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Item 07
Date: July 6, 2010 Acknowledge Receipt of City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31, 2009 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. 2009 Overview The City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31, 2009 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, 2009 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 6 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 (pages 6 -13) and Management's Discussion and Analysis (pages 17 -33). • MMKR has submitted the attached Management Report regarding their observations during the course of the audit. Supporting Information Dennis a er, nc- ©ir-ctor Item No. • City of Lakeville Comprehensive Annual Financial Report for the Year Ended December 31, 2009 • Special Purpose Audit Reports — Single Audit, Internal Controls, and Compliance with Laws and Regulations • Management Report Financial Impact: - N/A budgeted: N/A Source: N/A Related Documents (CIP, ERP, etc.): Notes: COMPREHENSIVE ANNUAL FINANCIAL REPORT 2009 Year Ended December 31, 2009 City of Lakeville, Minnesota COMPREHENSIVE ANNUAL FINANCIAL REPORT 2009 City of Minnesota For the Year Ended December 31, 2009 Issued by the Finance Department Dennis Feller, Finance Director INTRODUCTORY SECTION CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2009 TABLE OF CONTENTS INTRODUCTORY SECTION Page Table of Contents 1 - 3 Elected and Appointed Officials 4 Organizational Structure 5 Letter of Transmittal 6 - 13 Certificate of Achievement 14 FINANCIAL SECTION Independent Auditors' Report 15 - 16 Management's Discussion and Analysis 17 - 33 Basic Financial Statements Government -wide Financial Statements Statement of Net Assets Statement of Activities 34 35 Fund Financial Statements Balance Sheet - Governmental Funds 36 - 37 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 38 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 39 - 40 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 41 Statement of Net Assets - Proprietary Funds 42 Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Funds 43 Statement of Cash Flows - Proprietary Funds 44 Statement of Fiduciary Net Assets - Agency Fund 45 Notes to Basic Financial Statements 46 - 82 Required Supplementary Information other than MD &A General Fund - Schedule of Revenues, Expenditures and Changes in Fund Balances - Budgetary Comparison 83 - 89 Notes to Required Supplementary Information 90 Other Post - Employment Benefits Plan - Schedule of Funding Progress 91 CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2009 TABLE OF CONTENTS Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Combining Governmental Funds Special Revenue Funds (Nonmajor) Combining Balance Sheet Combining Statement of Revenues, Expenditures Debt Service Funds (Nonmajor) Combining Balance Sheet Combining Statement of Revenues, Expenditures Capital Projects Funds (Nonmajor) Combining Balance Sheet Combining Statement of Revenues, Expenditures Special Revenue Funds - Budgetary Comparison Schedules Communications Benefit Accrual Surface Water Management Economic Development Downtown Special Service District Agency Fund - Statement of Changes in Assets and Liabilities Supplemental Information Schedule of Changes in Bonded Indebtedness Schedule of Bonds and Interest Payable Combined Schedule of Bonded Indebtedness FINANCIAL SECTION (continued) 2 and Changes in Fund Balances and Changes in Fund Balances and Changes in Fund Balances Page 92 93 94 95 96 97 98 - 99 100 - 101 102 103 104 105 106 107 108 109 - 118 119 - 120 CITY OF LAKEVILLE, MINNESOTA COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED DECEMBER 31, 2009 TABLE OF CONTENTS STATISTICAL SECTION Page Financial Trends Net Assets by Category - Government -wide 121. Changes in Net Assets - Governmental Activities 122 Changes in Net Assets - Business -type Activities 123 Changes in Net Assets - Total Governmental and Business -type Activities 124 Fund Balances - Governmental Funds 125 - 126 Changes in Fund Balances - Governmental Funds 127 - 128 Revenue Capacity Tax Capacity Valuation and Assessor's Taxable Market Value of Taxable Property 129 - 130 Property Tax Rates - Direct and Overlapping Governments 131 Principal Property Taxpayers 132 Property Tax Levy and Collections 133 Debt Capacity Ratio of Outstanding Debt by Type 134 Ratio of Net Bonded Debt Outstanding 135 Direct and Overlapping Governmental Debt 136 Legal Debt Margin 137 Pledged Revenue Coverage 138 Demographic and Economic Information Demographic and Economic Statistics 139 Principal Employers 140 Commercial and Industrial Building Permits Issued 141 Operating Information Employees by Function/Program (Full -Time Equivalent) 142 Operating Indicators by Function 143 Capital Assets Statistics by Function 144 CITY OF LAKEVILLE, MINNESOTA ELECTED AND APPOINTED OFFICIALS DECEMBER 31, 2009 ELECTED OFFICIALS Term of Office Expires MAYOR COUNCIL MEMBERS: Mark Bellows December 31, 2010 Kevin Miller December 31, 2010 Laurie Rieb December 31, 2012 Kerrin Swecker December 31, 2012 APPOINTED OFFICIALS City Administrator Steven C. Mielke Finance Director/Treasurer Dennis Feller City Clerk Charlene Friedges Holly Dahl December 31, 2010 4 0 0 V V 0 0 0 L Y7 0 0 E 18 et 0 0 a ' m z _ c ▪ E c0 a o U T 0 N 0. • C o > o E U E E d 0 0 0 U W 0 0 ¢ O 0 > 0 0 0 m w 0 — c U O C 0 E E 88 0 0 5 a LL U c c LL 2 c - O 0 0 m m O� u 0 d C O 0. - 7 O E E U • c 8 W 0 c Q 0 U p O C f o Q U E W.T2 V a This page intentionally left blank. June 16, 2010 Mayor Holly Dahl, Council Members, and Citizens of the City of Lakeville 20195 Holyoke Avenue Lakeville, Minnesota 55044 Dear Mayor Dahl, Council Members, and Citizens: The City provides both leadership and services for the community. Leadership in community building, together with service delivery, is best constructed on a strong financial base. To reflect this stewardship and performance, we hereby submit the detailed comprehensive annual financial report of the City of Lakeville for the year ended December 31, 2009. This report was prepared in accordance with U.S. generally accepted accounting principles (GAAP) as established by the Governmental Accounting Standards Board and meets the requirements of the Minnesota State Auditor's Office. 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, Karnowski, Radosevich & Co., P.A., a professional firm of certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the year ended December 31, 2009, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates used by management; and evaluating the overall financial statement presentation. Based upon the audit, the independent auditor concluded that there was a reasonable basis for rendering an unqualified opinion that the financial statements, for the year ended December 31, 2009, are fairly presented in conformity with GAAP. 6 City of Lakeville a 20195 Holyoke Ave. • Lakeville, M11? 9r,')__98 "00 „ fax 9.52-985 4199 s Soa.11'e n 4 i° " 1i'ei + :i1Cv to 'Liu?: Twin Cities Honorable Mayor, City Council, and Citizens June 16, 2010 The independent auditors' report is presented in the financial section of this report. 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. 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. The City has. a land area of 38 square miles and serves a community with a population of approximately 54,848 residents. While portions of the City's 38 total square miles are outside of the Metropolitan Urban Service Area (MUSA, the area provided sanitary sewer and water service by City), a large amount of land is still available for development and MUSA expansions to the year 2030 as approved by the Metropolitan Council in conjunction with the City's completion of the 2008 Comprehensive Plan Update. MUSA expansions will occur in five -year increment expansions beginning no sooner than 2010 through approximately 2030 that includes the large area currently designated as the Urban Reserve along Cedar Avenue, south of Dodd Boulevard. Housing and income levels evidence an increasingly affluent population. Wealth indices are comparable to metro area averages, with per capita and median family income at 114% and 135% of the state medians, respectively. The City has convenient access to the metropolitan area via four Interstate Highway 35 interchanges. 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, among other things, for 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: public water and sanitary sewer utilities, 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. ci.lakeville.mn. us. RESIDENTIAL PERMITS 700 600 I � 500 F 400 W 300 a 200 I0ar a __ —0—Total Residential Units --Single Family Honorable Mayor, City Council, and Citizens June 16, 2010 The City is also 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 fund budgetary comparison schedules are also presented within the required supplementary information section for governmental funds and the special revenue funds budgetary comparison schedules are presented in the nonmajor governmental funds subsection of this report. Economic Condition and Outlook The prolonged recession of recent years has affected our nation, state and community. The recent proliferation of data appears to indicate that the recession is at or near an end; the economy is expected to recover albeit at a moderate rate. Residential, commercial and industrial growth is at or near historical low levels. However, Minnesota's population will grow and so will the need for housing and business. The eventual economic recovery will result in a resumption of community growth and revenues associated with construction such as development fees and building permits. Lakeville is well positioned to receive that growth when it happens. 8 Honorable Mayor, City Council, and Citizens June 16, 2010 Commercial and industrial development has been decreasing when compared to previous year's activities. Recent significant economic development is derived primarily from companies purchasing or leasing existing vacant facilities. COMMERCIAL - INDUSTRIAL BUILDING CONSTRUCTION 545,000.000 540.000,000 535.000,000 530.000,000 525.000.000 520.000.000 515,000.000 S10.000 ,000 55,000,000 5- 2005 . 