges ($28,949) $10,160,814 (22.8 ) (A.1 %) (22.8 %) A summary of 2013 expenses by function for governmental activities are shown as follows: Expenses by Function - Governmental Activities Total Expenses $37,408,149 General Interest on Debt Government $3,864,333 $5,135,338 (103 %) Public Works (13.7 %) Parks and $5,085,633 I Recreation (13.6%) $3;5 03,087 (9.4 % ) Depreciation $8,940,423 (23.9 %) Public Safety $10,879,335 (29.1 %) W1 Expenses — The City's 2013 total governmental activities expenses (before depreciation on capital assets and interest on long -term debt) increased by $1,303,896 or 5.6 %. Total governmental activities expenses increased by $1,821,055 or 5.1 %, shown as follows: ovennmental activities expenses 2013 Generalgovenunent $ 5,135,338 Public safety 10,879,335 Public works 5,085,633 Parks and recreation 3,503,087 Total before depreciation and interest 24,603,393 Depreciation on capital assets 8,940,423 Interest on long -term debt 3,864,333 Total govemmental activities expenses $ 37,408,149 2012 $ 5,036,855 10,233,256 4,867,136 3,162,250 23,299,497 8,790,719 3,496,878 $ 35,587,094 Increase/ (D ecrease ) $ 98,483 646,079 218,497 340,837 1,303,896 149,704 367,455 $ 1,821,055 Following are explanations of various increases and (decreases) in expenses by governmental function as shown above. General government expenses increased by $98,483 or 2.0 %; which is primarily attributed to personnel services. Public safety expenses increased by $646,079 or 6.3 %; which is comprised of several components that include the City share of construction cost for the joint Dakota County fire training center; and remodeling of the fire station. Public works expenses increased by $218,497 or 4.5 %; primarily due to street reconstruction overall was higher than the prior year. The street department expenses in 2013 increased due to snow events at year end and associated increase in overtime, motor fuels and road de -icing chemicals. Parks and recreation expenses increased 340,837 or 10.8 %; primarily as a result of filling a vacant director position and increase in operating expenses for the Heritage Center's first full year of operations. Interest on long -term debt increased by $367,455 or 10.5 %; which primary due to new debt issuance. 27 Business -type activities. Business -type activities increased the City's 2013 total net position by $1,090,369. Key elements of the increase in net position along with a comparison of revenues, expenses, and changes in net position during fiscal years 2013 and 2012 are shown as follows: Increase / 2013 2012 (Decrease Revenues Charges for services Liquor Utflity Operating grants and contributions Liquor Ut>7ity Capital contributions utility Investment earnings (charges) Total revenues $ 3,948,599 $ 3,839,723 $ 108,876 9,126,838 9,542,284 (415,446) 3,762 3,762 1,007,291 69,968 103,525 (33,557) 3,414,738 2,903,043 511,695 (42,114 78,611 (120,725 16,521,791 16,470,948 50,843 Liquor 2,473,738 2,392,945 80,793 Utility 10,863,625 10,365,651 497,974 Total expenses 13,337,363 12,758,596 578,767 Change in net position before transfers Transfers Change in net position 3,184,428 3,712,352 (527,924) (2,094,059 (3,101,350 1,007,291 1,090,369 611,002 479,367 Net position - beginning Net position - ending 117,993,783 $ 119,084,152 117,382,781 $ 117,993,783 611,002 $ 1,090,369 The City's 2013 business -type total revenues increased by $50,843 or 0.3 %; the various revenue components are discussed in detail in the following paragraphs. The liquor fund 2013 charges for services (sales less cost of goods sold) increased due to sales volume. The 2013 cost of goods sold as a percentage of sales were 74.3 %, compared to 74.8% in 2012. The overall utility revenue charges for services decreased by $415,446. This overall decrease is represented by a water revenue decrease of $515,372, sanitary sewer revenue increase of $57,203, street light revenue increase of $24,773 and environmental resources revenue increase of $17,950. The water decrease is due to customer consumption as a result of changes in weather patterns and increase in customers as a result of community growth. The sanitary sewer, street light and environmental resources increases are due to increase in customers. PQ • The utility fund experienced a total increase of $511,695 in capital contributions. Majority of the increase is derived from water and sanitary sewer contributed from developer improvement projects. City improvement project infrastructure assets of $94,958 were contributed to the utility fund which is within the net transfer amount of ($2,094,059) on the Statement of Activities. The total amount of contributed infrastructure assets received by the utility fund varies yearly. • Investment earnings decreased ($120,725). The reduction is the result of changes in investment asset values which are inversely related to the changes in market rates. The decrease is consistent with prevailing market conditions. The City's 2013 business -type total expenses increased by $578,767 or 4.5% are as follows: decrease) From 2012 Liquor usiness -type activities expenses Fund Personnel services $ 7,208 Commodities (6,896) Other charges and services 91,786 Sanitary sewage treatment and disposal - Depreciation on capital assets (3,252) Interest, fiscal charges, bond premium (net) (8,053 Total increase /(decrease) $ 80,793 decrease) From 2012 Utility Fund Total $ 84,190 $ 91,398 (32,562) (39,458) 260,181 351,967 141,595 141,595 44,570 41,318 - (8,053 $ 497,974 $ 578,767 o The liquor fund other charges and services increase of $91,786 is primarily the result of professional fees and credit card processing fees related to increase in sales volume. o The utility fund other charges and services increase is attributed to several major maintenance projects compared to previous year on lift stations. Metropolitan Council Environmental Services (MCES), which is responsible for sewage treatment and disposal, increased sanitary sewer processing costs by approximately 4.8 %. Financial Analysis of the City's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. Some funds are required statutorily while others are established internally to assist management in accounting for certain activities. Governmental funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such 29 information is useful in assessing the City's financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $64,782,416. Of this amount, $25,939,736 or 40% of this combined ending fund balance constitutes unrestricted fund balance that is available for spending at the government's discretion. Nonspendable fund balances of $126,014 are amounts that are not in a spendable form, such as prepaid items, and inventory. The remaining fund balance is restricted for (a) debt service of $32,825,580, (b) capital acquisition of $5,849,027, and (c) other restricted purposes of $42,059. The general fund is the chief operating fund of the City. At the end of the current fiscal year, the fund balance was $9,666,560 which surpassed the beginning 2014 budgeted fund balance of $9,578,040, by $88,520. The 2013 net change in fund balance of ($1,825,215) surpassed the final 2013 adopted budget net change in fund balance of ($3,022,332) by $1,197,117. The G.O. obligation (debt service) fund balance decreased by ($640,055) due to reduced bond debt obligations. The G.O. improvement (debt service) fund balance increased by $686,681. The City levies the required property taxes and special assessments levied against benefited property owners to meet the bonded debt service requirements in the following year. The change in fund balance is subject to principal and interest requirements of existing debt and that of new debt issuance. The building (capital projects) fund expended $965,165 for the city share of construction cost for the joint Dakota County fire training center, remodeling of the fire station #1, and major maintenance projects. Financing was provided by $914,755 of revenues from the final payment of the sale of land from Lifetime Fitness, investment income, donations and other revenue sources. An additional $1,238,360 of financing was provided from transfers from the liquor fund (enterprise). The improvement construction (capital projects) fund accounts for major infrastructure reconstruction projects that require debt issuance for financing purposes. The activity in this fund may fluctuate from year to year depending on the scope of project. Large projects such as the interstate highway interchange and bridge reconstruction projects may take several years to complete. The fund balance decreased by ($251,817) due to the preliminary engineering costs associated with the 2014 street reconstruction project. The 2014 street reconstruction project will be financed with bond issuance in 2014. Other Post - Employment Benefits (OPEB) In accordance with the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Post - employment Benefits Other Than Pensions, an actuarial valuation was required to be computed and reported for the City's post - employment health insurance benefits provided to eligible employees through the City's Other Post - Employment Benefits Plan. 30 The net OPEB obligation and corresponding expense for governmental activities is reported within the government -wide financial statements. The net OPEB obligation liability and corresponding expense for enterprise funds are recorded within those funds. Refer to Note 14. — Other Post- Employment Benefits (OPEB) Plan, of the Notes to Basic Financial Statements for complete information concerning the City's OPEB Plan. General Fund Budgetary Highlights With the exception of the streets, and arts center departments, all other general fund departments expended their 2013 budget appropriations at or below the final adopted budget. A schedule of revenues, expenditures and changes in fund balances — budgetary comparison is disclosed in the required supplemental information section of this report. A summary of general fund revenues, expenditures, other financing sources (uses), variance with final budget, and net change in fund balance is as follows: Net change in fund balance $ (620,725 $ (3,022,332 $ (1,825,215 $1,197,117 The 2013 actual general fund revenues exceeded the final budget by $974,993 and expenditures were under final adopted budget by $222,124. Other financing sources (uses) were at the final budget. The general fund actual net change in fund balance surpassed final budget by $1,197,117. 31 General Fund Budget As Variance Originally Final With Final Adopted Budget Actual Budget Revenues Property taxes $ 15,920,497 $ 15,920,497 $ 15,961,759 $ 41,262 Licenses and permits 1,345,449 1,401,449 2,087,937 686,488 Intergovernmental 621,226 721,524 800,341 78,817 Charges for services 1,625,740 1,733,758 2,027,905 294,147 Fines 294,809 294,809 219,535 (75,274) hrvesnr�ent income (charges) 32,735 32,735 (27,206) (59,941) Donations 15,454 39,047 44,260 5,213 Miscellaneous 54,971 54,971 59,252 4,281 Total revenues 19,910,881 20,198,790 21,173,783 974,993 Expenditures Personnel services 15,301,446 15,462,789 15,186,343 276,446 Commodities 1,623,218 1,688,101 1,938,689 (250,588) Other charges and services 4,194,086 4,347,639 4,150,267 197,372 Capital outlay 23,153 36,283 37,389 (1,106) Other 105,000 - - Total expenditures 21,246,903 21,534,812 21,312,688 222,124 Other financing sources (uses) 715,297 (1,68 6,310) (1,686,310) - Net change in fund balance $ (620,725 $ (3,022,332 $ (1,825,215 $1,197,117 The 2013 actual general fund revenues exceeded the final budget by $974,993 and expenditures were under final adopted budget by $222,124. Other financing sources (uses) were at the final budget. The general fund actual net change in fund balance surpassed final budget by $1,197,117. 31 The following is a brief summary explanation of the various budgets to actual variances for revenues: o Property taxes were greater than anticipated by $41,262 due to higher than anticipated collection of current taxes. o Licenses and permits exceeded estimates by $686,488 due to greater than anticipated building permit fees. The number of residential building permits issued increased from 282 in 2012 to 374 units in 2013. o Intergovernmental revenues exceeded estimates by $78,817 due to federal grants for public safety highway safety initiatives. o Charges for services exceeded estimates by $294,147 which is primarily related to public works engineering fees derived from reconstruction projects. o Fines were below estimates by ($75,274) due to police officer vacancies in traffic control division. o Investment income was below estimates by ($59,941) due to prevailing market conditions. The City's Management employs prudent investment practices and cash management techniques to maximize investment income while protecting the City's treasury. o Donations and miscellaneous revenues experienced variances of $5,213 and $4,281, respectively. The following is a brief summary explanation of the various budgets to actual variances for expenditures: o Personnel costs including benefits were below budget $276,446 due to vacant positions as a result of retirements and resignations, lower than anticipated benefit costs and fire emergency calls. o Commodities exceed budget by ($250,588) due to a number of factors the most significant of which is the number and quantity of snow events which resulted in an increase in de -icing chemicals. o Other charges and services were $197,372 below budget which is attributed to several factors including, an energy reduction programs which resulted in overall lower cost of natural gas and electricity and no elections held in 2013. o Capital outlay exceeded budget by a variance of ($1,106). 32 Capital Asset and Debt Administration Capital assets. The City's capital assets for governmental and business -type activities as of December 31, 2013 are $298.5 million (net of accumulated depreciation). This amount represents an increase (including additions, deletions, and depreciation) of approximately $8.0 million from 2012. The net investment in capital assets including land, historical treasures, buildings, machinery and equipment, other improvements, infrastructure, and construction in process are shown as follows: Land Historical treasures Buildings and improvements Machinery and equipment Other improvements Infrastructure Streets Storm sewer Parks Water Sanitary sewer Construction in process Total Governmental Business -type Activities Activities Total $ 22,717,752 $ 1,800,456 $ 24,518,208 100,000 - 100,000 42,885,111 18,541,192 61,426,303 7,120,987 1,198,804 8,319,791 2,859,976 - 2,859,976 58,310,415 58,310,415 40,826,861 40,826,861 7,789,912 - 7,789,912 48,242,739 48,242,739 36,090,632 36,090,632 7,532,493 2,436,985 9,969,478 $ 190,143,507 $ 108,310,808 $ 298,454,315 The City's 2014 adopted budget provides funding for $36.7 million in infrastructure capital assets, public buildings improvements and upgrades, and equipment capital assets such as vehicle replacements for public safety and public works, and technology equipment. Refer to Note 3. - Capital Assets, of the Notes to Basic Financial Statements for additional information. Debt administration. At the end of the current fiscal year, the City of Lakeville had total bonded debt outstanding of $108.445 million, which is a decrease of ($1.3 million) compared to the prior year. The decrease is due to the issuance of one new bond issue totaling $4.685 million, and principal bond maturities of ($5.985 million). The City manages its debt structure by utilizing approaches that take full advantage of its financial position, revenue trends and conditions in municipal bond markets. During 2012, the City issued the General Obligation Refunding Bonds Series 2012 B to call the Street Reconstruction Bonds Series 2003 A and the Capital Improvement Plan Bonds Series 2004 A on February 1, 2014, and February 1, 2015, respectively. The refunding 33 transaction yielded a net savings to the City of $2,768,474 with a present value economic gain of $2,235,119. Refer to Note 5. — Long -Term Liabilities, of the Notes to Basic Financial Statements for additional information about the City's governmental and business -type long -term debt activity. The City's outstanding bonded obligation debt as of December 31, 2013 is shown as follows: Balance Balance January 1 Issued Redeemed December 31 General obligation bonds Capital improvement 39,730,000 715,000 39,015,000 Street reconstruction 30,715,000 - 1,135,000 29,580,000 G.O. Improvement 13,185,000 4,685,000 1,230,000 16,640,000 State -aid street revenue 5,280,000 - 690,000 4,590,000 Water revenue 3,760,000 - 895,000 2,865,000 Tax increment 2,755,000 - 420,000 2,335,000 Park 1,215,000 - 400,000 815,000 Arena revenue 1,175,000 - 130,000 1,045,000 HRA lease revenue 8,535,000 - 210,000 8,325,000 Total governmental 106,350,000 4,685,000 5,825,000 105,210,000 Business -type bonds Liquor revenue 3,395,000 - 160,000 3,235,000 Total bonds payable $ 109,745,000 $ 4,685,000 $ 5,985,000 $ 108,445.000 Credit Rating The City of Lakeville's general obligation bond rating as of Aal December 31, 2013 is "Aal" as rated by Moody's Investors Service. Moody's Investor Service credit report stated the rating was "The Aal underlying rating reflects the city's history of excellent financial management and strong reserve levels; wealthy tax base located just south of the Twin Cities Metropolitan Area, and an above average debt burden. " State statutes limit the amount of general obligation debt a Minnesota city may issue to 3% of total assessor's taxable market valuation. The City has $37,758,698 of net bonded debt, which is subject to the $143,024,260 current debt limitation, thereby resulting in a legal debt margin of $105,265,562. Refer to the Statistical Section of this report for a detailed computation of the City's legal debt margin. 34 Economic Conditions and Next Year's Budget The City of Lakeville remains one of the top growth cities in the Minnesota twin city metro area. The number of residential building permits for new construction was up in 2013 (374 residential dwelling units compared to 282 residential dwelling units in 2012). In our opinion, the resurgence is due to a number of factors including but not limited to; near historical low interest rates, low regional unemployment rate 4 %, improved personal income levels, reduced number of home foreclosures and increasing home values. The budget and five year capital improvement plan are premised on the assumption growth will continue at a subdued level for the foreseeable future. The adopted 2014 budget reflects a continuation of the program and service levels established by the City Council over the past several years. No new programs or services were included in the adopted budget. The 2014 budget also focuses on City efforts to position the City to thrive through investments in community planning to prepare for the future, investments in technology to maximize efficiencies, developing effective partnerships to capitalize on opportunities and multi- agency resources, infrastructure improvements to promote economic and community development and service continuity through staffing enhancements to meet the expectations of community residents and businesses. Requests for Information This financial report is designed to provide a general overview of the City of Lakeville's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be directed to the City of Lakeville Finance Department at 20195 Holyoke Avenue, Lakeville, Minnesota 55044, (952) 985 -4400, or email request to dfeller @ci.lakeville.mn.us. 35 This page intentionally left blank. BASIC FINANCIAL STATEMENTS CITY OF LAKEVILLE, MINNESOTA STATEMENT OF NET POSITION DECEMBER 31, 2013 ASSETS: Cash and investments Receivables Internal balances Inventory Prepaid items Restricted assets (temporarily): Cash and investments Investments held by trustee Capital assets Non - depreciable Depreciable, net Total capital assets Total assets LIABILITIES: Salaries, accounts, contracts, interest, and deposits Unearned revenue Non - current liabilities Due within one year Due in more than one year Total liabilities NET POSITION: Net investment in capital assets Restricted for Special purposes Debt service Capital acquisition Unrestricted Total net position See accompanying notes to basic financial statements. Governmental Business -type Activities Activities Total $ 41,735,486 $ 11,356,043 $ 53,091,529 10,521,158 2,529,740 13,050,898 (191,612) 191,612 - 100,632 1,721,888 1,822,520 25,382 36,210 61,592 - 324,125 324,125 23,759,815 - 23,759,815 30,350,245 4,237,441 34,587,686 159,793,262 104,073,367 263,866,629 190,143,507 108,310,808 298,454,315 266,094,368 124,470,426 390,564,794 4,359,124 1,776,002 6,135,126 381,119 - 381,119 17,097 388,177 17,485,977 94,498,952 3,222,095 97,721,047 116,336,995 5,386,274 121,723,269 129,599,494 105,055,746 234,655,240 42,759 - 42,759 12,114,137 324,125 12,438,262 5,489,048 - 5,489,048 2,511,935 13,704,281 16,216,216 $ 149,757,373 $ 119,084,152 $ 268,841,525 36 E-� 0 y W IC- M ^ � M W r[ ✓ -^i U� W Q W W Q '� z o�W H 6 FN a C C @ O 3 00 C O d a d Y R d Z Z , C N• C y d N a w K W � ` t Yd U Z N P (O N �lI M N M 01 N M OD M N N M N M N V M M N 7 W N t0 O O O ap h M 7 N Of N N O) O O C N N N (n N N ')T N OD h N m h N h R r O. 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CITY OF LAKEVILLE, MINNESOTA BALANCE SHEET- GOVERNMENTAL FUNDS DECEMBER 31, 2013 Assets Cash and investments Investments held by trustee Interest receivable Taxes receivable Accounts receivable Special assessments receivable Inventory Prepaid items Total assets Liabilities Salaries payable Accounts payable Contracts payable Deposits payable Unearned revenue Total liabilities Deferred inflows of resources Unavailable revenue - taxes Unavailable revenue - special assessments Unavailable revenue - other Total deferred inflows of resources Fund balances Nonspendable Restricted Committed Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances See accompanying notes to basic financial statements. Debt Service General G.O. General Obligation Imorovement $ 9,586,160 $ 3,893,147 $ 2,882,563 - 23,064,497 - 38,263 164,411 8,145 1,292,346 315,906 71,947 437,327 - - - 705,698 5,827,548 100,632 - - 25,382 768,790 5,819,601 $ 11,480,110 $ 28,143,659 $ 8,790,203 $ 392,835 $ - $ - 797,474 3,210 3,317 13,959 381,119 - - 1,585,387 3,210 3,317 228,163 63,092 13,472 - 705,698 5,806,129 228,163 768,790 5,819,601 126,014 - - - 27,371,659 2,967,285 45,000 - - 9,495,546 9,666,560 27,371,659 2,967,285 $ 11,480,110 $ 28,143,659 $ 8,790,203 38 Capital Projects Nonmajor Total Improvement Governmental Governmental Buildina Construction Funds Funds $ 1,607,736 $ 1,512,049 $ 21,504,305 $ 40,985,960 - - 695,318 23,759,815 3,418 5,429 76,870 296,536 - - 160,434 1,840,633 132,430 190,774 543,975 1,304,506 - - 513,567 7,046,813 - 100,632 25,382 $ 1,743,584 $ 1,708,252 $ 23,494,469 $ 75,360,277 17,551 76,627 94,178 687,539 7,631 $ 400,466 276,441 1,264,097 340,054 938,116 88,335 102,294 - 381,119 712,461 3,086,092 - 32,477 337,204 - - 509,608 7,021,435 132,430 - 700 133,130 132,430 - 542,785 7,491,769 126,014 - 1,030,007 7,347,715 38,716,666 1,516,976 212,336 14,891,508 16,665,820 - (221,630) 9,273,916 1,516,976 1,020,713 22,239,223 64,782,416 $ 1,743,584 $ 1,708,252 $ 23,494,469 $ 75,360,277 166,104 521,435 39 CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2013 Fund balance - total governmental funds $ 64,782,416 Amounts reported for governmental activities in the statement of net position are different because: 1. Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds. Governmental capital assets $311,296,089 Less accumulated depreciation (121,152,582) 190,143,507 2. Grant receivable that is applicable towards accrued bond interest payable is susceptible to full accrual on the government -wide statements. 30,933 3. Long term liabilities are not payable with current financial resources and therefore are not reported in the governmental funds. Bonds (105,210,000) Accrued interest (1,644,629) Loan (1,159,843) Unamortized bond discount 7,846 Unamortized bond premium (2,566,425) (110,573,051) 4. Accrued compensated absences and net OPEB obligations are not Payable with current financial resources and therefore are not reported in the governmental funds. (2,668,330) 5. Deferred inflows of resources in governmental funds is susceptible to full accrual on the government -wide statements. 7,491,769 6. The City uses an internal service fund to charge the cost of insurance activities to individual funds. A portion of the assets and liabilities of the municipal reserves fund are included in governmental activities in the statement of net position. 550,129 Net position of governmental activities $149,757,373 See accompanying notes to basic financial statements. 40 This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2013 Revenues Property taxes Tax increment Licenses and permits Intergovernmental Charges for services Special assessments Fines Investment income (charges) Donations Miscellaneous Total revenues Expenditures - current General government Public safety Public works Parks and recreation Total expenditures - current Expenditures - capital outlay General government Public safety Public works Parks and recreation Total expenditures - capital outlay Expenditures - debt service Principal maturities Interest on debt Fiscal charges Total expenditures - debt service Total expenditures Debt Service General G.O. General Obligation Improvement $ 15,961,759 $ 4,105,726 $ 960,014 2,087,937 - 800,341 71,780 2,027,905 - - 5,064,156 82,716 1,008,314 219,535 - - (27,206) 63,879 (5,790) 44,260 - 59,252 21,173,783 4,324,101 1,962,538 4,188,672 10,113,958 3,766,665 3,206,004 21,275,299 24,796 4,124 282 8,187 37,389 2,250,000 1,230,000 2,808,907 318,189 5,249 10,685 5,064,156 1,558,874 21,312,688 5,064,156 1,558,874 Excess (deficiency) of revenues over expenditures (138,905) (740,055) 403,664 Other financing sources and (uses) Transfers from other funds Transfers to other funds Issuance of debt Premium on bonds issued Sale of capital assets Total other financing sources and (uses) 715,297 100,000 280,604 (2,401,607) - - 2,413 (1,686,310) 100,000 283,017 Net change in fund balance Fund balance, January 1 Fund balance, December 31 See accompanying notes to basic financial statements. (1,825,215) (640,055) 686,681 11,491,775 28,011,714 2,280,604 $ 9,666,560 $ 27,371,659 $ 2,967,285 41 Capital Projects Nonmajor Total Improvement Governmental Governmental Building Construction Funds Funds $ $ $ 2,094,440 $ 23,121,939 652,188 - 859,436 859,436 89,666 5,251,396 639,557 2,727,494 61,377 268,780 2,393,611 3,534,512 20,458 - 4,877,504 6,925,867 - 52,319 1,143,349 - 219,535 (2,230) (3,862) (52,799) (28,008) 41,583 75,092 105,018 265,953 29,944 576,592 665,788 89,755 340,010 11,545,678 39,435,865 586,103 4,774,775 - 10,113,958 3,766,665 - 3,206,004 586,103 21,861,402 161,934 59,604 595,497 841,831 652,188 - 797,693 1,454,005 89,666 5,251,396 2,274,349 7,615,693 61,377 - 2,542,010 2,611,574 965,165 5,311,000 6,209,549 12,523,103 2,345,000 5,825,000 821,644 3,948,740 10,417 26,351 3,177,061 9,800,091 965,165 5,311,000 9,972,713 44,184,596 (875,410) (4,970,990) 1,572,965 (4,748,731) 1,238,360 4,759,818 7,094,079 - (41,701) (2,414,613) (4,857,921) 4,682,587 4,685,000 - 78,287 78,287 825,000 825,000 2,063,360 4,719,173 2,345,205 7,824,445 1,187,950 (251,817) 3,918,170 3,075,714 329,026 1,272,530 18,321,053 61,706,702 $ 1,516,976 $ 1,020,713 $ 22,239,223 $ 64,782,416 42 CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2013 Net change in fund balances - total governmental funds $ 3,075,714 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures while the government -wide statement of activities reports depreciation expense to allocate those expenditures over the life of the assets. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. This is the amount by which depreciation expense exceeded capital outlay. Capital outlay $ 9,973,154 Capital contributed by developer 4,138,329 Depreciation expense (8,940,423) 5,171,060 2. In the government -wide statement of activities, only the gain or loss on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sales increase financial resources. Thus, the change in net position differs from the change in fund balance by the net book value of the capital assets disposed of. (57,771) 3. Revenues in the government -wide statement of activities that do not provide current financial resources are not reported as revenues in the governmental funds. (111,576) Deferred inflows of resources - December 31, 2012 (7,323,458) Deferred inflows of resources - December 31, 2013 7,491,769 168,311 4. Bond proceeds are reported as other financing sources in governmental funds and thus 222,334 31,829 contribute to the increase in fund balance. Bond, loan, and capital lease principal maturities are reported as expenditures in governmental funds thus reducing fund balance. In the government -wide statements, however, issuing debt increases long- (161,828) term liabilities while debt repayment reduces long -term liabilities thus affecting the (41,953) (203,781) statement of activities. Bond proceeds (4,685,000) Bond, loan, and capital lease principal maturities 5,825,000 1,140,000 5. Interest and debt premium /discounts in the government -wide statement of activities differs from the amounts reported in governmental funds because accrued interest was calculated for long -term debt payable in addition to the amortizations of debt premiums/ discounts which are recognized respectively as expenditures and other financing sources and uses in the governmental fund statements. Accrued interest payable (111,576) Grant applicable towards accrued interest payable (642) Premium on 2013 bonds issued (78,287) Amortization of debt premiums /discounts 222,334 31,829 6. Accrued compensated absences and net OPEB obligations are not payable with current financial resources and therefore are not reported in the governmental funds. Net compensated absences increase - December 31, 2013 (161,828) Net OPEB obligation increase - December 31, 2013 (41,953) (203,781) 7. Internal service funds are used by management to charge the costs of certain activities, such as insurance, to individual funds. This amount represents a portion of the change in net position of the internal service fund, which are reported in with governmental activities. (98,719) Change in net position of governmental activities $ 9,226,643 See accompanying notes to basic financial statements 43 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF NET POSITION - PROPRIETARY FUNDS DECEMBER 31, 2013 Business -type Activities - Governmental Enterprise Funds Activities - Internal Service ASSETS Current assets Cash and investments Interest receivable Accounts receivable Inventory Prepaid expenses Total current assets Non - current assets Restricted cash and investments Capital assets Land Buildings and improvements Machinery and equipment Infrastructure Construction in process Accumulated depreciation Net capital assets Total non - current assets Total assets LIABILITIES Current liabilities Salaries payable Accounts payable Contracts payable Accrued interest payable Deposits payable Accrued compensated absences Long -term debt - current Total current liabilities Non - current liabilities Accrued compensated absences Net OPEB obligation Long -term debt Total non - current liabilities Total liabilities NET POSITION Net investment in capital assets Restricted for debt service Unrestricted Total net position Liquor $ 3,876,758 18,942 81 1,679,469 22,710 5,597,960 324,125 Utility $ 7,479,285 39,870 2,470,847 42,419 13,500 10,045,921 Total $ 11,356,043 58,812 2,470,928 1,721,888 36,210 15,643,881 324,125 1,272,296 528,160 1,800,456 3,903,664 22,041,706 25,945,370 420,956 2,343,101 2,764,057 - 129,277,552 129,277,552 30,714 2,406,271 2,436,985 (1,324,144) (52,589,468) (53,913,612) 4,303,486 1 04,007,322 108,310,808 4,627,611 104,007, 322 108,634,933 Funds 749,526 1.737 751,263 10,225,571 114,053,243 124,278,814 751,263 32,223 49,408 81,631 - 1,207,916 299,812 1,507,728 9,522 4,228 100,682 104,910 - 67,396 - 67,396 - 8,937 5,400 14,337 - 92,550 130,627 223,177 - 165,000 - 165,000 1,578,250 585,929 2,164,179 9,522 10,760 82,327 93,087 13,841 25,105 38,946 3,090,062 3,090,062 3,114,663 107,432 3,222,095 4,692,913 693,361 5,386,274 9,522 1,048,424 104,007,322 105,055,746 324,125 - 324,125 4,160,109 9,352,560 13,512,669 741,741 $ 5,532,658 $ 113,359,882 118,892,540 $ 741,741 Explanation of difference between proprietary funds statement of net position and the government -wide statement of net position: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount consists of the necessary adjustment to reflect the consolidation of internal service fund activities: Net position of business -type activities See accompanying notes to basic financial statements. 191,612 $ 119,084,152 44 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2013 Sales and cost of sales Sales Cost of sales Gross profit Operating revenues User charges Other Total operating revenues Gross profit and total operating revenues Operating expenses Personnel services Commodities Other charges and services Disposal charges Depreciation Total operating expenses Operating income (loss) Non - operating revenue (expense) Intergovernmental - grants Investment income (charges) Interest, fiscal charges, bond premium (net) Disposal of capital assets Total non - operating revenue (expense) Income (loss) before contributions and transfers Contributed capital from governmental activities Contributed capital from developers Transfers from other funds Transfers to other funds Total contributions and transfers (net) Change in net position Net position, January 1 Net position, December 31 Business -type Activities - Governmental Enterprise Funds Activities - Internal Service Liauor Utility Total Funds $ 15,381,124 $ 15,381,124 11,432,525 11,432,525 3,948,599 3,948,599 3,762 179,828 183,590 (13,469) (28,351) (41,820) (1,235) (161,309) - (161,309) (27,516) (106,220) (133,736) - (198,532) 45,257 (153,275 (1,235 1,469,168 (1,572,714) (103,546 (68,482 94,958 94,958 3,304,878 3,304,878 1,396 1,396 - (1,749,982) (440,431) (2,190,413) (47,141 (1,749,982) 2,960,801 1,210,819 (47,141) (280,814) 1,388,087 1,107,273 (115,623) 5,813,472 111,971,795 857,364 $ 5,532,658 $ 113,359,882 $ 741,741 Explanation of difference between proprietary funds statement of revenue, expenses, and changes in fund net position and the statement of activities: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount represents the income that has been allocated back to the business -type activities in the government -wide statement of activities that is attributable to the City's business -type activities: Change in net position of business -type activities See accompanying notes to basic financial statements. 45 (16,904) $ 1,090,369 $ 8,966,298 8,966,298 $ 298,427 160,540 160,540 112,636 9,126,838 9,126,838 411,063 3,948,599 9,126,838 13,075,437 411,063 1,282,013 1,796,122 3,078,135 - 50,973 355,301 406,274 - 833,997 2,339,848 3,173,845 478,310 - 3,092,195 3,092,195 - 113,916 3,161,343 3,275,259 2,280,899 10,744,809 13,025,708 478,310 1,667,700 (1,617,971) 49,729 (67,247) 3,762 179,828 183,590 (13,469) (28,351) (41,820) (1,235) (161,309) - (161,309) (27,516) (106,220) (133,736) - (198,532) 45,257 (153,275 (1,235 1,469,168 (1,572,714) (103,546 (68,482 94,958 94,958 3,304,878 3,304,878 1,396 1,396 - (1,749,982) (440,431) (2,190,413) (47,141 (1,749,982) 2,960,801 1,210,819 (47,141) (280,814) 1,388,087 1,107,273 (115,623) 5,813,472 111,971,795 857,364 $ 5,532,658 $ 113,359,882 $ 741,741 Explanation of difference between proprietary funds statement of revenue, expenses, and changes in fund net position and the statement of activities: The City uses an internal service fund to charge the cost of its insurance activities to individual funds. This amount represents the income that has been allocated back to the business -type activities in the government -wide statement of activities that is attributable to the City's business -type activities: Change in net position of business -type activities See accompanying notes to basic financial statements. 