2006 2007 200K YEAR 2009 Like many areas of the State, housing values have trended downward in recent years. The assessors estimated taxable market values for residential market values declined on the average home by approximately (7.75 %) in 2009. This follows a reduction of (3.3 %) in market value in the previous year. $300,000 $280,000 $260,000 $240,000 $220,000 $200,000 ASSESSORS ESTIMATED MARKET VALUE Median Value Homesteaded Residential 2004 2005 2006 2007 2008 2009 2010 Year At the start of 2010, sales of existing homes have been increasing. As market conditions continue to improve, housing valuations will respond accordingly. The state legislature created the Market Value Homestead Credit (MVHC) program in 2001 to provide state -paid property tax relief to owner's homesteaded residential property. The credit to homeowners reduces a city's property tax receipts by the amount of the credit allocated to the city. This means the city will receive less than its certified tax levy from taxpayers. The state makes up the difference by reimbursing the city for 9 Honorable Mayor, City Council, and Citizens June 16, 2010 the city portion of the credit received by property owners. The combination of after - credit tax receipts and the MVHC reimbursement should equal the city's certified levy. However, since the implementation of the 2001 Omnibus Tax Law, Lakeville has (a) lost all of its Local Government Aid (LGA) and (b) has only received its full entitlement of the MVHC twice in the last eight years. Unless there is a significant improvement in the State sales and income tax revenues, there is high probability that municipalities such as Lakeville will remain vulnerable to the loss of its Market Value Homestead Credit for the foreseeable future. Lakeville has established its financial framework in response to these structural revenue challenges. Lakeville's labor market data has proved to be impressive; the City's employment rate has consistently surpassed state and national averages as reported by the U.S Department of Commerce Bureau of Economic Analysis as of December 31, 2009. Lakeville's diversified local economy and prime location will enable the community to be well positioned for a bright future. Major Initiatives Civilian Unemployment Labor Force Rate City of Lakeville 30,727 6.4% Dakota County 231,391 6.9% State of Minnesota 2,962,237 7.4% United States 153,059,000 10.0% Comprehensive Plan Update - Minnesota Statues requires cities within the Twin Cities Metropolitan Area to update their local comprehensive plans every ten years. The Comprehensive Plan consists of the Land Use Plan, Transportation Plan, Sanitary Sewer Plan, Water Plan, Storm Water Plan and the Park, Trails and Open Space Plan. Lakeville's last major Comprehensive Plan update was adopted in 1998 with previous Comprehensive Plan updates completed in 1988, 1986, 1981 and 1975. The 1998 Comprehensive Plan update addressed Lakeville's continued growth and development through 2020. After extensive public involvement and review and approval- by the Planning Commission and City Council the 2008 Comprehensive Land Use Plan update was approved in December of 2008 and extended the City's development framework to 2030. Interstate Highway 35 /County Road 70 Interchange Reconstruction - Since 2002 the City has endeavored to address the continued economic growth, long - standing traffic congestion and safety concerns by improving the interchanges at County Roads 46, 50, 60, and 70. The final interchange improvement at County Road 70 was completed during 2009; the reconstruction involved replacing and widening the bridge over I -35 to alleviate congestion and improve safety and to utilize access management techniques. In addition to the bridge replacement, entrance and exit ramps and frontage roads were realigned to provide additional ramp spacing and improved interstate highway access. The Project was financed in a cost share arrangement with the Minnesota Department of 10 Honorable Mayor, City Council, and Citizens June 16, 2010 Transportation, Dakota County, and the City. The City's share (45 %) of the Project was financed through a combination street reconstruction bonds, state -aid street bonds, and various capital project funds. Debt service on the state -aid street bonds will be repaid by State of Minnesota municipal state aid funds and debt service on the street reconstruction bonds will be provided by general property taxes. Holyoke /Highview Avenue Reconstruction — The City completed the reconstruction of Holyoke/Highview Avenue: from Heritage Drive to Dodd Boulevard during 2009. The existing pavement on this road segment was old and deteriorated; the project consisted of reconditioning the existing pavement surface that included bituminous reclamation, new bituminous surfacing and aggregate shouldering. The primary funding source for the project was provided by a Federal American Recovery and Reinvestment (ARRA) economic stimulus grant ($811,509). Interstate Highway 35 Park & Ride Station and Cedar Avenue Bus Rapid Transit Park & Ride Station — In an agreement between the City of Lakeville and the State of Minnesota (through Metropolitan Council) two park and ride facilities were constructed in 2009. The Interstate Highway 35 Station includes a 750 -stall parking ramp that will provide mass transit service to Lakeville area residents to downtown Minneapolis and surrounding communities. In addition, a roundabout at the Kenrick Avenue /175 Street/Junelle Path intersection was constructed to provide safe and efficient access to the parking ramp. The Cedar Avenue Bus Rapid Transit (BRT) Station construction provides bus shoulder lanes, additional through lanes and access modifications for the Bus Rapid Transit along the Cedar Avenue corridor from 160 Street to 181 Street. These Park & Ride facilities were financed in a cost share agreement in accordance with an approved Resolution Authorizing the Execution of an Agreement with Regard to a Transit Service Expansion Plan for the City of Lakeville dated May 5, 2008. Downtown Market Plaza - The construction of Downtown Market Plaza was completed in 2009; the Project as approved by the Lakeville City Council in December 2006 serves as a multi- functional public space in the heart of downtown Lakeville. The Plaza consists of a green/open gathering space and 64 off street public parking spaces. The Plaza provides the ability to support short-term events such as farmer's market, art fairs and antique car shows and also extends the current function of adjacent Pioneer Park as a multifaceted gathering place. The projects primary funding sources were provided by a local Community Development Agency (CDA) grant ($350,000), Dakota County (CDA) grant ($200,000), and a Federal Community Development Block Grant ($70,915). Infrastructure Improvements — Each year in anticipation of the challenges faced by population and economic growth the City prepares a five -year Capital Improvement Plan (CIP). The CIP is a long -range program 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 construction projects. The CIP is premised on the assumption that commercial and industrial development will moderate. The CIP is also premised on the residential activities as previously discussed. 11 Honorable Mayor, City Council, and Citizens June 16, 2010 Dodd Boulevard (County Road 9) from 183rd Street to Hayes Avenue Reconstruction — The Project will be designed in 2010, right -of -way acquired in 2011, and reconstructed in 2012. Dakota County will be responsible for 55% of the project costs. The three year project was initiated due to safety issues. The City of Lakeville will finance its share of costs ($1.3 million) with municipal state aid construction funds. Dodd Boulevard is a County road and therefore has no impact on City operating costs. Projects completed m 2009 include East Community Park, Casperson Park playground/landscaping upgrade, Well #19 construction (17191 Gerdine Path) and Well #8 rehabilitation (18490 Italy Avenue). Active projects include the North Park field irrigation project and Fieldstone Creek Park construction. Relevant Financial Policies Transit Levy — The City Council at its May 5, 2008 meeting approved a Resolution Authorizing the Execution of an Agreement with Regard to a Transit Service Expansion Plan for the City of Lakeville. As a result, the Metropolitan Council would levy $370,000 to Lakeville properties in 2009 and approximately $743,000 in 2010. The resolution passed by the City Council resolved that the additional cost of the Metropolitan Council Transit Tax Levy would be offset by City budget reductions for property taxes payable in 2009 -2010. The Council stated that its intention in passing the resolution was to make sure"that there would not be a net property tax increase as a result of the imposition of the Metropolitan Council Transit Tax Levy. As such, the City reallocated the allowed maximum amount of Municipal State Aid (MSA) revenues from a construction account to the general fund for MSA eligible street maintenance expenses of $293,012 and additional budget adjustments will partially offset the 2009 tax levy reduction of ($370,000). The re- allocation of MSA funds will reduce the City's ability to fund future construction projects on MSA- eligible roadways using MSA funds. Distinguished Budget Presentation Award The Government Finance Officers Association (GFOA) of the United States presented a Distinguished Budget Presentation Award to the City of Lakeville, Minnesota, for its annual budget for the fiscal year beginning January 1, 2009. A governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. This is the first year that the City of Lakeville has received this prestigious award. The Distinguished Budget Presentation Awards Program is specifically designed to encourage state and local governments to prepare and issue budget documents of the highest quality. Top - quality budget documents are essential if citizens and others with an interest in a government's finances are to be full and informed participants in the budget process. Better budget documents contribute to better decision making and enhanced accountability. A Distinguished Budget Presentation Award is valid for a period of one year only. We believe our annual budget for the fiscal year beginning January 1, 2010 continues to 12 Honorable Mayor, City Council, and Citizens June 25, 2010 conform to the Distinguished Budget Presentation Awards Program requirements, and we have submitted it to the GFOA to determine its eligibility for another certificate. Certificate of Achievement Award 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, 2008. This is the 21st 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 fmancial 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. Acknowledgements 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 Brian Kempa, Tom Nesseth, and David Lang. We would also like to thank the City Council for its commitment in planning and implementing the financial operations of the City in a fiscally prudent and progressive manner. Respectfully submitted, Steven Mielke City Adm ni trator ' Dennis Feller Finance Director 13 Certificate of Achievement for Excellence in Financial Reporting Presented to City of Lakeville Minnesota For its Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2008 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. President ifeAtrt. Executive Director 14 This page intentionally left blank. FINANCIAL SECTION CERTIFIED 'PUBLIC ACCOUNTANTS To the City Council and Residents City of Lakeville, Minnesota INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lakeville (the City) as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing 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 over fmancial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City as of December 31, 2009, and the respective changes in financial position and cash flows, where applicable thereof, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated June 16, 2010 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA (continued) 15 Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite %410 • Minneapolis, MN 55416 • Telephone: 952- 545 -0424 • Telefax: 952- 545 -056 • www.mmkr.com The Management's Discussion and Analysis, which follows this report letter, and the budgetary comparison information for the General Fund and the Schedule of Funding Progress for the City's other post - employment benefits plan, which follows the basic financial statements, are not required parts of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management, regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 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 have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. , KAA 44-0104 k: 44644-1A4 d., PA- June 16, 2010 16 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, 2009. Please read the information presented here in conjunction with our letter of transmittal. Financial Highlights • The assets of the City exceeded liabilities by $250,912,969 at the close of the most recent fiscal year. Of this amount, $17,225,786 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets decreased by ($1,133,134). • The City's governmental funds reported combined ending fund balances of $41,795,771. Of this total amount, $25,072,462 or 60.0% is available for spending at the government's discretion. • As of the end of the current fiscal year, the City's unreserved- designated fund balance for the general fund was $11,196,826 or 57.0% of total general fund expenditures of $19,650,579. The unreserved - designated fund balance is adequate and sufficient, but not excessive. 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 assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. 17 The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government -wide financial statements distinguish functions of the City 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 off -sale liquor operation and water and sanitary sewer 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. 18 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, property taxes (debt service) fund, special assessments (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 financial statements 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, and street lighting) operations. The City uses an internal service fund to account for its risk management insurance liability program. This service benefits 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. This section 19 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 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 $250,912,969 at the close of the fiscal year ending December 31, 2009. By far the largest portion or 88.8% of net assets is reflected in its investment in capital assets (e.g. land, buildings, machinery and equipment, other improvements, 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 investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Current and other assets Capital assets Total assets Current and other liabilities Long -term liabilities Total liabilities Net assets: Invested in capital assets net of related debt Restricted Unrestricted Total net assets Total liabilities and net assets Governmental Activities Business -type Activities Total 2009 2008 Net Assets 2009 2008 2009 2008 $ 53,870,342 $ 47,193,058 $ 18,132,087 $ 16,398,219 $ 72,002,429 190,311,798 195,935,559 107,161,216 108, 800,771 297,473,014 $ 244,182,140 $ 243,128,617 $ 125,293,303 $125,198,990 $ 369,475,443 $ 5,826,195 $ 7,054,867 $ 1,516,011 $ 1,674,279 $ 7,342,206 106,902,995 102,981,898 4,317,273 4,570,460 111,220,268 112,729,190 110,036,765 5,833,284 6,244,739 118,562,474 $ 63,591,277 304,736,330 $ 368,327,607 $ 8,729,146 107,552,358 116,281,504 119,699,102 120,954,521 103,150,022 104,535,771 222,849,124 225,490,292 10,542,926 9,037,087 295,133 311,133 10,838,059 9,348,220 1,210,922 3,100,244 16,014,864 14,107,347 17,225,786 17,207,591 131,452,950 133,091,852 119,460,019 118,954,251 250,912,969 252,046,103 $ 244,182,140 $ 243,128,617 $ 125,293,303 $125,198,990 $ 369,475,443 $ 368,327,607 The City's total restricted net assets of $10,838,059 comprise 4.3% of total net assets at the close of the fiscal year ending December 31, 2009. These assets are subject to external restrictions on how they may be used. The 2009 remaining balance of $17,225,786 (6.9% of total net assets), in unrestricted net assets may be used to meet the government's ongoing obligations to citizens and creditors. Certain balances within unrestricted net assets have internally imposed designations or limitations, which may further limit the purpose for which such net assets maybe used. 20 Change in net assets. The City's 2009 total net assets during the current fiscal year decreased by ($1,133,134) as shown in the following table. This decrease is primarily attributed to economic conditions, decrease in community growth, and the City's cost share funding of the Interstate Highway 35 /County Road 70 Interchange project. The Project (completed in 2009) has approximately $3.6 million remaining in unsettled right - of -way land acquisitions; these remaining costs will be paid subsequently as purchase agreements are settled. Additional details that account for the change in net assets are provided in the following analysis of the governmental and business -type activities. Change in Net Assets Govemmental Activities Business -type Activities Total 2009 2008 2009 2008 2009 2008 Revenues Program revenues Charges for services $ 6,283,708 $ 8,997,382 $ 11,289,454 $ 10,958,447 $ 17,573,162 $ 19,955,829 Operating grants and contributions 2,255,596 1,494,157 7,026 7,026 2,262,622 1,501,183 Capital grants and contributions 3,072,926 2,342,079 158,252 975,410 3,231,178 3,317,489 General revenues Property taxes 23,912,318 23,391,055 23,912,318 23,391,055 Investment earnings 463,092 1,383,236 227,055 457,466 690,147 1,840,702 Total revenues 35,987,640 37,607,909 11,681,787 12,398,349 47,669,427 ' Expenses General govemment 5,916,590 6,169,957 5,916,590 6,169,957 Public safety 9,726,394 10,019,681 9,726,394 10,019,681 Public works 12,866,216 15,706,515 12,866,216 15,706,515 Parks and recreation 4,774,745 4,900,341 4,774,745 4,900,341 Interest on long -term debt 3,994,790 4,218,695 3,994,790 4,218,695 Liquor 2,437,654 2,407,714 2,437,654 2,407,714 Utility - 9,086,172 8,319,303 9,086,172 8,319,303 Total expenses 37,278,735 41,015,189 11,523,826 10,727,017 48,802,561 51,742,206 Change in net assets before transfers (1,291,095) (3,407,280) 157,961 1,671,332 (1,133,134) (1,735,948) Transfers (34' (2,029,933) 347,807 2,029,933 Change in net assets (1,638,902) (5,437,213) 505,768 3,701,265 (1,133,134) (1,735,948) Net assets - beginning 133,091,852 138,529,065 118,954,251 115,252,986 252,046,103 253,782,051 Net assets - ending 5131,452,950 5133,091,852 $119,460,019 5118,954,251 5250,912,969 5252,046,103 Governmental activities. Governmental activities share decreased the City's net assets by ($1,638,902). As previously discussed, this decrease is primarily due to the Interstate Highway 35 /County Road 70 Interchange reconstruction project. The reductions in governmental program revenues charges for services are directly related to economic conditions. The City responded to the economic challenges by reducing operating expenses, and deferring capital acquisitions. Revenues — The City's 2009 total revenues for governmental activities decreased by ($1,620,269). Charges for services decreased a total of ($2,713,674) primarily due to the economic recession that caused reductions in revenue streams from community 21 development within residential and commercial development areas totaling ($2,953,216). A summary of the various increases (decreases) are shown as follows: Increase / Charges for services 2009 2008 (Decrease) Licenses and building permit fees $ 1,603,909 $ 1,936,532 $ (332,623) Connection and area charges 1,069,160 2,593,037 (1,523,877) Park dedication fees 108.245 1,204,961 (1,096,716) Other 3,502,394 3,262,852 239,542 Total charges for services $ 6,283,708 $ 8,997,382 $ (2,713,674) Operating grants and contributions experienced an overall increase of $761,439. The increase is composed of State -aid provided for street reconstruction bonds debt service related to the reconstruction of Cedar Avenue and Interstate Highway 35 interchanges at County Roads 46 and 70. The City also received an asset liquidation distribution from ALF Ambulance. ALF Ambulance operates under a joint powers agreement between the City of Lakeville and neighboring cities of Apple Valley and Farmington. A summary of the various operating grants and contributions are shown as follows: Increase / Operating grants and contributions 2009 2008 (Decrease) State -aid for street bonds debt service $ 833,879 $ 544,857 $ 289,022 ALF Ambulance distribution 409,611 409,611 Highway improvements state and county aid 234,139 92,619 141,520 Other grants, contributions and donations 777,967 856,681 (78,714) Total operating grants and contributions $ 2,255,596 $ 1,494,157 $ 761,439 Capital grants and contributions increased by $730,847. Contributed infrastructure from private land developers increased by $806,089; the infrastructure consists of street, storm sewer, and park capital assets. The City received a Federal American Recovery and Reinvestment (ARRA) economic stimulus grant of $811,509 that provided the primary funding source for the Holyoke/Highview Avenue reconstruction project. The City received the final matching contribution from the Spirit of Brandtjen Farms land developer for the completion of the new East Community Park. The City also received the final grants from the Federal government and other local government sources for the completion of the new Downtown Market Plaza. The