45 (16,904) $ 1,090,369 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2013 Business -type Activities - Governmental Enterprise Funds Activities - Internal Service Liauo Utili Total Funds Cash flows from operating activities Cash received from customers Cash received from general service charges Cash paid to suppliers Cash paid to and for employees Net cash flows from operating activities $ 15,382,045 $ 9,317,257 $ 24,699,302 $ - - - - 411,597 (12,527,013) (5,917,725) (18,444,738) (472,732) (1,297,327) (1,770,562) (3,067,889) - 1,557,705 1,628,970 3,186,675 (61,135) Cash flows from noncapital financing activities Intergovernmental - grant Transfers from other funds Transfers to other funds Net cash flows from noncapital financing activities Cash flows from capital and related financing activities Acquisition of capital assets Proceeds from sale of capital assets Interest and fiscal charges Principal maturities Net cash flows from capital and related financing activities Cash flows from investing activities Investment income received Net change in cash and cash equivalents Cash and cash equivalents, January 1 Change in Accounting Principle Cash and cash equivalents, December 31 (including restricted cash account of $324,125) Reconciliation of operating income (loss) to net cash flows from operating activities Operating income (loss) Adjustments Depreciation expense (Increase) decrease in assets Accounts receivable Inventory Prepaid expenses Increase (decrease) in liabilities Salaries payable Accounts payable Deposits payable Accrued compensated absences Net OPEB obligation Total adjustments Net cash flows from operating activities Supplemental schedule of non -cash financing activities: The City assumes ownership of utility capital assets from governmental projects and land developers. Capital assets assumed were as follows: See accompanying notes to basic financial statements. 3,762 71,409 75,171 - - 1,396 1,396 - (1,749,982) (440,431) (2,190,413) (47,141) (1,746,220) (367,626) (2,113,846) (47,141) (116,291) (2,676,861) (2,793,152) - 108 4,474 4,582 - (166,175) - (166,175) - (160,000) (160,000) (442,358) (2,672,387) (3,114,745) - (6,807) (18,212) (25,019) (355) (637,680) (1,429,255) (2,066,935) (108,631) 4,838,563 8,908,539 13,747,102 858,157 $ 4,200 $ 7,479,284 $ 11,680,167 $ 749,526 $ 1,667,700 $ (1,617,971) $ 49,729 $ (67,247) 113,916 3,161,343 3,275,259 - 921 190,419 191,340 534 (275,968) 87,271 (188,697) - (1,216) - (1,216) - 5,196 9,027 14,223 - 67,046 (217,152) (150,106) 5,578 620 (500) 120 - (22,976) 11,599 (11,377) - 2,466 4,934 7,400 - (109,995) 3,246,941 3,136,946 6,112 $ 1,557,705 $ 1,628,970 $ 3,186,675 $ (61,135) $ 3,399,836 $ 3,399,836 46 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF FIDUCIARY NET POSITION - AGENCY FUND DECEMBER 31, 2013 Escrow Fund Assets Cash and investments Liabilities Deposits payable See accompanying notes to basic financial statements. $ 6,851,480 $ 6,851,480 47 NOTES TO BASIC FINANCIAL STATEMENTS Note 1 —Summary of Significant Accounting Policies Note 2 — Cash and Investments Note 3 — Capital Assets Note 4 — Operating Leases Note 5 — Long -Term Liabilities Note 6 — Net Investment in Capital Assets Note 7 — Net Position (Restricted) Note 8 — Construction Commitments Note 9 — Fund Balances Note 10 — Contributed Capital Assets from Private Land Developers and City Government Note 11 — Excess of Expenditures over Appropriations Note 12 — Interfund Transfers Note 13 — Joint Powers Debt Commitment Note 14 — Other Post - Employment Benefits (OPEB) Plan Note 15 — Risk Financing and Related Insurance Issues Note 16 — Defined Benefit Pension Plans - Statewide Note 17 — Defined Contribution Plan — Statewide Note 18 — Lakeville Fire Relief Association Note 19 — Deferred Compensation Plan Note 20 — Litigation Note 21 — Conduit Debt Note 22 — GASB Standards Issued But Not Yet Implemented CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accountine Policies The City of Lakeville operates under the "Optional Plan A" form of government, according to applicable State of Minnesota Statutes. The Statutes prescribe a Mayor - Council form of organization. The City provides the following services: public safety, highways and streets, water and sanitary sewer, public improvements, planning and zoning, culture- recreation, and general administration. The basic financial statements of the City of Lakeville have been prepared in conformity with United States generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard- setting body for establishing governmental accounting and financial reporting principles. The City's more significant accounting policies are described below. A. Financial Reporting Entity of the Ciri The City of Lakeville is a municipal corporation governed by an elected mayor and a four- member council. In accordance with GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units — an amendment of GASB Statement No. 14, these financial statements represent the City of Lakeville and its sole component unit. The City includes all funds, organizations, agencies, departments, and offices that are not legally separate from such. Component units are legally separate organizations for which the elected officials of the City are financially accountable and are included within the basic financial statements of the City based on the nature and the significance of their operational or financial relationships with the City. Blended Component Unit The Housing and Redevelopment Authority (HRA) of Lakeville, Minnesota was created by the City to provide housing and redevelopment assistance to its citizens. The HRA provides this assistance through the administration of various programs. The HRA is governed by a five - member Board of Commissioners comprised of the City of Lakeville Council in accordance with Minnesota Statutes 469.003, Subdivision 6. Although it is legally separate from the City, the HRA is reported as if it were a part of the City (blended) because the City Council is also the HRA governing board. The Commissioners terms of office coincide with those of the City Council member. The City Administrator serves as the HRA Executive Director. The operational responsibility for the HRA rests with management of the City. During fiscal year 2006, the HRA issued $9,230,000 in Ice Arena Lease Revenue Bonds, Series 2006, to finance the construction of the single sheet Hasse ice arena facility. Debt service will be payable from equal lease payments to be made by the City pursuant to the lease agreement between the HRA and the City, and in conjunction with the joint powers agreement between the City and Independent School District No. 194. These HRA bond obligations are combined and presented separately in the debt service funds as debt supported by HRA lease revenue. The HRA has not issued separate financial statements for the period ending December 31, 2013. Information of a non - financial matter regarding the HRA can be obtained at the City's Finance offices, located at 20195 Holyoke Avenue, Lakeville, Minnesota 55044. W. CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1 — Summary of Significant Accounting Policies (continued) B. Government -wide and Fund Financial Statements The basic financial statements include both government -wide and fund financial statements. The government -wide financial statements focus on the City as a whole (consolidation of the City, excluding fiduciary funds) while the fund financial statements focus on the major individual funds (reported as separate columns within the fund financial statements). Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. Both the govemment -wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business -type. In the governmental -wide Statement of Net Position, both the governmental and business -type activities columns (a) are presented on a consolidated basis by column, and (b) are reflected, on a full accrual, economic resources measurement focus, which incorporates long -term assets and receivables as well as long- term debt and obligations. The City generally first uses restricted assets for expenses incurred for which both restricted and unrestricted assets are available. The City may defer the use of restricted assets based on a review of the specific transaction. The government -wide Statement of Activities reflects both the gross cost and the net cost per function category (general government, public safety, public works, and parks and recreation) which are otherwise being supported by both program and general revenues (charges for services, grants and contributions, property taxes, etc.). The Statement of Activities reduces gross expenses (including depreciation) by the related program revenues and operating/capital grants and contributions. The program revenues must be directly associated with the function (general government, public safety, public works, and parks and recreation) or a business -type activity. Program revenues are derived directly from the program itself or from parties outside the City's taxpayers or citizenry, as a whole. The City does not allocate indirect expenses. The operating grants and contributions column include operating- specific and discretionary grants while the capital grants and contributions column includes capital specific grants and contributions. The governmental fund financial statements are presented using the current financial resources measurement focus and the modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. Since the governmental fund statements are presented using a measurement focus and basis of accounting different from that used in the government -wide statement's governmental column, a reconciliation is presented that briefly explains the adjustments necessary to reconcile ending net position and the change in net position. Both the City as a whole and the City's major funds, including both governmental and enterprise funds, as well as an agency fund, are presented utilizing the focus of the GASB Statement No. 34 reporting model. Each presentation provides valuable information that can be analyzed and compared (between years and between governments) to enhance the usefulness of the information. 10 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) B. Government -wide and Fund Financial Statements (continued) In the fund financial statements, financial transactions and accounts of the City are organized on the basis of funds. The operation of each fund is considered to be an independent fiscal and separate accounting entity, with a self - balancing set of accounts recording cash and/or other financial resources together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Major governmental funds — The City reports the following major governmental funds: • General fund — The general fund is the general operating fund of the City. It is used to account for all financial resources except for those required to be accounted for in another fund. This fund records revenues such as property taxes, licenses and permits, intergovernmental revenues, charges for services, fines, and investment income. Most of the current day -to -day operations of the City are financed from this fund. • Debt service general obligation fund — This fund accounts for those bond issues that financed debt approved by voter referendum, equipment certificates of indebtedness, and capital improvement bonds. Revenues are provided primarily from property taxes. • Debt service G. 0. Improvement fund — This fund accounts for those bond issues that financed street, storm sewer, water, and sanitary sewer improvements. The special assessments levied against benefited property owners are pledged toward the repayment of the principal and interest on these bonds. • Capital projects building fund — This fund accounts for the accumulation and disbursement of funds for the construction or improvement of public buildings. • Capital projects improvement construction And — This fund accounts for complex construction contracts that involve multiple financing resources from the City and other government entities. Construction projects usually extend over several years before completion. Major proprietary funds — The City reports the following major proprietary funds: • Enterprise liquor fund — This fund is used to account for the retail operations of three off - sale liquor stores. • Enterprise utility fund — This fund is used to account for water, sanitary sewer service, street lighting, and environmental resources provided to City customers. 50 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) B. Government -wide and Fund Financial Statements (continued) Other funds — The City reports the following other funds: • Internal service fund — The internal service fund accounts for the City's risk management program relating to general liability, excess liability, property, and casualty insurance costs which are charged to other departments of the City. • Agency fund — The agency fund is used to record the receipt and remittance of monies held by the City as an agent primarily for land developers and builders that will be refunded to the respective depositors when the conditions are satisfied in accordance with the respective agreements. C. Measurement Focus and Basis of Accounting The accounting and reporting treatment applied to a fund is determined by its measurement focus. Funds are classified into three categories: Governmental, Proprietary, and Fiduciary. To provide an accurate cost measurement of individual activities in the fund financial statement consolidation process, the City's interfund activity relating to services provided by and used between functions has been removed from these statements; exceptions are for charges between the government's liquor and utility function and other functions of the government. Governmental Funds: Measurement focus: Governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Reported fund balance is considered a measure of "available spendable resources." Governmental fund operating statements represent increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Basis of accounting: Governmental funds are accounted for using the modified accrual basis of accounting. Their revenues are recognized when susceptible to accrual (i.e., when they become measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current fiscal year or soon enough thereafter to be used to pay liabilities of the current fiscal year. For this purpose the City generally considers revenues to be available if collected within 60 days of year end. • Revenues: Major revenues that are susceptible to accrual include property taxes, excluding delinquent taxes received over 60 days after current fiscal year -end; special assessments, intergovernmental revenue, charges for services, investment income, and donations. Major revenues that are not susceptible to accrual (i.e., license and permit revenues, and miscellaneous revenues) are recorded when received because they are not measurable until collected. 51 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1 — Summary of Significant Accounting Policies (continued) C. Measurement Focus and Basis of Accounting (continued) Governmental Funds: (continued) • Expenditures: Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on long -term debt, other post - employment benefits, and compensated absences which are recognized when due. Proprietary and Fiduciary Funds: • Measurement focus: Proprietary funds and fiduciary funds (with the exception of agency funds) are accounted for on a flow of economic resources measurement focus. This means that all assets, including capital assets, and all liabilities, including long -term liabilities, associated with fund activity are included on the Statement of Net Position. Proprietary fund types Statement of Revenues, Expenses and Changes in Net Position present increases (i.e., revenues) and decreases (i.e., expenses) in net total position. Basis of accounting: Proprietary funds and fiduciary funds (including agency funds) are accounted for using the accrual basis of accounting. Revenues are recognized when earned and expenses are recorded at the time the liabilities are incurred. Unbilled utility service receivables are recorded at current fiscal year -end. Operating versus non - operating items: Proprietary funds distinguish operating revenues and expenses from non - operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenue of the City's enterprise funds and internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non - operating revenues and expenses. D. Assets, Liabilities, Deferred Inflows of Resources. and Net Position or Equity 1. Cash and investments, and interest receivable Cash balances from all funds are combined and invested to the extent available in certificates of deposit, commercial paper, U.S. Government securities, and other securities authorized by State Statutes. Earnings from such investments are allocated to the respective funds on the basis of applicable cash balance participation by each fund. 2. Investments held by trustee Cash and investments held by trustee represent in part the fair value of deposits that are required to be held in trust for various City obligations. These established escrow accounts will remain in effect until the terms and conditions of the obligations have been fulfilled. 52 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) D. Assets Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) 3. Taxes receivable Property tax levies are set by the City Council in December each year and are certified to Dakota County for collection in the following year. Such taxes become a receivable of the City and become a lien on the respective property as of January 1. In Minnesota, most counties act as collection agents for all property taxes. Dakota County spreads the levies over all taxable property within the City of Lakeville. Real and personal property taxes are payable in equal installments by property owners to Dakota County on May 15 and October 15 of each year. Dakota County remits these and delinquent collections to the City twice a year, in January and July. Unpaid taxes on December 31 are classified in the fund financial statements as delinquent taxes receivable. Taxes receivable include the following components: Unremitted - amounts collected by Dakota County but not yet remitted to the City by December 31. Delinquent - amounts billed to property owners but not paid. 4. Special assessments receivable Special assessments are levied against the benefited properties for the assessable costs of special assessment improvement projects in accordance with State Statutes. The City usually adopts the assessment rolls when the individual projects are complete or substantially complete. The City is obligated for the payment of special assessment debt not covered through the collection of special assessments from property owners. Any obligation by the City would be paid by property taxes. Special assessments are collectable over a term of years generally consistent with the term of years of the related bond issue. Collection of annual special assessment installments (including interest) is administered by Dakota County in the same manner as property taxes. Property owners are allowed to prepay total future installments without interest or prepayment penalties. As of December 31, 2013 the special assessment delinquent receivable was $44,255 in the governmental funds and $36,644 in the proprietary enterprise utility fund. Special assessments receivable includes the following components: Unremitted - amounts collected by Dakota County but not yet remitted to the City by December 31. Delinquent - amounts billed to property owners but not paid. Deferred - assessment installments that will be billed to property owners in future years. Other - assessments for which payment has been delayed based on State Statutes or City Council action. 5. Inventory The inventory in the general fund is stated at FIFO (first -in, first -out) cost and consists of expendable supplies held for consumption. Under FIFO, the cost is recognized as an expenditure at the time the inventory items are used (consumption method). The inventories of the proprietary funds are stated at the lower of FIFO cost or replacement market. 6. Prepaid items Payments made to vendors for services that will benefit periods beyond the current year are recorded as prepaid items. Prepaid items are also accounted for using the consumption method. 53 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Inflows of Resources. and Net Position or Equity (continued) 7. Unamortized bond premium and bond discount In the governmental fund financial statements, bond premiums and discounts are recognized as other financing sources and uses, respectively in the current fiscal year. Bond discounts and bond premiums for the City's government -wide financial statements are deferred and amortized over the term of the bonds using the straight -line method. Unamortized bond premiums and discounts are included within the non - current liabilities due in more than one year of the City's government -wide statement of net position. The enterprise liquor fund includes a non - current liability for unamortized bond premium associated with the issuance of the liquor revenue bonds of 2007. The bond premium is amortized over the term of the bonds using the straight -line method. 8. Restricted assets (temporarily) The government -wide Statement of Net Position "restricted assets (temporarily)" represents cash and investments, and investments held by trustee that have imposed restrictions placed on them by parties outside the government. These restricted amounts are pledged by bond covenants to the repayment of City indebtedness. The assets are temporarily restricted until the terms and conditions of the obligations have been fulfilled. 9. Capital assets Capital assets, which include land, historical treasures, construction in process, buildings and improvements, machinery and equipment, other improvements, and infrastructure, are reported in the applicable governmental or business -type activity columns of the government -wide Statement of Net Position. Such assets are capitalized at historical cost, or estimated historical cost for assets where actual historical cost is not available. Donated assets are recorded as capital assets at their estimated fair value on the date of donation. The City defines capital assets as those with an initial, individual cost of $5,000 or more with an estimated useful life of not less than three years. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Capital outlays are recorded as expenditures in the City's governmental fund financial statements, which use the modified accrual basis of accounting. Capital outlays that meet the City's capitalization criteria are reported in the government -wide Statement of Net Position and proprietary funds Statement of Net Position, both of which use the full accrual basis of accounting. Interest incurred during the construction phase of capital assets for business -type activities is included as part of the capitalization value of assets constructed. 54 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) 9. Capital assets (continued) Depreciation on the capital assets is recorded on a government -wide basis. Land, historical treasures, and construction in process are not depreciated. Capital assets are depreciated using the straight -line method over their estimated useful lives as follows: Buildings and improvements 50 -75 years Machinery and equipment 3 -15 years Other improvements 10 -50 years Infrastructure 20 -50 years 10. Deferred inflows of resources In addition to liabilities, statements of financial position or balance sheets will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that rime. The City has only one type of item, which arises under a modified accrual basis of accounting, which qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds Balance Sheet. The governmental funds report unavailable revenue from three sources: property taxes, special assessments, and other receivables not collected within 60 days of year- end. These amounts are deferred and recognized as an inflow of resources in the period the amounts became available. 11. Compensated absences It is the City's policy to permit employees to accumulate earned but unused leave benefits as either paid time off (PTO), or vacation and sick leave. Under the City's personnel policies and collective bargaining contracts, City employees are granted leave benefits in varying amounts based on length of services. PTO accruals vary from 18 to 30 days per year, vacation accruals vary from 10 to 20 days per year and sick leave accrues at a rate of 12 days per year. As benefits accrue to employees, the accumulated PTO, vacation and vested sick leave is reported as an expense and liability in the government -wide and proprietary fund financial statements. Accrued PTO, vacation and a percentage of sick leave is paid to employees upon termination (severance) and is reported as an expenditure in the governmental fund that will pay for it. No liability is recorded for non - vesting accumulating rights to receive sick leave benefits. 55 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) 12. Net other post - employment benefits (OPEB) obligation In accordance with the provisions of GASB Statement No. 45, Accounting and financial Reporting by Employers for Post - employment Benefits Other Than Pensions, an actuarial valuation is required to be computed and reported for the City's post - employment health insurance benefits provided to eligible employees through the City's Other Post - Employment Benefits Plan. OPEB is reported as an expense on a pay -as- you -go basis and is accrued as it is earned. The net OPEB obligation liability and corresponding expense for governmental activities is reported within the government -wide financial statements. The net OPEB obligation liability and corresponding expense for enterprise funds are recorded within those funds. 13. Long -term obligations Long -term obligations are recorded in the City's government -wide Statement of Net Position when they become a liability of the City. Long -term obligations are recognized as a liability of a governmental fund only when due or when payment is made to the paying agent. 14. Net Position Classifications In the government -wide and proprietary fund financial statements, net position represents the difference between assets, deferred outflows of resources (if any), liabilities, and deferred inflows of resources. Net position is displayed in three components: Net Investment in Capital Assets — Consists of capital assets, net of accumulated depreciation reduced by any outstanding debt attributable to acquire capital assets. Restricted Net Position — Consists of net position restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. Unrestricted Net Position — All other elements of net position that do not meet the definition of "restricted" or "net investment in capital assets." 15. Fund balance classifications In the fund financial statements, governmental fund reports fund balance in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: • Nonspendable — Consists of amounts that are not in spendable form, such as prepaid items, inventory, and other long -term assets. • Restricted — Consists of amounts related to externally imposed constraints established by creditors, grantors, or contributors; or constraints imposed by state statutory provisions. 4T..1 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 D. Assets, Liabilities, Deferred Inflows of Resources, and Net Position or Equity (continued) 16. Fund balance classifications (continued) Committed — Consists of amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision - making authority. The City Council is the highest level of decision - making authority for the government that can, by adoption of a resolution prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the resolution remains in place until a similar action is taken (the adoption of another resolution) to remove or revise the limitation. Assigned — Consists of internally imposed constraints. These constraints consist of amounts intended to be used by the City for specific purposes but do not meet the criteria to be classified as restricted or committed. Pursuant to City resolution, the City Administrator and the Finance Director are authorized to establish assignments of fund balance. Unassigned — The residual classification for the General Fund, which also reflects negative residual amounts in the other funds. The City will endeavor to maintain an unrestricted (committed, assigned and unassigned) fund balance in the General fund of an amount not less than 40 and not greater than 50 percent of the next year's budgeted expenditures of the General fund. This will assist in maintaining an adequate level of fund balance to provide for cash flow requirements and contingency needs. At December 31, 2013, the unrestricted fund balance of the General Fund was 43.0 percent of the subsequent year's budgeted expenditures. When both restricted and unrestricted resources are available for use, it is the City's policy to first use restricted resources, and then use unrestricted resources as they are needed. When committed, assigned or unassigned resources are available for use, it is the City's policy to use resources in the following order; 1.) committed, 2.) assigned, and 3.) unassigned. E. Revenue. Expenditures and Expenses 1. In the governmental fund financial statements property tax revenue is recognized when it becomes measurable and available to finance expenditures of the current fiscal year. All delinquent taxes receivable are fully offset by deferred inflow of resources in the governmental fund financial statements. Taxes due from Dakota County on December 31 are included in revenue since they are remitted to the City within 60 days after December 31. In the government-wide Statement of Activities property tax revenue is recognized when levied. 2. In the governmental fund financial statements special assessments principal and interest are recognized as revenue when they become measurable and available to finance expenditures of the current fiscal year. All delinquent and deferred assessments receivable are fully offset by deferred inflow of resources in the fund financial statements. Both the principal and interest on special assessments are payable in installments over a term of years that matches the scheduled payments for the bond issue which financed the project. In the government -wide Statement of Activities special assessments revenue is recognized when levied. 57 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 1— Summary of Sienilicant Accounting Policies (continued) E. Revenue. Expenditures and Expenses (continued) 3. Investment income is recorded as revenue in the year earned. Elements of investment income include interest earned on investments and unrealized gains or (losses) on net increases or decreases in the fair value of investments. 4. Certain grants and aids received by the City require that eligible expenditures be made in order to earn the grant. Revenue for these grants is recorded in the period of which eligible expenditures are made. 5. Enterprise utility fund service charges are recognized when earned with no allowance for uncollectibles because delinquent accounts deemed uncollectible during the normal billing process are certified to Dakota County as a property tax lien. Quarterly utility service charges provided to customers but unbilled are included as receivables as of December 31. 6. Interfund service transactions are accounted for as expenditures or expenses. Service transaction payments to a fund are recorded as an expenditure or expense in the paying fund and conversely recorded as a reduction of expenditure or expense in the fund that is receiving payment. Interfund service transactions within the respective categories of governmental activities and business -type activities in the government -wide Statement of Activities are eliminated. F. Cash Flows For purposes of the Statement of Cash Flows, the City considers all highly liquid debt instruments with an original maturity from the time of purchase of three months or less to be cash equivalents. The proprietary funds equity in the government -wide cash and investments management pool is considered to be a cash equivalent. G. Prior Year Comparative Information Certain prior year information presented has been reclassified to conform to the current year presentation. Note 2 — Cash and Investments A. Components of Cash and Investments The City's cash surpluses are pooled and invested in accordance with State Statute and City investment policy. Investment earnings and unrealized gains and losses are allocated to funds on the basis of average cash balances. Investments are stated at fair value, which is the amount that a financial instrument could be exchanged for in a current transaction between willing parties. The investments are not identified with specific funds. Investments held by trustee include balances held in segregated accounts for specific purposes. Interest earned on these trustee accounts is allocated directly to the responsible fund. The amounts represent funds held as required by the debt obligation covenants and other agreements. 58 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 2 — Cash and Investments (continued) A. Components of Cash and Investments (continued) The City's cash and investments as of December 31, 2013 consist of the following: Cash on hand $ 13,165 Deposits 1,089,705 Investments 82,924,079 Total cash and investments $ 84,026,949 The City's cash and investments as of December 31, 2013 are presented in the financial statements as follows: Statement of Net Position Cash and investments $ 53,091,529 Temporarily restricted cash and investments 324,125 Temporarily restricted investments held by trustee 23,759,815 Statement of Fiduciary Net Position Cash and investments 6,851,480 Total cash and investments $ 84,026,949 B. Deposits In accordance with applicable Minnesota Statutes, the City is permitted to maintain deposits at depository banks authorized by the City Council, including checking accounts, savings accounts, and non - negotiable certificates of deposits. The City's deposit policy does not limit depository choices. The following is considered the most significant risk associated with deposits: Custodial Credit Risk — hi the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City does not have a formal policy addressing this risk. At year-end, the carrying amount of the City's deposits was $1,089,705 while the balance on the bank records was $818,337. The City does not have any custodial credit risk for its deposits since all City deposits held in safekeeping by the City's banks are fully protected by insurance and/or collateral as required by Minnesota Statutes and authorized by the City Council. 