summary of capital grants and contributions is shown as follows: 22 Capital grants and contributions Contributed infrastructure from developers Holyoke/Highview Avenue reconstruction grant East Community Park matching contribution Downtown Market Plaza grants Other grants and contributions Total capital grants and contributions Property tax revenue increased $521,263 or 2.2% primarily due to a special levy to recover the loss of State -aid (Market Value Homestead Credit). Investment earnings decreased by ($920,144) or (66.5 %) due to low yields consistent with prevailing market conditions. General revenues Property taxes Investment earnings Total general revenues Property Taxes $4912318 O%) 2009 2008 $ 1,342,646 $ 536,557 811,509 30,192 602,349 209,258 448,124 679,321 755,049 $ 3,072,926 $ 2,342,079 Increase / 2009 2008 (Decrease) $23,912,318 $23,391,055 $ 521,263 463,092 1,383,236 (920,144) $24,375,410 $24,774,291 $ (398,881) Revenues by Source - Govermnental Activities Total Revenues $35,987,640 Comes for Services $6,283,708 (17.5%) 23 Increase / (Decrease) $ 806,089 811,509 (572,157) (238,866) (75,728) $ 730,847 Investment Earnings $463,092 (13%) Expenses — The City's 2009 total governmental activities expenses (before depreciation on capital assets and interest on long -term debt) decreased by ($3,812,538) or (13.4 %). Total governmental activities expenses decreased by ($3,736,454) or (9.1 %), shown as follows: Governmental activities expenses General government Public safety Public works Parks and recreation Total before depreciation and interest Depreciation on capital assets Interest on long -term debt Total governmental activities expenses The City sustained significant revenue losses in 2009 due to the impact of the ongoing economic recession. The losses occurred in several revenues sources that included the State Legislature canceling the City's entire state -aid for market value homestead credit; building permit revenue; fees related to residential development and engineering improvement projects; property tax delinquencies; and reductions in interest on investment income. To address these losses, the City responded with major operating cost reductions in the following areas: o The City reduced personnel staffmg levels for a second year in a row by eliminating eight full -time positions, one part-time position, reduced the hours of four full -time positions to part-time status, and eliminated several seasonal positions. These reductions are in addition to the eight full -time positions and one part-time position eliminated in 2008. The duties and responsibilities previously performed by these staff reductions were reassigned to existing staff throughout the organization. To further these reductions, the City mandated a three day unpaid furlough for all full -time employees, a five day unpaid furlough for all directors and City Administrator, and canceled all out -of -state non - required schools and conferences. o The City deferred several major maintenance projects that included the sealcoating portion of the City's annual pavement management program; as well as pedestrian trail sealcoating/striping and parking lot sealcoating/striping at Antlers and Aronson Parks. These maintenance projects will be deferred until a future period. o Service levels in numerous areas were either reduced or changed in the way they were delivered; as such the City closed five of its eleven outdoor skating rinks; emergency medical calls (Delta) jointly serviced by the City's fire department and ALF Ambulance are solely serviced by ALF; public safety training seminars provided to banks and other local businesses are no longer provided; boulevard mowing adjacent to County roads were eliminated in addition to snow plowing of 24 2009 $ 5,613,350 8,963,562 7,008,196 3,052,141 24,637,249 8,646,696 3,994,790 $ 37,278,735 2008 $ 5,818,934 9,323,416 9,933,300 3,374,137 28,449,787 8,346,707 4,218,695 $41,015,189 Increase / (Decrease) $ (205,584) (359,854) (2,925,104) (321,996) (3,812,538) 299,989 (223,905) $ (3,736,454) trails and sidewalks not adjacent to collector or arterial roads. The Park Gardener seasonal position was eliminated thus affecting the aesthetic appearance of City parks and gateways. o Service fees were increased in addition to implementing new fees to avoid adverse changes in the delivery of City services. As such, new fees were implemented but not limited to a fiscal agent fee charged to the Lakeville Arenas for fiscal services and a recreation youth sport surcharge. These services were previously provided at no charge to the recipients. In addition to the above cost reductions, the City implemented a "Budget Trimming" process where all City costs were examined at the program and line item level; this trimming process provided substantial cost reductions beyond those discussed above. Business -type activities. Business -type activities increased the City's total net assets by $505,768. Key elements of the increase in net assets along with a comparison of revenues, expenses, and changes in net assets during fiscal years 2009 and 2008 are shown as follows: Revenues Charges for services Liquor Utility Operating grants and contributions Liquor Utility Capital contributions Utility Investment earnings Total revenues Expenses Liquor Utility Total expenses Change in net assets before transfers Transfers Change in net assets Net assets - beginning Net assets - ending Business -type Activities Increase / 2009 2008 (Decrease) $ 3,797,780 $ 3,603,240 $ 194,540 7,491,674 7,355,207 136,467 25 3,762 3,264 158,252 227,055 11,681,787 2,437,654 9,086,172 11,523,826 157,961 347,807 505,768 118,954,251 $ 119,460,019 3,762 3,264 975,410 457,466 12,398,349 2,407,714 8,319,303 10,727,017 1,671,332 2,029,933 3,701,265 115,252,986 $ 118,954,251 (817,158) (230,411) (716,562) 29,940 766,869 796,809 (1,513,371) (1,682,126) (3,195,497) 3,701,265 $ 505,768 The City's 2009 business -type total revenues increased by $100,596 or 0.9 %; excluding the decrease in capital contributions of infrastructure capital assets from land developers of ($817,158). These increases and (decreases) are discussed in detail in the following paragraphs. o The liquor fund 2009 sales increased by approximately $161,000 or 1.1% from 2008 sales thus yielding a gross profit increase of $194,540 or 5.4 %. Cost of goods sold as a percentage of sales decreased (1.1 %) due to a trend in consumers +ng towards selecting d o with higher margins such as wine �G'vvaruo se1VVLlllg products with iiigher gross iiiargaiis SuV.. uu Jbiiie instead of spirits. o The overall utility revenue charges for services increased by $136,467. This increase is represented by a water revenue decrease of ($257,608), sanitary sewer revenue increase of $297,378, street light revenue increase of $66,396, and other increase of $30,301. The water decrease is due to a reduction in 2009 consumption as a result of changes in weather patterns and its impact on irrigation. The sanitary sewer increase is due to a 2009 rate increase. Beginning December 2009, the City's street lighting program was moved from the general fund to the utility fund. o The utility fund experienced a decrease of ($817,158) in capital contributions of infrastructure capital assets from land developer improvement projects. City improvement projects contributions to the utility fund of $885,410 are within the net transfer amount of $347,807 on the Statement of Activities. The total amount of contributed infrastructure assets received by the utility fund varies yearly depending on the rate at which land developers and City contractors are able to install the operational infrastructure, (i.e., watermain and sanitary sewer lines). o Investment earnings decreased ($230,411) or (50.4 %) due to low yields consistent with prevailing market conditions. The City's 2009 business -type total expenses increased by $796,809 or 7.4 %. The various increases and (decreases) from 2008 are shown as follows: Increase /(Decrease) From 2008 Business -type activities expenses Personnel $ 17,350 $ 33,344 $ 50,694 Commodities 4,823 52,137 56,960 Other charges and services 28,625 434,269 462,894 Sanitary sewage treatment and disposal 173,804 173,804 Depreciation on capital assets (7,261) 73,315 66,054 Interest and fiscal charges (13,597) (13,597) Total increase /(decrease) $ 29,940 $ 766,869 $ 796,809 26 Liquor Utility Fund Fund Total o The utility fund other charges and services increased by approximately $434,000. The increase is attributable to the City's utility customer water meter replacement program costing $221,000 and the Maple Island lift station rehabilitation project costing $213,000. o Metropolitan Council Environmental Services (MCES) charges for sanitary sewage treatment and disposal increased by $173,804 or 7.0 %. The overall increase is comprised of an MCES rate increase of 3.8% and a customer usage increase of 3.2 %. 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 information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $41,795,771. Of this amount, $25,072,462 or 60.0% of this combined ending fund balance constitutes unreserved fund balance that is available for spending at the government's discretion. The remaining fund balance is reserved to (a) pay debt service of $15,722,926, (b) pay remaining contractual obligations of $100,970, and (c) for other restricted purposes of $899,413. The general fund is the chief operating fund of the City. At the end of the current fiscal year, the fund balance was $11,206,725. The 2009 change in fund balance of ($38,788) exceeded the final adopted budget net change in fund balance of ($1,435,461) by $1,396,673. The property taxes (debt service) fund balance increased by $1,035,402. The City levies the required property taxes collected in the current year to meet the bonded debt service requirements in the following year. The change in fund balance may fluctuate yearly based on fluctuating principal and interest requirements of existing debt and that of new debt issuance. The special assessments (debt service) fund balance increased by $4,414,830. The increase is primarily due to the issuance of the Improvement Refunding Bonds of 2009 B for $4,250,000 that will be used to pay the callable principal balance of Improvement Bonds 2000 A and 2001 A on February 1, 2010 for $4,285,000. 