59 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 2 — Cash and Investments (continued) C. Investments The City's investments as of December 31, 2013 are as follows The 4M Fund is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities and is an external investment pool not registered with the Securities and Exchange Commission (SEC) that follows the same regulatory rules of the SEC under rule 2a7. The City's investment in the 4M Fund is measured at the net asset value per share provided by the pool, which is based on an amortized cost method that approximates fair value. The City's investment policy does not place any further limitations beyond the state statute requirements for the risk categories described below. Investments are subject to various risks, the following of which are considered the most significant; Custodial Credit Risk — For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker - dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have any custodial credit risk for its investments since all of the City's investments held in safekeeping by the City's brokerage firm in the City's name are insured and registered. .t Interest Risk - Maturity Duration in Years Credit Risk Less Investment Type Ratios A2enc Fair Value Than 1 11 = 5 66 = 10 Money market funds Minnesota Municipal (4M) N/R N/A $ 6,576,189 $ - $ - $ - Wells Fargo Advantage AAAm S &P 1,067,748 - - - First American Treasury Obligation AAAm S &P 870 - - Certificates ofdeposit N/R N/A 14,884,183 6,155,000 8,729,183 U.S. treasury securities N/R N/A 5,006,954 4,312,506 694,448 U.S. government agencies AA+ S &P 45,693,335 24,620,229 16,397,416 4,675,690 Municipal Bonds AAA S &P 306,440 - 306,440 - Municipal Bonds Aaa Moody's 101,252 101,252 - - Municipal Bonds Aal Moody's 1,283,665 1,000,771 - 282,894 Municipal Bonds AA+ S &P 601,020 - 497,335 103,685 Municipal Bonds Aa2 Moody's 1,171,159 708,687 462,472 Municipal Bonds AA S &P 1,623,843 153,086 1,362,892 107,865 Municipal Bonds Aa3 Moody's 1,113,112 - 1,113,112 Municipal Bonds AA- S &P 877,565 - 877,565 - Municipal Bonds Al Moody's 108,621 108,621 Municipal Bonds A2 Moody's 182,965 182,965 Municipal Bonds A S &P 567,177 567,177 - Municipal Bonds A- S &P 1,757,981 500,000 1,257,981 - Total investments $ 82,924,079 $ 38,118,708 $ 31,419,337 $ 5,741,227 The 4M Fund is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities and is an external investment pool not registered with the Securities and Exchange Commission (SEC) that follows the same regulatory rules of the SEC under rule 2a7. The City's investment in the 4M Fund is measured at the net asset value per share provided by the pool, which is based on an amortized cost method that approximates fair value. The City's investment policy does not place any further limitations beyond the state statute requirements for the risk categories described below. Investments are subject to various risks, the following of which are considered the most significant; Custodial Credit Risk — For investments, this is the risk that in the event of a failure of the counterparty to an investment transaction (typically a broker - dealer) the City would not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have any custodial credit risk for its investments since all of the City's investments held in safekeeping by the City's brokerage firm in the City's name are insured and registered. .t CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 2 — Cash and Investments (continued) C. Investments (continued) Credit Risk — This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State Statutes authorize investments in money market funds, certificates of deposit, commercial paper, U.S. treasury securities, U.S. government agencies, and other securities provided they meet the two highest quality ratings of nationally recognized rating organizations. Concentration Risk — This is the risk associated with investing a significant portion of the City's investments (considered 5 percent or more) in the securities of a single issuer, excluding U.S. guaranteed investments (such as treasuries), investment pools, and mutual funds. As of December 31, 2013, the City's investment portfolio includes the following securities of single issuers exceeding 5 percent: Federal National Mortgage Association 34.2% Federal Home Loan Bank 10.4% Federal Home Loan Mortgage Corporation 8.5% Interest Rate Risk — This is the risk of potential variability in the fair value of fixed rate investments resulting from changes in interest rates (the longer the period for which an interest rate is fixed, the greater the risk). D. Investment Policy The City's investment policy limits exposure to interest rate risk by investing in shorter term securities (maturing in one year or less) to meet current operating cash requirements. Longer term investments are to be purchased with the intent to match maturity periods with future funding needs for capital replacement and debt obligations. The City will not purchase investments that, at the time of investment, cannot be held to maturity. This does not mean that an investment cannot be sold prior to maturity. Investment activity will focus upon protection of taxpayer dollars and investment income, consistent with statutory authorization and financial prudence. The City will conduct its investment transactions with several legal competing, reputable investment security dealers and qualifying banks. The City will invest only in the following instruments or those others that may subsequently be permitted by State Statute. • United States Treasury obligations • Federal Agency Securities • Certificates of Deposit • Commercial Paper • Banker's Acceptance • Money Market Funds • State and local securities 61 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3 — Capital Assets A summary of changes in governmental capital assets during the year ended December 31, 2013 are as follows: Non - depreciable Land Balance 506,454 $ (2,245) $ - $ 22,717,752 Balance Governmental Activities January 1 Additions Deletions Transfers December 31 Depreciable (6,326,248) - 7,532,493 Total non-depreciable 29,113,820 7,564,918 Buildings and improvements $ 54,309,672 $ 155,617 $ - $ - $ 54,465,289 Machinery and equipment 18,349,529 1,885,194 (867,152) (5,933) 19,361,638 Other improvements 4,927,165 137,736 - 5,064,901 Infrastructure Streets 120,842,064 7,542,197 (1,474,910) - 126,909,351 Storm sewer 53,257,450 2,684,981 (178,336) - 55,764,095 Parks 18,913,482 467,088 19,380,570 Total depreciable at cost 270,599,362 12,872,813 (2,520,398) (5,933) 280,945,844 Less accumulated depreciation Buildings and improvements (10,426,245) (1,153,933) - - (11,580,178) Machinery and equipment (11,776,467) (1,297,175) 827,058 5,933 (12,240,651) Other improvements (1,960,383) (244,542) - - (2,204,925) Infrastructure Streets (65,666,716) (4,396,794) 1,464,574 - (68,598,936) Storm sewer (14,025,981) (1,084,493) 173,240 - (14,937,234) Parks (10,827,172) (763,486) - (11,590,658) Total accumulated depreciation (114,682,964) (8,940,423) 2,464,872 5,933 (121,152,582) Total depreciable, net $ 155,916,398 $ 3,932,390 $ (55,526) $ - $ 159,793,262 Non - depreciable Land $ 22,213,543 $ 506,454 $ (2,245) $ - $ 22,717,752 Historical treasures 100,000 - - - 100,000 Construction in process 6,800,277 7,058,464 (6,326,248) - 7,532,493 Total non-depreciable 29,113,820 7,564,918 (6,328,493) - 30,350,245 Depreciable, net 155,916,398 3,932,390 (55,526) 159,793,262 Total capital assets, net $ 185,030,218 $ 11,497,308 $ (6,384,019) $ - $ 190,143,507 Depreciation expense was charged to governmental functions as follows: General government $ 228,016 Public safety 904,774 Public works 6,155,801 Parks and recreation 1,651,832 Total depreciation expense $ 8,940,423 62 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 3 — Capital Assets (continued) A summary of changes in business -type capital assets during the year ended December 31, 2013 are as follows: Business -type Activities Depreciable Buildings and improvements Machinery and equipment Infrastructure Water Sanitary sewer Total depreciable at cost Less accumulated depreciation Buildings and improvements Machinery and equipment Infrastructure Water Sanitary sewer Total accumulated depreciation Total depreciable, net Non - depreciable Land Construction in process Total non - depreciable Depreciable, net Total capital assets, net Balance Balance January 1 Additions Deletions Transfers December 31 $ 25,908,596 $ 94,505 $ (57,731) $ - $ 25,945,370 2,557,579 246,618 (46,073) 5,933 2,764,057 70,690,169 2,901,780 (288,394) - 73,303,555 54,171,643 2,246,589 (444,235) - 55,973,997 153,327,987 5,489,492 (836,433) 5,933 157,986,979 (6,888,499) (545,786) 30,107 - (7,404,178) (1,440,684) (164,709) 46,073 (5,933) (1,565,253) (23,831,032) (1,474,685) 244,901 - (25,060,816) (19,170,320) (1,090,079) 377,034 (19,883,365) (51,330,535) (3,275,259) 698,115 5,933 (53,913,612) $ 101,997,452 $ 2,214,233 $ 138,318 $ $ 104,073,367 $ 1,800,456 $ - $ $ $ 1,800,456 1,628,580 2,436,985 (1,628,580) 2,436,985 3,429,036 2,436,985 (1,628,580) 4,237,441 101,997,452 2,214,233 (138,318) 104,073,367 $ 105,426,488 $ 4,651,218 $ 1,766,898 $ $ 108,310,808 Depreciation expense was charged to enterprise funds as follows: Liquor fund Utility fund Total depreciation expense $ 113,916 3,161,343 $ 3,275,259 63 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 4 — Ooeratine Leases eratine Lease (Ames Arena On December 1, 2006, the City (as lessor) entered into a joint powers agreement with the Lakeville Arenas (a Minnesota Joint Powers entity, as lessee), whereas the Lakeville Arenas is responsible for operations and maintenance of the Ames Arena. Lakeville Arenas shall pay all debt service requirements due on the Gross Revenue Recreation Facility Bonds of 1999 less payments received by Lakeville Hockey Association, Inc. (Boosters) towards debt service payments in accordance with the revised and restated gaming revenue agreement dated February 16, 1999. The agreement will remain in effect until August 1, 2019. The cost of the leased space is included in the total Ames ice arena cost of $4,143,826, of which $1,392,999 has been depreciated to date. These amounts are recorded in the City's capital assets. The 2013 lease revenue totaled $88,626. eratine Sublease (Hasse Arena On December 1, 2006, the City (as sublessor) entered into a joint powers agreement with the Lakeville Arenas (a Minnesota Joint Powers entity, as sublessee), whereas the Lakeville Arenas is responsible for operations and maintenance of the Hasse Arena. In addition, the joint powers agreement calls for Independent School District No. 194 to provide for one -half of all future ice arena lease payments to the City. Lease agreement payments coinciding with the bonded debt service schedule commencing February 1, 2007 will remain in effect until February 1, 2032. The 2013 lease revenue totaled $284,070. 9perating Lease (Heritage Liquor Store): The Heritage Liquor Store (located in Heritage Shopping Center) consists of 8,859 square feet of space at a monthly lease cost of $14,600 plus a proportionate share of real estate taxes, property insurance, special assessments, common area maintenance, and management fees. The fiscal year 2013 lease expense totaled $175,200. The lease has a term of fifteen years expiring on June 30, 2014. The City owns the land and buildings of its remaining two liquor stores. Note 5 — Lone -Term Liabilities General Oblieation Bonds The City's general obligation bonds are supported primarily from revenues derived from property tax levies, special assessment levies, tax increment levies, state -aid street revenue, water connection revenue charges, ice arena operations, and contributions by an organization conducting lawful gaming at approved locations. These bonds are backed by the full-faith and credit of the City. 6dl CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 5 — Lone -Term Liabilities (continued) Revenue Bonds The following revenue bonds are not general obligations of the City and accordingly are not backed by the full -faith and credit of the City. Governmental Activities The Gross Revenue Recreation Facility Bonds, Series 1999, are supported primarily from revenues derived from ice arena operations and contributions from gaming revenues. The HRA Ice Arena Lease Revenue Bonds, Series 2006, will be payable from equal lease payments to be made by the City pursuant to the lease agreement between the HRA of Lakeville, the City, and in conjunction with the joint powers agreement between the City and Independent School District No. 194. The City's portion of the lease payments are supported by property tax levies. The Water Revenue Refunding Bonds, Series 2004, are payable solely from water connection revenues. The lease, consisting of land, building and equipment of the Hasse Arena located at 8525 215"' Street West, requires the City to provide lease payments sufficient to pay when due, the principal and interest on the HRA Ice Arena Lease Revenue Bonds, Series 2006 ($9,230,000 original amount issued), of which the City paid $591,675 in 2013. Title to the arena will transfer to the City upon completing the prescribed lease payments coinciding with the bonded debt service schedule commencing February 1, 2007 and maturing February 1, 2032. The cost of the leased space is included in the total Hasse ice arena cost of $7,505,840, of which $836,864 has been depreciated to date. These amounts are recorded in the HRA's capital assets. Business -tune Activities The Liquor Revenue Bonds, Series 2007, are payable solely from enterprise liquor fund revenues. Future revenue pledged for the payment of long -term debt is as follows: Revenue Pledged Current Year Remaining Pledged Principal and Priacipal and Revenue Bond Issue Use of Proceeds Type Term of Pledge Interest Interest Pad Received RecreatronFacility Ice arena Arena Revenues 2014 -2019 $ 1,223,773 $ 181,830 $ 183,626 Ice Arena Lease Revenue Additional ice arena Lease Revenues 2014 -2032 12,550,534 591,675 284,070 liquor Revenue Additional liquor Store Liquor Sales Revenue 2014 -2027 4,494,875 325,750 3,948,599 Water Connection Revenue Water systemmfrastructure Water Connections 2014.2016 3,041,900 1,027,500 5,009,567 65 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 5 — Long -Term Liabilities (continued Metropolitan Council Loan Agreement 2006 On February 21, 2006, the City entered into a loan agreement with the Metropolitan Council for the purpose of acquiring property for a commuter vehicle park and pool lot located within a proposed state trunk highway right -of -way. The Metropolitan Council provided a loan to the City in the amount of $1,466,300 to finance the acquisition of the property. In 2013, the City made no payments on this loan. As of December 31, 2013 the balance of the loan is $1,159,843. The loan (free of interest charge) will be discharged by the Metropolitan Council upon the conveyance of the property to the highway authority at an undetermined future date. General Obligation Refunding Bonds, Series 2012 B On August 15, 2012, the City issued $22,450,000 in General Obligation Refunding Bonds, Series 2012 B. The proceeds of this issue will be used to retire, in advance of their stated maturities, the 2015 through 2026 maturities of the Street Reconstruction Bonds, Series 2003 A (refunded principal of $10,035,000) on their February 1, 2014 call date; and the 2016 through 2030 maturities of the Capital Improvement Plan Bonds, Series 2004 A (refunded principal $12,460,000) on their February 1, 2015 call date. The proceeds of the new bonds were placed in an escrow account (established by the City) whereby Open Market Securities were purchased by the trustee in adequate amounts sufficient to be responsible for the payment of the total called principal amount ($22,495,000) in addition to the series 2012 B accrued interest payments of $673,066 due August 1, 2013, $350,150 due February 1, 2014, $199,425 due August 1, 2014, and $199,425 due on the crossover refunding date of February 1, 2015. The refunding transaction yielded a net savings to the City of $2,768,474 with a present value economic gain of $2,235,119. General Obligation Improvement Bonds, Series 2013 A On August 15, 2013, the City issued $4,685,000 in General Obligation Improvement Bonds, Series 2013 A to finance various improvement projects in the City. The bonds mature February 1, 2034, with a provisional call date of February 1, 2023, bearing interest rates ranging from 2.0% to 4.0 %. Debt service will be payable from property taxes and special assessments levied to benefiting properties. .. CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 5 — Long -Term Liabilities (continued) The total long -term bonded debt outstanding as of December 31, 2013 (including amounts to be called 2/1/2014 of $10,035,000 and 2/1/2015 of $12,460,000) is summarized as follows: LIRA lease revenue bonds 2032 Total governmental activity bonds Business -tvve Bonds Liquor revenue bonds 2027 Total long -term bonded debt outstanding 4.25 % - 4.625% 8,325,000 105,210,000 5.00% 3,235,000 $108,445,000 The City is in compliance with all significant bond covenants. The annual requirements to amortize all outstanding bonded debt as of December 31, including interest payments of $28,084,917 are as follows: Year Ending Maturities Interest Rates Amount Governmental Activity Bonds Principal Interest Principal General obligation bonds Total 2014 $ 16,030,000 Park bonds 2015 0.50 % -0.75% $ 815,000 Capital improvement bonds 2030, 2032 2.0 % -5.0% 39,015,000 Street construction bonds 2014.2030 2.00 % -5.95% 29,580,000 G.O. Improvement bonds 2016 -2034 0.50 % - 4.125% 16,640,000 Tax increment bonds 2014 -2022 2.00 % -5.10% 2,335,000 State -aid street revenue bonds 2018 -2021 0.5%-4.0% 4,590,000 Water connection revenue bonds 2016 4.00% 2,865,000 Arena revenue bonds 2015 -2019 2.7 % -5.4% 1,045,000 Total general obligation bonds 33,394,746 2024 -2028 96,885,000 LIRA lease revenue bonds 2032 Total governmental activity bonds Business -tvve Bonds Liquor revenue bonds 2027 Total long -term bonded debt outstanding 4.25 % - 4.625% 8,325,000 105,210,000 5.00% 3,235,000 $108,445,000 The City is in compliance with all significant bond covenants. The annual requirements to amortize all outstanding bonded debt as of December 31, including interest payments of $28,084,917 are as follows: Year Ending Governmental Business -type December 31. Principal Interest Principal Interest Total 2014 $ 16,030,000 $ 3,700,592 $ 165,000 $ 157,625 $ 20,053,217 2015 18,830,000 3,021,371 175,000 149,125 22,175,496 2016 6,275,000 2,542,819 180,000 140,250 9,138,069 2017 5,255,000 2,363,098 190,000 131,000 7,939,098 2018 5,445,000 2,184,204 200,000 121,250 7,950,454 2019 -2023 23,670,000 8,118,371 1,165,000 441,375 33,394,746 2024 -2028 18,875,000 4,048,486 1,160,000 119,250 24,202,736 2029 -2033 10,725,000 844,001 - - 11,569,001 2034 105,000 2,100 107,100 Total $ 105,210,000 $ 26,825,042 $ 3,235,000 $ 1,259,875 $136,529,917 WA CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 5 — Lone -Term Liabilities (continued) Accrued Compensated Absences Governmental Activities The governmental funds accumulated liability for accrued PTO, vacation and vested sick pay (including applicable salary- related payments) as of December 31, 2013 is $2,443,249. This amount is included in the non - current liabilities of the government -wide Statement of Net Position. In the event of employee separation from City, the general fund and the responsible special revenue fund will pay the accumulated vacation portion, while the internal service compensation liability fund paid the PTO and vested sick pay portion. In future years the general fund and the responsible special revenue fund will pay the PTO and vested sick pay portion. Business -tvve Activities The accumulated liability for accrued PTO, vacation and vested sick pay for proprietary enterprise funds (including applicable salary- related payments) as of December 31, 2013 is $316,264. In the event of employee separation from City, the responsible enterprise fund will pay the accumulated severance portion. These amounts are recorded as a liability and as an expense when earned in the responsible funds. Unamortized Bond Premium and Discount Unamortized bond premium and bond discount included within non - current liabilities are as follows: Governmental Unamortized bond premium Unamortized bond discount Total unamortized (net) $ 2,566,425 (7,846) Business -type 20,062 $ 2,558,579 $ 20,062 Net Other Post - Employment Benefit (OPEB) Obligati on Other post - employment benefit obligations in prior years have been liquidated primarily by the general fund for governmental activities and by the liquor fund and utility fund for business -type activities. W CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 5 — Lone -Term Liabilities (continued) During the year ended December 31, 2013 the following changes occurred in non - current liabilities: Governmental Activities G.O. Improvement bonds Other bonds Total bonds Metropolitan Council loan - Total long -term debt Accrued compensated absences Unamortized bond premium/discount Net OPEB obligation Total governmental activities Business -tvve Activities Liquor revenue bonds Accrued compensated absences Unamortized bond premium Net OPEB obligation Total business -type activities Total governmental and business -type activities Balance Balance Due Within January 1 Additions Deletions December 31 One Year $ 71,660,000 $ - $ (2,250,000) $ 69,410,000 $12,380,000 34,690,000 4,685,000 (3,575,000) 35,800,000 3,650,000 106,350,000 4,685,000 (5,825,000) 105,210,000 16,030,000 1,159,843 - - 1,159,843 - 107,509,843 4,685,000 (5,825,000) 106,369,843 16,030,000 2,281,421 .1,229,628 (1,067,800) 2,443,249 1,067,800 2,702,626 78,287 (222,334) 2,558,579 - 183,128 60,389 (18,436) 225,081 112,677,018 6,053,304 (7,133,570) 111,596,752 17,097,800 3,395,000 - (160,000) 3,235,000 165,000 327,641 211,800 (223,177) 316,264 223,177 21,595 (1,533) 20,062 - 31,546 10,654 (3,254 38,946 3,775,782 222,454 (387,964) 3,610,272 388,177 $116,452,800 $ 6,275,758 $ 7,521,534 $ 115,207,024 $17,485,977 Note 6 — Net Investment in Capital Assets Net investment in capital assets as of December 31, 2013 is calculated as follows: Governmental Business -type Total Capital assets, net of depreciation Less applicable: Bonds payable Loan payable Unamortized bond premium/ discount (net) Unspent bond proceeds Invested in capital assets, net $ 190,143,507 $ 108,310,808 $ 298,454,315 (59,305,000) (3,235,000) (62,540,000) (1,159,843) (1,159,843) (1,109,177) (20,062) (1,129,239) 1,030,007 - 1,030,007 $ 129,599,494 $ 105,055,746 $ 234,655,240 The City has $45,905,000 in bonds and $1,449,402 in bond premium/discount (net) that are unrelated in the calculation above. We" CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 7 — Net Position (Restricted) The government -wide Statement of Net Position reports restricted amounts in the net position section. These amounts represent assets (less any related liabilities) that have imposed restrictions placed on them by parties outside the City government. Net position restricted for debt service represents assets pledged by bond covenant to the repayment of City bond obligations. The government -wide restricted net position is as follows: Restricted Net Position Cash and investments Temporarily restricted Cash and investments Investments held by trustee Receivables Less related liabilities Total restricted net position Note 8 — Construction Commitments Governmental Business -type Activities Activities Total $ 14,445,875 $ - $ 14,445,875 23,759,815 7,323,667 (27,883,413 $ 17,645,944 324,125 $ 324,125 324,125 23,759,815 7,323,667 (27,883,413) $ 17,970,069 The City has outstanding construction and build projects as of December 31, 2013. These projects include a fuel system upgrade and other sanitary sewer projects. The City's commitments with contractors and other governmental entities are shown as follows: Projects Governmental Activities Improvement Project 13 -02 Kenrick Avenue Trail City of Lakeville /City of Apple Valley sanitary sewer interceptor Total governmental 70 Remaining Spent -to -Date Commitment $ 4,936,917 $ 512,658 1,172,545 298,611 53,591 55,614 $ 6,163,053 $ 866,883 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 9 — Fund Balances At December 31, 2013, a summary of the governmental fund balance classification are as follows: 71 Debt Service Capital Projects General G.O. Improvement General Fund Obligation Improvement Building Construction Nonmajor Total Nonspendable Inventory $ 100,632 $ — $ — $ — $ — $ — $ 100,632 Prepaid terns 25,382 — — — — — 25,382 Total nonspendable 126,014 — — — — — 126,014 Restricted Debt Service — 27371,659 2,967,285 — — 2,486,636 32,825,580 Public improvements — — — — 1,030,007 — 1,030,007 Street construction — — — — — 3,400,889 3,400,889 Park development — — — — — 1,343,159 1,343,159 Tax increment — — — — — 74,972 74,972 Public communications — — — — — 27,403 27,403 Special Service District — — — — — 14,656 14,656 Total restricted — 27,371,659 2,967,285 — 1,030,007 7,347,715 38,716,666 Committed Emerald Ash Borer 45,000 — — — — — 45,000 Public improvements — — — — 212,336 — 212,336 Public buildings — — — 1,516,976 — — 1,516,976 Pavement.management — — — — — 1,500,060 1,500,060 Storm sewer trunk system 1,515,811 1,515,811 Water trunk system — — — — — 2,303,521 2,303,521 Sanitary sewer trunk system — — — — — 3,793,109 3,793,109 Trail improvement — — — — — 925,648 925,648 Capital acquisitions — — — — — 3,926,628 3,926,628 Public communications 866,873 866,873 Economic development — — — — — 59,858 59,858 Total committed 45,000 — — 1,516,976 212,336 14,891,508 16,665,820 Unassigned 9,495,546 — — — (221,630) — 9,273,916 Total $ 9,666,560 $27371,659 $ 2,967,285 $ 1,516,976 $ 1,020,713 $22239223 $64,782,416 71 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 10 — Contributed Capital Assets from Private Land Developers and City Government The ownership of local streets, storm sewer, parks, water and sanitary sewer infrastructure capital assets that are constructed and completed during the year by private land developers becomes contributed property of the City. Storm sewer, water and sanitary sewer infrastructure assets constructed within Dakota County and State of Minnesota right -of -way boundaries also become City capital assets since they are serviced and maintained by the City. Roads and highways constructed within Dakota County and State of Minnesota right -of -way boundaries are excluded from City capital assets. The City assumed ownership of the following governmental and business -type capital assets contributed through private land developers during the current fiscal year as follows: From Private Land Developers Infrastructure Streets Storm sewer Parks Water Sanitary sewer Governmental Enterprise Utility Fund 1,823,704 1,954,029 360,596 Total 1,767,490 1,537,388 $ 4,138,329 $ 3,304,878 The ownership of water and sanitary sewer infrastructure assets that are constructed and completed during the year by City governmental activities (through various funding sources at cost) becomes contributed property of the City's enterprise utility fund. The City's enterprise utility fund assumed ownership of the following capital assets contributed during the current fiscal year as follows: From governmental activities Utility Fund Infrastructure Water $ 94,958 Note 11— Excess of Expenditures over Appropriations For the year ended December 31, 2013, total expenditures (the legal level of budgetary control) in the special revenue downtown special service district fund exceeded appropriations. The expenditures exceeding budget of ($9,603) were funded by available fund balance. 72 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 12— Interfund Transfers The City provides financing for a variety of operations and capital projects utilizing resources from certain funds, interfund transfers used for these various activities during the current fiscal year are as follows: Transfers To: Debt Service Capital Projects Nonmalor Enterprise General G.O. Govntl. Transfers From Fund G.O. . Improve. Bide. Funds Mign Total General fund $ - $ - $ - $ 590,000 $ 1,811,607 $ - $ 2,401,607 Improve Const. Fund - - 41,701 - - - 41,701 Nontnajor govntl. funds 65,237 238,903 2,110,473 2,414,613 Total 65,237 - 280,604 590,000 3,922,080 - 4,857,921 Enterprise - Liquor 162,488 100,000 - 648,360 837,738 1,396 1,749,982 Enterprise - Utility 440,431 - - - - - 440,431 Internal service funds 47,141 47,141 Total $ 715,297 $ 100,000 $ 280,604 $ 1,238,360 $ 4,759,818 $ 1,396 7,095,475 (1) (2) (3) (4) (5)(6) Less: Utility fund (7) (1,396) Total governmental fiords $ 7,094,079 The following are explanations to interfund transfers sub -notes I through 9. Abbreviation key: (SR) special revenue fund, (DS) debt service fund, (CP) capital projects fund, (E) enterprise fund, (IS) internal service fund. (1) The transfers to general fund were provided mainly as overhead and maintenance costs from the following funds: Fund Amount Communications (SR) $ 65,237 Liquor (E) 162,488 Utility (E) 440,431 Municipal reserves (IS) 47,141 Total $ 715,297 Description Public communications and city hall overhead costs. Patrol, chemical awareness, and city hall overhead costs City hall overhead costs. City hall overhead costs. (2) The total transfer to debt service general obligation fund was provided by the liquor fund ($100,000) to be applied towards the debt service of the new station completed in 2008. (3) The total transfer to debt service G.O. improvement fund was provided by the improvement construction fund ($41,701) to reduce the future special assessment fee requirements and provide adequate cash flow and by various capital projects funds ($238,903) related to City improvement projects whereby user connection service charges are pledged towards the improvement bonds debt service requirements. 73 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31.2013 Note 12 — Interfund Transfers (continued) (4) The total transfer to capital projects building fund was provided by the general fund ($590,000) to finance various future building maintenance, and by the enterprise liquor fund ($640,000) to fund various building maintenance and ($8,360) for fundraising revenues collected on behalf of the Heritage Center. (5) The total transfer to nonmajor governmental funds ($2,965,090) was provided from the following governmental funds: From: Amount To: General Fund $ 1,811,607 Equipment (CP) for equipment acquisition Tax increment (DS) 125,500 Storm sewer (CP) for DHY TIF district loan. Park Dedication (CP) 956,990 Trail improvement (CP) for Kenrick Avenue Trail. Water (CP) 1,027,983 Water revenue (DS) for debt service requirements. Total other govntl. 3,922,080 (6) The total transfer to nonmajor governmental funds was provided by the enterprise liquor fund ($837,738) to fund various equipment purchases. (7) The total transfer to enterprise utility fund was provided by the enterprise liquor fund ($1,396) for customer service billing overhead costs. Included within the transfers to governmental activities from business -type activities of $2,094,059 on the Statement of Activities is the City's contributed capital from governmental activities to enterprise utility fund capital assets of ($94,958). Note 13 — Joint Powers Debt Commitment On August 25, 2005 the City of Lakeville entered into a joint powers agreement with the Cities of Apple Valley, Burnsville, Eagan, Farmington, Hastings, Inver Grove Heights, Mendota Heights, Rosemount, South St. Paul, West St. Paul, Minnesota, and Dakota County Minnesota, to establish the Dakota Communications Center (DCC), a Minnesota nonprofit corporation. The purpose of the DCC is to engage in the operation and maintenance of a countywide public safety answering point and communications center for law enforcement, fire, emergency medical services, and other public safety services for the mutual benefit of residents residing in the above mentioned cities and county, (members). Pursuant to the joint powers agreement, members are required to provide DCC their pro rata share of cost of operations and maintenance, and capital projects. On May 1, 2007, the DCC issued Public Safety Revenue Bonds, Series 2007 in the amount of $7,315,000 to provide financing for the acquisition of equipment and reimbursement for conversion costs. The bonds are special obligations of the DCC, payable from revenues to be received from members. Pursuant to the joint powers agreement, members will levy taxes for the payment of their pro rata share of the principal and interest payments due on the bonds. The bonds maturing February 1, 2014, bear interest rates ranging from 4.5% - 5.0 %. The debt will be re -paid with member assessments over a seven year amortization. All members reserve the right to prepay, in whole or in part on any date, its allocated share of principal and interest on the bonds. On February 19, 2013 the City paid off its allocated share in the amount of $147,000. 74 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 13 — Joint Powers Debt Commitment (continued) Information regarding the Dakota Communications Center can be obtained at the website www.mn- dcc.or¢Ltats.asp or by contacting Dennis Feller at the City of Lakeville, 20195 Holyoke Avenue, Lakeville, Minnesota 55044. Telephone 952- 985 -4481 or email address dfeller @lakevillemn.gov. Note 14 — Other Post - Employment Benefits (OPEB) Plan A. Plan Description The City provides post - employment insurance benefits to certain eligible employees through the City's Other Post - Employment Benefits Plan, a single- employer defined benefit plan administered by the City. All post - employment benefits are based on contractual agreements with employee groups. These contractual agreements do not include any specific contribution or funding requirements. These benefits are summarized as follows: Post- Emplovment Insurance Benefits - All retirees of the City have the option under state law to continue their medical insurance coverage through the City from the time of retirement until the employee reaches the age of eligibility for Medicare. For members of all employee groups, the retiree must pay the full premium to continue coverage for medical and dental insurance. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees, whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an "implicit rate subsidy." This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City's younger and statistically healthier active employees. B. Fundine Policy The required contribution is based on projected pay -as- you -go financing requirements, with additional amounts to pre -fund benefits as determined annually by the City. C. Annual OPEB Cost and Net OPEB Oblieation The City's annual OPEB cost (expense) is calculated based on annual required contributions (ARC) of the City, an amount determined on an actuarially determined basis in accordance with the parameters of GASB Statement No. 45. The ARC represents a level funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. 75 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 14 — Other Post - Employment Benefits (OPEB) Plan (continued) C Annual OPEB Cost and Net OPEB Obligation (continued) The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and the changes in the City's net OPEB obligation to the plan: Annual required contribution $ 75,006 Interest on net OPEB obligation 8,587 Adjustment to annual required contribution 12,550 Annual OPEB cost (expense) 71,043 Contributions made 21,690 Increase in net OPEB obligation 49,353 Net OPEB obligation - beginning of year 214,674 Net OPEB obligation - end of year $ 264,027 The City's annual OPEB cost; the percentage of annual OPEB cost contributed to the plan; and the net OPEB obligation for the year are as follows: Fiscal Annual Employer Year Ended OPEB Cost Contribution December 31, 2011 $ 73,281 $ 11,356 December 31, 2012 $ 72,144 $ 16,594 December 31, 2013 $ 71,043 $ 21,690 D. Funded Status and Funding Progress Annual OPEB Net OPEB Cost Contributed Obligation 15.5% $ 159,124 23.0% $ 214,674 30.5% $ 264,027 As of January 1, 2011, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $588,458, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $588,458. The covered payroll (annual payroll of active employees covered by the plan) was $11,683,196, and the ratio of the UAAL to the covered payroll was 5.0 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and ARC'S of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress immediately following the notes to the basic financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 76 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 14 — Other Post - Employment Benefits (OPEB) Plan (continued) E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long -term perspective of the calculations. In the January 1, 2011 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included: a 4.0 percent investment rate of return (net of administrative expenses) based on the City's own investments; a 2011 annual healthcare cost trend rate of 8.0 percent, and reduced by decrements of .5 percent to an ultimate rate of 5.0 percent after six years for medical insurance. Both rates included a 2.5% inflation assumption. The UAAL is being amortized on a level dollar basis over a closed period. The remaining amortization periods at January 1, 2011 for the various amortization layers ranged from 27 to 30 years. Note 15 — Risk Financing and Related Insurance Issues The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City purchased the following insurance coverage through the League of Minnesota Cities Insurance Trust ( LMCIT), a public entity risk pool currently operating as a common risk management and insurance program for Minnesota cities: general liability, excess liability, workers compensation, property, automobile, marine, crime, employee dishonesty, boiler, petro fund, and open meeting law. The City pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self - sustaining through member premiums and will reinsure through commercial companies for claims in excess of reserved amounts for each insured event. The LMCIT allows for the pool to make additional assessments to make the pool self - sustaining. Current state statutes (Minnesota statutes solid. 466.04) provide limits of liability for the City. These limits are that the combination of defense expense and indemnification expense shall not exceed $1,500,000 for any number of claims arising out of a single occurrence. The Minnesota statutory limit on claims is $1,500,000 per occurrence. The City self - insures the risk of any potential judicial ruling in excess of the statutory maximum. The City has never had a claim in excess of the statutory maximum. There have been no significant reductions in insurance coverage from the prior year and insurance settlements have not exceeded coverage in the past three years. Workers compensation premiums for 2013 and 2012 were $360,277 and $368,868, respectively. The City is enrolled in the LMCIT workers compensation `regular" program. The LMCIT regular program provides a fixed premium based on payroll and provides no claim risk to the City as a result of high claims experience. The City's workers compensation premiums are accounted for directly in the responsible funds. 77 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 16 — Defined Benefit Pension Plans - Statewide A. Plan Descriotion All full -time and certain part-time employees of the City of Lakeville are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund ( PEPFF), which are cost - sharing, multiple- employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The City does not have any members enrolled in the Basic Plan; therefore all new members must participate in the Coordinated Plan. All police officers are covered by PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after five 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 PERA's Coordinated Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate is 1.2 percent of average salary for each of the first 10 years of service and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 1.7 percent of average salary for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all GERF and PEPFF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Coordinated Plan members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated Plan members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single -life annuity is a lifetime annuity that ceases upon death of the retiree - -no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. W , CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 16 — Defined Benefit Pension Plans — Statewide (continued) A. Plan Description (continued) PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the internet at www.pWera.ora or by writing to PERA at 60 Empire Drive #200, Saint Paul, Minnesota, 55103- 2088 or by calling (651) 296 -7460 or 1- 800 - 652 -9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Coordinated Plan members were required to contribute 6.25% of their annual covered salary in 2013. PEPFF members were required to contribute 9.6% of their annual covered salary in 2013. In 2013, the City of Lakeville was required to contribute the following percentages of annual covered payroll: 7.25% for Coordinated Plan members, and 14.4% for PEPFF members. The City's contributions to the GERF Coordinated Plan for the years ending December 31, 2013, 2012, and 2011 were $611,079, $587,750, and $596,142, respectively. The City's contributions to the PEPFF for the years ending December 31, 2013, 2012, and 2011 were $693,976, $679,673, and $650,578, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. Note 17 — Defined Contribution Plan — Statewide A. Plan Description Two Council members of the City of Lakeville are covered by the Public Employees Defined Contribution Plan ( PEDCP), a multiple - employer deferred compensation plan administered by the Public Employees Retirement Association of Minnesota (PERA). The PEDCP is a tax qualified plan under Section 401 (a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. B. Funding g olicv Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D.03, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5 percent of salary which is matched by the elected official's employer. 79 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 17 — Defined Contribution Plan — Statewide (continued) B. Funding Policv (continued) Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2 percent of employer contributions and twenty -five hundredths of one percent of the assets in each member's account annually. Total contributions made by the City of Lakeville for the year ending December 31, 2013 were as follows: Contribution Amount Covered Payroll Required Employee Employer Employee Employer Rates $ 1,670 $ 1,670 5.0% 5.0% 5.0% Note 18 — Lakeville Fire Relief Association A. Plan Description Firefighters of the City of Lakeville Fire Department are members of the Lakeville Fire Relief Association. There are no covered salaries or related fringe benefits in connection with the Relief Association plan. Since members are volunteers, City of Lakeville contributions to the Lakeville Fire Relief Association are not based on payroll, but rather on years of active service. The Association is the administrator of a single employer defined benefit pension plan available to firefighters that was established in 1972 and operates under the provisions of Minnesota State Statutes Chapter 424A. The plan is governed by a board of six members elected by the members of the Association for three year terms. One City Council member, Finance Director, and Fire Chief are ex officio, nonvoting members of the Board of Trustees. Non - employer pension contributions include state -aid from the State of Minnesota and municipal contributions from the City of Lakeville. On- behalf state -aid payments from the State of Minnesota are received initially by the City of Lakeville and subsequently remitted to the Relief Association. These on- behalf state -aid payments in addition to the City's municipal contribution payments to the Relief Association plan are recognized as revenues and expenditures in the City's general fund during the period. The Lakeville Fire Relief Association issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Lakeville Volunteer Firefighters' Relief Association, 20195 Holyoke Avenue, Lakeville, Minnesota, 55044 or by calling (952) 985 -4480. M CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 18 — Lakeville Fire Relief Association (continued) B. Current Plan Membershin At December 31, 2013, membership data related to the Association was as follows: Members Retired members entitled to benefits, but not yet receiving them 25 Active Plan Participants Vested 5 Partially vested 33 Non - vested 41 Total plan membership 104 C. Benefit Provisions Authority for payment of pension benefits is established in Minnesota State Statue 69.77 and may be amended only by the Minnesota State Legislature. Twenty-Year Service Pension - Each member who is at least 50 years of age, has retired from the Fire Department, has served at least 20 years of active service with the department before retirement and has been a member of the Association in good standing at least 7 years prior to retirement, shall be entitled to a lump sum service pension in the amount of $6,513 (effective April 1, 2013) for each year of service (including each year over 20) but not exceeding the maximum amount per year of service allowed by law for the minimum average amount of available financing per firefighter. The Association's benefit amount will increase to $6,610 for calendar year 2014. Any member who retires after 20 years of service and is under the age of 50 is placed on the deferred pension roll. In 2009, the Association amended their bylaws on March 30, 2009 which changed how interest is earned on a deferred member's retirement account. All moneys deferred prior to the amendment shall earn interest at 5 percent compounded annually. All moneys deferred after the amendment will be placed in a separate investment account and will earn interest at the current market rate. Seven -Year Service, but Less than Twenty -Year Service Pension - Each member who is at least 50 years of age; who has retired from the Fire Department; who has served at least 7 years of active service with the department before retirement, but has not served at least 20 years of active service; and, who has been a member of the Association in good standing at least 7 years prior to retirement, shall be entitled to a pro -rated lump sum service pension based on the percentages shown in the following table: M CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 18— Lakeville Fire Relief Association (continued) C. Benefit Provisions (continued) For Dutv of More Less % of Than Than Pension 7 Years 8 Years 48% 8 9 52% 9 10 56% 10 11 60% 11 12 64% 12 13 68% 13 14 72% 14 15 76% 15 16 80% 16 17 84% 17 18 88% 18 19 92% 19 20 96% 20 - 100% The payment amount will be calculated by using the amount payable per year of service in effect at the time of such early retirement, multiplied by the number of accumulative years of service, multiplied by the appropriate percentage as defined above. Death Benefit - Upon the death of any member who is in good standing, the Association will pay a death benefit equal to the full annual service pension amount for each year the member has served. Disability Benefits - In the event of total permanent disability incurred in the line of duty, a member shall be eligible to collect a disability benefit in an amount equal to his/her full years of active service on the Fire Department multiplied by the base sum pension benefit. The benefit is payable immediately upon approval by the Association regardless of age. For total permanent disability not incurred in the line of duty, a member shall be paid in accordance with the seven -year partial vesting provision described above. State Supplemental Benefits - Minnesota Statutes provide for the payment of a supplemental benefit equal to 10 percent of a regular lump sum distribution up to a maximum of $1,000. D. Contributions and Reserves The Lakeville Fire Relief Association's funding policy provides for contributions from the State of Minnesota and the City of Lakeville, in amounts sufficient to accumulate assets to pay benefits when due. 82 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 18 — Lakeville Fire Relief Association (continued) D. Contributions and Reserves (continued) The Volunteer Firefighters' Relief Association Financing Guidelines Act of 1971 (Chapter 261 as amended by Chapter 509 of Minnesota Statutes 1980) specifies minimum contributions required on an annual basis. The minimum support rates from the municipality and state aid are determined in the amount required to meet the normal cost plus amortizing any existing prior year service costs over a closed 10 -year period. The minimum contribution from the City of Lakeville and state aid is determined as follows: Normal cost + Amortization payment on unfunded accrued liability prior to any change + Amortization contribution on unfunded accrued liability prior to any change = Total contribution required Annual pension cost (APC) contributed from the State of Minnesota and the City of Lakeville for the last three years are as follows: E. Funding Progress Actuarial Actuarial Total Net Value State of City of Pension December 31 % of APC Pension Year Minnesota Lakeville Contribution APC Contributed Obligation 2013 $ 314,365 $ 60,000 $ 374,365 $ 374,365 100% $ 2012 221,958 44,804 266,762 266,762 100% 2011 213,067 44,804 257,871 257,871 100% E. Funding Progress Actuarial Actuarial Valuation Date Value Accrued (Unfunded) Funded December 31 of Assets Liabili Overfunded Ratio 2013 $ 7,022,870 $ 5,674,075 $ 1,348,795 123.8% 2012 5,852,995 5,485,211 367,784 106.7% 2011 5,619,763 5,480,096 139,667 102.5% F. Additional Information: Actuarial valuation date: Actuarial valuation method: Actuarial cost method: Actuarial assumptions rate of investment return: Annual covered payroll: Age and service retirement age: Amortization method: Amortization period: Inflation rate: August 1, 2013 Fair Value Entry age normal cost 5% per annum, compounded annually None (all volunteer firefighters) Assumed to occur at age 50. No turnover or early retirement Level Dollar Closed 10 Years Not applicable Pic. CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2013 Note 19 — Deferred Compensation Plan The City offers its employees an optional deferred compensation plan created in accordance with Internal Revenue Service Code Section 457. The plan is available to all City employees, which permits them to tax defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Under provisions of Section 72(p) of the Internal Revenue Code, a plan may permit participant loans once 457 plan assets are held in a trust. As of the current fiscal year, the City's plan does not have a loan provision for its participants. All amounts of compensation deferred under the plan must be held in trust for the exclusive benefit of plan participants and/or beneficiaries. Investments are managed by the plan's trustee under various investment options or a combination thereof The choice of investment options is made by the participant. Note 20 — Litieation There are several lawsuits pending in which the City is involved. The City Attorney has indicated that existing and pending lawsuit claims and other actions in which the City is a defendant are either covered by insurance, fully reserved for by the City, or the cases are in the early stages of discovery, and accordingly, the ultimate outcome cannot presently be determined. It is the opinion of City management that in each case the possibility of material loss, net of amounts reserved is remote. Note 21— Conduit Debt On April 7, 2008, the Housing and Redevelopment Authority (HRA) of Lakeville approved the issuance of the Housing and Redevelopment Authority of Lakeville, Minnesota Education Facilities Revenue Note (All Saints School Project), Series 2008. The HRA acted as the conduit for a bank qualified tax- exempt refinancing of existing debt for All Saints School under the responsibility of All Saints Church of Lakeville, Dakota County, Minnesota, a religious corporation organized under the laws of the State of Minnesota and constituting a nonprofit corporation under the laws of the State of Minnesota. The note funds will provide non - religious portions of the renovation and equipping of, and construction of additions to, a school for grades kindergarten through 8th grade known as All Saints School, owned and operated by the All Saints Church, and located at 19795 Holyoke Avenue in Lakeville. The HRA authorized the revenue note in the principal amount of $2,000,000. The note provides needed financial assistance to a private- sector entity deemed to be in the public interest. Neither the HRA nor the City is obligated in any circumstance for repayment of this note, and accordingly the note is not reported as a liability in the accompanying financial statements. As of December 31, 2013, $2,000,000 remains outstanding on this note. Note 22 — GASB Standards Issued But Not Yet Implemented GASB Statement No. 68 replaces the requirements of Statement No. 27, "Accounting for Pensions by State and Local Governmental Employers" and Statement No. 50, "Pension Disclosures," as they relate to governments that provide pensions through pension plans administered as trusts or similar arrangements that meet certain criteria. Statement No. 68 requires governments providing defined benefit provisions to recognize their long -term obligation for pension benefits as a liability for the first rime, and to more comprehensively and comparably measure the annual costs of pension benefits. 84 This page intentionally left blank. REQUIRED SUPPLEMENTARY INFORMATION CITY OF LAKEVILLE, MINNESOTA GENERALFUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Variance Originally Final With Final Adopted Budget Actual Budget Revenues Property taxes General property taxes Current Delinquent Fiscal disparities Mobile home tax Graveltax Total property taxes Licenses and permits Intergovernmental Market value homestead credit State -aid police State -aid fire State -aid PERA State police and fire grants State other grants Federal other grants County and other grants Total intergovernmental Charges for services General government Public safety Public works Parks and recreation Total charges for services Fines Investment income (charges) (continued) $ 13,713,988 $ 13,713,988 $ 13,946,037 $ 232,049 289,208 289,208 160,755 (128,453) 1,863,194 1,863,194 1,784,432 (78,762) 45,200 45,200 51,068 5,868 8,907 8,907 19,467 10,560 15,920,497 15,920,497 15,961,759 41,262 1,345,449 1,401,449 2,087,937 686,488 - - 2,969 2,969 342,585 342,585 378,812 36,227 213,067 313,365 313,365 - 21,303 21,303 21,303 - 34,137 34,137 35,511 1,374 8,034 8,034 662 (7,372) 2,100 2,100 36,429 34,329 11,290 11,290 621,226 721,524 800,341 78,817 218,878 218,878 239,686 20,808 329,189 399,574 403,240 3,666 522,929 532,529 814,317 281,788 554,744 582,777 570,662 (12,115) 1,625,740 1,733,758 2,027,905 294,147 294,809 294,809 219,535 (75,274) 32,735 32,735 (27,206) (59,941) 85 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Variance Originally Final With Final Adopted Budget Actual Budget Revenues (continued) Donations $ 15,454 $ 39,047 $ 44,260 $ 5,213 Miscellaneous 54,971 54,971 59,252 4,281 Total revenues 19,910,881 20,198,790 21,173,783 974,993 Expenditures General government 377,823 381,850 333,559 48,291 Mayor and Council 1,125 1,125 540 585 Personnel services 49,740 49,740 46,444 3,296 Commodities 50 50 - 50 Other charges and services 45,485 46,323 45,317 1,006 Total Mayor and Council 95,275 96,113 91,761 4,352 Comm ittees /Commissions Personnel services 63,001 63,001 46,370 16,631 Commodities 1,884 1,884 1,475 409 Other charges and services 17,387 17,387 8,761 8,626 Total committees /commissions 82,272 82,272 56,606 25,666 City administration Personnel services 377,823 381,850 333,559 48,291 Commodities 1,125 1,125 540 585 Other charges and services 12,957 12,957 12,077 880 Capital outlay 1,064 1,064 1,104 (40) Total city administration 392,969 396,996 347,280 49,716 (continued) 01 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Variance Originally Final With Final Adopted Budget Actual Budget Expenditures (continued) General government (continued) City Clerk Personnel services Commodities Other charges and services Total City Clerk Legal counsel Other charges and services Planning Personnel services Commodities Other charges and services Capital outlay Total planning Community and economic development Personnel services Commodities Other charges and services Total community and economic development Inspections Personnel services Commodities Other charges and services Capital outlay Total inspections $ 102,214 $ 102,214 $ 101,468 $ 746 300 300 88 212 12,450 12,450 12,748 (298) 114,964 114,964 114,304 660 65,132 79,952 72,033 7,919 375,280 385,164 347,116 38,048 2,150 2,150 1,114 1,036 15,404 15,404 12,334 3,070 592 (592) 392,834 402,718 361,156 41,562 259,210 261,377 262,090 (713) 205 205 232 (27) 41,006 41,006 31,191 9,815 300,421 302,588 293,513 9,075 646,267 650,880 645,754 5,126 15,849 15,849 13,118 2,731 111,749 167,749 159,290 8,459 21,113 21,113 22,675 (1,562) 794,978 855,591 840,837 14,754 (continued) 87 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Variance Originally Final With Final Adopted Budget Actual Budget Expenditures (continued) General government (continued) General government facilities Personnel services Commodities Other charges and services Capital outlay Total general government facilities Finance Personnel services Commodities Other charges and services Total finance Information systems Personnel services Commodities Other charges and services Total information systems Human resources Personnel services Commodities Other charges and services Total human resources Insurance coverage Other charges and services Total general government $ 193,426 $ 193,426 $ 191,568 $ 1,858 28,335 28,335 12,111 16,224 221,046 221,046 196,920 24,126 425 (425) 442,807 442,807 401,024 41,783 541,266 550,642 547,910 2,732 3,700 3,700 2,676 1,024 65,168 65,168 62,317 2,851 610,134 619,510 612,903 6,607 312,362 315,596 298,042 17,554 6,098 6,098 6,047 51 162,859 162,859 156,096 6,763 481,319 484,553 460,185 24,368 256,429 256,429 256,922 (493) 1,828 1,828 1,379 449 104,938 104,938 76,145 28,793 363,195 363,195 334,446 28,749 227,420 227,420 227,420 - 4,363,720 4,468,679 4,213,468 255,211 (continued) M CITY OF LAKEVILLE, MINNESOTA GENERALFUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Expenditures (continued) Public safety Police Personnel services Commodities Other charges and services Capital outlay Total police Fire protection Personnel services Commodities Other charges and services Total fire protection Total public safety Public works Engineering Personnel services Commodities Other charges and services Total engineering Street maintenance Personnel services Commodities Other charges and services Capital outlay Total street maintenance Total public works (continued) Budget As Variance Originally Final With Final Adopted Budget Actual Budget $ 6,701,950 $ 6,776,903 $ 6,687,966 $ 88,937 362,209 362,209 352,933 9,276 1,672,061 1,672,061 1,603,328 68,733 4,124 (4,124) 8,736,220 8,811,173 8,648,351 162,822 1,018,520 1,118,818 1,091,666 27,152 139,497 139,497 129,792 9,705 286,515 286,515 248,273 38,242 1,444,532 1,544,830 1,469,731 75,099 10,180,752 10,356,003 10,118,082 237,921 617,554 568,554 545,865 22,689 11,157 11,157 8,450 2,707 64,643 113,643 111,775 1,868 693,354 693,354 666,090 27,264 1,615,045 1,615,045 1,704,869 (89,824) 746,444 805,726 1,107,228 (301,502) 272,914 272,914 288,478 (15,564) 282 (282) 2,634,403 2,693,685 3,100,857 4( 07,172 3,327,757 3,387,039 3,766,947 (379,908) CITY OF LAKEVILLE, MINNESOTA GENERALFUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Originally Adopted Variance Final With Final Budget Actual Budget Expenditures (continued) Parks and recreation Park maintenance Personnel services Commodities Other charges and services Capital outlay $ 1,553,930 $ 258,468 390,146 1,555,721 $ 1,482,546 $ 73,175 258,468 259,211 (743) 413,739 392,754 20,985 - 592 (592) Total park maintenance Recreation 2,202,544 2,227,928 2,135,103 92,825 Personnel services 333,475 333,475 330,903 2,572 Commodities 28,969 28,969 21,625 7,344 Other charges and services 215,057 215,057 208,911 6,146 Capital outlay 976 976 1,236 (260) Total recreation 578,477 578,477 562,675 15,802 Heritage Center Personnel services Commodities Other charges and services Capital outlay Total heritage center Arts Center Personnel services Commodities Other charges and services Total arts center Total parks and recreation Other Total expenditures Excess (deficiency) of revenues over expenditures (continued) 32,923 32,923 28,307 4,616 1,425 7,026 4,158 2,868 38,257 47,559 51,595 (4,036) 13,130 6,359 6,771 72,605 100,638 90,419 10,219 251,031 251,031 236,978 14,053 13,525 13,525 16,512 (2,987) 151,492 151,492 172,504 (21,012) 416,048 416,048 425,994 9,946 3,269,674 3,323,091 3,214,191 108,900 105,000 21,246,903 21,534,812 21,312,688 222,124 (1,336,022) (1,336,022) (138,905) 1,197,117 , CITY OF LAKEVILLE, MINNESOTA GENERALFUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2013 Budget As Variance Originally Final With Final Adopted Budget Actual Budget (continued) Other financing sources (uses) Transfers from /(to) Special Revenue - Communications Fund Capital Projects - Building Fund Capital Projects - Equipment Fund Enterprise - Liquor Fund Enterprise - Utility Fund Internal Service - Municipal Reserves Fund Total other financing sources (uses) $ 65,237 $ 65,237 $ 65,237 $ - (590,000) (590,000) - - (1,811,607) (1,811,607) - 162,488 162,488 162,488 - 440,431 440,431 440,431 - 47,141 47,141 47,141 - 715,297 (1,686,310) (1,686,310) - Net change in fund balance Fund balance, January 1 $ (620,725 $ (3,022,332 (1,825,215) $1,197,117 11,491,775 Fund balance, December 31 $ 9,666,560 91 CITY OF LAKEVILLE, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2013 A. Budeetary Information Budgets are adopted on a basis consistent with U.S. generally accepted accounting principals. Annual appropriated budgets are adopted for the General Fund and Special Revenue Funds. Budgeted amounts are as originally adopted or as amended by the City Council. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. The City Administrator submits a proposed operating budget to the City Council. 2. Public hearings are conducted to obtain taxpayer comments. 3. Upon Council approval the budget is legally adopted and employs formal budgetary integration during the year. 4. Expenditures may legally exceed budgeted appropriations at the fund level through City Council action. 5. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is at the department level for the General Fund and total expenditures for the Special Revenue Funds. The City Administrator has authorization to expend funds in excess of the appropriation for individual line items. 6. Budget appropriations of all funds lapse at year -end to the extent they were not encumbered. Encumbrances are re- appropriated in the following year's budget. 92 CITY OF LAKEVILLE, MINNESOTA OTHER POST - EMPLOYMENT BENEFITS PLAN - SCHEDULE OF FUNDING PROGRESS DECEMBER 31, 2013 93 Unfunded Unfunded Actuarial Actuarial Actuarial Actuarial Liability as a Valuation Accrued Value of Accrued Funded Covered Percentage Date Liability Plan Assets Liability Ratio Payroll of Payroll Janaury 1, 2008 $ 290,424 $ $ 290,424 - $ 11,365,890 2.6% Janaury 1, 2011 $ 588,458 $ $ 588,458 - $ 11,683,196 5.0% 93 This page intentionally left blank. NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds - These funds are used to account for revenues and expenditures that have a legally restricted use for a specific purpose. Communications Fund This fund accounts for franchise fees from cable TV provider operations. Expenditures and other financing uses are used to finance the City's cable TV channels and public communications, including long -term replacement of equipment. Economic Development Fund This fund accounts for a $125,000 Economic Recovery Grant received from the State of Minnesota Department of Trade and Economic Development in 1995. The grant purpose is to provide loans to businesses expanding in or locating to Lakeville. The fund also accounts for administrative fees received from the issuance of conduit debt. Downtown Special Service District Fund The Downtown Special Service District was created in 1998 pursuant to Minnesota Statute 428A. A service charge, payable with property taxes, is levied against the commercial properties in the Downtown Business District for the purpose of financing budgeted programs and activities within the District. Debt Service Funds — These funds account for the accumulation of resources that are restricted to the payment of long -term debt principal and interest, but excluding debt issued for and serviced by an enterprise fund. Tax Increment Fund Debt issued to finance construction of public improvements in accordance with approved tax increment plans. Property tax increments received from designated tax increment financing districts are pledged to the payment of the bonds. State -aid Revenue Fund Debt issued to finance construction of State -aid street projects within the City. The primary revenue source is municipal state aid allotments from the State of Minnesota Department of Transportation. Water Revenue Fund Debt issued to finance the construction of wells, pump houses, towers, water main systems, and the City's water treatment facility. Water connection fees are pledged toward the repayment of the principal and interest on these bonds. Arena Revenue Fund Debt issued for the construction of the Lakeville Ames Ice Arena first and second sheet of ice, spectator seating and locker rooms. Revenue sources include donations from net operating ice arena revenues and other sources pledged to the payment of the bonds. The Ice Center Refunding Bonds, Series 2008 A and the 2005 Capital Dehumidification Lease - Purchase agreement are general obligations that are backed by the full -faith and credit of the City. The Gross Revenue Recreation Facility Bonds of 1999 are not general obligations and accordingly are not backed by the full -faith and credit of the City. (continued) NONMAJOR GOVERNMENTAL FUNDS Debt Service Funds (continued) HRA Revenue Fund The HRA also issued the HRA Ice Arena Lease Revenue Bonds, Series 2006 for the Hasse single sheet ice arena facility. Debt service will be payable from property taxes and lease payments to be made to the City pursuant to the lease agreement between the Authority and Independent School District 194. These HRA bonds are not general obligations and accordingly are not backed by the full -faith and credit of the City. Capital Projects Funds — These funds account for financial resources used in the acquisition of capital facilities, equipment, and infrastructure (except those financed by enterprise funds). Municipal State-aid Fund This fund accounts for an annual allotment from the State of Minnesota Municipal State -aid street construction account. Pavement Management Fund This fund accounts for pavement management activities relating to cracksealing, patching, seal coating and overlays. These major maintenance projects are financed with property taxes. Storm Sewer Fund This fund accounts for fees and area charges to land developers for construction of storm sewer systems. Water Fund This fund accounts for revenues derived primarily from connection charges collected at the time building permits are issued and antenna site leases with wireless communications companies. Funds are appropriated towards the construction costs of water supply lines, wells and water storage facilities, and provide the debt service to bonds issued to finance the construction of the City's water treatment facility and other trunk infrastructure improvements. Sanitary Sewer Fund This fund accounts for sewer connection and area fees charged to land developers for connecting to the City's sanitary sewer system, appropriations are applied to the construction of sanitary sewer trunk systems. Park Dedication Fund This fund accounts for park dedication fees received from land developers. The expenditures consist of acquiring and developing City parks and trails. Trail Improvement Fund This fund accounts for the long term maintenance, repairs and replacement of City trails. Tax Increment Fund This fund accounts for revenue received from tax increment property districts that does not require debt financing. The expenditures are for current and future development of tax increment property. Equipment Fund This fund accounts for the purchase of equipment for general government, public safety, public works, and park maintenance. This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2013 Assets Cash and investments Total Special Debt Capital Nonmajor Revenue Service Projects Governmental Funds Funds Funds Funds Assets Cash and investments $ 814,307 $ 1,727,298 $ 18,962,700 $ 21,504,305 Investments held by trustee - 695,318 - 695,318 Interest receivable 3,623 4,427 68,820 76,870 Taxes receivable 700 4,487 537,598 542,785 Unremitted - 15,392 112,565 127,957 Delinquent - 4,487 27,990 32,477 Accounts receivable 169,076 47,500 327,399 543,975 Special assessments 968,790 2,486,636 18,783,797 22,239,223 Unremitted - 3,959 3,959 Delinquent $ 987,006 $ 2,494,422 1,022 1,022 Deferred 186,633 186,633 Other 321,953 321,953 Total assets $ 987,006 $ 2,494,422 $ 20,013,041 $ 23,494,469 Liabilities Salaries payable $ 7,631 $ - $ - $ 7,631 Accounts payable 9,885 3,299 263,257 276,441 Contracts payable - - 340,054 340,054 Deposits payable 88,335 88,335 Total liabilities 17,516 3,299 691,646 712,461 Deferred inflows of resources Unavailable revenue - taxes 4,487 27,990 32,477 Unavailable revenue - special assessments 509,608 509,608 Unavailable revenue - other 700 - 700 Total deferred inflows of resources 700 4,487 537,598 542,785 Fund balance Restricted 42,059 2,486,636 4,819,020 7,347,715 Committed 926,731 - 13,964,777 14,891,508 Total fund balance 968,790 2,486,636 18,783,797 22,239,223 Total liabilities, deferred inflows of resources, and fund balances $ 987,006 $ 2,494,422 $ 20,013,041 $ 23,494,469 94 CITY OF LAKEVILLE, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2013 95 Total Special Debt Capital Nonmajor Revenue Service Projects Governmental Funds Funds Funds Funds Revenues Property taxes $ - $ 282,840 $ 1,811,600 $ 2,094,440 Tax increment - 669,288 190,148 859,436 Licenses and permits 639,557 - - 639,557 Intergovernmental 223,256 847,628 1,322,727 2,393,611 Charges for services 57,370 372,696 4,447,438 4,877,504 Special assessments - - 52,319 52,319 Investment income (charges) (2,576) (1,288) (48,935) (52,799) Donations - 95,000 10,018 105,018 Miscellaneous 6 - 576,586 576,592 Total revenues 917,613 2,266,164 8,361,901 11,545,678 Expenditures - current General government 586,103 586,103 Expenditures - capital outlay General government 172,972 422,525 595,497 Public safety - 797,693 797,693 Public works - 2,274,349 2,274,349 Parks and recreation - 2,542,010 2,542,010 Total expenditures - capital outlay 172,972 6,036,577 6,209,549 Expenditures - debt service Principal bond maturities 2,345,000 2,345,000 Interest on debt 821,644 821,644 Fiscal charges 10,417 10,417 Total expenditures - debt service 3,177,061 3,177,061 Total expenditures 759,075 3,177,061 6,036,577 9,972,713 Excess (deficiency) of revenues over expenditures 158,538 (910,897) 2,325,324 1,572,965 Other financing sources (uses) Transfers from other funds - 1,027,983 3,731,835 4,759,818 Transfers to other funds (65,237) (125,500) (2,223,876) (2,414,613) Total other financing sources (uses) (65,237) 902,483 1,507,959 2,345,205 Net change in fund balance 93,301 (8,414) 3,833,283 3,918,170 Fund balance, January 1 875,489 2,495,050 14,950,514 18,321,053 Fund balance, December 31 $ 968,790 $ 2,486,636 $ 18,783,797 $ 22,239,223 95 CITY OF LAKEVILLE, MINNESOTA SPECIAL REVENUE FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2013 Downtown Economic Special Communications Development Service District Total Assets Cash and investments Interest receivable Accounts receivable Total assets Liabilities Salaries payable Accounts payable Total liabilities Deferred inflows of resources Unavailable revenue - other $ 740,113 $ 59,590 $ 14,604 $ 814,307 3,355 268 - 3,623 168,324 752 169,076 $ 911,792 $ 59,858 $ 15,356 $ 987,006 $ 7,631 $ 9,885 _ 17,516 $ $ 7,631 9,885 17,516 700 700 Fund balance Restricted 27,403 - 14,656 42,059 Committed 866,873 59,858 - 926,731 Total fund balance 894,276 59,858 14,656 968,790 Total liabilities, deferred inflows of resources, and fund balances $ 911,792 $ 59,858 $ 15,356 $ 987,006 96 CITY OF LAKEVILLE, MINNESOTA SPECIAL REVENUE FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2013 Economic Communications Development Revenues Licenses and permits Intergovernmental Federal grants State -aid PERA County and local grants Charges for services Investment income (charges) Miscellaneous Total revenues Expenditures Current General government Capital outlay General government Total expenditures $ 639,557 $ Downtown Special Service District Total $ - $ 639,557 54,450 143,675 198,125 516 - - 516 24,615 24,615 27,403 2,500 27,467 57,370 (2,385) (191) - (2,576) 6 6 719,547 170,599 27,467 917,613 500,312 47,177 38,614 586,103 42,632 130,340 - 172,972 542,944 177,517 38,614 759,075 Excess (deficiency) of revenues over expenditure: 176,603 (6,918) (11,147) 158,538 Other financing uses Transfer to General Fund (65,237) (65,237) Net change in fund balance 111,366 (6,918) (11,147) 93,301 Fund balance, January 1 Fund balance, December 31 782,910 66,776 25,803 875,489 $ 894,276 $ 59,858 $ 14,656 $ 968,790 97 CITY OF LAKEVILLE, MINNESOTA DEBT SERVICE FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2013 Bonds Tax State -aid Water Arena HRA Increment Revenue Revenue Revenue Revenue Total Assets Cash and investments Investments held by trustee Interest receivable Taxes receivable Unremitted Delinquent Accounts receivable Total assets Liabilities Accounts payable Deferred inflows of resources Unavailable revenue - taxes $ 1,154,992 $ 26,837 $ $ 211,112 $ 334,357 $ 1,727,298 695,318 695,318 3,222 126 770 309 4,427 (2,017) - - 17,409 15,392 128 - 4,359 4,487 - 47,500 - 47,500 $ 1,156,325 $ 26,963 $ $ 259,382 $ 1,051,752 $ 2,494,422 $ 59 $ 490 $ $ - $ 2,750 $ 3,299 128 - 4,359 4,487 Fund balance Restricted for debt service 1,156,138 26,473 259,382 1,044,643 2,486,636 Total liabilities, deferred inflows of resources, and fund balances $ 1,156,325 $ 26,963 $ $ 259,382 $ 1,051,752 $ 2,494,422 98 CITY OF LAKEVILLE, MINNESOTA DEBT SERVICE FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2013 Bonds Tax State -aid Water