27 The building (capital projects) fund balance decreased by ($136,059) mainly due to transferring the remaining unused police station construction bond proceeds of ($238,000) to the responsible property taxes (debt service) fund. The new 70,000 square foot police station facility was completed in August 2008 and all construction contract obligations have been fulfilled. The improvement construction fund is the primary fund used to account for major infrastructure improvement projects that require debt issuance for financing purposes. The activity in this fund may fluctuate from year to year depending on the demand for infrastructure expansion. Large projects may take several years to complete such as the interstate highway interchange and bridge reconstruction projects. The improvement construction (capital projects) fund balance increased by $3,645,294. The increase is primarily due to the issuance of the 2009 Street Reconstruction Bonds A for $4,945,000. These bonds were issued to fund the City's remaining share of the Interstate Highway 35 /County Road 70 Interchange project. The project (completed in 2009) has approximately $3.6 million remaining in unsettled right -of -way land acquisitions; these costs will be paid subsequently as purchase agreements are settled. The City also completed construction of the new Downtown Market Plaza; this project was substantially funded by Federal, Dakota County and local grants. 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. 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 17. — 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 The City Council amended the originally adopted budget on two occasions during 2009. The amendments to the originally adopted budget were for economic and various routine reasons. A schedule of revenues, expenditures and changes in fund balances — budgetary comparison is disclosed in the required supplemental information section of this report. All general fund departments expended their 2009 budget appropriations at or below the final adopted budget. A summary of general fund revenues, expenditures, other financing sources (uses), variance with final budget, and net change in fund balance is as follows: 28 Revenues Property taxes Licenses and permits Intergovernmental Charges for services Fines Investment income Donations Miscellaneous Total revenues Expenditures Personnel services Commodities Other charges and services Capital outlay Other Total expenditures Other financing sources (uses) Net change in fund balance General Fund Budget As Originally Adopted $ 15,371,147 1,397,905 1,703,997 2,052,405 272,394 253,826 21,500 57,451 21,130,625 14,891,850 1,618,832 5,091,363 80,233 294,000 21,976,278 845,653 29 Final Budget $15,408,870 1,142,405 1,142,281 1,922,316 272,394 83,826 29,881 57,451 20,059,424 14,339,134 1,565,485 4,931,308 44,032 Variance With Final Actual Budget $ 15,544,153 $ 135,283 1,062,368 (80,037) 967,096 (175,185) 2,005,794 83,478 297,413 25,019 161,318 77,492 33,996 4,115 154,655 97,204 20,226,793 167,369 13,881,048 1,268,637 4,468,843 32,051 458,086 296,848 462,465 11,981 20,879,959 19,650,579 1,229,3 80 (614,926) (615,002) (76) E $ (38,788) $ 1,396,673 The 2009 actual general fund revenues were over final budget by $167,369 and expenditures were under final adopted budget by $1,229,380. Other financing sources (uses) were slightly over final budget by ($76). The general fund actual net change in fund balance exceeded final budget by $1,396,673. The following is a brief summary explanation of the various budgets to actual variances: o Property taxes variance of $135,283 is due to collecting greater than anticipated prior year's delinquent property taxes. o Licenses and permits variance of ($80,037) is due to lower than anticipated residential and commercial plan review fees earned by the building inspections department. Residential building permits issued have remained constant as evidenced by 174 and 173 residential building permits issued in 2009 and 2008, respectively. This excludes permits issued for 242 apartment units in 2008. o Intergovernmental variance of ($175,185) is due to lower than budgeted receipt of state -aid for public safety fire and public works streets activities. o Charges for services variance of $83,478 is due to several reasons such as general government residential planning fees and builder escrow administrative fees reduced due to the economic recession ($52,000); public safety fees for housing ALF Ambulance operations staff ($31,000); public works engineering fees related improvement projects exceeding budget by $224,000; and parks and recreation program fees for recreation and arts center activities lower than budget by ($58,000). o Fines variance of $25,019 is due to greater than anticipated collection of traffic related ticket fines. o Investment income variance of $77,492 is due to earnings exceeding expectations. The City's Management employs prudent investment practices and cash management techniques to maximize investment income potential while protecting the City's treasury. o Donations and miscellaneous revenues experienced slight variances of $4,115 and $97,204, respectively. c, Personnel variance of $458,086 is mainly due to budget savings related to health insurance cost rates remaining level with 2008, three full -time vacant positions that remained unfilled, efficient management and reduction of staff overtime, firefighters emergency medical (Delta) calls eliminated, reduced fire relief association pension required payment, and reductions due to routine employee turnover. These budget savings include all applicable benefits. o Commodities variance of $296,848 is attributed to several reasons such as motor fuels savings of approximately $132,000 and deicing chemical applied to roads savings of approximately $28,000. Budget trimming combined with cooperative purchasing agreements and the exercising of prudent and efficient purchasing practices by staff yielded significant budget savings of approximately $137,000. o Other charges and services variance of $462,465 is attributed to significant savings in building electricity and natural gas due to energy prices not increasing as the budget anticipated for savings of $133,000. The remaining budget variance of approximately $329,000 is also due to budget trimming and the use of the competitive bidding process to ensure the City receives the best value for its money. City staff is committed to providing the highest quality of services in a cost - effective, innovative and responsible manner. o Capital outlay variance of $11,981 is mainly due to budget savings by postponing certain purchases until needed. 30 Capital Asset and Debt Administration Capital assets. The City's capital assets for governmental and business -type activities as of December 31, 2009 are $297.5 million (net of accumulated depreciation). This amount represents a decrease (including additions, deletions, and depreciation) of approximately ($7.3) million from 2008. The 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 Machinery and equipment Other improvements Infrastructure Streets Storm sewer Parks Water Sanitary sewer Construction in process Total Capital Assets (net of depreciation) Governmental Business -type Activities Activities $ 21,490,469 $ 1,800,456 100,000 45,670,128 20,809,565 7,388,759 568,301 2,323,261 64,519,876 38,941,991 9,390,986 31 486,328 48,013,230 35,969,664 $ 190,311,798 $ 107,161,216 Total $ 23,290,925 100,000 66,479,693 7,957,060 2,323,261 64,519,876 38,941,991 9,390,986 48,013,230 35,969,664 486,328 $ 297,473,014 The City's 2010 adopted budget provides funding for $7.4 million in infrastructure capital assets, public buildings improvements and upgrades, property for a future fourth liquor store, 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 $106,170,000, which is an increase of $3.415 million compared to the prior year. The increase is due to principal debt payments of ($6.71 million) and the issuance of the following debt: Principal Bond issue Amount G.O. Street Reconstruction Bonds, Series 2009 A $ 4,945,000 G.O. Improvement Refunding Bonds, Series 2009 B 4,250,000 G.O. Tax Increment Refunding Bonds, Series 2009 B 930,000 $ 10,125,000 The City issued the General Obligation Street Reconstruction Bonds, Series 2009 A (Taxable) to provide financing for the remaining City share of costs of the Interstate Highway 35 /County Road 70 Interchange Reconstruction Project. The City issued these bonds (referred to as `Build America Bonds" Direct Payment) under the authorization of Section 1531, Title 1 of Division B of the American Recovery and Reinvestment Act of 2009 (ARRA). The Build America Bonds (Direct Payment) designation provides for a Federal subsidy credit to be paid to the City by the U.S. Treasury Department in an amount equal to 35 percent of the interest payable to investors in these taxable bonds. The credit will be received semi- annually to coincide with the debt service payment schedule. Debt service will be payable solely from property taxes. The City manages its debt structure by utilizing approaches that take full advantage of financial trends and emerging economic conditions in municipal bond markets; as such the City issued the Improvement ($4,250,000) and Tax Increment Refunding ($930,000) Bonds, Series 2009 B to call both Improvement Bonds, Series 2000 A and 2001 A, and Tax Increment Bonds, Series 1999 B on February 1, 2010 totaling $5,225,000. The crossover refunding transactions yielded a combined present value economic gain of $592,490. Refer to Note 7. — Long -Term Debt, 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, 2009 (including amounts to be called 2/1/2010 of $5,225,000) is shown as follows: Outstanding Debt General Obligation Bonds and Revenue Bonds Governmental bonds General obligation bonds Equipment certificates Park Capital improvement Street reconstruction Special assessment Tax increment State -aid revenue Water revenue Ice arena revenue Total general obligation bonds Gross revenue recreation facility HRA Public facility lease revenue HRA Ice arena lease revenue Total governmental Business -type bonds Liquor revenue Balance January 1 Issued $ 3,800,000 $ 2,595,000 29,335,000 19,815,000 10,425,000 4,335,000 7,575,000 7,735,000 775,000 86,390,000 10,125,000 835,000 2,085,000 9,180,000 98,490,000 10,125,000 32 4,945,000 4,250,000 930,000 Balance Redeemed December 31 $ 790,000 335,000 525,000 735,000 1,890,000 360,000 500,000 1,000,000 6,135,000 65,000 100,000 130,000 6,430,000 $ 3,010,000 2,260,000 28, 810,000 24,025,000 12,785,000 4,905,000 7,075,000 6,735,000 775,000 90,380,000 770,000 1,985,000 9,050,000 102,185,000 4,265,000 - 280,000 3,985,000 Total bonds payable $102,755,000 $10,125,000 $ 6,710,000 $ 106,170,000 The City of Lakeville's general obligation bond rating as of December 31, 2009 was an "Aa2" bond rating by Moody's Investors Service. Subsequent to fiscal year ending December 31, 2009, Moody's upgraded the City's bond rating to "Aal." 