Arena HRA Increment Revenue Revenue Revenue Revenue Total Revenues Property taxes Current and delinquent Fiscal disparities Total property taxes $ 247 $ $ 247 $ $ 250,667 $ 250,914 31,926 31,926 282,593 282,840 Tax increment Intergovernmental - State -aid Charges for services Investment income (charges) Donations Total revenues Expenditures - debt service 669,288 - - 847,628 (2,291) (90) 667,244 847,538 Principal bond maturities - 669,288 - - 847,628 88,626 284,070 372,696 (547) 1,640 (1,288) 95,000 95,000 183,079 568,303 2,266,164 Principal bond maturities 420,000 690,000 895,000 130,000 210,000 2,345,000 Interest on debt 98,011 157,628 132,500 51,830 381,675 821,644 Fiscal charges 3,753 1,029 483 323 4,829 10,417 Total expenditures - debtservice 521,764 848,657 1,027,983 182,153 596,504 3,177,061 Excess (deficiency) of revenues over expenditures 145,480 (1,119) (1,027,983) 926 (28,201) (910,897) Other financing sources (uses) Transfer from /(to) Capital Projects Storm Sewer Fund (125,500) - - - - (125,500) Water Fund 1,027,983 1,027,983 Total other financing sources (uses) (125,500) - 1,027,983 - 902,483 Net change in fund balance 19,980 (1,119) 926 (28,201) (8,414) Fund balance, January 1 1,136,158 27,592 258,456 1,072,844 2,495,050 Fund balance, December 31 $ 1,156,138 $ 26,473 $ - $ 259,382 $ 1,044,643 $ 2,486,636 99 CITY OF LAKEVILLE, MINNESOTA CAPITAL PROJECTS FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2013 Municipal Pavement Storm State -aid Manaaement Sewer Water Assets Cash and investments Interest receivable Taxes receivable Unremitted Delinquent Accounts receivable Special assessments Unremitted Delinquent Deferred Other $ 3,386,150 $ 1,483,210 $ 1,510,229 $ 2,355,188 14,739 5,588 5,237 6,347 75,235 18,633 - - 345 - 2,131 - 2 1,022 - - 2,978 1,615 103,436 59,530 44,967 Total assets Liabilities Accounts payable Contracts payable Deposits payable Total liabilities Deferred inflows of resources Unavailable revenue - taxes Unavailable revenue - special assessments Total deferred inflows of resources Fund balance Restricted Committed Total fund balance Total liabilities, deferred inflows of resources, and fund balances $ 3,400,889 $ 1,588,797 $ 1,576,956 $ 2,509,940 $ $ 66,104 $ $ 58,016 66,104 58,016 18,633 - 4,000 61,145 148,403 22,633 61,145 148,403 3,400,889 - - - 1,500,060 1,515,811 2,303,521 3,400,889 1,500,060 1,515,811 2,303,521 $ 3,400,889 $ 1,588,797 $ 1,576,956 $ 2,509,940 100 Sanitary Park Trail Tax Sewer Dedication Improvement Increment Equipment Total $ 3,801,972 $ 1,339,330 $ 1,009,347 $ 145,373 $ 3,931,901 $ 18,962,700 15,437 8,520 3,821 314 8,817 68,820 1,253 36,077 112,565 - 632 8,725 27,990 - 327,054 - - 327,399 1,826 - - - 3,959 - - - - - 1,022 78,364 240 - - - 186,633 217,456 - - - - 321,953 $ 4,115,055 $ 1,348,090 $ 1,340,222 $ 147,572 $ 3,985,520 $ 20,013,041 $ $ 498 $ 74,520 $ 71,968 $ 50,167 $ 263,257 - 340,054 - - 340,054 26,126 4,193 88,335 26,126 4,691 414,574 71,968 50,167 691,646 632 8,725 27,990 295,820 240 509,608 295,820 240 632 8,725 537,598 - 1,343,159 - 74,972 - 4,819,020 3 ,793,109 - 925,648 - 3,926,628 13,964,777 3,793,109 1,343,159 925,648 74,972 3,926,628 18,783,797 $ 4,115,055 $ 1,348,090 $ 1,340,222 $ 147,572 $ 3,985,520 $ 20,013,041 101 CITY OF LAKEVILLE, MINNESOTA CAPITAL PROJECTS FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPEN YEAR ENDED DECEMBER 31, 2013 AND CHANGES IN FUND BALANCES Municipal Pavement Storm State -aid Management Sewer Water Revenues Property taxes Current Fiscal disparities Total property taxes Tax increment Intergovernmental Municipal state -aid Federal grants County and local grants Charges for services Special assessments Investment income (charges) Donations Miscellaneous Total revenues Expenditures - capital outlay General government Public safety Public works Parks and recreation Total expenditures - capital outlay Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from /(to) General Fund Debt Service - G.O. Improvement Fund Debt Service - Tax Increment Fund Debt Service - Water Revenue Fund Capital Projects - Park Dedication Fund Capital Projects - Trail Improvement Fund Enterprise - Liquor Fund Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 $ $ 1,084,906 $ $ 138,236 _ 1,223,142 (81,000) (136,093) 125,500 - (1,027,983) _ 44,500 (1,164,076) 4,177 373,122 839,301 766,013 3,396,712 1,126,938 676,510 1,537,508 $ 3,400,889 $ 1,500,060 $ 1,515,811 $ 2,303,521 102 374,335 35,662 - - - 1,500 1,062,856 1,703,952 10,735 254 21,204 (10,480) (3,973) (3,724) (4,513) 5,983 304,494 25,182 1,605,739 1,065,369 2,025,137 21,005 1,232,617 270,568 95,048 21,005 1,232,617 270,568 95,048 4,177 373,122 794,801 1,930,089 (81,000) (136,093) 125,500 - (1,027,983) _ 44,500 (1,164,076) 4,177 373,122 839,301 766,013 3,396,712 1,126,938 676,510 1,537,508 $ 3,400,889 $ 1,500,060 $ 1,515,811 $ 2,303,521 102 Sanitary Park Trail Tax Sewer Dedication Improvement Increment Equipment Total $ $ $ $ $ 521,898 $ 1,606,804 66,560 204,796 588,458 1,811,600 190,148 - 190,148 374,335 1,811,607 1,811,607 (21,810) - (238,903) - - 125,500 - - - (1,027,983) 956,990 - - 956,990 (956,990) - - - (956,990) - - 837,738 837,738 (956,990) 956,990 (21,810) 2,649,345 1,507,959 486,272 4,701 826,400 18,844 31 831,132 - _ - 56,128 81,598 117,260 477,318 1,201,812 925,648 $ 74,972 - 4,447,438 20,059 67 - 52,319 (10,976) (6,058) (2,717) (224) (6,270) (48,935) 2,424 2,000 - 5,594 10,018 - 34,261 - 231,848 576,586 486,401 1,237,207 825,683 189,924 901,259 8,361,901 - - - 149,270 273,255 422,525 - - 797,693 797,693 129 - - 654,982 2,274,349 - 334,097 1,864,998 342,915 2,542,010 129 334,097 1,864,998 149,270 2,068,845 6,036,577 486,272 903,110 (1,039,315) 40,654 (1,167,586) 2,325,324 1,811,607 1,811,607 (21,810) - (238,903) - - 125,500 - - - (1,027,983) 956,990 - - 956,990 (956,990) - - - (956,990) - - 837,738 837,738 (956,990) 956,990 (21,810) 2,649,345 1,507,959 486,272 (53,880) (82,325) 18,844 1,481,759 3,833,283 3,306,837 1,397,039 1,007,973 56,128 2,444,869 14,950,514 $ 3,793,109 $ 1,343,159 $ 925,648 $ 74,972 $ 3,926,628 $ 18,783,797 103 CITY OF LAKEVILLE, MINNESOTA COMMUNICATIONS - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2013 Revenues Licenses and permits Intergovernmental Federal grants State -aid PERA Charges for services Investment income Miscellaneous Total revenues Expenditures - general government Current Personnel Commodities Other charges and services Capital outlay Total expenditures - general government Excess of revenues over expenditures Other financing uses Transfer to General Fund Net change in fund balance Fund balance, January 1 Budget 321,973 324,080 Variance With As Originally Final 2,983 Final Adopted Budoet Actual Budget $ 593,396 $ 593,396 $ 639,557 $ 46,161 - 58,950 54,450 (4,500) 516 516 516 - - 27,250 27,403 153 4,350 4,350 (2,385) (6,735) 6 6 598,262 684,462 719,547 35,085 321,973 321,973 324,080 (2,107) 6,386 6,386 2,983 3,403 91,099 180,049 173,249 6,800 90,238 90,238 42,632 47,606 509,696 598,646 542,944 55,702 88,566 85,816 176,603 90,787 (65,237) (65,237) (65,237) - $ 23,329 $ 20,579 111,366 $ 90,787 782,910 Fund balance, December 31 $ 894,276 104 CITY OF LAKEVILLE, MINNESOTA ECONOMIC DEVELOPMENT - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2013 Excess (defiiciency)ofrevenues over expenditures $ (4,317) $ (10,128 $ (6,918) $ Fund balance, January 1 Fund balance, December 31 66,776 $ 59,858 105 Budget Variance With As Originally Final Final Adopted Budget Actual Budget Revenues Intergovernmental Federal grants $ - $ 143,675 $ 143,675 $ - County and local grants 24,615 24,615 - Chargesforservices 2,500 2,500 2,500 - Investment income 683 683 (191) (874) Total revenues $ 3,183 171,473 170,599 (874) Expenditures - General government Current Other charges and services 7,500 46,026 47,177 (1,151) Capital outlay - 135,575 130,340 5,235 Total expenditures - general government 7,500 181,601 177,517 4,084 Excess (defiiciency)ofrevenues over expenditures $ (4,317) $ (10,128 $ (6,918) $ Fund balance, January 1 Fund balance, December 31 66,776 $ 59,858 105 CITY OF LAKEVILLE, MINNESOTA DOWNTOWN SPECIAL SERVICE DISTRICT - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2013 Variance With Fund balance, January 1 Fund balance, December 31 25,803 $ 14,656 106 Original and Final Final Budget Actual Budget Revenues Charges for services $ 27,534 $ 27,467 $ (67) Donations 500 - (500) Total revenues 28,034 27,467 (567) Expenditures - general government Current Personnel 11,300 10,632 668 Commodities 388 200 188 Other charges and services 17,323 27,782 (10,459) Total expenditures - general government 29,011 38,614 (9,603) Excess (deficiency) of revenues over expenditures $ (977) (11,147) $ (10,170) Fund balance, January 1 Fund balance, December 31 25,803 $ 14,656 106 AGENCY FUND Agency Fund — The Agency Fund is used to account for assets held by the City as an agent for other City funds, governments, and individuals. Escrow Fund This fund accounts for deposits paid by land developers, builders, and other individuals for future disbursements. The disbursements relating to these events will be made when specific terms and conditions have been satisfied. CITY OF LAKEVILLE, MINNESOTA AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES YEAR ENDED DECEMBER 31, 2013 Balance Balance Escrow Fund January 1 Increases Decreases December 31 Assets Cash and investments $ 5,890,114 $ 2,388,560 $ 1,427,194 $ 6,851,480 Liabilities Deposits payable $ 5,890,114 $ 2,388,560 $ 1,427,194 $ 6,851,480 107 This page intentionally left blank. SUPPLEMENTAL INFORMATION CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF CHANGES IN BONDED INDEBTEDNESS YEAR ENDED DECEMBER 31, 2013 108 Outstanding Outstanding January 1 Issued Redeemed December 31 Governmental Activities: General obligation bonds $ 71,660,000 $ - $ 2,250,000 $ 69,410,000 G.O. Improvement bonds 13,185,000 4,685,000 1,230,000 16,640,000 Tax increment bonds 2,755,000 - 420,000 2,335,000 State -aid street revenue bonds 5,280,000 - 690,000 4,590,000 Water connection revenue bonds 3,760,000 - 895,000 2,865,000 Arena revenue bonds 1,175,000 - 130,000 1,045,000 HRA lease revenue bonds 8,535,000 - 210,000 8,325,000 Total governmental activity bonds 106,350,000 4,685,000 5,825,000 105,210,000 Business -type Activities: Liquor revenue bonds 3,395,000 - 160,000 3,235,000 Total bonded indebtedness $ 109,745,000 $ 4,685,000 $ 5,985,000 $ 108,445,000 108 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Capital Improvement Bonds of 2004 A 11/1104 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Obliaation Bonds: Principal and interest 4.00 Park Refunding Bonds of 2011 B 1211/11 586,506 Principal and interest Principal and Interest 0.60 4/1/14 $ 405,000 $ 4,290 Principal and Interest 0.75 4/1/15 410,000 1,538 Total Total 815,000 5,828 Capital Improvement Bonds of 2004 A 11/1104 (Central Maintenance Facility) Principal and interest 4.00 2/1/14 320,000 586,506 Principal and interest 4.00 211/15 360,000 290,053 Principal (call 2/1/15) 12,460,000 Total 13,140,000 876,559 Capital Improvement Refunding Bonds of 2012 B 8/15/12 (Central Maintenance Facility) Interest 2.00 2/1/14 - 398,850 Interest 2.00 2/1/15 - 398,850 Principal and interest 2.00 2/1/16 505,000 393,800 Principal and interest 2.00 2/1/17 530,000 383,450 Principal and interest 4.00 2/1/18 570,000 366,750 Principal and interest 4.00 2/1/19 635,000 342,650 Principal and interest 4.00 2/1/20 670,000 316,550 Principal and interest 4.00 2/1/21 750,000 288,150 Principal and interest (call provision date) 3.00 2/1/22 770,000 261,600 Principal and interest 3.00 2/1/23 810,000 237,900 Principal and interest 3.00 2/1/24 865,000 212,775 Principal and interest 3.00 2/1/25 930,000 185,850 Principal and interest 3.00 2/1/26 1,040,000 156,300 Principal and interest 3.00 2/1/27 1,070,000 124,650 Principal and interest 3.00 2/1/28 1,125,000 91,725 Principal and interest 3.00 2/1/29 1,200,000 56,850 Principal and interest 3.00 2/1/30 1,295,000 19,425 Total 12,765,000 4,236,125 Capital Improvement Bonds of 2007 D 8/1/07 (Police Station) Principal and interest 5.00 2/1/14 450,000 630,113 Principal and interest 5.00 2/1/15 470,000 607,113 Principal and interest 5.00 211/16 490,000 583,113 Principal and Interest (call provision date) 5.00 2/1/17 515,000 557,988 Principal and interest 5.00 2/1/18 535,000 531,738 Principal and interest 5.00 2/1/19 560,000 504,363 Principal and interest 5.00 2/1/20 585,000 475,738 Principal and interest 5.00 211/21 610,000 445,863 Principal and interest 5.00 2/1122 635,000 414,738 Principal and interest 5.00 2/1/23 665,000 382,238 Principal and interest 5.00 2/1/24 695,000 348,238 (continued) 109 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Obligation Bonds: (continued) Capital Improvement Bonds of 2007 D (Police Station, continued) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Street Reconstruction Bonds of 2003 A Principal and Interest Principal (call 2/1/14) Total Street Reconstruction Refunding Bonds of 2012 B Interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest (call provision date) Principal and interest Principal and interest Principal and interest Principal and interest Total Street Reconstruction Bonds of 2005 A Principal and interest Principal and interest Principal and Interest (call provision date) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest (continued) 5.00 2/1/25 $ 730,000 $ 312,613 5.00 2/1/26 765,000 275,238 5.00 2/1/27 800,000 236,113 5.00 2/1/28 835,000 195,238 4.625 2/1/29 875,000 154,128 4.625 2/1/30 920,000 112,619 4.625 2/1/31 965,000 69,028 4.625 2/1/32 1,010,000 23,356 13,110,000 6,859,576 3/15/03 4.00 2/1114 700,000 226,191 10,035,000 - 10,735,000 226,191 8/15/12 2.00 2/1/14 - 301,450 2.00 2/1/15 645,000 295,000 2.00 2/1/16 725,000 281,300 2.00 2/1/17 675,000 267,300 4.00 2/1/18 730,000 245,950 4.00 2/1/19 765,000 216,050 4.00 2/1/20 805,000 184,650 4.00 2/1/21 835,000 151,850 3.00 2/1/22 850,000 122,400 3.00 2/1/23 880,000 96,450 3.00 211/24 905,000 69,675 3.00 2/1/25 935,000 42,075 3.00 2/1/26 935,000 14,025 9,685,000 2,288,175 12/1/05 3.85 2/1/14 145,000 92,719 3.75 2/1/15 150,000 87,115 3.75 2/1/16 155,000 81,396 3.85 2/1/17 160,000 75,410 3.85 2/1/18 170,000 69,058 3.90 2/1/19 175,000 62,373 3.90 2/1120 180,000 55,450 4.00 2/1/21 190,000 48,140 4.00 2/1/22 195,000 40,440 4.10 2/1/23 205,000 32,338 4.10 2/1/24 215,000 23,728 4.20 2/1/25 225,000 14,595 110 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Obligation Bonds: (continued) Street Reconstruction Bonds of 2005 A (continued) Principal and interest Total 4.20 2/1/26 $ 235,000 $ 4,935 2700,000 687,697 Street Reconstruction Bonds of 2007 H 12115/07 Principal and interest 3.50 2/1/14 120,000 97,545 Principal and interest 4.00 2/1/15 125,000 92,945 Principal and interest 4.00 2/1/16 125,000 87,945 Principal and interest 4.00 2/1/17 130,000 82,845 Principal and Interest (call provision date) 4.00 2/1/18 140,000 77,445 Principal and interest 4.00 2/1/19 145,000 71,745 Principal and interest 4.00 2/1/20 150,000 65,845 Principal and interest 4.10 2/1/21 155,000 59,668 Principal and interest 4.125 2/1/22 160,000 53,190 Principal and interest 4.20 2/1/23 170,000 46,320 Principal and interest 4.375 2/1/24 175,000 38,922 Principal and interest 4.375 2/1/25 185,000 31,047 Principal and interest 4.50 2/1/26 190,000 22,725 Principal and interest 4.50 2/1/27 200,000 13,950 Principal and interest 4.50 2/1/28 210,000 4,725 Total 2,380,000 846,862 Taxable Street Reconstruction Bonds of 2009 A (Build America Bonds) 12/30/09 Principal and interest 2.70 2/1/14 205,000 209,345 Principal and interest 3.00 2/1115 205,000 203,503 Principal and interest 3.50 2/1/16 210,000 196,753 Principal and interest 4.00 2/1/17 215,000 188,778 Principal and interest 4.25 2/1/18 225,000 179,696 Principal and interest 4.50 2/1/19 230,000 169,740 Principal and Interest (call provision date) 4.65 2/1/20 235,000 159,101 Principal and interest 4.75 2/1/21 245,000 147,819 Principal and interest 4.90 2/1/22 250,000 135,875 Principal and interest 5.00 2/1/23 260,000 123,250 Principal and interest 5.20 2/1/24 270,000 109,730 Principal and interest 5.30 2/1/25 280,000 95,290 Principal and interest 5.40 2/1/26 290,000 80,040 Principal and interest 5.50 2/1/27 300,000 63,960 Principal and interest 5.65 2/1/28 310,000 46,953 Principal and interest 5.80 2/1/29 320,000 28,915 Principal and interest 5.95 2/1/30 330,000 9,818 Total 4,380,000 2,148,566 Total General Obligation Bonds $ 69,410,000 $ 18,175,579 111 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Improvement Bonds of 2007 F Issue Interest Principal Maturity Annual Date Rate Date Amount Interest G.O. Improvement Bonds: 9,113 Principal and interest 4.00 Improvement Refunding Bonds of 2007 B 2/1/07 7,113 Principal and interest Principal and interest 3.875 2/1/14 $ 95,000 $ 9,009 Principal and interest 3.875 2/1/15 90,000 5,425 Principal and interest 3.875 2/1/16 95,000 1,841 Total Total 280,000 16,275 Improvement Bonds of 2007 F 8/1/07 Principal and Interest (call provision date) 4.00 2/1/14 50,000 9,113 Principal and interest 4.00 2/1/15 50,000 7,113 Principal and interest 4.00 2/1/16 50,000 5,113 Principal and interest 4.00 2/1/17 50,000 3,088 Principal and interest 4.125 2/1/18 50,000 1,031 Total 250,000 25,458 Improvement Bonds of 2008 A 1011/08 Principal and interest 3.10 2/1/14 30,000 5,940 Principal and interest 3.25 2/1/15 30,000 4,988 Principal and interest 3.75 2/1/16 30,000 3,938 Principal and interest 3.75 211117 30,000 2,813 Principal and interest 3.75 2/1/18 30,000 1,688 Principal and interest 3.75 2/1/19 30,000 563 Total 180,000 19,930 Improvement Refunding Bonds of 2009 B 12/30/09 Principal and interest 2.00 2/1/14 385,000 57,613 Principal and interest 2.00 2/1/15 380,000 49,963 Principal and interest 2.50 2/1/16 390,000 41,288 Principal and interest 2.75 2/1/17 375,000 31,256 Principal and interest 3.00 2/1/18 355,000 20,775 Principal and interest 3.00 2/1/19 360,000 10,050 Principal and interest 3.00 2/1/20 155,000 2,325 Total 2,400,000 213,270 Improvement Bonds of 2011 A 12/1/11 Principal and interest 0.700 2/1/14 190,000 38,455 Principal and interest 0.950 2/1/15 195,000 36,864 Principal and interest 1.200 2/1/16 190,000 34,798 Principal and interest 1.400 2/1/17 190,000 32,328 Principal and interest 1.700 2/1/18 190,000 29,383 Principal and interest 1.900 2/1/19 190,000 25,963 Principal and interest 2.100 2/1/20 190,000 22,163 Principal and interest 2.250 2/1/21 195,000 17,974 Principal and interest 2.600 211/22 50,000 15,130 Principal and interest 2.600 2/1/23 50,000 13,830 Principal and interest 3.100 2/1/24 50,000 12,530 Principal and interest 3.100 2/1/25 45,000 11,183 (continued) 112 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 113 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest G.O. Improvement Bonds: (continued) Improvement Bonds of 2011 A (continued) Principal and interest 3.100 2/1/26 $ 45,000 $ 9,788 Principal and interest 3.100 2/1/27 45,000 8,393 Principal and interest 3.500 2/1/28 45,000 6,998 Principal and interest 3.500 2/1/29 45,000 5,513 Principal and interest 3.500 2/1/30 45,000 3,938 Principal and interest 3.500 2/1/31 45,000 2,363 Principal and interest 3.500 2/1/32 45,000 788 Total 2,040,000 328,382 Improvement Bonds of 2012 A 8/15112 Principal and interest 2.000 2/1/14 505,000 179,225 Principal and interest 2.000 2/1/15 550,000 168,675 Principal and interest 2.000 2/1/16 550,000 157,675 Principal and interest 2.000 2/1/17 555,000 146,625 Principal and interest 2.000 2/1/18 550,000 135,575 Principal and interest 3.000 2/1/19 550,000 121,825 Principal and interest 3.000 2/1/20 555,000 105,250 Principal and interest 3.000 2/1/21 565,000 88,450 Principal and interest (call provision date) 3.000 2/1/22 565,000 71,500 Principal and interest 4.000 2/1/23 575,000 51,525 Principal and interest 4.000 2/1/24 135,000 37,325 Principal and interest 3.000 2/1/25 130,000 32,675 Principal and interest 3.000 2/1/26 130,000 28,775 Principal and interest 3.000 2/1/27 130,000 24,875 Principal and interest 3.000 2/1/28 130,000 20,975 Principal and interest 3.000 2/1/29 130,000 17,075 Principal and interest 3.000 2/1/30 125,000 13,250 Principal and interest 3.000 2/1/31 125,000 9,500 Principal and interest 3.000 2/1/32 125,000 5,750 3.100 2/1/33 125,000 1,938 Total 6,805,000 1,418,463 Improvement Bonds of 2013 A 8115/13 Principal and interest 2.000 2/1/14 - 115,862 Principal and interest 2.000 2/1/15 295,000 117,600 Principal and interest 2.000 2/1/16 360,000 111,050 Principal and interest 2.000 2/1/17 360,000 103,850 Principal and interest 2.000 2/1/18 365,000 96,600 Principal and interest 2.000 2/1/19 370,000 89,250 Principal and interest 2.000 2/1120 375,000 81,800 Principal and interest 2.250 2/1/21 380,000 73,775 Principal and interest 2.500 2/1/22 380,000 64,750 Principal and interest (call provision date) 2.750 2/1123 385,000 54,706 Principal and interest 2.750 2/1/24 395,000 43,981 Principal and interest 3.500 2/1/25 100,000 36,800 (continued) 113 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Total G.O. Improvement Bonds $ 16,640,000 $ 3,175,777 Tax Increment Bonds: Tax Increment Refunding Issue Interest Principal Maturity Annual Date Rate Date Amount Interest G.O. Improvement Bonds: (continued) Principal and interest 4.00 2/1/14 70,000 Improvement Bonds of 2013 A (continued) Principal and interest 4.00 2/1/15 210,000 Principal and interest 3.500 2/1/26 $ 100,000 $ 33,300 Principal and interest 3.500 2/1127 100,000 29,800 Principal and interest 3.750 2/1128 100,000 26,175 Principal and interest 3.750 2/1/29 100,000 22,425 Principal and interest 3.750 2/1/30 100,000 18,675 Principal and interest 4.000 2/1/31 105,000 14,700 Principal and interest 4.000 211/32 105,000 10,500 Principal and interest 4.000 2/1/33 105,000 6,300 Principal and interest 4.000 2/1/34 105,000 2,100 Total Bonds of 2007 C 4,685,000 1,153,999 Total G.O. Improvement Bonds $ 16,640,000 $ 3,175,777 Tax Increment Bonds: Tax Increment Refunding 211/07 Bonds of 2007 A Principal and interest 4.00 2/1/14 70,000 78,161 Principal and interest 4.00 2/1/15 210,000 72,561 Principal and Interest (call provision date) 4.00 2/1/16 220,000 63,961 Principal and interest 4.00 2/1/17 220,000 55,161 Principal and interest 4.00 2/1/18 230,000 46,161 Principal and interest 4.00 2/1/19 240,000 36,761 Principal and interest 4.125 2/1/20 245,000 26,908 Principal and interest 4.125 2/1/21 260,000 16,493 Principal and interest 4.20 2/1/22 265,000 5,565 Total 1,960,000 401,732 Taxable Tax Increment Refunding 2/1/07 Bonds of 2007 C Principal and interest 5.10 2/1/14 135,000 3,443 Total 135,000 3,443 Tax Increment Refunding 12/30/09 Bonds of 2009 B Principal and interest 2.00 2/1/14 240,000 2,400 Total 240,000 2,400 Total Tax Increment Bonds State -aid Street Revenue Bonds: State -aid Street Bonds of 2007 G Principal and interest (continued) $ 2,335,000 $ 407,575 12/15/07 4.00 4/1/14 375,000 73,900 114 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Issue Date State -aid Street Revenue Bonds: (continued) State -aid Street Bonds of 2007 G (continued) Principal and interest Principal and Interest (call provision date) Principal and interest Principal and interest Total State -aid Street Refunding Bonds of 2010 A Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total State -aid Street Refunding Bonds of 2011 B Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest 1/1/10 12/1 /11 Interest Principal Maturity Annual Rate Date Amount Interest 4.00 4/1115 $ 390,000 4.00 4/1/16 405,000 4.00 4/1/17 425,000 4.00 4/1/18 440,000 2,035,000 2.00 2.00 3.00 3.00 3.00 3.25 4.00 4/1/14 4/1/15 4/1/16 4/1/17 4/1/18 4/1/19 4/1/20 255,000 260,000 275,000 280,000 285,000 300,000 305,000 0.60 0.75 1.25 1.25 1.75 1.75 2.15 2.15 4/1/14 4/1/15 4/1/16 4/1/17 4/1/18 4/1/19 4/1/20 4/1/21 1,960,000 70,000 75,000 70,000 75,000 75,000 75,000 75,000 80,000 595,000 Total State -aid Street Revenue Bonds Water Connection Revenue Bonds: Water Revenue Refunding Bonds of 2004 B Principal and Interest (call provision date) Principal and interest Principal and interest Total Water Connection Revenue Bonds 1111/04 115 $ 4,590,000 $ 58,600 42,700 26,100 8,800 210,100 54,900 49,750 43,025 34,700 26,225 17,075 6,100 231,775 8,543 8,051 7,333 6,426 5,301 3,989 2,526 860 43,029 $ 484,904 4.00 2/1/14 890,000 4.00 2/1/15 960,000 4.00 2/1/16 1,015,000 96,800 59,800 20,300 $ 2,865,000 $ 176,900 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Gross Revenue Recreation Facility Issue Interest Principal Maturity Annual 4.25 Date Rate Date Amount Interest Arena Revenue Bonds: 211/16 Interest 5.30 Ice Center Refunding Bonds of 2008 A 10/1/08 Principal and interest 5.30 (Ames Ice Arena) 135,000 41,145 Principal and interest Principal and interest 3.10 2/1/14 $ 135,000 $ 6,643 Principal and interest 3.25 2/1/15 140,000 2,275 Total Principal and interest 275,000 8,918 Gross Revenue Recreation Facility 411/99 225,000 372,431 4.25 Bonds of 1999 (Ames Ice Arena) 245,000 362,444 4.25 211/16 Interest 5.30 2/1/14 & 8/1/14 41,145 Principal and interest 5.30 8/1/15 135,000 41,145 Principal and interest 5.30 8/1/16 145,000 33,990 Principal and interest 5.30 8/1/17 155,000 26,305 Principal and interest 5.40 811/18 165,000 18,090 Principal and interest 5.40 8/1/19 170,000 9,180 Total 4.50 2/1/24 770,000 169,855 Total Arena Revenue Bonds HRA Lease Revenue Bonds: HRA Ice Arena Lease Revenue 12/01106 Bonds of 2006 (Hasse Ice Arena) Principal and interest Principal and interest Principal and interest Principal and Interest (call provision date) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total HRA Lease Revenue Bonds Total Governmental Activity Bonds $ 1,045,000 $ 178,773 4.25 2/1/14 225,000 372,431 4.25 2/1/15 245,000 362,444 4.25 211/16 270,000 351,500 4.50 2/1/17 315,000 338,675 4.50 2/1/18 340,000 323,938 4.50 2/1/19 355,000 308,300 4.50 2/1/20 370,000 291,988 4.50 2/1/21 390,000 274,888 4.50 2/1/22 415,000 256,775 4.50 2/1/23 435,000 237,650 4.50 2/1/24 450,000 217,738 4.50 2/1/25 470,000 197,038 4.50 2/1/26 495,000 175,325 4.625 2/1/27 520,000 152,163 4.625 2/1/28 545,000 127,534 4.625 2/1/29 575,000 101,634 4.625 2/1/30 605,000 74,347 4.625 2/1/31 635,000 45,672 4.625 2/1/32 670,000 15,494 $ 8,325,000 $ 4,225,534 $ 105,210,000 $ 26,825,042 116 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDED INDEBTEDNESS AND ANNUAL INTEREST PAYABLE DECEMBER 31, 2013 Issue Date Liquor Revenue Bonds: Liquor Revenue Bonds of 2007 Principal and interest Principal and interest Principal and interest Principal and Interest (call provision date) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest 5/1/07 Interest Principal Maturity Annual Rate Date Amount Interest 5.00 2/1/14 $ 165,000 $ 157,625 5.00 2/1/15 175,000 149,125 5.00 2/1/16 180,000 140,250 5.00 2/1/17 190,000 131,000 5.00 2/1/18 200,000 121,250 5.00 2/1/19 210,000 111,000 5.00 2/1/20 220,000 100,250 5.00 2/1/21 235,000 88,875 5.00 2/1122 245,000 76,875 5.00 2/1/23 255,000 64,375 5.00 2/1124 270,000 51,250 5.00 2/1/25 285,000 37,375 5.00 2/1/26 295,000 22,875 5.00 2/1/27 310,000 7,750 Total Business -type Activity Bonds Total Bonded Indebtedness and Annual Interest Payable $ 3,235,000 $ 1,259,875 $ 108,445,000 $ 28,084,917 117 This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA COMBINED SCHEDULE OF BONDED INDEBTEDNESS DECEMBER 31, 2013 Interest Issue Call Maturity Rates % Date Date Date Governmental Activities: General Obligation Bonds: Park Refunding Bonds of 2011 B Capital Improvement Bonds of 2004 A Capital Improvement Refunding Bonds of 2012 B Capital Improvement Bonds of 2007 D Street Reconstruction Bonds of 2003 A Street Reconstruction Refunding Bonds of 2012 B Street Reconstruction Bonds of 2005 A Street Reconstruction Bonds of 2007 H Street Reconstruction Bonds of 2009 A (Taxable) Total General Obligation Bonds G.O. Improvement Bonds: Improvement Refunding Bonds of 2007 B Improvement Bonds of 2007 F Improvement Bonds of 2008 A Improvement Refunding Bonds of 2009 B Improvement Refunding Bonds of 2011 A Improvement Refunding Bonds of 2012 A Improvement Refunding Bonds of 2013 A Total G.O. Improvement Bonds 0.50 -0.75 Dec-01 -11 n/a Apr -01 -15 3.50 -4.75 Nov -01 -04 Feb -01 -15 Feb -01 -30 2.00 -4.00 Aug -15 -12 Feb -01 -22 Feb -01 -30 4.625 -5.00 Aug -01 -07 Feb -01 -17 Feb -01 -32 3.50 -4.50 Mar -15 -03 Feb -01 -14 Feb -01 -26 2.00 -4.00 Aug -15 -12 Feb -01 -22 Feb -01 -30 3.85 -4.20 Dec-01 -05 Feb -01 -16 Feb -01 -26 3.50 -4.50 Dec-15 -07 Feb -01 -18 Feb -01 -28 1.55 -5.95 Dec -30 -09 Feb -01 -20 Feb -01 -30 3.875 Feb -01 -07 n/a Feb -01 -16 4.00 -4.125 Aug -01 -07 Feb -01 -14 Feb -01 -18 2.70 -3.75 Oct-01 -08 n/a Feb -01 -19 2.00 -3.00 Dec -30 -09 n/a Feb -01 -20 0.50 -3.50 Dec -01 -11 Feb -01 -21 Feb -01 -32 2.00 -4.00 Aug -15 -12 Feb -01 -22 Feb -01 -33 2.00 -4.00 Aug -15 -13 Feb -01 -23 Feb -01 -34 Tax Increment Bonds: Tax Increment Refunding Bonds of 2007 A 4.00 -4.20 Feb -01 -07 Feb -01 -16 Feb -01 -22 Tax Increment Refunding Bonds of 2007 C (Taxable) 5.10 Feb -01 -07 n/a Feb -01 -14 Tax Increment Refunding Bonds of 2009 B 2.00 Dec-30 -09 n/a Feb -01 -14 Total Tax Increment Bonds State -aid Street Revenue Bonds: State -aid Street Bonds of 2007 G 4.00 Dec-15 -07 Apr -01 -16 Apr -01 -18 State -aid Street Refunding Bonds of 2010 A 2.004.00 Jan -01 -10 n/a Apr -01 -20 State -aid Street Refunding Bonds of 2011 B 0.50 -2.15 Dec-01 -11 n/a Apr -01 -21 Total State -aid Street Revenue Bonds Water Connection Revenue Refunding Bonds of 2004 B Arena Revenue Bonds: Ice Center Refunding Bonds of 2008 A Gross Revenue Recreation Facility Bonds of 1999 Total Arena Revenue Bonds HRA Lease Revenue Bonds: HRA Ice Arena Lease Revenue Bonds of 2006 4.00 Nov -01 -04 Feb -01 -14 Feb -01 -16 2.70 -3.25 Oct -01 -08 n/a Feb -01 -15 5.30 -5.40 Apr -01 -99 n/a Aug -01 -19 4.25 -4.625 Dec -01 -06 Feb -01 -17 Feb -01 -32 Total Governmental Activity Bonds Business -tvoe Activity: Liquor Revenue Bonds of 2007 5.00 May -01 -07 Feb -01 -17 Feb -01 -27 Total Bonded Indebtedness 118 Bonds Due in 2014 Authorized Issued Retired Outstandina Principal Interest 1,215,000 1,215,000 400,000 815,000 405,000 4,290 14,445,000 14,445,000 1,305,000 13,140,000 320,000 586,506 12,765,000 12,765,000 - 12,765,000 - 398,850 15,115,000 15,115,000 2,005,000 13,110,000 450,000 630,113 14,890,000 14,890,000 4,155,000 10,735,000 10,735,000 226,191 9,685,000 9,685,000 - 9,685,000 - 301,450 5,430,000 5,430,000 3,030,000 2,400,000 145,000 92,719 2,810,000 2,810,000 430,000 2,380,000 120,000 97,545 4,945,000 4,945,000 565,000 4,380,000 205,000 209,345 81,300,000 81,300,000 11,890,000 69,410,000 12,380,000 2,547,009 3,165,000 3,165,000 2,885,000 280,000 95,000 9,009 1,310,000 1,310,000 1,060,000 250,000 50,000 9,113 620,000 620,000 440,000 180,000 30,000 5,940 4,250,000 4,250,000 1,850,000 2,400,000 385,000 57,613 2,385,000 2,385,000 345,000 2,040,000 190,000 38,455 6,805,000 6,805,000 - 6,805,000 505,000 179,225 4,685,000 4,685,000 - 4,685,000 - 115,862 23,220,000 23,220,000 6,580,000 16,640,000 1,255,000 415,217 2,265,000 2,265,000 305,000 1,960,000 70,000 78,161 820,000 820,000 685,000 135,000 135,000 3,443 930,000 930,000 690,000 240,000 240,000 2,400 4,015,000 4,015,000 1,680,000 2,335,000 445,000 84,004 3,675,000 3,675,000 1,640,000 2,035,000 375,000 73,900 2,680,000 2,680,000 720,000 1,960,000 255,000 54,900 665,000 665,000 70,000 595,000 70,000 8,543 7,020,000 7,020,000 2,430,000 4,590,000 700,000 137,343 9,735,000 9,735,000 6,870,000 2,865,000 890,000 96,800 775,000 775,000 500,000 275,000 135,000 6,643 1,250,000 1,250,000 480,000 770,000 41,145 2,025,000 2,025,000 980,000 1,045,000 135,000 47,788 9,230,000 9,230,000 905,000 8,325,000 225,000 372,431 136,545,000 136,545,000 31,335,000 105,210,000 16,030,000 3,700,592 3,955,000 3,955,000 720,000 3,235,000 165,000 157,625 E 140,500,000 $ 140,500,000 $ 32,055,000 $ 108,445,000 $ 16,195,000 $3,858,217 119 This page intentionally left blank. STATISTICAL SECTION This part of the City of Lakeville's Comprehensive Annual Financial Report presents detailed information as a context for understanding the current year's financial statements, note disclosures, and required supplementary information about the government's overall financial health. This information has not been audited by the independent auditor. Financial Trends These schedules present trend information that may assist the reader in assessing the City's financial performance from a historical perspective. Net Position by Component - Government -wide Changes in Net Position - Governmental Activities Changes in Net Position - Business -type Activities Changes in Net Position - Total Governmental and Business -type Activities Fund Balances - Governmental Funds Changes in Fund Balances - Governmental Funds Revenue Capacity These schedules contain information that may assist the reader in assessing the City's most significant revenue source, the property tax. Tax Capacity Valuation and Assessor's Taxable Market Value of Taxable Property Property Tax Rates - Direct and Overlapping Governments Principal Property Taxpayers Property Tax Levy and Collections Debt Capacity These schedules provide information that may assist the reader in evaluating the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Ratio of Outstanding Debt by Type Ratio of Net Bonded Debt Outstanding Direct and Overlapping Governmental Debt Legal Debt Margin Pledged Revenue Coverage Demographic and Economic Information These schedules present demographic and economic indicators that are commonly used for financial analysis in understanding the City's ongoing and future financial status. Demographic and Economic Statistics Principal Employers Commercial and Industrial Building Permits Issued Operating Information These schedules contain service and infrastructure indicators that may assist the reader in understanding the information in the City's financial report as it relates to the services the City provides and the activities it performs. Employees by Function /Program (Full -Time Equivalent) Operating Indicators by Function Capital Assets Statistics by Function Source: Unless otherwise noted, the information contained within these schedules is derived from comprehensive annual financial reports for the relevant year. This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA Net Position by Component - Government -wide Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2004 2005 2006 2007 Governmental Activities Net investment in capital assets (1) $ 13,712,628 $ 34,629,141 $ 47,013,052 $125,574,976 Restricted 7,079,763 7,728,450 7,200,932 9,727,357 Unrestricted 9,463,615 1,834,965 2,727,757 2,225,861 Total governmental activities 30,256,006 44,192,556 56,941,741 137,528,194 Business -type Activities Net investment in capital assets 95,869,103 102,503,832 105,571,786 103,156,352 Restricted 72,000 59,000 45,500 326,133 Unrestricted 6,741,613 7,396,116 7,423,725 11,770,501 Total business -type activities 102,682,716 109,958,948 113,041,011 115,252,986 Total Government -wide Net investment in capital assets 109,581,731 137,132,973 152,584,838 228,731,328 Restricted 7,151,763 7,787,450 7,246,432 10,053,490 Unrestricted 16,205,228 9,231,081 10,151,482 13,996,362 Total government -wide $132,938,722 $154,151,504 $169,982,752 $252,781,180 Notes: (1) The net investment in capital assets amount for fiscal years 2004 through 2006 excludes infrastructure assets that were acquired prior to January 1, 2004. 2007 includes the addition of these infrastructure assets acquired (net of depreciation) for $76,014,220. (2) Includes a restatement of $186,003 in Business -type activities. (3) The City implemented GASB Statement No. 65 in 2012. Net position for 2011 was restated for the effects of implementing this standard. Net position for previous years has not been restated. 