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 $60,213,098 of net bonded debt, which is subject to the $180,739,965 current debt limitation, thereby resulting in a legal debt margin of $120,526,867. Refer to the Statistical Section of this report for a detailed computation of the City's legal debt margin. Economic Conditions and Next Year's Budget The City of Lakeville has been adjusting to the realities of the economy and legislative taxing constraints. The conditions in the housing and finance industries have resulted in a significant reduction in building permits and development activities. As such, the 2010 budget recognizes these new realties and positions the City with the stability needed to meet the challenges of 2010 and beyond. The 2010 tax levy takes into consideration the City Council directive to increase the levy for the loss of the 2009 Market Value Homestead Credit ($630,561). Certain fees for services have also increased to offset the increase in service operating costs. The 2010 budget does not provide for any new employees and defers several major maintenance projects. The City was awarded an American Recovery and Reinvestment Act (ARRA) Energy Efficiency and Conservation Block grant for $474,100 that will fund energy efficiency upgrades at several City facilities in 2010; these facility upgrades will improve building efficiency thereby reducing future energy costs. The most significant project in the 2010 budget is the Dodd Boulevard (County Road 9) from 185 Street (County Road 60) to Hayes Avenue reconstruction project. The project will be designed in 2010, right -of -way acquisition in 2011, and reconstructed in 2012. While the budget recognizes the need to control tax increases, the City will continue to be efficient in managing its resources so as to maintain the excellent level of services and programs Lakeville residents have come to enjoy. 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. 33 This page intentionally left blank. BASIC FINANCIAL STATEMENTS CITY OF LAKEVILLE, MINNESOTA STATEMENT OF NET ASSETS DECEMBER 31, 2009 ASSETS: Cash and investments Receivables Internal balances Inventory Prepaid items Unamortized bond issuance and discount cost Restricted assets (temporarily): Cash and investments Investments held by trustee Capital assets Non - depreciable Depreciable, net Total capital 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 ASSETS: Total assets Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total net assets See accompanying notes to basic financial statements. 34 Governmental Activities $ 37,701,685 8,807,968 (142, 727) 284,535 9,899 1,060,646 5,225,000 923,336 22,076,797 168,235,001 190,311,798 244,182,140 4,916,688 909,507 16,452,807 90,450,188 112,729,190 119,699,102 10,542,926 1,210, 922 $ 131,452,950 Business -type Activities $ 13,881,472 2,326,909 142,727 1,384,783 25,581 75,482 295,133 1,800,456 105,360,760 107,161,216 125,293,303 1,516,011 103,150,022 295,133 16,014,864 $ 119,460,019 Total $ 51,583,157 11,134,877 1,669,318 35,480 1,136,128 5,520,133 923,336 23,877,253 273,595,761 297,473,014 369,475,443 6,432,699 909,507 483,859 16,936,666 3,833,414 94,283,602 5,833,284 118,562,474 222,849,124 10,838,059 17,225,786 $250,912,969 s- (00 0 • 0 O LC) O LO LO 1 LC) r Ln N N d' O 1 co co N CO CA CO O 0) O r LC) 0) CO 1- M O (O M M LL) csi 4- ( 0 d 00) (0 LC) O LC) LO " LO 6 N N (O CO CO N CO 0) CO c) O (O M M L(j E9 ER E9 E9 m > m E ( E o ) O co E E 0 C > N 7 O O Q O O O N 0) LO M M O) co co N CO 0 d' (O 0) 0) CO r N . ' N O r r T CO N ti 0 0 r CO LO T co 0) CO 00 CO r N E9 O d' CO LO 0 cn u-) N N ti r- (0 (D co r- a) 41 r N CO Id O cn N O N O) W O a) N (0 N 0) N O M (0 0) O LC) L() N N O O ti M O N (O L() co ti co ti N M 000 CO 0) csi to co r v ER ' N N LC) LC) N N O O LC) T r N CO CD N O M CV') I- O d ct ti 0) 0) O c I� I P N (0 r CO co N N r 35 O 0) 0) O 0) (o L ) CO N I� L0 CO 0 O 00 (O N M I� (0 Nt CO N O ti r T M N C) E. N N (O N N N CO M O ti E9 O O N O co co Ef} 00 NC LO (o N O CO N N CO O M O (0 ti N O N M M co (o ti Ln O Ln N O 0) O co (O 0 (0 T 0) CO N M' O) N N E9 Tr; 0) N O N co 0) r r T E LN L CO 0) r N 0 d M T Cc) M r t c (0 cn co 0) 0) 7 0 ) C co C E O •C 0) 4 C C co ` L O 6) -O o x 0) 0 , C _a C 0 ) N , , p cm ) cri a i a i O N 4- C0 L 0) (1 L > C O U (0 co O C 0 F-- N N F- Z Z MAJOR GOVERNMENTAL FUNDS General Fund The General Fund accounts for all revenues and expenditures necessary in maintaining governmental activities of the City. The major revenues include property taxes, licenses and permits, intergovernmental revenue, and charges for services. The expenditures include providing for general government services, community and economic development, public safety, public works, and parks and recreation to the Citizens of Lakeville. Debt Service Funds — These funds account for the accumulation of resources for the payment of long -term debt principal and interest, but excluding debt issued for and serviced by an enterprise fund. Debt Supported Primarily by Property Taxes Debt approved by voter referendum, certificates of indebtedness, capital improvement and street reconstruction bonds. Revenues are provided primarily from property taxes. Debt Supported Primarily by Special Assessments Debt issued to finance construction of public improvements. The special assessments levied against benefited property owners are pledged toward the repayment of the principal and interest on these bonds. 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). Building Fund This fund accounts for the accumulation and disbursement of funds for the construction or improvement of public buildings. Improvement Construction Fund This fund accounts for the construction of certain public improvements, such as streets, storm sewers, water main and sanitary sewer systems. Construction contracts involve multiple financing resources from the City and other government entities. Construction projects usually extend over several years before completion. This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA BALANCE SHEET - GOVERNMENTAL FUNDS DECEMBER 31, 2009 Assets Cash and investments Investments held by trustee Interest receivable Taxes receivable Accounts receivable Loan receivable Special assessments receivable Inventory Prepaid items Total assets Liabilities and Fund Balances Liabilities Salaries payable Accounts payable Contracts payable Deposits payable Deferred revenue Total liabilities Fund balances Reserved for Prepaid items Accrued compensated absences Debt service Encumbrances Unreserved, designated reported in General fund Special revenue funds Unreserved, undesignated reported in Capital projects funds Total fund balances Total liabilities and fund balances 36 Debt Supported Primarily by Property Special General Taxes Assessments $10,920,387 $ 5,520,364 $ 6,410,526 38,532 1,382,107 306,756 284,535 9,899 $12,942,216 $ 7,138,262 $ 234,978 $ 567,489 18,100 914,924 1,735,491 9,899 11,196,826 See accompanying notes to basic financial statements. 12,715 402,761 50,000 1,152,422 1,321,969 1,321,969 S 5,600 60,744 5,816,293 6,448,816 11,206,725 5,816,293 6,448,816 $12,942,216 $ 7,138,262 $ 8,618,629 2,141,759 8,618,629 24,527 2,145,286 2,169,813 Capital Projects Improvement Building Construction $ 813,322 $ 5,532,605 1,004 3,494 1,365,067 73,381 $ 2,179,393 $ - $ - $ 3,260 1,917,444 1,365,067 1,368,327 4,100 ■ ■ 5,609,480 $ 16,129,695 $ 52,617,675 1,917,444 806,966 3,692,036 811,066 3,692,036 Nonmajor Governmental Funds $ 13,145,906 923,336 46,724 64,616 965,516 255,000 728,597 6,101 379,178 92,593 42,519 1,788,469 2,308,860 Total Governmental Funds $ 42,343,110 923,336 108,069 1,910,228 2,760,720 255,000 4,022,778 284,535 9,899 $ 241,079 2,891,898 92,593 60,619 7,535,715 10,821,904 - 9,899 889,514 889,514 3,457,817 15,722,926 96,870 100,970 - 11,196,826 1,325,731 1,325,731 8,050,903 12,549,905 13,820,835 41,795,771 $ 2,179,393 $ 5,609,480 $ 16,129,695 $52,617,675 CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS DECEMBER 31, 2009 Fund balance - total governmental funds Amounts reported for governmental activities in the statement of net assets are different because: 1. Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds. Governmental capital assets Less accumulated depreciation 2. Long term liabilities are not payable with current financial resources and therefore are not reported in the governmental funds. Bonds Accrued interest Capital lease and loan Unamortized debt issuance costs Unamortized bond discount Unamortized bond premium 3. Accrued compensated absences and net OPEB obligations are not Payable with current financial resources and therefore are not reported in the governmental funds. 4. Deferred revenue in governmental funds is susceptible to full accrual on the government -wide statements. 5. 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 assets. Net assets of governmental activities See accompanying notes to basic financial statements. 38 $ 41,795,771 $281,093,124 (90,781,326) 190,311,798 (102,185,000) (1,627,539) (1,578,390) 1,048,540 12,106 (1,006,907) (105,337,190) (2,132,698) 6,371,208 444,061 $131,452,950 This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED DECEMBER 31, 2009 Revenues Property taxes Tax increment Licenses and permits Intergovernmental Charges for services Special assessments Fines Investment income 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 Excess (deficiency) of revenues over expenditures Other financing sources and (uses) Transfers from other funds Transfers to other funds Issuance of debt Refunding bonds issued Premium on bonds issued Disposal of capital assets Total other financing sources and (uses) Net changes in fund balances Fund balance, January 1 Fund balance, December 31 Debt Supported Primarily by Property Special General Taxes Assessments $ 15,544,153 $ 5,095,794 $ 761,850 1,062,368 967,096 2,005,794 297,413 161,318 53,233 23,447 33,996 154,655 20,226,793 5,438,512 1,124,139 4,408,542 8,816,853 3,547,132 2,846,001 19,618,528 28,002 386 3,663 32,051 See accompanying notes to basic financial statements. 