120 2008 2009 2010 2011 2012 2013 $120,954,521 $119,699,102 $119,249,751 $120,485,858 $125,051,058 $129,599,494 9,037,087 10,542,926 10,027,737 16,474,815 17,403,167 17,645,944 3,100,244 1,210,922 2,324,315 (5,970,712) (1,923,495) 2,511,935 133,091,852 131,452,950 131,601,803 130,989,961 140, 530,730 149,757,373 104,535,771 103,150,022 311,133 295,133 14,107,347 15,828,861 118,954,251 119, 274, 016 225,490,292 222,849,124 9,348,220 10,838,059 17, 207, 591 17, 039, 783 $252,046,103 $250,726,966 (2) 101,893,442 295,133 16,363,211 118,551,786 221,143,193 10,322,870 18,687,526 $250,153,589 100,390,175 325,750 16,666,856 117,382,781 220,876,033 16,800,565 10,696,144 $ 248,372,742 (3) 102, 009, 893 105,055,746 325,750 324,125 15, 658,140 13, 704, 281 117,993,783 119,084,152 227, 060, 951 234, 655, 240 17, 728, 917 17, 970, 069 13, 734, 645 16, 216, 216 $258,524,513 $268,841,525 121 CITY OF LAKEVILLE, MINNESOTA Changes in Net Position - Governmental Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2004 2005 2006 2007 Expenses General govemment $ 3,593,032 $ 3,733,657 $ 4,452,707 $ 4,712,995 Public safety 8,439,118 8,928,681 10,057,597 10,308,296 Public works 18,238,780 12,970,903 7,507,095 15,844,963 Parks and recreation 3,044,450 3,535,082 3,819,806 4,556,759 Interest on long -term debt 3,109,159 4,032,004 3,278,091 3,867,395 Total expenses 36,424,539 33,200,327 29,115,296 39,290,408 Program Revenues Charges for services General government 3,965,377 3,313,130 2,960,761 2,495,649 Public safety 674,034 691,070 850,033 659,989 Public works 7,618,764 9,123,403 6,064,174 4,985,965 Parks and recreation 1,924,946 2,598,033 1,556,284 1,437,308 Operating grants and contributions General government 30,269 42,748 114,152 43,839 Public safety 636,132 683,047 741,342 698,926 Public works 152,216 105,659 106,871 6,604,149 Parks and recreation 12,658 15,906 33,575 13,456 Capital grants and contributions General government - - 171,400 - Public safety 4,651 - 326,143 5,000 Publicworks 9,872,250 13,320,961 6,169,357 3,384,857 Parks and recreation 806,770 1,595,022 2,272,358 550,757 Total program revenues 25,698,067 31,488,979 21,366,450 20,879,895 Net(Expense)Revenue General govemment 402,614 (377,779) (1,206,394) (2,173,507) Public safety (7,124,301) (7,554,564) (8,140,079) (8,944,381) Public works (595,550) 9,579,120 4,833,307 (869,992) Parks and recreation (300,076) 673,879 42,411 (2,555,238) Interest on long -term debt (3,109,159) (4,032,004) (3,278,091) (3,867,395) Total net (expense) revenue (10,726,472) (1,711,348) (7,748,846) (18,410,513) General Revenues and Other Property taxes 13,049,107 15,491,536 18,009,237 20,873,431 Investment earnings (charges) 794,732 1,023,616 1,505,062 1,977,519 Gain on sale of capital assets - - 1,434,692 - Transfers in (out) 307,071 (867,254) (450,960) 131,796 Total general revenues and other (net) 14,150,910 15,647,898 20,498,031 22,982,746 Change in net position $ 3,424,438 $13,936,550 $12,749,185 $ 4,572,233 Note: The City implemented GASB Statement No. 65 in 2012. Change in net position for 2011 was restated for the effect of implementing this standard. Change in net position for previous years has not been restated. 122 2008 2009 2010 2011 2012 2013 $ 6,169,957 $ 5,916,590 10,019,681 9,726,394 15,706,515 12,866,216 4,900,341 4,774,745 4,218,695 3,994,790 41,015,189 37,278,735 $ 5,248,677 10,858,447 12,197,868 4,775,015 3,740,076 36,820,083 $ 5,134,169 11,068,287 13,778,800 4,796,035 4,383,684 39,160,975 $ 5,258,319 $ 5,363,354 11,202,018 11,784,109 10,849,213 11,241,434 4,780,666 5,154,919 3,496,878 3,864,333 35,587,094 37,408,149 2,238,739 1,940,423 1,834,856 2,108,396 2,736,653 3,061,568 581,930 643,174 654,226 746,207 714,587 686,130 4,239,190 2,817,604 1,967,309 2,313,334 3,588,062 4,481,445 1,937,523 984,206 1,555,560 1,299,364 2,087,640 2,231,757 25,083 44,648 42,661 37,970 40,359 60,076 639,173 1,048,160 846,553 649,253 698,949 902,783 783,843 1,142,494 1,399,661 1,451,359 1,396,560 1,295,018 46,058 20,294 30,144 160,852 100,315 59,653 - - 91,735 195,693 50,000 - 21,576 26,325 19,530 - 1,420,813 2,783,528 3,025,905 2,906,106 5,569,732 6,350,827 871,266 187,699 267,360 2 97,245 370,237 1,296,764 12,833,618 11,612,230 11,645,811 11,996,411 17,414,359 20,621,714 (3,906,135) (3,931,519) (3,371,160) (2,987,803) (2,389,572) (2,046,017) (8,748,578) (8,035,060) (9,336,092) (9,646,502) (9,768,952) (10,195,196) (9,262,669) (6,122,590) (5,804,993) (7,108,001) (294,859) 885,856 (2,045,494) (3,582,546) (2,921,951) (3,038,574) (2,222,474) (1,566,745) (4,218,695) (3,994,790) (3,740,076) (4,383,684) (3,496,878) (3,864,333) (28,181,571) (25,666,505) (25,174,272) (27,164,564) (18,172,735) (16,786,435) 23,391,055 23,912,318 24,369,009 24,207,406 24,221,741 23,947,968 1,383,236 463,092 340,336 280,364 176,409 (28,949) - - - - 214,004 - (2,029,933) (347,807) 613,780 2,692,671 3,101,350 2,094,059 22,744,358 24,027,603 25,323,125 27,180,441 27,713,504 26,013,078 $(5,437,213) $ 1,638,902 $ 148,853 $ 15,877 $ 9,540,769 $ 9,226,643 123 CITY OF LAKEVILLE, MINNESOTA Changes in Net Position - Business -type Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2004 2005 2006 2007 Expenses Liquor $ 1,648,759 $ 1,791,612 $ 1,940,626 $ 2,164,440 Utility 6,699,466 7,020,440 7,925,809 8,029,064 Total expenses 8,348,225 8,812,052 9,866,435 10,193,504 Program Revenues Charges for services Liquor Utility Operating grants and contributions Liquor Utility Capital grants and contributions Liquor Utility Total program revenues Net (Expense) Revenue Liquor Utility Total net (expense) revenue General Revenues and Other Investment income (charges) Disposal of capital assets Transfers in (out) Total general revenues and other (net) 2,590,308 2,911,820 3,080,692 3,314,721 5,105,936 5,263,274 5,855,346 6,553,811 7,762 3,762 3,762 3,762 3,264 3,264 3,264 3,264 3,114,733 6,911,241 3,239,467 1,394,810 10,822,003 15,093,361 12,182, 531 11,270, 368 949,311 1,123,970 1,143,828 1,154,043 1,524,467 5,157,339 1,172,268 (77,179) 2,473,778 6,281,309 2,316,096 1,076,864 129,549 127,669 315,007 468,478 - - - 798,429 (307,071) 867,254 450,960 (131,796) (177,522) 994,923 765,967 1,135,111 Change in net position $ 2,296,256 $ 7,276,232 $ 3,082,063 $ 2,211,975 Note: The City implemented GASB Statement No. 65 in 2012. Change in net position for 2011 was restated for the effect of implementing this standard. Change in net position for previous years has not been restated. (1) Includes a restatement of $186,003. 124 2008 2009 2010 2011 2012 2013 $ 2,407,714 $ 2,437,654 $ 2,424,290 $ 2,439,261 $ 2,392,945 $ 2,473,738 8,319,303 9,086,172 9,903,296 10,401,650 10,365,651 10,863,625 10, 727, 017 11, 523, 826 12, 327, 586 12, 840, 911 12, 758, 596 13, 337, 363 3,603,240 3,611,777 3,612,321 3,546,877 3,839,723 3,948,599 7,355,207 7,491,674 7,432,391 8,866,345 9,542,284 9,126,838 3,762 3,762 3,762 3,762 3,762 3,762 3,264 3,264 3,264 59,707 103,525 69,968 - - 17,050 - - - 975,410 158,252 999,716 1,129,764 2,903,043 3,414,738 11,940,883 11,268, 729 12,068,504 13,606,455 16,392, 337 16, 563,905 1,199,288 1,177,885 1,208,843 1,111,378 1,450,540 1,478,623 14,578 (1,432,982) (1,467,925) (345,834) 2,183,201 1,747,919 1,213,866 (255,097) (259,082) 765,544 3,633,741 3,226,542 457,466 227,055 150,632 130,403 78,611 (42,114) 2,029,933 347,807 (613,780) (2,692,671) (3,101,350) (2,094,059) 2,487,399 574,862 (463,148) (2,562,268) (3,022,739) (2,136,173) $ 3,701,265 $ 319,765 $ 722,230 $(1,796,724) $ 611,002 $ 1,090,369 (1) 125 CITY OF LAKEVILLE, MINNESOTA Changes in Net Position - Total Governmental and Business -type Activities Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Expenses Governmental activities Business -type activities Total expenses Program Revenues Governmental activities Business -type activities Total program revenues Net (Expense) Revenue Governmental activities Business -type activities Total net (expense) revenue 2004 2005 2006 2007 $ 36,424,539 $ 33,200,327 $ 29,115,296 $ 39,290,408 8,348,225 8,812,052 9,866,435 10,193,504 44,772,764 42,012,379 38,981,731 49,483,912 25,698,067 31,488,979 21,366,450 20,879,895 10,822,003 15,093,361 12,182,531 11,270, 368 36,520,070 46,582,340 33,548,981 32,150,263 (10,726,472) (1,711,348) (7,748,846) (18,410,513) 2,473,778 6,281,309 2,316,096 1,076,864 (8,252,694) 4,569,961 (5,432,750) (17,333,649) General Revenues and Other Governmental activities 14,150,910 15,647,898 20,498,031 22,982,746 Business -type activities (177,522) 994,923 765,967 1,135,111 Total general revenues and other (net) 13,973,388 16,642,821 21,263,998 24,117,857 Change in Net Position Governmental activities 3,424,438 13,936,550 12,749,185 4,572,233 Business -type activities 2,296,256 7,276,232 3,082,063 2,211,975 Total change in net position $ 5,720,694 $ 21,212,782 $15,831,248 $ 6,784,208 Note: The City implemented GASB Statement No. 65 in 2012. Change in net position for 2011 was restated for the effects of implementing this standard. Change in net position for previous years has not been restated. (1) Includes a restatement of $186,003. 126 2008 2009 2010 2011 2012 2013 $ 41,015,189 $ 37,278,735 $ 36,820,083 $ 39,160,975 $ 35,587,094 $ 37,408,149 10, 727,017 11, 523,826 12,327, 586 12,840,911 12, 758,596 13,337,363 51,742,206 48,802,561 49,147,669 52,001,886 48,345,690 50,745,512 12,833,618 11,612,230 11,645,811 11,996,411 17,414,359 20,621,714 11,940,883 11,268, 729 12,068, 504 13,606,455 16,392,337 16,563,905 24,774,501 22,880,959 23,714,315 25,602,866 33,806,696 37,185,619 (28,181,571) (25,666,505) (25,174,272) (27,164,564) (18,172,735) (16,786,435) 1,213,866 (255,097) (259,082) 765,544 3,633,741 3,226,542 (26,967,705) (25,921,602) (25,433,354) (26,399,020) (14,538,994) (13,559,893) 22,744,358 24,027,603 25,323,125 27,180,441 27,713,504 26,013,078 2,487,399 574,862 (463,148) (2,562,268) (3,022,739) (2,136,173) 25,231,757 24,602,465 24,859,977 24,618,173 24,690,765 23,876,905 (5,437,213) (1,638,902) 148,853 15,877 9,540,769 9,226,643 3,701,265 319,765 (722,230) (1,796,724) 611,002 1,090,369 $ (1,735,948) $ (1,319,137) $ (573,377) $ (1,780,847) $10,151,771 $10,317,012 (1) 127 CITY OF LAKEVILLE, MINNESOTA Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2004 2005 2006 2007 General Fund Reserved $ - $ 10,322 $ 8,238 $ 8,483 Unreserved 9,089,470 10,012,455 11,010,426 11,698,291 Nonspendable - - - _ Committed - Assigned - Unassigned - Total general fund All Other Governmental Funds 9,089,470 10,022, 777 11, 018,664 11,706,774 Reserved 29,655,447 19,548,472 15,314,937 16,217,023 Unreserved Special revenue 799,538 810,972 937,978 1,083,601 Capital projects 16,213,118 13,076,770 9,839,833 17,115,258 Nonspendable - - _ - Restricted - - _ - Committed - - - - Unassigned - - - - Total all other governmental funds 46,668,103 33,436,214 26,092,748 34,415,882 Total Governmental Funds Reserved Unreserved Nonspendable Restricted Committed Assigned Unassigned 29,655,447 26,102,126 19, 558, 794 23,900,197 15, 323,175 21, 788,237 16,225,506 29,897,150 Total governmental funds All governmental funds percentage change $ 55,757,573 $ 43,458,991 $ 37,111,412 $ 46,122,656 30.3 % - 22_1% -14 z Note: The implementation of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Type Definitions, in fiscal year 2011 resulted in significant change in the City's fund balance classifications. Information prior to 2011 has not been restated. 128 2008 2009 2010 2011 2012 2013 $ 7,420 $ 9,899 $ 10,726 $ $ $ 11,238,093 11,196,826 9,385,202 - - - 384,329 256,476 126,014 - 45,000 519,146 620,725 - 9,644,863 10,614,574 9,495,546 11,245,513 11,206,725 9,395,928 10,548,338 11,491,775 9,666,560 10,464,632 16, 713,410 11, 060,144 1,107,202 1,325,731 1,444,846 11,074,322 12,549,905 15,384,343 - - - - 75 - - - 14,744,057 38,587,037 38,716,666 - 9,989,221 11,861,800 16,620,820 - - - (112,102) (233,910) (221,630) 22,646,156 30,589,046 27,889,333 24,621,251 50,214,927 55,115,856 10,472,052 16,723,309 11,070,870 - - - 23,419,617 25,072,462 26,214,391 - - - - - - 384,404 256,476 126,014 - - 14,744,057 38,587,037 38,716,666 - - 9,989,221 11,861,800 16,665,820 - - 519,146 620,725 - 9,532,761 10,380,664 9,273,916 $ 33,891,669 $ 41,795,771 $ 37,285,261 $ 35,169,589 $ 61,706,702 $ 64,782,416 -26.5% 21ZL -10.8% -5.7% 75.5% 129 CITY OF LAKEVILLE, MINNESOTA Changes in Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year Revenues Property taxes and tax increment Licenses and permits Intergovernmental Charges for services Special assessments Investment income (charges) Donations Miscellaneous Total revenues Expenditures General government Public safety Public works Parks and recreation Capital outlay Debt service Principal retirement Interest on debt Fiscal charges Total expenditures Excess (deficiency) of revenues over(under)expenditures Other financing sources (uses) Transfers in Transfers out Bond, note, loan and lease proceeds Payment on refunded bonds called Premium on bonds issued Discount on bonds issued Sale of capital assets 2004 2005 2006 2007 $ 12,982,754 $ 15,398,468 $ 17,882,708 $ 20,171,031 3,674,865 2,984,753 2,651,382 2,182,252 5,716,864 1,305,587 2,400,581 8,420,985 10,310,238 12,460,552 8,207,104 7,105,600 1,247,294 931,771 709,126 826,453 789,600 1,019,087 1,496,836 1,970,411 281,576 319,949 896,414 475,676 289,499 381,247 371,033 326,059 35,292,690 34,801,414 34,615,184 41,478,467 3,233,316 3,199,306 3,582,410 3,939,573 7,776,381 8,063,605 8,865,167 9,346,490 3,888,882 3,437,161 3,551,118 3,970,680 2,175,558 2,446,065 2,706,898 2,968,924 23,770,126 29,290,726 15,745,297 29,913,271 3,783,000 4,016,900 4,097,026 7,021,291 3,346,744 3,726,938 3,597,771 3,449,720 13,821 37,072 24,707 123,438 47,987,828 54,217,773 42,170,394 60,733,387 _(12,695,138) (19,416,359) (7,555,210) (19,254,920) 3,361,954 4,343,025 5,634,822 4,327,025 (2,138,784) (2,775,293) (4,997,410) (3,600,158) 24,180,000 5,564,000 12,281,300 30,850,000 - (12,825,000) (3,945,000) 346,672 - 68,479 610,404 (81,216) (13,955) - (3,242) 1,045,440 27,135 Total other financing sources (uses) 25,668,626 7,117,777 1,207,631 28,266,164 Net change in fund balances Debt service as a % of noncapital expenditures (excl. fiscal charges) $ 12,973,488 $(12,298,582) $ (6,347,579) $ 9,011,244 21.4 30.7% 29.2% Note: The City has no other taxes than property taxes and tax increment. 130 2008 2009 2010 2011 2012 2013 $ 22,901,637 $ 23,785,468 $ 24,435,538 $ 24,057,622 $ 24,453,849 $ 23,981,375 1,936,532 1,603,909 1,565,028 1,820,408 2,429,951 2,727,494 2,250,332 3,158,128 4,242,195 2,622,487 2,291,376 3,534,512 6,713,370 4,145,717 4,002,246 3,938,204 5,833,776 6,925,867 777,153 769,624 573,301 622,799 1,132,126 1,143,349 1,379,315 459,967 337,788 270,378 174,358 (28,008) 1,008,326 305,146 155,477 269,762 207,391 265,953 366,680 635,781 732,816 731,763 871,798 885,323 37,333,345 34,863,740 36,044,389 34,333,423 37,394,625 39,435,865 5,172,645 4,850,726 4,687,662 4,493,368 4,572,777 4,774,775 8,911,017 8,835,563 9,337,884 9,755,251 9,844,232 10,113,958 4,535,118 3,906,485 3,593,862 3,019,293 3,245,103 3,766,665 3,233,422 2,881,402 3,038,433 3,047,906 3,050,782 3,206,004 18,133,199 7,140,715 4,611,659 10,345,908 12,413,360 12,523,103 5,301,622 6,436,971 7,337,338 7,689,182 7,642,027 5,825,000 4,367,257 4,157,176 3,945,265 3,633,285 3,358,324 3,948,740 46,136 126,570 61,222 78,143 173,072 26,351 49,700,416 38,335,608 36,613,325 42,062,336 44,299,677 44,184,596 (12,367,071) (3,471,868) (568,936) (7,728,913) (6,905,052) (4,748,731) 7,688,315 5,156,485 5,740,982 5,324,043 6,699,447 7,094,079 (6,857,231) (4,386,727) (5,046,945) (2,524,276) (2,839,332) (4,857,921) 2,280,000 10,125,000 2,680,000 4,265,000 29,255,000 4,685,000 (2,975,000) - (7,955,000) - (1,830,000) - 116,016 99,322 - 1,957,050 78,287 - 365,196 540,067 - 200,000 825,000 136,084 11,375,970 (3,941,574) 7,064,767 33,442,165 7,824,445 $(12,230,987) $ 7,904,102 $ (4,510,510) $ (664,146) $ 26,537,113 $ 3,075,714 224A% alz% 31.6% 32.2% 2LWL 131 CITY OF LAKEVILLE, MINNESOTA Tax Capacity Valuation and Assessor's Taxable Market Value of Taxable Property Last Ten Fiscal Years Fiscal Year 2004 2005 2006 2007 Taxable Net Tax Capacity Valuation of Taxable Property Tax capacity value $ 41,253,071 $ 48,211,759 $ 55,521,140 $ 62,477,351 Less Captured tax increment tax capacity (1,684,734) (1,821,312) (1,935,093) (2,129,445; Contributions to fiscal disparities pool (2,434,792) (2,848,021) (3,429,966) (3,848,084; Plus: Distribution from fiscal disparities pool 4,281,367 4,416,475 4,707,601 5,329,560 Total taxable net tax capacity $ 41,414,912 $ 47,958,901 $ 54,863,682 $ 61,829,382 Taxable Net Tax Capacit Valuation by Class of Propert Homestead residential $ 32,609,971 $ 37,990,902 $ 44,087,330 $ 49,458,056 Commercial /industrial, public utility, and personal property 7,466,958 8,512,830 9,178,530 10,660,273 Non - homestead residential/apartments 892,175 913,735 939,412 1,008,576 Agriculture and seasonal /recreational 445,808 541,434 658,410 702,477 Total taxable net tax capacity Assessor's taxable market valuation Taxable net tax capacity as a percentage of assessor's taxable market value Direct tax capacity rate Notes: $ 41,414,912 $ 47,958,901 $ 54,863,682 $ 61,829,382 $3,742,588,600 $4,361,601,400 $5,034,819,600 $5,642,591,100 1 11' 1.1'. `�1 Taxes are determined by multiplying the taxable net tax capacity by the direct tax capacity rate as expressed as a percentage. The foregoing direct tax capacity rates do not reflect reductions for state property tax credits. Source: Dakota County Auditor and Treasurer's Office. 132 2008 2009 2010 2011 2012 2013 $ 66,208,936 $ 67,887,456 $ 65,235,789 $ 61,005,594 $ 57,583,990 $ 54,853,225 (2,173,426) (2,127,819) (1,998,923) (904,389) (862,243) (863,946) (4,416,898) (4,888,029) (5,623,626) (5,845,456) (5,591,597) (5,494,207) 5,967,401 7,115,384 7,429,875 7,807,412 7,194,884 6,825,229 $ 65,586,013 $ 67,986,992 $ 65,043,115 $ 62,063,161 $ 58,325,034 $ 55,320,301 $ 52,038,379 $ 51,916,328 $ 48,558,421 $ 44,951,025 $ 41,780,807 $ 38,983,401 11,801,273 14,325, 341 14,626, 593 15,226,802 14,711,893 14,351,101 1,000,649 1,082,546 1,127,962 1,271,776 1,265,526 1,311,388 745,712 662,777 730,139 613,558 566,808 674,411 $ 65,586,013 $ 67,986,992 $ 65,043,115 $ 62,063,161 $ 58,325,034 $ 55,320,301 $5,951,319,600 $6,024,665,500 $5,736,602,200 $5,356,855,900 $5,030,003,164 $4,767,475,321 34.195% 1,128% 33.973% 1.134% 36-624% wo. 60% 41.234% 133 CITY OF LAKEVILLE, MINNESOTA Property Tax Rates - Direct and Overlapping Governments Last Ten Fiscal Years Notes: Taxes are determined by multiplying the taxable net tax capacity by the tax capacity rate and market valued based rate expremd as a percentage. The foregoing tax capacity rates do not reflect reductions for state property tax credits credits. Special Districts include: Metropolitan Mosquito Control, Metropolitan Council, Metropolitan Transit District, Dakota County Community Development Agency, Light Rail Authority, and Vermillion River Watershed District. (1) The breakdown between operating and debt service tax rates were not available at the time of this report. Source: Dakota County Auditor and Treasurer's Office. 134 Overlapping Rates City of Lakeville Total Direct and Direct Rates Dakota County (1) School Distric1(1) Special Overlapping Rates Referendum General Levy Referendum anera a ren um Districts General Levy (Tax: Capacity- based) Levy (Market (Tax Capacity- Levy(Market Levy (Tax Levy (Market Levy Value- based) based) Value- based) Ind. Capacity- Value- (Tax Tax Market Fiscal School based) based) Capacity- Capacity- V Year Operating Debt Total To Debt Service District based based based Service u 2004 25.446% 4.604% 30.050% 0.00729% 30.300% 0.00754% 192 35.599% 0.04003% 3.518% 99.467% 0.05486% 194 26.901% 0.20593% 90.769% 0.22076% 196 26.740% 0.13978% 90.608% 0.15461% 2005 25.475% 5.851% 31.326% 0.00616% 28.267% 0.00666% 192 36.540% 0.04078% 3.752% 99.885% 0.05360% 194 25.411% 0.17349% 88.756% 0.18631% 196 22.065% 0.10862% 85.410% 0.12144% 2006 25.043% 6.567% 31.610% 0.00830% 26.318% 0.00592% 192 43.708% 0.05599% 3.780% 105.416% 0.07021% 194 25.670% 0.17079% 87.378% 0.18501% 196 27.654% 0.22437% 89,262% 0.23859% 2007 23.319% 8.264% 31.583% 0.00743% 25.127% 0.00516% 192 44.190% 0.05679% 3.771% 104.671% 0.06938% 194 25.252% 0.16868% 85.733% 0.18127% 196 23.607% 0.20824% 84.088% 0.22083% 2008 25.616% 8.579% 34.195% 0.00714% 25.184% 0.00471% 192 45.831% 0.13781% 3.749% 108.959% 0.14966% 194 26.272% 0.17167% 89.400% 0.18352% 196 21.136% 0.21274% 84.264% 0.22459% 2009 25.450% 8.523% 33.973% 0.00696% 25,821% 0.00471% 192 49.238% 0.13660% 4.301% 113.333% 0.14827% 194 27.062% 0.17413% 91.157% 0.18580% 196 21.109% 0.21032% 85.204 0.22199% 2010 28.066% 8.558% 36.624% 0.00738% 27.269% 0.00501% 192 53.452% 0.14742% 4.987% 122.332% 0.16981% 194 27.714% 0.18363% 96.594% 0.19602% 196 25.391% 0.22268% 94.271% 0.23507% 2011 30.904% 7.346% 38.250% 0.00803% 29.149% 0.00537% 192 52.157% 0.14558% 5.199% 124.755% 0.15898% 194 32.138% 0.19241% 104.736% 0.20581% 196 26.959% 0.22601% 99.557% 0.23941% 2012 31.122% 7.929% 39.051% 0.00784% 31.426% 0.00551% 192 55.308% 0.14005% 5.562% 131.347% 0.15340% 194 32.061% 0.18932% 108.100% 0.20267% 196 28.440% 0.22131% 104.479% 0.23466% 2013 32.206% 9.028% 41.234% 0.00843% 33.421% - 192 57.226% 0.15065% 5.884% 137.765% 0.15908% 194 33.536% 0.19955% 114.074% 0.20798% 196 27.956% 0.23542% 108.495% 0.24385% Notes: Taxes are determined by multiplying the taxable net tax capacity by the tax capacity rate and market valued based rate expremd as a percentage. The foregoing tax capacity rates do not reflect reductions for state property tax credits credits. Special Districts include: Metropolitan Mosquito Control, Metropolitan Council, Metropolitan Transit District, Dakota County Community Development Agency, Light Rail Authority, and Vermillion River Watershed District. (1) The breakdown between operating and debt service tax rates were not available at the time of this report. Source: Dakota County Auditor and Treasurer's Office. 134 CITY OF LAKEVILLE, MINNESOTA Principal Property Taxpayers Fiscal Year Ended December 31, 2013 and December 31, 2004 All other taxpayers 52,264,321 2013 39,494,256 2004 Total City of Lakeville taxpayers $ 54,853,225 1QQ,9 °Ln $ 41,253,071 100.0% Percentage Percentage Taxable of Taxable Taxable of Taxable Tax Tax Tax Tax Capacity Capacity Capacity Capacity Principal Property Taxpayer Type of Business Value Rank Value Value Rank Value Lakeville 2004 LLC Commercial $ 326,426 1 0.6% Heritage Commons LLC Retail 318,046 2 0.6% Dakota Electric Association utility 295,012 3 0.5% $ 267,199 1 0.6% Target Corporation Retail 256,414 4 0.5% $ 259,978 2 0.6% Argonne Investments LLC Retail 254,243 5 0.5% Walker Highview Hills LLC Senior Housing 246,873 6 0.5% LTF Real Estate Company Inc. Real estate 238,810 7 0.4% FR/CAL Interstate South LLC Industrial 229,026 8 0.4% CenterPoint Energy utility 216,430 9 0.4% Minnegasco Inc utility 207,624 10 0.4% 135,617 9 0.3% Southfork Apts. Ltd. Partnership Apartments 192,938 3 0.5% CRW Lakeville LLC Retail 166,343 4 0.4% Wausau Supply Company Lumber supply distributor 159,330 5 0.4% Muller Family Theatres of Lakeville Commercial 155,800 6 0.4% Xcel Energy utility 152,842 7 0.4% International Home Food, Inc. Food manufacturing 138,374 8 0.3% Mills Property Inc. Retail 130,394 10 0.3% Total principal taxpayers 2,588,904 4.7% 1,758,815 4.3% All other taxpayers 52,264,321 95_3% 39,494,256 95.7% Total City of Lakeville taxpayers $ 54,853,225 1QQ,9 °Ln $ 41,253,071 100.0% Source: Dakota County Auditor and Treasurer's Office. 135 CITY OF LAKEVILLE, MINNESOTA Property Tax Levy and Collections Last Ten Fiscal Years 2009 (1) 23,527,163 22,473,650 95.52% 2010 (1) Percentage 22,982,110 95.59% 2011 (1) 24,036,652 22,837,484 95.01% of Total - - 23,126,960 Total Tax Collection of Current Collection 2010 Collections Fiscal 99.00% Levy for Year's Levy 2013 of Prior Total To Tax Levy Year Fiscal Year (2) Amount (3) Percent Year Levy (4 Certified 2004 (1) 12,838,429 12,068,753 94.00% 116,556 12,185,309 94.91% 2005 (1) 15,232,317 14,460,888 94.94% 98,266 14,559,154 95.58% 2006 (1) 17,741,065 16,943,054 95.50% 162,281 17,105,335 96.42% 2007 19,943,578 19,652,615 98.54% 290,963 19,943,578 100.00% 2008 (1) 22,690,614 22,023,558 97.06% 403,300 22,426,858 98.84% 2009 (1) 23,527,163 22,473,650 95.52% 2010 (1) 24,041,653 22,982,110 95.59% 2011 (1) 24,036,652 22,837,484 95.01% 2012 - - 23,126,960 23,050,840 99.67% 2013 2010 23,079,185 22,848,820 99.00% 401,723 22,875,373 97.23% 262,682 23,244,792 96.69% 392,238 23,229,722 96.64% Fiscal Year 46,667 23,097,507 99.87% 2005 22,848,820 99.00% Notes (1) The State of Minnesota unalloted state aid for property tax relief - Market Value Homestead Credit (MVHC) in the fiscal years as follows: As a MVHC Percentage Loss of Tax Levy Fiscal Year Amount Certified 2004 611,064 4.76% 2005 607,574 3.99% 2006 632,238 3.56% 2007 - - 2008 305,479 1.35% 2009 630,561 2.68% 2010 731,494 3.04% 2011 835,005 3.47% 2012 - - 2013 (2) Total levy is net of current year cancellations and abatements. (3) Total tax levy and current tax collections include state paid credits (4) Includes county adjustments for prior year over collections, cancellations, and abatements. W-1 CITY OF LAKEVILLE, MINNESOTA Ratio of Outstanding Debt by Type Last Ten Fiscal years Business -type Governmental Activities Total General Total General Fiscal Obligation Other Capital Obligation Year Bonds Bonds Leases Capital Note 2004 85,888,275 3,485,000 219,888 136,900 2005 87,740,266 3,355,000 210,142 92,025,408 2006 72,557,465 12,493,799 183,697 85,824,961 2007 93,176,053 12,346,854 152,037 110,114,204 2008 87,305,937 12,144,909 119,061 103,862,634 2009 91,331,837 11,847,964 112,090 107,303,085 2010 79,746,332 10,821,019 104,752 94,386,764 2011 76,815,712 10,539,074 97,027 91,019,941 2012 100,480,497 8,572,129 3,416,595 112,469,221 2013 99,408,395 8,360,184 3,255,062 111,023,641 Business -type Total Activity Total % of Outstanding Revenue Outstanding Population Personal Debt Bond Debt M Income /21 Per Capita 840,000 90,570,063 49,097 4.5 1,845 720,000 92,025,408 51,472 4.2 1,788 590,000 85,824,961 52,323 3.8 1,640 4,439,260 110,114,204 53,829 4.5 2,046 4,292,727 103,862,634 54,828 4.1 1,894 4,011,194 107,303,085 55,772 4.3 1,924 3,714,661 94,386,764 55,954 3.7 1,687 3,568,128 91,019,941 56,534 3.5 1,610 3,416,595 112,469,221 57,048 4.0 1,971 3,255,062 111,023,641 57,789 N/A 1,921 Source: (1) Metropolitan Council as of April 1, (except for 2010 Federal Census). (2) See Demographic and Economic Statistics page. 137 CITY OF LAKEVILLE, MINNESOTA Ratio of Net Bonded Debt Outstanding Last Ten Fiscal Years Source: (1) G.O. Improvement bonds, tax increment bonds, State -aid street revenue bonds, water connection revenue bonds, arena revenue bonds, HRA public facility lease revenue bonds, and liquor revenue bonds. (2) Metropolitan Council as of April 1, (except for 2010 Federal Census). 138 Percentage Net Gross Debt Payable Debt Service Net Taxable of Net Bonded Bonded Fiscal Bonded From Other Monies Bonded Net Tax Debt to Taxable (2) Debt Year Debt Sources (1) Available Debt Ca aci Net Tax Capacity Population Per Capita 2004 85,888,275 50,536,900 4,340,477 31,010,898 41,414,912 74.88% 49,097 632 2005 87,740,266 47,625,000 4,649,080 35,466,186 47,958,901 73.95% 51,472 689 2006 72,557,465 34,855,000 4,894,911 32,807,554 54,863,682 59.80% 52,323 627 2007 93,176,053 42,870,000 5,171,284 45,134,769 61,829,382 73.00% 53,829 838 2008 87,305,937 38,030,000 5,925,387 43,350,550 65,586,013 66.10% 54,828 791 2009 91,331,837 39,015,000 6,941,902 45,374,935 67,986,667 66.74% 55,772 814 2010 79,746,332 29,460,000 6,527,316 43,759,016 65,043,115 67.28% 55,954 782 2011 76,815,712 28,305,000 5,663,237 42,847,475 62,063,161 69.04% 56,534 758 2012 100,480,497 29,550,000 29,084,558 41,845,939 58,325,034 71.75% 57,048 734 2013 99,408,395 30,710,000 28,416,302 40,282,093 55,320,301 72.82% 57,789 697 Source: (1) G.O. Improvement bonds, tax increment bonds, State -aid street revenue bonds, water connection revenue bonds, arena revenue bonds, HRA public facility lease revenue bonds, and liquor revenue bonds. (2) Metropolitan Council as of April 1, (except for 2010 Federal Census). 138 CITY OF LAKEVILLE, MINNESOTA Direct and Overlapping Governmental Debt As of December 31, 2013 Governmental Unit Debt Applicable to Taxable Debt Net Tax Capacity in the City Outstanding (2) Percentage (2) Amount Overlapping Debt (1) Independent School District 194 (City of Lakeville) 192 (City of Farmington) 196 (Cities of Rosemount, Apple Valley, Eagan) Dakota County Special District Metropolitan Council Total overlapping debt Direct Debt City of Lakeville bonded debt Total direct and overlapping debt Notes: $181,335,000 87.80% $159,212,130 200,101,000 18.90% 37,819,089 91,499,247 5.40% 4,940,959 46,485,000 12.40% 5,764,140 344,190,000 2.08% 7,144,415 214,880,733 99,408,395 100.00% 99,408,395 $ 314,289,128 (1) Overlapping governments are those that coincide, at least in part, with the geographical boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Lakeville. This process recognizes that, when considering the government's ability to issue and repay long -term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. (2) Debt figures and applicable percentages for other than the City of Lakeville are supplied by the City's fiscal consultant Springsted. 139 CITY OF LAKEVILLE, MINNESOTA Legal Debt Margin Last Ten Fiscal Years Legal Debt Marain Calculation: Assessor's taxable market valuation Legal debt limit: 3% of Assessor's taxable market valuation Amount of debt applicable to legal debt limit: Gross bonded debt Less debt payable from sources other than taxes: G.O. Improvement bonds Tax increment bonds State -aid street revenue bonds Water connection revenue bonds Arena revenue bonds Liquor revenue bonds Debt payable from taxes Less debt service monies available to pay principal and interest 66,175,000 (28,416,302) Fiscal Year 2013 $ 4,767,475,321 $ 143,024,260 Net bonded debt applicable to debt limit 37,758,698 37,758,698 Legal debt margin $ 105,265,562 Note: Minnesota Statutes 475.53, Subdivision 1, No municipality, except a school district or a city of the frist class, shall incur or be subject to a net debt in excess of two percent of the taxable market value of taxable property in the municipality for years 2007 and prior; three percent for years beginning in 2008. Source: Dakota County Auditor and Treasurer's Office. $ 96,885,000 $ 16,640,000 2,335,000 4,590,000 2,865,000 1,045,000 3,235,000 (30,710,000) 140 Net Bonded Assessor's Net Bonded Debt Applicable Taxable Debt Legal to Debt Limit as Fiscal Market Legal Applicable to Debt a Percentage of Year Valuation Debt Limit Debt Limit Marain Legal Debt Limit 2004 3,742,588,600 74,851,772 35,144,523 39,707,249 46.95% 2005 4,361,601,400 87,232,028 39,070,920 48,161,108 44.79% 2006 5,034,819,600 100,696,392 45,395,089 55,301,303 45.08% 2007 5,642,591,100 112,851,822 60,848,716 52,003,106 53.92% 2008 5,951,319,600 178,539,588 58,799,613 119,739,975 32.93% 2009 6,024,665,500 180,739,965 60,213,098 120,526,867 33.31% 2010 5,736,602,200 172,098,066 57,282,684 114,815,382 33.28% 2011 5,356,855,900 160,705,677 56,046,763 104,658,914 34.88% 2012 5,030,003,164 150,900,095 39,180,442 111,719,653 25.96% 2013 4,767,475,321 143,024,260 37,758,698 105,265,562 26.40% Legal Debt Marain Calculation: Assessor's taxable market valuation Legal debt limit: 3% of Assessor's taxable market valuation Amount of debt applicable to legal debt limit: Gross bonded debt Less debt payable from sources other than taxes: G.O. Improvement bonds Tax increment bonds State -aid street revenue bonds Water connection revenue bonds Arena revenue bonds Liquor revenue bonds Debt payable from taxes Less debt service monies available to pay principal and interest 66,175,000 (28,416,302) Fiscal Year 2013 $ 4,767,475,321 $ 143,024,260 Net bonded debt applicable to debt limit 37,758,698 37,758,698 Legal debt margin $ 105,265,562 Note: Minnesota Statutes 475.53, Subdivision 1, No municipality, except a school district or a city of the frist class, shall incur or be subject to a net debt in excess of two percent of the taxable market value of taxable property in the municipality for years 2007 and prior; three percent for years beginning in 2008. Source: Dakota County Auditor and Treasurer's Office. $ 96,885,000 $ 16,640,000 2,335,000 4,590,000 2,865,000 1,045,000 3,235,000 (30,710,000) 140 CITY OF LAKEVILLE, MINNESOTA Pledged Revenue Coverage Last Ten Fiscal Years Net Revenue Available Fiscal Gross (1) Operating For Debt Requirements (2) Times Year Revenues Expenses Service Principal Interest Total Coverage 2004 8,358,002 3,350,666 5,007,336 1,045,000 902,036 1,947,036 2.57 2005 9,048,259 3,587,604 5,460,655 1,095,000 848,550 1,943,550 2.81 2006 8,094,630 4,113,336 3,981,294 1,150,000 920,015 2,070,015 1.92 2007 8,731,414 3,945,627 4,785,787 1,335,000 1,011,204 2,346,204 2.04 2008 9,615,243 4,094,080 5,521,163 1,400,000 1,161,886 2,561,886 2.16 2009 8,507,945 4,485,946 4,021,999 1,575,000 1,066,238 2,641,238 1.52 2010 7,380,163 4,749,304 2,630,859 1,685,000 998,751 2,683,751 0.98 2011 8,146,497 4,307,467 3,839,030 1,635,000 937,952 2,572,952 1.49 2012 9,608,620 4,296,022 5,312,598 3,115,000 832,499 3,947,499 1.35 2013 8,763,816 4,549,736 4,214,080 1,395,000 731,755 2,126,755 1.98 Notes: (1) The primary revenue source for debt service include water system connection charges, water system user fees, ice arena net operating revenue and contributions from one organization conducting lawful gambing at approved locations, and liquor fund gross profits. (2) Revenue bonds include water connection revenue, arena revenue, and liquor revenue. 141 CITY OF LAKEVILLE, MINNESOTA Demographic and Economic Statistics Last Ten Fiscal Years Annual percentage increase average last ten fiscal years 1.98% Labor Force and Unemployment Rate (sesonally adjusted) (2) Percentage Personal Per Capita Building Permits Issued City of (1) Increase from Income (2) Personal Family Dwellings (3) Housing units Year Population Previous Year (in thousands) Income Single Multiple Total Valuation 2004 49,097 3.31% 2,021,323 41,170 382 524 906 160,871,000 2005 51,472 4.84% 2,174,229 42,241 237 428 665 131,774,000 2006 52,323 1.65% 2,287,875 43,726 221 223 444 101,474,955 2007 53,829 2.88% 2,456,163 45,629 183 195 378 72,128,000 2008 54,828 1.86% 2,541,333 46,351 137 279 416 71,062,000 2009 55,772 1.72% 2,474,827 44,374 127 54 181 41,010,000 2010 55,954 0.33% 2,519,161 45,022 138 2 140 38,718,000 2011 56,534 1.04% 2,617,468 46,299 122 2 124 37,621,000 2012 57,048 0.91% 2,843,672 49,847 280 2 282 84,444,000 2013 57,789 1.30% N/A N/A 374 - 374 120,393,000 Annual percentage increase average last ten fiscal years 1.98% Source: (1) Metropolitan Council as of April 1, (except for 2010 Federal Census). (2) U.S. Department of Commerce Bureau of Economic Analysis as of December 31, 2013. * Not seasonally adjusted, information is not available. (3) City of Lakeville Inspections Department. N/A - Not available. 142 Labor Force and Unemployment Rate (sesonally adjusted) (2) City of Lakeville Dakota County Rates Labor Unempl. Labor Unempl. State of United Year Force Rate Force Rate Minnesota States 2004 27,950 3.1% 229,734 4.2% 5.0% 5.4% 2005 28,745 3.2% 231,322 4.0% 4.8% 4.8% 2006 29,677 3.9% 230,427 4.1% 4.9% 4.5% 2007 30,492 4.3% 232,670 4.6% 4.7% 5.1% 2008 30,471 5.6% 229,716 6.1% 6.8% 7.1% 2009 30,727 6.4% 231,391 6.9% 7.4% 10.0% 2010 30,782 6.0% 230,247 6.6% 6.9% 9.4% 2011 31,237 4.8% 232,257 5.2% 5.7% 8.5% *2012 31,221 4.5% 231,902 4.9% 5.4% 7.6% *2013 31,562 4.0% 232,030 4.1% 4.6% 6.5% Source: (1) Metropolitan Council as of April 1, (except for 2010 Federal Census). (2) U.S. Department of Commerce Bureau of Economic Analysis as of December 31, 2013. * Not seasonally adjusted, information is not available. (3) City of Lakeville Inspections Department. N/A - Not available. 142 CITY OF LAKEVILLE, MINNESOTA Principal Employers Fiscal Year Ended December 31, 2013 and December 31, 2004 Principal Employer (1) Product/Service Independent School District 194 Elementary & secondary schools Hearthside Food Solutions Food service contractors ConAgra Store Brands Breakfast cereal products Target Retail Imperial Plastics, Inc. Plastics material & resin mfg. MOM Brands Cereal production Life Time Fitness Fitness clubs Menasha Corporation Corrugated & solid fiber box mfg. BTD Manufacturing Metal manufacturing City of Lakeville (2) City government Hearth & Home Technologies, Inc. Fireplacestmetal work Jeff Belzer's Chevy- Dodge -KIA New & used auto dealership Carquest Distribution Center General warehousing & storage Despatch Industries, Inc. Industrial furnace & oven mfg. National Polymers, Inc Plastics material & resin mfg. Total principal employers All other employers Total City of Lakeville civilian labor force (3) Source: (1) Telephone survey of individual employers, May 2014. (2) As of December 31, 2013 (full -time equivalent). 2013 2004 Employees Rank % Employees Rank % 1,273 1 4.0% 1,400 1 5.0% 715 2 2.3% 500 3 1.8% 515 3 1.6% 504 2 1.8% 360 4 1.1% 320 5 1.0% 250 6 0.6% 230 7 0.7% 221 8 0.7% 200 5 0.7% 210 9 0.7% 195 10 0.6% 203 4 0.7% 153 6 0.5% 150 7 0.5% 140 8 0.5% 130 9 0.5% - 0_0% 125 10 0_4% 4,289 13.6% 3,505 12.4% 27,273 86_4% 24,445 87.6% 31,562 1n0.0% 27,950 (3) U.S. Department of Commerce Bureau of Economic Analysis as of December 31, 2013. 