39 289,485 338,842 2,385,000 1,890,000 2,349,400 414,660 6,710 60,631 4,741,110 2,365,291 19,650,579 4,741,110 2,365,291 576,214 697,402 (1,241,152) 338,000 1,314,114 492,645 (1,263,647) 156,000 (615,002) 4,250,000 91,868 338,000 5,655,982 (38,788) 1,035,402 4,414,830 11,245,513 4,780,891 2,033,986 $ 11,206,725 $ 5,816,293 $ 6,448,816 Capital Projects Improvement Building Construction 209,258 4,204 15,264 80,000 20,794 104,998 224,522 28,009 97,814 434,006 102,647 - 399,660 26,706 1,413,945 3,868,601 45,695 - 691,581 203,057 1,511,759 5,393,848 203,057 1,511,759 (98,059) (1,287,237) (2,119,036) (3,471,868) 200,000 (238,000) (12,469) 4,945,000 (38,000) 4,932,531 (136,059) 3,645,294 947,125 46,742 $ 811,066 $ 3,692,036 Nonmajor Governmental Funds $ 1,531,885 851,786 541,541 1,981,774 2,038,224 141,297 202,501 292,849 162,919 7,744,776 Total Governmental Funds $ 22,933,682 851,786 1,603,909 3,158,128 4,044,018 769,624 297,413 459,967 406,845 338,368 34,863,740 442,184 4,850,726 18,710 8,835,563 359,353 3,906,485 35,401 2,881,402 855,648 20,474,176 2,161,971 1,393,116 59,229 3,614,316 9,863,812 2,811,726 (2,872,611) 930,000 24,148 209,196 1,102,459 (1,016,577) 14,837,412 $ 13,820,835 587,831 502,693 5,309,252 740,939 7,140,715 6,436,971 4,157,176 126,570 10,720,717 38,335,608 5,156,485 (4,386,727) 4,945,000 5,180,000 116,016 365,196 11,375,970 7,904,102 33,891,669 $ 41,795,771 40 CITY OF LAKEVILLE, MINNESOTA RECONCILIATION OF THE STATEMENT OF REVENUES, EXP.. 'DITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2009 Net change in fund balances - total govemmental funds $ 7,904,102 Amounts reported for governmental activities in the statement of activities are different because: 1. 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 assets decrease by the amount of depreciation expense charged for the year. This is the amount by which depreciation expense exceeded capital outlay. Capital outlay $ 3,804,892 Depreciation expense (8,646,696) (4,841,804) 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 assets differs from the change in fund balance by the net book value of the capital assets disposed of. (781,957) 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. Deferred revenue - December 31, 2008 (6,593,079) Deferred revenue - December 31, 2009 6,371,208 (221,871) 4. Bond proceeds are reported as other financing sources in governmental funds and thus 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- term liabilities while debt repayment reduces Tong -term liabilities thus affecting the statement of activities. Bond proceeds (10,125,000) Bond, loan, and capital lease principal maturities 6,436,971 (3,688,029) 5. Interest expense, debt issuance expense and debt premium revenue 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 issuance costs and debt premium revenue which are recognized respectively as expenditures and revenue in the governmental fund statements. Accrued interest payable 80,325 Issuance costs and premiums on 2009 bonds issued (net) 59,096 Amortization of debt issuance and discount costs (84,346) Amortization of debt issuance premium 83,126 138,201 6. Accrued compensated absences and net OPEB obligations are not payable with current financial resources and therefore are not reported in the govemmental funds. Accrued compensated absences - December 31, 2008 1,932,520 Accrued compensated absences - December 31, 2009 (2,076,636) Net OPEB obligation increase - December 31, 2009 (28,709) (172,825) 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 assets of the internal service fund, which are reported in with governmental activities. 25,281 Change in net assets of governmental activities $ (1,638,902) See accompanying notes to basic financial statements. 41 PROPRIETARY FUNDS Enterprise Funds — These funds are used to account for off -sale liquor, water and sewer operations of the City, both of which are self - supporting from retail sales and user charges. The operations are managed much in the same way as private enterprises. Liquor Fund This fund accounts for revenues and expenses related to the operation of Lakeville's municipal off -sale liquor stores. Utility Fund This fund accounts for revenues and expenses related to water, sanitary sewer service, and street lighting provided to the community. Internal Service Fund — The Internal Service Fund is used to account for services provided by one City department to other City departments on a cost reimbursement basis. Municipal Reserves Fund This fund accounts for the City's risk management program relating to general liability, excess liability, property and casualty insurance premiums. Premiums are based upon a $50,000 deductible per occurrence with a $100,000 aggregate maximum. The Statutory Municipal Tort Liability has a maximum limit of $1,500,000. This fund also accounts for excess liability self- insurance coverage in excess of the statutory maximum of $1,500,000. 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 STATEMENT OF NET ASSETS - PROPRIETARY FUNDS DECEMBER 31, 2009 ASSETS Business -type Activities - Governmental Enterprise Funds Activities - Internal Service Liquor Utility Total Fund Current assets Cash and investments $5,057,484 $ 8,823,988 $ 13,881,472 $ 583,575 Interest receivable 20,458 33,522 53,980 1,000 Accounts receivable 2,535 2,270,394 2,272,929 5,173 Inventory 1,336,502 48,281 1,384,783 Prepaid expenses 22,081 3,500 25,581 Total current assets 6,439,060 11,179,685 17,618,745 589,748 Non - current assets Restricted cash and investments 295,133 295,133 Unamortized bond issuance cost 75,482 75,482 Capital assets Land 1,272,296 528,160 1,800,456 Buildings and improvements 3,866,744 21,951,434 25,818,178 Machinery and equipment 378,253 1,673,013 2,051,266 Infrastructure 119,563,573 119,563,573 Accumulated depreciation (910,905) (41,161,352) (42,072,257) Net capital assets 4,606,388 102,554,828 107,161,216 Total non - current assets 4,977,003 102,554,828 107,531,831 Total assets 11,416,063 113,734,513 125,150,576 589,748 LIABILITIES AND NET ASSETS Current liabilities Salaries payable 16,332 16,785 33,117 Accounts payable 915,524 463,016 1,378,540 Accrued interest payable 83,154 83,154 Deposits payable 17,600 3,600 21,200 Accrued compensated absences 78,177 110,682 188,859 Bonds payable 295,000 295,000 Total current liabilities 1,405,787 594,083 1,999,870 Non -current liabilities Accrued compensated absences 59,714 48,007 107,721 Unamortized bond premium 26,194 26,194 Net OPEB obligation 3,921 5,578 9,499 Bonds payable 3,690,000 - 3,690,000 Total non - current liabilities 3,779,829 53,585 3,833,414 Total liabilities 5,185,616 647,668 5,833,284 Net assets Invested in capital assets, net of related debt 595,194 102,554,828 103,150,022 Restricted for debt service 295,133 295,133 Unrestricted 5,340,120 10,532,017 15,872,137 586,788 Total net assets $6,230,447 $113,086,845 119,317,292 $ 586,788 Explanation of difference between proprietary funds statement of net assets and the govemment -wide statement of net assets: The City uses an intemal 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: 142,727 Net assets of business -type activities $ 119,460,019 See accompanying notes to basic financial statements. 42 2,960 2,960 2,960 CITY OF LAKEVILLE, MINNESOTA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2009 Liquor Sales and cost of sales Sales $14,604,481 Cost of sales 10,806,701 Gross profit 3,797,780 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 - State -aid PERA Investment income Interest, fiscal charges, bond premium Total non - operating revenue (expense) Income (loss) before contributions and transfers Contributed capital from developers and City Transfers from other funds Transfers to other funds Total Change in net assets Net assets, January 1 Net assets, December 31 3,797,780 Business -type Activities - Enterprise Funds Ut 1,235,561 1,379,992 47,197 372,579 831,945 1,698,616 2,645,442 117,211 2,995,222 2,231,914 9,091,851 1,565,866 (1,600,177) 3,762 3,264 85,650 140,342 (207,599) (118,187) 143,606 1,447,679 (1,456,571) 1,235,154 20,484 (628,754) (120,825) (628,754) 1,134,813 818,925 (321,758) 5,411,522 113,408,603 $ 6,230,447 Explanation of difference between proprietary funds statement of revenue, expenses, and changes in fund net assets and the statement of activities: $ 113,086,845 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 assets of business -type activities See accompanying notes to basic financial statements. 43 Total $ 14,604,481 10,806,701 3,797,780 $ 7,291,391 7,291,391 $ 375,381 200,283 200,283 67,638 7,491,674 7,491,674 443,019 7,491,674 11,289,454 443,019 2,615,553 419,776 2,530,561 2,645,442 3,112,433 11,323,765 (34,311) 7,026 225,992 (207,599) 25,419 (8,892) 1,235,154 20,484 (749,579) 506,059 497,167 8,601 $ 505,768 Governmental Activities - Internal Service Fu nd 372,662 372,662 70,357 4,188 4,188 74,545 (40,663) (40,663) 33,882 552,906 586,788 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED DECEMBER 31, 2009 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 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 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 Cash and cash equivalents, December 31 (including restricted cash account of $295,133) 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 noncash 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. 44 Business -type Activities - Govemmental Enterprise Funds Activities - Internal Service Liquor Utility Total Fund $14,606,291 $ 7,392,512 $ 21,998,803 $ (12,054,281) (1,268,662) 1,283,348 3,762 (628,754) (624,992) (10,582) (207,181) (280,000) (497,763) 1,810 (136,707) 119 (4,582,759) (16,637,040) (1,400,386) (2,669,048) 1,409,367 2,692,715 3,264 20,484 (120,825) (97,077) (227,142) (227,142) 7,026 20,484 (749,579) (722,069) (237,724) (207,181) (280,000) (724,905) 117,211 2,995,222 3,112,433 (99,162) (97,352) (27,472) (164,179) 119 $ 1,235,154 $ 1,235,154 453,892 (371,573) 82,319 (40,663) (40,663) 99,496 161,023 260,519 260,089 1,246,171 1,506,260 5,092,528 7,577,817 12,670,345 $5,352,617 $ 8,823,988 $ 14,176,605 $ 583,575 4,245 45,901 537,674 $ 1,565,866 $ (1,600,177) $ (34,311) $ 70,357 10,873 (39,324) (37,691) (77,015) (239,743) 161,850 (77,893) 1,089 7,893 (500) 7,393 4,554 14,293 18,847 1,669 3,004 4,673 (282,518) 3,009,544 2,727,026 11,962 $1,283,348 $ 1,409,367 $ 2,692,715 $ 82,319 This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA STATEMENT OF FIDUCIARY NET ASSETS - AGENCY FUND DECEMBER 31, 2009 Escrow Fund Assets Cash and investments $ 5,478,426 Liabilities Deposits payable See accompanying notes to basic financial statements. 45 $ 5,478,426 This page intentionally left blank. NOTES TO BASIC FINANCIAL STATEMENTS Note 1 — Summary of Significant Accounting Policies Note 2 — Cash and Investments Note 3 — Capital Assets Note 4 — Accrued Compensated Absences Note 5 — Deferred Revenue Note 6 — Leases Note 7 — Long -Term Debt Note 8 — Invested in Capital Assets, Net of Related Debt Note 9 — Net Assets (Restricted) Note 10 — Construction Commitments Note 11 — Fund Equity Balances, Unreserved, Designated Note 12 — Contributed Assets from City Government and Private Land Developers Note 13 — Excess of Expenditures over Appropriations Note 14 — Interfund Transfers Note 15.