143 CITY OF LAKEVILLE, MINNESOTA Commercial and Industrial Building Permits Issued Years 2013 and 2012 NEW BUILDING PERMITS 2013 AND 2012 (in excess of $250,000) BUSINESS Cosmopolitan Orthodontics McDonalds Corp (Kenyon Avenue) McDonalds Corp (Cedar Avenue) Ballet Royale Advanced Auto Parts Sheila A. Lewis, Trust PRODUCT /SERVICE VALUATION (1) Medical $ 1,400,000 Restaurant 900,000 Restaurant 800,000 Dance Studio 724,000 Retail 500,000 Office/Warehouse /Storage 474,000 EXPANSION OR REMODEL BUILDING PERMITS 2013 AND 2012 (in excess of $250,000) BUSINESS PRODUCT /SERVICE VALUATION (1) MOM Brands Jeff Belzer's Chevy- Dodge -KIA National Polymers ConAgra Foods QA -1 Precision Products McDonalds Corp Notes: Admin. Offices /technology center $ 4,758,000 New & used auto dealership 2,420,000 Plastic products 2,094,000 Store brand /private label food products 1,500,000 Motorsports products manufacturer 761,000 Restaurant 400,000 (1) Valuation excludes land and personal property. Source: City of Lakeville Inspections Department. 144 CITY OF LAKEVILLE, MINNESOTA Employees by Function/Program (Full -Time Equivalent) Last Ten Fiscal Years Function /Program General government City administration Communications City clerk Finance Information systems Human resources Planning Community and economic development Protective inspection General government buildings Total general government Public safety 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3.0 3.0 3.0 3.0 3.0 2.8 2.5 2.5 2.5 2.4 4.7 4.7 4.7 4.8 4.1 3.9 4.0 4.0 4.0 4.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 6.0 6.0 5.6 6.6 6.6 6.5 6.4 6.0 7.0 7.0 2.6 3.0 3.9 4.0 4.0 3.3 3.0 3.0 3.0 2.9 2.6 2.8 2.9 3.0 3.0 2.8 2.8 2.8 2.8 2.8 5.5 5.5 5.5 5.5 4.5 3.8 3.0 3.0 3.0 2.8 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 12.0 12.0 12.0 12.0 12.4 8.7 8.0 8.0 7.0 7.0 2.0 2.0 2.5 3.1 3.1 3.0 3.0 3.0 3.0 3.0 41.9 42.5 43.6 45.5 442 38.3 36.2 35.8 35.8 35.4 Police officers (sworn) 46.0 48.0 49.5 51.2 52.8 51.0 51.5 51.9 53.0 50.2 Police dispatchers 8.4 10.0 10.0 - - - - - - - Police administration 12.0 11.4 11.4 12.9 12.4 11.1 10.8 11.3 12.2 11.5 Fire (excluding volunteer firefighters) 3.0 3.5 4.5 4.6 4.6 4.6 4.6 4.6 4.6 4.6 Total public safety 69.4 72.9 75.4 68.7 69.8 66.7 66.9 67.8 69.8 66.3 Public works - Engineering 13.0 13.0 14.0 14.0 12.3 9.3 9.0 6.8 7.0 6.0 Street maintenance 17.0 17.6 18.5 19.8 20.0 19.4 19.0 19.0 19.3 19.3 Total public works 30.0 30.6 32.5 33.8 32.3 28.7 28.0 25.8 26.3 25.3 Parks and recreation Park maintenance 14.0 14.8 15.0 15.0 15.0 14.5 15.0 15.0 15.0 15.0 Recreation 4.7 4.7 4.7 5.3 5.3 4.9 4.7 4.7 4.7 4.7 Arts center 3.0 3.0 3.0 3.2 3.6 3.7 3.7 3.7 3.7 3.7 Total parks and recreation 21.7 22.5 22.7 23.5 23.9 23.1 23.4 23.4 23.4 23.4 Total governmental activities 163.0 168.5 174.2 171.5 170.2 156.8 154.5 152.8 155.3 150.4 Liquor 24.8 24.8 25.9 26.4 25.9 25.7 25.7 25.8 25.7 24.9 Utility 15.0 15.5 16.5 17.5 18.0 18.0 18.0 20.0 20.0 20.0 Total business -type activities 39.8 40.3 42.4 43.9 43.9 43.7 43.7 45.8 45.7 44.9 Total employees 202.8 208.8 216.6 215.4 214.1 200.5 198.2 198.6 201.0 195.3 Source: City of Lakeville Human Resources Department. 145 CITY OF LAKEVILLE, MINNESOTA Operating Indicators by Function Last Ten Fiscal Years Function 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 General government Number of registered voters 26,834 N/A 30,072 N/A 31,024 N/A 32,617 N/A 32,200 N/A Number of final plats approved 26 34 21 18 10 8 10 12 14 13 Number of building permits issued 2,623 2,179 3,970 3,487 1,878 1,428 1,421 1,467 2,349 1,647 Valuation of building permits issued (in millions) $ 230 $ 187 $ 165 $ 126 $ 111 $ 62 $ 49 $ 77 $ 119 $ 142 Public safety Crimes against person reported 201 194 141 155 158 151 151 142 133 141 Crimes against property reported 1,198 1,376 1,165 1,477 1,424 1,245. 1,259 1,161 1,186 1,057 Traffic citations issued 4,418 5,935 6,348 6,773 6,229 6,499 5,497 5,241 4,400 3,370 Number of volunteer firefighters 75 88 80 80 90 78 74 83 77 79 Number of annual fire calls 852 1,048 1,078 1,149 1,230 1,343 1,189 1,262 1,208 1,062 Public works City street miles added 5.8 9.8 3.5 2.1 1.0 0.5 2.3 2.2 1.4 2.6 Parks and recreation Park acres mowed 442 453 465 465 171 471 471 473 473 474 Park facility reservations taken 363 312 400 432 479 559 661 655 717 888 Program activity registrations taken 6,627 5,396 6,749 6,836 7,994 8,201 8,369 9,051 9,850 9,310 Liquor Annual sales (in millions) $ 10.5 $ 11.5 $ 12.1 $ 13.0 $ 14.4 $ 14.6 $ 14.7 $ 14.4 $ 15.2 $ 15.4 Utility (in millions of gallons) Water (average daily consumption) 5.7 5.6 6.0 6.5 6.3 6.1 4.8 5.7 6.7 5.9 Sanitary sewer (1) 4.2 4.1 3.9 3.9 4.0 3.3 3.3 3.3 3.4 3.4 (average daily treatment) Notes: (1) Sewage is treated by the Metropolitan Council Environmental Services. N/A Indicates information is not available for this period at the printing of this report. Source: Various City of Lakeville Departments. 146 CITY OF LAKEVILLE, MINNESOTA Capital Assets Statistics by Function Last Ten Fiscal Years Function (1) Public safety Police stations Fire stations Public works City streets (miles) Parks and recreation Acres of parks, conservation areas, and greenways Parks Conservation areas Trails and sidewalks - paved (miles) Ice rinks - outdoor (fully boarded) Ice rinks - indoor Fields (softball, soccer, baseball, football, Lacrosse) Courts (basketball, volleyball, tennis) Playgrounds Swimming beaches Liquor Number of on -sale stores owned Number of on -sale stores leased utility Water Water mains (miles) Fire hydrants Wells Water Towers Sanitary sewer Sanitary sewer mains (miles) Sanitary sewer lift stations 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1 1 1 1 1 1 1 1 1 1 4 4 4 4 4 4 4 4 4 4 241.8 251.6 255.1 257.2 258.2 258.7 261.0 263.2 264.6 267.2 1,314 1,325 1,610 1,610 1,623 1,636 1,663 1,671 1,712 1,776 53 53 53 55 56 59 59 59 59 59 18 18 18 18 18 18 18 18 20 20 79 83 86 88 91 91 91 100 100 103 11 11 12 12 12 12 12 12 12 12 2 2 2 3 3 3 3 3 3 3 122 125 125 135 136 136 136 150 150 150 26 27 27 36 39 39 39 38 38 38 33 36 38 38 39 39 40 40 40 40 3 3 3 3 3 3 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 270 290 297 304 310 311 311 313 313 321 2,840 3,031 3,128 3,313 3,374 3,386 3,386 3,434 3,434 3,572 14 15 15 16 16 17 17 17 17 17 4 4 5 5 5 5 5 5 5 5 221 230 238 253 255 256 259 261 261 261 21 21 20 20 20 20 19 19 19 20 Notes: (1) Indicators for general government functions are not available. Source: Various City of Lakeville Departments. 147 Management Report for City of Lakeville, Minnesota December 31, 2013 THIS PAGE INTENTIONALLY LEFT BLANK M KR CERTIFIED PUBLIC ACCOUNTANTS To the City Council and Management City of Lakeville, Minnesota PRINCIPALS Thomas M. Montague, CPA Thomas A. Karnowski. CPA Paul A. Radosesich. CPA William). lauer. CPA James H. Eichten, CPA Aaron J. Nielsen, C:PA Victoria L. Holinka, CPA We have prepared this management report in conjunction with our audit of the City of Lakeville, Minnesota's (the City) financial statements for the year ended December 31, 2013. The purpose of this report is to provide comments resulting from our audit process and to communicate information relevant to city finances in Minnesota. We have organized this report into the following sections: • Audit Summary • Governmental Funds Overview • Enterprise Funds Overview • Government -Wide Financial Statements • Legislative Updates • Accounting and Auditing Updates We would be pleased to further discuss any of the information contained in this report or any other concerns that you would like us to address. We would also like to express our thanks for the courtesy and assistance extended to us during the course of our audit. The purpose of this report is solely to provide those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process comments resulting from our audit process and information relevant to city finances in Minnesota. Accordingly, this report is not suitable for any other purpose. i' "( 41^ ', 9"( a44 y f a/u w64,t4 / /La� ' & . 1 A . Minneapolis, Minnesota May 30, 2014 Malloy, Montague. Karnowski. Radosevich. & Co.. P.A. 5353 5Y',,� ,a Hod,c .,J • Sxitu 410 • !Jinncapnl ie. h1N 55416 •'ml phxnc 952 545.04:4 • Tdh[,t: 95].545.0569 • xwx'.mmkr.rnm THIS PAGE INTENTIONALLY LEFT BLANK AUDIT SUMMARY The following is a summary of our audit work, key conclusions, and other information that we consider important or that is required to be communicated to the City Council, administration, or those charged with governance of the City. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA, Gov ERNMENTAUDITING STANDARDS, AND THE U.S. OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR A -133 We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended December 31, 2013, and the related notes to the financial statements. Professional standards require that we provide you with information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards, and the U.S. Office of Management and Budget Circular A -133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information to you verbally and in our audit engagement letter. Professional standards also require that we communicate the following information related to our audit. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously discussed and coordinated in order to obtain sufficient audit evidence and complete an effective audit. AUDIT OPINION AND FINDINGS Based on our audit of the City's financial statements for the year ended December 31, 2013: • We have issued an unmodified opinion on the City's basic financial statements. • We reported no deficiencies in the City's internal control over financial reporting that we considered to be material weaknesses. • The results of our testing disclosed no instances of noncompliance required to be reported under Government Auditing Standards. • We reported that the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements. • The results of our tests indicate that the City has complied, in all material respects, with the requirements that could have a direct and material effect on each major federal program. • We reported no deficiencies in the internal controls over compliance and its operation that we consider to be material weaknesses in our testing of major federal programs. • We reported no findings based on our testing of the City's compliance with Minnesota laws and regulations. Overall, we found the City's financial records to be in excellent condition. This not only provides for an efficient year -end audit, but should also provide confidence in the interim financial data used to manage the City throughout the year. 4- SIGNIFICANT ACCOUNTING POLICIES Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note I of the notes to basic financial statements. No new accounting policies were adopted, and the application of existing policies was not changed during the year. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENTS Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: • Depreciation — Management's estimates of depreciation expense are based on the estimated useful lives of the assets. • Net Other Post - Employment Benefit (OPEB) Liabilities — Actuarial estimates of the net OPEB obligation is based on eligible participants, estimated future health insurance premiums, and estimated retirement dates. • Compensated Absences — Management's estimate is based on current rates of pay and sick leave balances estimated to be paid out as future severance pay. We evaluated the key factors and assumptions used to develop these accounting estimates in determining that they are reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Where applicable, management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management, when applicable, were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. DISAGREEMENTS WITH MANAGEMENT For purposes of this report, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. -2- MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated May 30, 2014. MANAGEMENT CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS With respect to the combining and individual fund statements and schedules, supplemental information accompanying the financial statements, and the separately issued Schedule of Expenditures of Federal Awards, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the combining and individual fund statements and schedules, supplemental information, and Schedule of Expenditures of Federal Awards to the underlying accounting records used to prepare the basic financial statements or to the basic financial statements themselves. With respect to the introductory and statistical sections accompanying the financial statements, our procedures were limited to reading this other information and, in doing so, we did not identify any material inconsistencies with the audited financial statements. -3- GOVERNMENTAL FUNDS OVERVIEW This section of the report provides you with an overview of the financial trends and activities of the City's governmental funds, which includes the General Fund, special revenue, debt service, and capital project funds. These funds are used to account for the basic services the City provides to all of its citizens, which are financed primarily with property taxes. The governmental fund information in the City's financial statements focuses on budgetary compliance, and the sufficiency of each governmental fund's current assets to finance its current liabilities. PROPERTY TAXES Minnesota cities rely heavily on local property tax levies to support their governmental fund activities. In recent years this dependence has been heightened, as economic conditions have resulted in reductions to other revenue sources such as state aids and fees generated from property development or redevelopment. Despite these conditions, property taxes levied by Minnesota cities increased a record low 0.9 percent state -wide for 2012, and 2.27 percent for 2013. Almost one -third of Minnesota cities kept their 2013 levy at the same level as the previous year, while another 13 percent reduced their levies for 2013. Economic conditions have also had a profound effect on the tax base of Minnesota cities with state -wide taxable market values declining each of the last four levy years, including average decreases of 8.8 percent and 4.5 percent for taxes payable in 2012 and 2013, respectively. There is optimism that this trend is reversing, as the market value decline for the 2013 levy year was the smallest of the past four years. However, since the assessed valuation used for levying property taxes is based on values from the previous fiscal year (e.g. the market value for taxes payable in 2013 is based on estimated values as of January 1, 2012), taxable market value improvement has lagged behind recent upturns in the housing market and the economy in general. The City's taxable market value decreased 6.1 percent for taxes payable in 2012 and 5.2 percent for taxes payable in 2013. The following graph shows the City's changes in taxable market value over the past 10 years: Taxable Market Value $7,000,000,000 $6,000,000,000 $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 w Tax capacity is considered the actual base available for taxation. It is calculated by applying the state's property classification system to each property's market value. Each property classification, such as commercial or residential, has a different calculation and uses different rates. Consequently, a city's total tax capacity will change at a different rate than its total market value, as tax capacity is affected by the proportion of the City's tax base that is in each property classification from year -to -year, as well as legislative changes to tax rates. The City's tax capacity decreased 5.6 percent and 4.7 percent for taxes payable in 2012 and 2013, respectively. The following graph shows the City's change in tax capacities over the past 10 years: Local Net Tax Capacity $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 The following table presents the average tax rates applied to city residents for each of the last two levy years, along with comparative state -wide and metro -area rates. The general increase in rates reflects both the increased reliance of local governments on property taxes and the recent decline in tax capacities. Rates expressed as a percentage of net tax capacity All Cities Seven - County City of State -Wide Metro Area Lakeville 2012 2013 2012 2013 2012 2013 Average tax rate City 46.3 48.8 43.4 46.1 39.1 41.2 County 46.8 48.5 45.0 47.1 31.4 33.4 School 27.3 28.5 28.5 30.3 33.6 34.9 Special taxing 6.8 7.2 8.7 9.4 5.4 5.8 Total 127.2 133.0 125.6 132.9 109.6 115.3 Both the total tax rate applied to Lakeville taxpayers and the city portion of the tax rate have been lower than the state -wide and metro averages in recent years. The increase in the city tax rate for 2013 was caused by the decline in property market values, as the City's tax levy for 2013 was about $48,000 lower than the previous year. The school tax rate for the City represents an average of Independent School District (ISD) No. 192, Farmington; ISD No. 194, Lakeville; and ISD No. 196, Rosemount - Apple Valley - Eagan. -5- GOVERNMENTAL FUND BALANCES The following table summarizes the changes in the fund balances of the City's governmental funds during the year ended December 31, 2013, presented both by fund balance classification and by fund: Governmental Funds Change in Fund Balance Fund balances of governmental funds Total by classification Nonspendable Restricted Committed Assigned Unassigned Total governmental funds Total by fund General General Obligation Debt Service G.O. Improvement Debt Service Building Capital Projects Improvement Construction Capital Projects Nonmajor funds Total governmental funds Fund Balance as of December 31, Increase 2013 2012 (Decrease) $ 126,014 $ 256,476 $ (130,462) 38,716,666 38,587,037 129,629 16,665,820 11,861,800 4,804,020 — 620,725 (620,725) 9,273,916 10,380,664 (1,106,748) $ 64,782,416 $ 61,706,702 $ 3,075,714 $ 9,666,560 $ 11,491,775 $ (1,825,215) 27,371,659 28,011,714 (640,055) 2,967,285 2,280,604 686,681 1,516,976 329,026 1,187,950 1,020,713 1,272,530 (251,817) 22,239,223 18,321,053 3,918,170 $ 64,782,416 $ 61,706,702 $ 3,075,714 In total, the fund balances of the City's governmental funds increased by $3,075,714 during the year ended December 31, 2013. The increase in committed fund balances is primarily from utility connection charges, interfund transfers, and other funding sources earmarked for various capital purposes in the Building Capital Projects Fund and several nonmajor capital projects funds. The decrease in the assigned fund balance category is due to the City adopting a balanced budget for the General Fund in 2014. At December 31, 2012, there was $620,725 assigned in the General Fund to finance the projected shortfall in the original budget adopted for 2013. The decrease in unassigned fund balances is primarily the result of the transfers of almost $2.4 million from the General Fund other funds to finance capital improvements and equipment purchases. GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES The following table presents the per capita revenue of the City's governmental funds for the past three years, along with state -wide averages. We have included the most recent comparative state -wide averages available from the Office of the State Auditor to provide a benchmark for interpreting your City's data. The amounts received from the typical major sources of governmental fund revenue will naturally vary between cities based on factors such as the City's stage of development, location, size and density of its population, property values, services it provides, and other attributes. It will also differ from year -to -year due to the effect of inflation and changes in the City's operation. Also, certain data on these tables may be classified differently than how they appear on the City's financial statements in order to be more comparable to the state -wide information, particularly in separating capital expenditures from current expenditures. We have designed this section of our management report using per capita data in order to better identify unique or unusual trends and activities of your city. We intend for this type of comparative and trend information to complement, rather than duplicate, information in the Management's Discussion and Analysis. An inherent difficulty in presenting per capita information is the accuracy of the population count, which for most years is based on estimates. The City's governmental funds have typically generated less revenue per capita in total than other Minnesota cities in its population class. The City's governmental funds received total revenues of $39.4 million in 2013, about $2.0 million (5.5 percent) more than the prior year. On a per capita basis, governmental fund revenue for 2013 increased $27 from the prior year. Intergovernmental revenue increased $21 per capita from the prior year, mainly due to the $826,400 federal Highway Planning and Construction grant used for the City's Kenrick Avenue Trail improvement project. Revenue from charges for services was $18 per capita higher than the previous year, reflecting an increase in development activity and growth as evidenced by connection and area charges, and park dedication fees. -7- Governmental Funds Revenue per Capita With State -Wide Averages by Population Class State -Wide City of Lakeville Year December 31, 2012 2011 2012 2013 Population 20,000 - 100,000 56,534 57,048 57,789 Property taxes $ 416 $ 410 $ 414 $ 400 Tax increments 46 16 15 15 Franchise and other taxes 30 10 10 11 Special assessments 62 11 20 20 Licenses and permits 35 22 32 36 Intergovernmental revenues 138 46 40 61 Charges for services 83 70 102 120 Other 50 22 22 19 Total revenue $ 860 $ 607 $ 655 $ 682 The City's governmental funds have typically generated less revenue per capita in total than other Minnesota cities in its population class. The City's governmental funds received total revenues of $39.4 million in 2013, about $2.0 million (5.5 percent) more than the prior year. On a per capita basis, governmental fund revenue for 2013 increased $27 from the prior year. Intergovernmental revenue increased $21 per capita from the prior year, mainly due to the $826,400 federal Highway Planning and Construction grant used for the City's Kenrick Avenue Trail improvement project. Revenue from charges for services was $18 per capita higher than the previous year, reflecting an increase in development activity and growth as evidenced by connection and area charges, and park dedication fees. -7- The expenditures of governmental funds will also vary from state -wide averages and from year -to -year, based on the City's circumstances. Expenditures are classified into three types as follows: • Current — These are typically the general operating type expenditures occurring on an annual basis, and are primarily funded by general sources such as taxes and intergovernmental revenues. • Capital Outlay and Construction — These expenditures do not occur on a consistent basis, more typically fluctuating significantly from year -to -year. Many of these expenditures are project- oriented, and are often funded by specific sources that have benefited from the expenditure, such as special assessment improvement projects. • Debt Service — Although the expenditures for debt service may be relatively consistent over the term of the respective debt, the funding source is the important factor. Some debt may be repaid through specific sources such as special assessments or redevelopment funding, while other debt may be repaid with general property taxes. The City's expenditures per capita of its governmental funds for the past three years, together with state -wide averages, are presented in the following table: Governmental Funds Expenditures per Capita With State -Wide Averages by Population Class Total expenditures in the City's governmental funds for 2013 were $44.2 million, a decrease of about $115,000 (0.3 percent) from the previous year. The City's current governmental operating expenditures increased $15 per capita in total, mainly due to an increase in street maintenance (public works) costs. Capital outlay costs were about $110,000 higher than the previous year, but decreased $1 per capita due to the estimated change in the City's population. Debt service principal and interest costs were $26 per capita less than the prior year due to refunding bonds issued in recent years, which have lowered the City's scheduled payments on outstanding debt. State -Wide City of Lakeville Year December 31, 2012 2011 2012 2013 Population 20,000 - 100,000 56,534 57,048 57,789 Current General government $ 84 $ 79 $ 80 $ 83 Public safety 241 173 173 175 Public works 92 53 57 65 Parks and recreation 86 54 53 55 All other 92 — — $ 595 $ 359 $ 363 $ 378 Capital outlay and construction $ 221 $ 183 $ 218 $ 217 Debt service Principal $ 103 $ 136 $ 134 $ 101 Interest and fiscal 39 66 62 69 $ 142 $ 202 $ 196 $ 170 Total expenditures in the City's governmental funds for 2013 were $44.2 million, a decrease of about $115,000 (0.3 percent) from the previous year. The City's current governmental operating expenditures increased $15 per capita in total, mainly due to an increase in street maintenance (public works) costs. Capital outlay costs were about $110,000 higher than the previous year, but decreased $1 per capita due to the estimated change in the City's population. Debt service principal and interest costs were $26 per capita less than the prior year due to refunding bonds issued in recent years, which have lowered the City's scheduled payments on outstanding debt. GENERAL FUND The City's General Fund accounts for the financial activity of the basic services provided to the community. The primary services included within this fund are the administration of the municipal operation, police and fire protection, building inspection, streets and highway maintenance, and parks and recreation. The graph below illustrates the change in the General Fund financial position over the last five years. We have also included a line representing annual expenditures and operating transfers out to reflect the change in the size of the General Fund operation over the same period. General Fund Financial Position Year Ended December 31, $22,000,000 $20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 2009 2010 2011 2012 2013 Fund Balance O Cash Balance (Net) — Expenditures The City's General Fund cash and investments balance at December 31, 2013 was $9,586,160, a decrease of $1,326,690. Total fund balance at December 31, 2013 was $9,666,560, which is a decrease of $1,825,215 from the prior year, but $1,197,117 higher than projected in the City's final budget. As the graph illustrates, the City has generally been able to maintain healthy cash and fund balance levels as the volume of financial activity has grown. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. A healthy financial position allows the City to avoid volatility in tax rates; helps minimize the impact of state funding changes; allows for the adequate and consistent funding of services, repairs, and unexpected costs; and is a factor in determining the City's bond rating and resulting interest costs. Maintaining an adequate fund balance has become increasingly important given the fluctuations in state funding for cities in recent years. A trend that is typical to Minnesota local governments, especially the General Fund of cities, is the unusual cash flow experienced throughout the year. The City's General Fund cash disbursements are made fairly evenly during the year other than the impact of seasonal services such as snowplowing, street maintenance, and park activities. Cash receipts of the General Fund are quite a different story. Taxes comprise about 75 percent of the fund's total annual revenue. Approximately half of these revenues are received by the City in July and the rest in December. Consequently, the City needs to have adequate cash reserves to finance its everyday operations between these payments. The City's General Fund balance at the end of the 2013 fiscal year represents approximately 45.4 percent of annual expenditures based on 2013 levels, compared to 56.7 percent at the end of the previous year. 962 The following chart reflects the City's General Fund revenue sources for 2013 compared to budget General Fund Revenue Budget and Actual Taxes Intergovernmental Charges for Services Licenses and Permits All Other $ $2 $4 $6 $8 $10 $12 $14 $16 $18 Millions ■Budget ■Actual General Fund revenue for 2013 was $21,173,783, which was $974,993 (4.8 percent) more than budget. Charges for services were $294,147 over budget, mostly due to engineering fees charged to reconstruction projects. Licenses and permits revenue was over budget by $686,488, primarily due to a 33 percent increase in residential building permits issued. Revenue in the "all other" category as shown above was $125,721 lower than projected, mainly due to lower than projected income from traffic enforcement fines and a negative market value adjustment on the City's investment portfolio. The following graph presents the City's General Fund revenues by source for the last five years. The graph reflects the City's reliance on property taxes and other local sources of revenue, and shows the virtual elimination of general state aid revenue in recent years. General Fund Revenue by Source Year Ended December 31, $18,000,000 $16,500,000 $15,000,000 $13,500,000 $12,000,000 $10,500,000 $9,000,000 $7,500,000 $6,000,000 $4,500,000 $3,000,000 $1,500,000 S— ❑2009 02010 02011 02012 ■2013 Overall, General Fund revenues decreased $295,777 (1.4 percent) from the previous year. Property tax revenue was $567,741 lower than last year, due to a 1.8 percent decrease in the General Fund levy and reduced collections of delinquent taxes. Revenue from charges for services (up $142,283) and licenses and permits (up $256,864) were both higher than last year due to increased development activity. Finally, revenue in the "all other" category as shown above was $123,248 lower than last year, mainly due to a decline in traffic enforcement fines and the negative investment market value adjustment, as discussed above. -10- Taxes Intergovernmental Charges for Licenses and All Other Services Permits The following graphs illustrate the components of General Fund spending for 2013 compared to budget: General Fund Expenditures Budget and Actual General Government Public Safety Public Works Parks and Recreation $- $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 ■ Budget ■ Actual Millions Total General Fund expenditures for 2013 were $21,312,688, which was $222,124 (1.0 percent) under the final budget. General Fund expenditures were under budget in every department except public works, which was over budget by $379,808 due to increased personnel and supply costs for snow removal and street maintenance. General government expenditures were $255,211 under budget, with the largest savings in personnel services in the city administration, planning, and information systems departments. Public safety expenditures were $237,921 under budget, mainly due to unfilled police officer positions, fewer fire calls than anticipated, and contractual cleaning cost savings. Parks and recreation costs were under budget by $108,900, mainly due to unfilled personnel vacancies. The following graph presents the City's General Fund expenditures by function for the last five years. $11,000,000 $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- General Fund Expenditures by Function Year Ended December 31, General Government Public Safety Public Works Parks and Recreation 02009 02010 02011 ■2012 02013 Total General Fund expenditures for 2013 were $1,032,628 (5.1 percent) higher than the previous year. Expenditures increased in every department, including general government ($93,318), public safety ($262,549), public works ($516,105), and parks and recreation ($160,656). The largest increase was in public works, due to higher costs for snow removal and street maintenance. -11- ENTERPRISE FUNDS OVERVIEW The City maintains two enterprise funds to account for services the City provides that are financed primarily through fees charged to those utilizing the service. This section of the report provides you with an overview of the financial trends and activities of the City's enterprise funds, which include the (water, sewer, street light, and environmental resources) Utility Fund and Liquor Fund. ENTERPRISE FUNDS FINANCIAL POSITION The following table summarizes the changes in the financial position of the City's enterprise funds during the year ended December 31, 2013, presented both by classification and by fund: Enterprise Funds Change in Financial Position Net position of enterprise funds Total by classification Net investment in capital assets Restricted for debt service Unrestricted Total enterprise funds Total by fund Liquor Utility Total enterprise funds Net Position as of December 31, Increase 2013 2012 (Decrease) $ 105,055,746 $ 102,009,893 $ 3,045,853 324,125 325,750 (1,625) 13,512,669 15,449,624 (1,936,955) $ 118,892,540 $ 117,785,267 $ 1,107,273 $ 5,532,658 $ 5,813,472 $ (280,814) 113,359,882 111,971,795 1,388,087 $ 118,892,540 $ 117,785,267 $ 1,107,273 In total, the net position of the City's enterprise funds increased by $1,107,273 during the year ended December 31, 2013. The Liquor Fund net position decreased by $280,814 due mostly to transfers of $1.75 million to governmental funds to provide funding for debt service requirements, various capital projects, and general overhead costs. The increases in both the net investment in capital assets and the net position of the Utility Enterprise Fund were primarily due to capital infrastructure contributions of $3.3 million received from developers. -12- LIQUOR FUND The following graphs present five years of operating results for the Liquor Fund: Liquor Fund Revenues, Expenses, and Income Year Ended December 31, $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 2009 2010 2011 2012 2013 0 Sales O Cost of Sales ■ Operating Expenses 0 Operating Income The Liquor Fund ended 2013 with net position of $5,532,658, a decrease of $280,814 from the prior year. Of this, $1,048,424 represents the net investment in capital assets, and $324,125 is restricted in accordance with revenue bond covenants, leaving $4,160,109 of unrestricted net position. Gross liquor sales for 2013 were $15,381,124, a $161,060 (1.1 percent) increase from last year. The Liquor Fund generated a gross profit of $3,948,599 in 2013, or about 25.7 percent, of gross sales. Operating expenses for 2013 were $2,280,899, an increase of $65,077 from last year, primarily in increased professional fees and credit card processing fees. Net operating income for 2013 was $1,667,700, about 10.8 percent, of gross sales. The Liquor Fund also made transfers out of $1,749,982 to support the General Fund, for debt service, and for various capital needs. Liquor Fund — Operating Ratios Year Ended December 31, 30% 25% 20% 15% 10% 5% 2009 2010 2011 2012 2013 ■Gross Profit as a Percentage of Sales Operating Income as a Percentage of Sales 24.7% 24.5% 24.7% 25.2% 25.7% 9.40 i� 9.3% 9.4% ]0.7% 10.8% 13- UTILITY FOND The following graph presents five years of comparative operating results for the City's (water, sewer, street light, and environmental resources) Utility Fund: Uulty Fund Year Ended December 31, $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 2009 2010 2011 2012 2013 � Operating Expense Depreciation oOperating Revenue -- Income Before Depreciation The Utility Fund ended 2013 with net position of $113,359,882, an increase of $1,388,087 from prior year operations. Of the net position balance, $104,007,322 represents the City's net investment in utility capital assets, leaving $9,352,560 of unrestricted net position. Utility Fund operating revenue was $9,126,838 for 2013, a decrease of $410,468 (4.3 percent). Most of the decrease was in water revenue. Water revenue was about $512,000 lower than last year due to an 11 percent decrease in water usage, mainly attributable to a decrease in irrigation usage caused by a change in weather conditions. Operating expenses (including depreciation of $3,161,343) were $10,744,809, which represents an increase of $377,376 (3.6 percent). The Utility Fund also received capital contributions of $3,399,836 in 2013, the majority of which was contributed by developers. -14- GOVERNMENT -WIDE FINANCIAL STATEMENTS In addition to fund -based information, the current reporting model for governmental entities also requires the inclusion of two government -wide financial statements designed to present a clear picture of the City as a single, unified entity. These government -wide financial statements provide information on the total cost of delivering services, including capital assets and long -term liabilities. STATEMENT OF NET POSITION The Statement of Net Position essentially tells you what your city owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the City has leftover to use for providing services after its debts are settled. However, those resources are not always in spendable form, or there may be restrictions on how some of those resources can be used. Therefore, net position is divided into three components: net investment capital assets, restricted, and unrestricted. The following table presents the components of City's net position as of December 31, 2013 and 2012, for governmental activities and business -type activities: As of December 31, 2013 2012 Net position Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities $ 129,599,494 17,645,944 2,511,935 149,757,373 $ 125,051,058 17,403,167 (1,923,495) 140,530,730 Business -type activities Net investment in capital assets Restricted Unrestricted Total business -type activities 105,055,746 324,125 13,704,281 119,084,152 102,009,893 325,750 15,658,140 117,993,783 Increase (Decrease) $ 4,548,436 242,777 4,435,430 9,226,643 3,045,853 (1,625) (1,953,859) 1,090,369 Total net position $ 268,841,525 $ 258,524,513 $ 10,317,012 c total net position at December 31, 2013 was $10,317,012 higher than the total net positi reported at the previous year -end. Of the increase, $9.2 million came from governmental activities and $1.1 million from business -type activities. One of the primary reasons for the increases in both the governmental and business -type activities was the amount of infrastructure contributed by developers during 2013. -15- STATEMENT OF ACTIVITIES The Statement of Activities tracks the City's yearly revenues and expenses, as well as any other transactions that increase or reduce total net positions. These amounts represent the full cost of providing services. The Statement of Activities provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund -based financial statements. This statement includes the cost of supplies used, depreciation of long -lived capital assets, and other accrual -based expenses. The following table presents the change in the net position of the City for the years ended December 31, 2013 and 2012: General revenues Property taxes and tax increments Investment earnings (charges) Other revenues Total general revenues 23,947,968 24,221,741 (71,063) 255,020 214,004 23,876,905 24,690,765 Change in net position Net position — beginning Net position — ending 10,317,012 10,151,771 258,524,513 248,372,742 $ 268,841,525 $ 258,524,513 One of the goals of this statement is to provide a side -by -side comparison to illustrate the difference in the way the City's governmental and business -type operations are financed. The table clearly illustrates the dependence of the City's governmental operations on general revenues, such as property taxes and unrestricted grants. It also shows that, for the most part, the City's business -type activities are generating sufficient program revenues (service charges and program- specific grants) to cover expenses. This is critical given the current downward pressures on the general revenue sources. -16- 2013 2012 Program Expenses Revenues Net Change Net Change Net (expense) revenue Governmental activities General government $ 5,363,354 $ 3,317,337 $ (2,046,017) $ (2,389,572) Public safety 11,784,109 1,588,913 (10,195,196) (9,768,952) Public works 11,241,434 12,127,290 885,856 (294,859) Parks and recreation 5,154,919 3,588,174 (1,566,745) (2,222,474) Interest on long -term debt 3,864,333 — (3,864,333) (3,496,878) Business -type activities Liquor 2,473,738 3,952,361 1,478,623 1,450,540 Utility 10,863,625 12,611,544 1,747,919 2,183,201 Total net (expense) revenue $ 50,745,512 $ 37,185,619 (13,559,893) (14,538,994) General revenues Property taxes and tax increments Investment earnings (charges) Other revenues Total general revenues 23,947,968 24,221,741 (71,063) 255,020 214,004 23,876,905 24,690,765 Change in net position Net position — beginning Net position — ending 10,317,012 10,151,771 258,524,513 248,372,742 $ 268,841,525 $ 258,524,513 One of the goals of this statement is to provide a side -by -side comparison to illustrate the difference in the way the City's governmental and business -type operations are financed. The table clearly illustrates the dependence of the City's governmental operations on general revenues, such as property taxes and unrestricted grants. It also shows that, for the most part, the City's business -type activities are generating sufficient program revenues (service charges and program- specific grants) to cover expenses. This is critical given the current downward pressures on the general revenue sources. -16- LEGISLATIVE UPDATES Despite an improving economy, the 2013 Legislature faced the familiar prospect of having to address a significant projected deficit in order to adopt a balanced budget for the next biennium. The November 2012 financial forecast projected a deficit of $1.1 billion in the state General Fund for the 2014 -2015 biennium, which was revised down to a $627 million deficit in the February 2013 forecast. Even with this challenge, there was an expectation that with one political party holding the Governor's office and majorities in both the House and Senate, this biennial budget agreement would be reached more quickly and easily than the previous one, which featured numerous vetoes, a special session, and the longest shutdown of non - essential state government services in Minnesota history. While in the end there was no special session or government shutdown, the 2013 session still stretched until the final day allowable under the state constitution, with the last bill passed at midnight. The following is a summary of recent legislative activity affecting the finances of Minnesota cities in 2013 and into the future: Local Government Aid (LGA) — The state -wide LGA appropriation for fiscal 2013 was set to increase about 2.8 percent to $426.4 million. However, the 2012 Legislature froze 2013 LGA payments at 2012 levels for cities with a population of 5,000 or more. For cities with populations below 5,000, 2013 LGA was the greater of their 2012 aid or the amount they would have received for 2013 under existing law. The 2013 Legislature completely overhauled the LGA formula for fiscal year 2014 and thereafter, creating a three - tiered formula that includes separate "need factor" calculations for cities with populations under 2,500, between 2,500 and 10,000, or over 10,000. The new formula simplifies the LGA calculation, and is designed to reduce the volatility of the LGA distribution by limiting the amount it may decline in a given year. Under the new formula, each city's LGA distribution for 2014 will be no less than their 2013 LGA. Beginning in 2015, any reduction to a city's LGA distribution will be limited to the lesser of $10 per capita, or 5 percent of their previous year net tax levy. For cities that gain under the new formula, the increases will be distributed proportionate to their unmet need, as determined by the new "need factor" calculations. The state -wide LGA appropriation is $507.6 million for fiscal 2014, $509.1 million for 2015, and $511.6 million for fiscal 2016 and thereafter. Levy Limits — A levy limit for city property tax levies payable in 2014 was established for all cities with populations exceeding 2,500. The levy limit base is the certified levy (excluding special levies) plus the certified LGA for taxes payable in fiscal 2012 or 2013, whichever is greater, increased by 3 percent. The levy limit is equal to the base, less the city's certified LGA for fiscal 2014. Levies for special purposes such as debt service, abatements, or voter - approved purposes, are not subject to this limitation. Market Value Definitions — A number of levy, tax, spending, debt, and similar limits that had previously been computed based on "market value" or "taxable market value" must now be computed based on "estimated market value." This change was enacted to eliminate the effects of the homestead market value exclusion established in 2011. Levy Authority for Watershed Management Plan — Cities are granted the authority to levy taxes to provide funding for the implementation of a comprehensive watershed management plan. Tax Status of Leased Tax- Exempt Property — Tax- exempt property owned by a political subdivision and held under a lease for a term of at least one year, or under a contract for the purchase thereof, is considered to be the property of the person holding it for all purposes of taxation. This change makes the tax treatment of leased property owned by local governments consistent with leased property owned by the federal government. -17- Tax Increment Financing (TIF) — A number of changes and clarifications were made to rules governing the use of TIF, including: • The prohibition on using tax increments for improvements or equipment primarily of a decorative or aesthetic nature, or with costs twice as high due to the selection of materials or designs compared to more commonly used improvements or equipment, is eliminated. • The four -year rule originally applying to TIF Districts certified between January 1, 2005 and April 20, 2009 is extended through December 31, 2016. • Development authorities may elect to reduce the original net tax capacity of qualifying TIF districts for the effects of the homestead market value exclusion that replaced the homestead tax credit program. • Taxes paid by captured tax capacity of TIF districts that are attributable to the new general education levy authorized by the 2013 Legislature, will be paid to the school district that imposes the levy. Park Dedication Fees — A clarification was made to define the basis on which a city calculates a park dedication fee charged to a developer in lieu of dedicating land for park usage. The fee must be calculated on the fair market value of the land as annually determined by the city based on tax valuation or other relevant data. The new law also provides a method for resolving valuation disputes through negotiation or the use of independent appraisals of land in the same land use category. Host Community Economic Development Grants — A new program was created that will provide grants for the acquisition and improvement of publicly owned capital assets for metro -area cities that host waste disposal facilities. No local matching funds are required. Change to Small Cities Development Block Grants — The Minnesota Department of Employment and Economic Development is now allowed to provide a forgivable loan through the Small Cities Development Block Grant Program directly to a private enterprise. The city in which the private enterprise is located is no longer required to submit an application, only a resolution of support. Wastewater and Stormwater Funding — Several changes were made to wastewater and stormwater grant and loan programs administered by the Public Facilities Authority. The changes include expanded eligibility for some programs, and increased grant or loan ceilings for others. Sales Tax Exemption — Cities are exempted from paying sales tax on qualifying purchases, effective for purchases made on or after January 1, 2014. This exemption does not include purchases of goods or services to be used as inputs to goods or services cities provide to the public that are generally provided by a private business, such as liquor stores, golf courses, marinas, or fitness centers. Cities with a population over 500 will be required to include a property tax savings report along with its proposed 2013 payable 2014 property tax levy certification, with the amount of sales or use taxes paid or estimated to have been paid in fiscal 2012. Cities must also discuss the savings resulting from the sales tax exemption at their fall truth -in- taxation public hearings. Organized Solid Waste Collection — The process for imposing the city- organized collection of solid waste was streamlined and better defined. The previous 180 -day process for cities to adopt organized collection of solid waste was eliminated. The process now begins with a 60 -day period in which cities may negotiate with collectors currently operating in the city, thereby giving them the first opportunity to develop a proposal for organized collection. If the 60 -day negotiation period ends without an agreement, a city may continue the process by passing a resolution to form a committee to study the methods of organizing collection and make recommendations. A city must provide public notice and hold at least one public hearing before deciding to implement organized collection. go Pensions — An omnibus pension bill was passed that made a number of changes to both state -wide pension plans and single employer relief associations, including: Changes to the Public Employees Retirement Association (PERA) General Plan: • The "average salary" for determining surviving spouse and dependent benefits was redefined. • A number of clarifications were made to what constitutes "salary" for plan purposes. • Changes were made to the level of annual post - retirement adjustments, which will vary based on the funding level of the plan. Changes to the PERA Police and Fire Plan: • Increases employee contribution rate from 9.6 percent of salary to 10.2 percent for fiscal 2014, and 10.8 percent for fiscal 2015 and thereafter. • Increases employer contribution rate from 14.4 percent of salary to 15.3 percent for fiscal 2014, and 16.2 percent for fiscal 2015 and thereafter. • A 20 -year proportional vesting period was established for new hires beginning in 2014, under which the member becomes 50 percent vested after 10 years, and vests an additional 5 percent annually until fully vested at 20 years. • The retirement annuity formula calculation was changed to incorporate the effect of the new 20 -year vesting period, and a new cap of 33 years on allowable service time included in the annuity calculation. • The early retirement reduction factor was increased from the current 2.4 percent per year to 5 percent, phased in over a 5 -year period beginning July 1, 2014. • Changes were made to the level of annual post - retirement adjustments, which will vary based on the funding level of the plan. Changes to single employer relief associations: • The threshold of assets at which police relief associations and salaried or volunteer fire relief associations must prepare financial statements and have them audited by an independent auditor was raised from $200,000 to $500,000. • Volunteer firefighter relief associations are now required to pay a supplemental survivor benefit whenever it pays a survivor benefit, regardless of whether it is authorized in the association bylaws. • Any change to the interest rate paid during the deferral period of lump -sum service pensions must be approved by the governing body of the city or independent firefighting corporation to which the association is related. In addition, a new supplemental state aid was created to provide funding for pension plans. An annual allotment of $15.5 million will be distributed among the PERA Police and Fire Plan ($9 million), municipal volunteer firefighter associations ($5.5 million allocated based on proportionate share of fire state aid), and the Minnesota State Retirement System State Patrol Plan ($1 million). Expansion of Debt Authority — Several changes were made to expand the allowable uses of certain types of debt, including: • Home rule charter city or statutory city capital notes are allowed to be used for the purchase of application development services and training related to the use of computer hardware and software. • Capital improvement program (CIP) bonds are allowed to be used for expenditures incurred before the adoption of the CIP, if the expenditures are included in the plan. • Street reconstruction bonds are allowed to be used for bituminous overlay projects, which previously had not been included in the definition of reconstruction. -19- Authorized Investments — The list of authorized investments for cities was expanded to include: revenue obligations issued by local governments without levy authority that are rated AA or better; short-term (13 month maturity or less) obligation issued by a school district that is either rated in the highest credit rating category or covered by the State of Minnesota Credit Enhancement Program; and short-term (18 month maturity or less) guaranteed investment contracts when the issuer's or guarantor's short-term debt is rated in the highest rating category, even if their long -term debt is rated below the top two rating categories. Elections — The Legislature passed an omnibus elections policy bill that made a number of changes and clarifications to election requirements, including: • Establishing "no excuse" absentee balloting; • Increasing the time for counting absentee ballots from 4 days prior to the election to 7; • Reducing the number of people a voter may vouch for in a polling place from 15 to 8; • Eliminating the requirement to have at least one telecommunications device for deaf voter registration in every city of the first, second, or third class; • Requiring that the municipal clerk designated to administer absentee ballots also be responsible for the administration of a "ballot board "; • Reducing the number of election judges required in a precinct for elections other than a general election from 4 to 3, for precincts with more than 500 voters; and allowing the minimum number of three election judges for all elections including general elections for precincts with less than 500 registered voters; • Modifying the vote differentials requiring publically funded recounts to 0.25 percent in elections where more than 50,000 votes are cast, and 0.5 percent for elections in which between 400 and 50,000 votes are cast; • Amending the time period in which cities are prohibited from holding a special election from the first 40 days following a general election to the first 56 days; • Increasing the number of days' notice a city clerk must provide to a county auditor before holding a municipal election from 67 to 74 days; and • Establishing a pilot program and task force for the use of electronic rosters of voters. Alternative Bid Publication for Projects Funded by Special Assessments — A technical change was made to eliminate duplicative publication requirements for projects funded with special assessments. The definition of "recognized industry trade journal" was broadened to include websites or electronic publications, thereby eliminating circumstances that were forcing cities utilizing an alternative electronic publication method to also publish written notice for certain projects. Met Council Allocated Costs — A change was made to allow cities that are allocated costs by the Met Council to request the cost be deferred, or to be paid over time on a payment schedule with interest as agreed to by the Met Council. Liquor Licensing — An omnibus liquor bill was passed that made several changes to liquor licensing and distribution. Among the changes are: authorizing cities with municipal liquor operations to issue brewer taproom licenses that allow consumption on the premises or adjacent to malt liquor breweries; authorizing cities to issue brewers a license for off -sale of malt liquor packaged by the brewer; providing for the sale of malt - liquor educator licenses that will allow malt liquor tastings and education to be conducted similar to wine tastings; and allowing micro - distilleries to provide product samples on site. Tax - Exempt Holding Period for Development Property — The tax exempt holding period for city -owned land held for development is increased from 9 to 15 years for property acquired between January 1, 2000 and December 31, 2010, or for property located in a city outside of the metro area with a population under 20,000. -20- Citizen Contact Information Classified as Private Data — Citizen contact information submitted to cities in order to receive certain notifications or to subscribe to the city's electronic publications, such as phone numbers or email addresses, is now classified as private data. The names of people on such lists remain public information. Criminal History and Background Checks — Cities are authorized to perform criminal history checks on applicants for: city employment, volunteer positions, or a license that does not otherwise subject the applicant to a criminal history check. Such criminal history checks may not be substituted for statutorily mandated background checks. Background checks are now required for all fire department applicants, and are allowed for current fire department employees. The fire chief is also required to perform criminal history record checks of applicants. -21- ACCOUNTING AND AUDITING UPDATES GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO. 67 — FINANCIAL REPORTING FOR PENSION PLANS — AN AMENDMENT OF GASB STATEMENT NOS. 25 AND 50 The primary objective of this statement is to improve financial reporting by state and local government pension plans. GASB Statement No. 67 replaces the requirements of GASB Statement Nos. 25 and 50 for pension plans that are administered through trusts or equivalent arrangements that meet the following criteria: contributions from employers and nonemployer contributing entities to the pension plan and earnings on those contributions are irrevocable; pension plan assets are dedicated to providing pensions to plan members in accordance with the benefit terms; and pension plan assets are legally protected from the creditors of employers, nonemployer contributing entities, and the pension plan administrator. If the plan is a defined benefit pension plan, plan assets also are legally protected from creditors of the plan members. The requirements of GASB Statement Nos. 25 and 50 remain applicable to pension plans that are not administered through trusts covered by the scope of this statement and to defined contribution plans that provide post - employment benefits other than pensions. The statement makes a number of changes in the financial statement presentation, measurement, and required disclosures relating to the reporting of these types of pension plans. This statement is effective for financial statements for fiscal years beginning after June 15, 2013. Earlier application is encouraged. GASB STATEMENT N0.68 — ACCOUNTING AND FINANCIAL REPORTING FOR PENSIONS — AN AMENDMENT OF GASB STATEMENT NOS. 27 AND 50 The primary objective of this statement is to improve accounting and financial reporting by state and local governments for pensions. This statement replaces the requirements of GASB Statement Nos. 27 and 50, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria (as described earlier for GASB Statement No. 67). The requirements of GASB Statement Nos. 27 and 50 remain applicable for pensions that are not covered by the scope of this statement. This statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense /expenditures. hi addition, this statement details the recognition and disclosure requirements for employers with liabilities (payables) to a defined benefit pension plan and for employers whose employees are provided with defined contribution pensions. This statement also addresses circumstances in which a nonemployer entity has a legal requirement to make contributions directly to a pension plan. This statement is effective for financial statements for fiscal years beginning after June 15, 2014. Earlier application is encouraged. Included in this statement are major changes in how employers that participate in cost - sharing pension plans, such as the Teachers' Retirement Association (TRA) and PERA, account for pension benefit expenses and liabilities. In financial statements prepared using the economic resources measurement focus and accrual basis of accounting (government -wide and proprietary funds), a cost - sharing employer that does not have a special funding situation is required to recognize a liability for its proportionate share of the net pension liability of all employers with benefits provided through the pension plan. A cost - sharing employer is required to recognize pension expense and report deferred outflows of resources and deferred inflows of resources related to pensions for its proportionate share of collective pension expense and collective deferred outflows of resources and deferred inflows of resources related to pensions. In addition, the effects of (1) a change in the employer's proportion of the collective net pension liability and (2) differences during the measurement period between the employer's contributions and its proportionate share of the total of contributions from employers included in the collective net pension liability are required to be determined. These effects are required to be recognized in the employer's pension expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all active and inactive employees that are provided with pensions through the pension plan. -22- GASB STATEMENT N0.69 — GOVERNMENT COMBINATIONS AND DISPOSALS OF GOVERNMENT OPERATIONS This statement provides accounting and financial reporting guidance, including disclosure requirements, for government combinations and disposals of government operations. Government combinations include mergers, acquisitions, and transfers of operations. Included within the scope of this statement are combinations of governmental entities, or combinations of governmental entities with nongovernmental entities (such as a nonprofit entity), as long as the new or continuing organization is a government. This statement does not apply to combinations in which a government acquires an organization that continues to exist as a separate entity, or acquires an equity interest in an organization that remains legally separate from the acquiring government. A disposal of operations occurs when a government either transfers or sells specific operations. The provisions of this statement are effective for financial statements for periods beginning after December 15, 2013. Earlier application is encouraged. CHANGES TO REQUIREMENTS FOR FEDERAL GRANTS In December 2013, the U.S. Office of Management and Budget (OMB) issued "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Audits," which supersedes all or parts of eight OMB circulars; consolidating federal cost principles, administrative principles, and audit requirements in one document. The "Super Circular" includes a number of significant changes to the federal Single Audit process, including an increase in dollar threshold for requiring a Single Audit, changes to the thresholds and process used for determining major programs, a reduction in the percentage of expenditures required to be covered by a Single Audit, revised criteria for determining low -risk auditees, and an increase in the threshold for reporting questioned costs. The draft version of this guidance also included proposed reductions in the number of compliance requirements to be tested in a Single Audit, but final guidance on those changes will not be available until an updated compliance supplement is issued in 2014. -23- THIS PAGE INTENTIONALLY LEFT BLANK CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA Special Purpose Audit Reports on Single Audit, Internal Controls, and Compliance with Laws and Regulations Year Ended December 31, 2013 THIS PAGE INTENTIONALLY LEFT BLANK CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA Year Ended December 31, 2013 Table of Contents Page Independent Auditor's Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A -133 1 -2 Schedule of Expenditures of Federal Awards Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 4 -5 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by OMB Circular A- 133 6-7 Independent Auditor's Report on Minnesota Legal Compliance Schedule of Findings and Questioned Costs 9 -10 THIS PAGE INTENTIONALLY LEFT BLANK MMKR CERTIFIED PUBLIC ACCOUNTANTS PRINCIPAL Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichren, CPA Aaron J. Nielsen, CPA Victorta L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB CIRCULAR A -133 To the City Council and Management City of Lakeville, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville, Minnesota (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements. We issued our report thereon dated May 30, 2014, which contained an unmodified opinion on those financial statements. Audit standards referred to in the previous paragraph require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations, and is not a required part of the basic financial statements of the City. The Schedule of Expenditures of Federal Awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. (continued) -1- Malloy, Montague, Karnowski, Radosevich, & Co., P.A. 5153 IXSrran Soul ward • Suitt 410 • Minncapolil. MN 55416 • Td phoaa: 95L545 -0434 • T<kfax: 952545 -0569 • xx...mmkt.mm The purpose of this report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A -133 is solely to describe the scope of our testing of the Schedule of Expenditures of Federal Awards and the results of that testing based on our audit. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 30, 2014 -2- CITY OF LAKEVILLE Schedule of Expenditures of Federal Awards Year Ended December 31, 2013 Federal Federal Federal Grantor/Pass- Through Grantor/Program Title CFDA No. Expenditures U.S. Department of Housing and Urban Development Passed through Dakota County Community Development Block Grants 14.218 $ 196,185 U.S. Department of Justice Direct Bulletproof Vest Partnership Program 16.607 5,687 U.S. Department of Transportation Passed through Minnesota Department of Transportation Highway Planning and Construction 20.205 826,400 Passed through the City of Hastings, Minnesota State and Community Highway Safety 20.600 21,018 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 9,724 Total federal awards $ 1,059,014 Note: The Schedule of Expenditures of Federal Awards is prepared on the accrual basis of accounting in accordance with the requirements of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Therefore, the amounts presented in this schedule may differ from the amounts presented in, or used in the preparation of, the City's basic financial statements. -3- THIS PAGE INTENTIONALLY LEFT BLANK MMKR CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council and Management City of Lakeville, Minnesota PRINCIPALS Thomas M. Montague, CPA Thomas A. Karns ki, CPA Paul A. Radosevich. CPA William J. Lauer. CPA James H. Eichten, CPA Aaron J. Nelsen, CPA Victoria L. Holinka, CPA We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville, Minnesota (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 30, 2014. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. (continued) -4- Malloy, Montague, Karnowski, Radosevich, & Co., P.A. 5353 uayze:a B.0,, od • Suit. 410 • Minnerpnli >. MN 55416 • Tdgh ... : 952. 5454424 • TeW..: e52- 545 -0569 • w».,mmkr.aom COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 41 A Minneapolis, Minnesota May 30, 2014 -5- MMKR CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A -133 To the City Council and Management City of Lakeville, Minnesota REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM PRINCIPALS Thomas M. Montague, CPA Thomas A. Kamowski, CPA Paul A. Radose ich.. CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA We have audited the City of Lakeville, Minnesota's (the City) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended December 31, 2013. The City's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. MANAGEMENT'S RESPONSIBILITY Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Those standards and OMB Circular A -133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City's compliance. OPINION ON EACH MAJOR FEDERAL PROGRAM In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2013. (continued) -6- Malloy, Montague, Karnowski, Radosevich, & Co.. P.A. 5353 W-y... Bauk vrd • Saim 410 • Mimaayoli , MN 55416 • Td.,h.ne: 952-545.0424 • Td Jax: 952 - 545.0569 • awm.mmkcram REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to on the previous page. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A -133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A -133. Accordingly, this report is not suitable for any other purpose. Minneapolis, Minnesota May 30, 2014 -7- PRINCIPALS Thomas M. Montague, CPA Thomas A. Kamowski, CPA Paul A. Radosevich, CPA VrIIliam 1. Lauer. CPA James H. Eichum, CPA Aaron J. Nielsen, CPA Vicroria L. Holinka, CPA INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the City Council and Management City of Lakeville, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville, Minnesota (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated May 30, 2014. The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories. In connection with our audit, nothing came to our attention that caused us to believe that the City failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City's noncompliance with the above referenced provisions. The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this report is not suitable for any other purpose. Fr Minneapolis, Minnesota May 30, 2014 -$- Malloy, Montague, Karnowski, Radosevich, & Co.. P.A. 5353 Wayzv. Rn ulevud • Suiu 410 Minneapolis. MN 55416 • Trlrphonr: 955.545 -0424 • Telrf2s: 952.545 -0569 • .xu.mmkcwm CITY OF LAKEVILLE Schedule of Findings and Questioned Costs Year Ended December 31, 2013 A. SUMMARY OF AUDIT RESULTS This summary is formatted to provide federal granting agencies and pass- through agencies answers to specific questions regarding the audit of federal awards. Financial Statements What type of auditor's report is issued? Unmodified X Qualified Adverse Disclaimer Internal control over financial reporting: Are there significant control deficiencies disclosed? Are any of these conditions) a material weakness? Noncompliance material to the financial statements: Are there findings material to the financial statements? Federal Awards Internal controls over major federal award programs: Are there significant control deficiencies disclosed? Are any of these condition(s) a material weakness? Major federal award program compliance: What type of auditor's report is issued? Yes_ No X Yes No N/A X Yes_ No X Yes_ No X Yes_ No_ N/A X Unqualified X Qualified Adverse Disclaimer Are there audit findings relative to the major programs? Programs tested as major programs: Program or Cluster U.S. Department of Transportation Highway Planning and Construction Threshold for distinguishing type A and B programs Does the auditee qualify as a low -risk auditee? Yes_ No X CFDA No. 20.205 $ 300,000 Yes_ No X in CITY OF LAKEVILLE Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2013 B. FINDINGS —FINANCIAL STATEMENT AUDIT None. C. FINDINGS — MAJOR FEDERAL AWARD PROGRAMS AUDIT None. D. FINDINGS — MINNESOTA LEGAL COMPLIANCE AUDIT None. E. SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS — MAJOR FEDERAL AWARD PROGRAMS AUDIT Not applicable. 10- THIS PAGE INTENTIONALLY LEFT BLANK MMKR CERTIFIED PUBLIC A C C O U N T A N T S INDEPENDENT AUDITOR'S REPORT To the City Council and Management City of Lakeville, Minnesota REPORT ON THE FINANCIAL STATEMENTS PRINCIPALS Thomas M. Montague, CPA Thomas A. Karno"ki. CPA Paul A. Radosevich, CPA William J. lauec CPA James H. Eichren, CPA Aamn J. Nielsen, CPA Victoria L. Holinka, CPA We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville, Minnesota (the City) as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (continued) 16 Malloy, Montague. Karnowski, Radosevich, & Co.. P.A. 5351 NndI ,d • Sui,, 4111 • Minnr4poli,, MN 55416 • 7elrp6nno: 952 - 545.11424 • Tu1r6., 1 152545 -11561 wa w.mm4e:nm OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of December 31, 2013, and the respective changes in financial position and, where applicable, cash flows thereof, in accordance with accounting principles generally accepted in the United States of America. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the budgetary comparison information for the General Fund, and the Other Post - Employment Benefits Plan — Schedule of Funding Progress, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund statements and schedules, supplemental information, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules and supplemental information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements and schedules and supplemental information are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. (continued) 17