— Joint Powers Debt Commitment Note 16 — Risk Financing and Related Insurance Issues Note 17 — Other Post - Employment Benefits (OPEB) Plan Note 18 — Defined Benefit Pension Plans - Statewide Note 19 — Defined Contribution Plan — Statewide Note 20 — Lakeville Fire Relief Association Note 21 — Deferred Compensation Plan Note 22 — Litigation Note 23 — Conduit Debt Note 24 — Subsequent Events CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting 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 City 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 it's 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. During fiscal year 2002, the HRA issued $2,535,000 in Public Facility Lease Revenue Bonds, Series 2002 A, to finance the construction of the City's fourth fire station and acquire a new fire truck. Debt service will be payable solely from lease payments to be made by the City pursuant to the lease agreement between the HRA and 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. 46 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1— Summary of Significant Accounting Policies (continued) A. Financial Reporting Entity of the City (continued) The HRA has not issued separate financial statements for the period ending December 31, 2009. 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. 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 government -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 Assets, 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 assets and the change in net assets. 47 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) B. Government -wide and Fund Financial Statements (continued) 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. 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 property taxes fund — This fund accounts for those bond issues that fmanced debt approved by voter referendum, equipment certificates of indebtedness, and capital improvement bonds. Revenues are provided primarily from property taxes. • Debt service special assessments 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 fund — This fund accounts for complex construction contracts that involve multiple fmancing 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 f ind — This fund is used to account for the retail operations of three off - sale liquor stores. • Enterprise utility fiend — This fund is used to account for water, sanitary sewer service, and street lighting provided to City customers. 48 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) B. Govemment -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. 49 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) C. Measurement Focus and Basis of Accounting (continued) Governmental Funds: (continued) • Deferred revenues: Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received before the City has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the City has a legal claim to the resources, the liability for deferred revenue is removed and revenue is recognized. • 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 Assets. Proprietary fund types Statement of Revenues, Expenses and Changes in Net Assets present increases (i.e., revenues) and decreases (i.e., expenses) in net total assets. • 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. Private sector standards of accounting and financial reporting issued prior to December 1, 1989 generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of GASB. Cities also have the option of following subsequent private sector guidance for their business -type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private sector guidance. • 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 fund are charges to customers for sales and services. Operating expenses for enterprise funds and internal service fund 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. 50 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, and Net Assets 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. 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 four times a year, in January, April, July and December. Unpaid taxes on December 31 are classified in the fund financial statements as delinquent taxes receivable. This receivable is fully offset by deferred revenue, as it is not available to finance current expenditures. 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. Loan receivable The capital projects storm sewer fund has a loan receivable of $255,000; the loan repayment is fully supported by annual tax increment revenue generated by the DHY Tax Increment Financing District 17. The loan receivable is fully offset by deferred revenue, as it is not available to finance current expenditures. 51 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1— Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, and Net Assets or Equity (continued) 5. Special assessments receivable Special assessments are levied against the benefited properties for the assessable costs of special assessment improvement projects m 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 adminiQtered by Dakota County in the same manner as property taxes. Property owners are allowed to prepay total future installments without interest or prepayment penalties. Special assessments receivable includes the following components: 6. Inventory 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. 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. 7 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. 8. Unamortized bond issuance costs, bond discounts, and bond premiums In the governmental fund financial statements, bond issuance costs and bond discounts are recognized as expenditures in the current fiscal year. Conversely, bond premiums are recognized as revenues in the current fiscal year. Bond issuance costs, 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 are included within the non - current liabilities due in more than one year of the City's government -wide statement of net assets. 52 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1— Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, and Net Assets or Equity (continued) 8. Unamortized bond issuance costs, bond discounts, and bond premiums (continued) The enterprise liquor fund includes a non - current asset for unamortized bond issuance cost associated with the issuance of the liquor revenue bonds of 1997 and 2007. The enterprise liquor fund also includes a non - current liability for unamortized bond premium associated with the issuance of the liquor revenue bonds of 2007 The bond issuance costs and bond premium are amortized over the term of the bonds using the shaight -line method. 9. Restricted assets (temporarily) The government -wide Statement of Net Assets "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. 10. Capital assets Capital assets, which include land, historical treasures, construction in process, buildings, 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 Assets. 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 Assets and proprietary funds Statement of Net Assets, 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. 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 50 -75 years Machinery and equipment 3 -15 years Other improvements 10 -50 years Infrastructure 20 -50 years 53 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, and Net Assets or Equity (continued) 11. Compensated absences . Accumulated vacation and vested severance leave that have matured due to employee retirement or separation is reported as an expenditure in the governmental fund that will pay it. Accumulated vacation and vested severance leave are reported as an expense and liability in the government -wide statements as the benefits accrue to the employees. Accumulated vacation and vested severance leave of the enterprise funds are recorded as an expense and liability in those funds as the benefits accrue to the employees. In accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences, salary related payments such as the employer's share of Social Security, Medicare, and PERA are required to be reported in with the applicable amounts of accumulated vacation and vested severance leave benefits. These applicable amounts have been added to the accrued compensated absences. 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 eamed. 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 Assets 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. Fund equity In the fund financial statements, governmental funds report reservations of fund balance that represent those portions of fund equity not appropriable for expenditure or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources. 54 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) D. Assets, Liabilities, and Net Assets or Equity (continued) 15. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the general fund and special revenue funds. Encumbrances recorded in the governmental funds financial statements represent the uncompleted portion of contracts. The outstanding encumbrances as of December 31 are reported as reservations of fund balances since they do not constitute expenditures or liabilities. 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 revenue 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 fmance expenditures of the current fiscal year. All delinquent assessments receivable are fully offset by deferred revenue 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. 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. 55 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 1 — Summary of Significant Accounting Policies (continued) E. Revenue, Expenditures and Expenses (continued) 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 The City has applied the provisions of GASB Statement No. 9, Reporting Cash Flows of Proprietary and Non - expendable Trust Funds and Governmental Entities that use Proprietary Fund Accounting. This Statement establishes standards for cash flow reporting. It requires a Statement of Cash Flows as part of a full set of fmancial statements for all proprietary entities that use proprietary fund accounting. 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. 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 fmancial 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. The City's cash and investments as of December 31, 2009 consist of the following: Cash on hand $ 12,615 Deposits 536,903 Investments 62,955,534 Total cash and investments $ 63,505,052 56 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 2 — Cash and Investments (continued) A. Components of Cash and Investments (continued) The City's cash and investments as of December 31, 2009 are presented in the financial statements as follows: B. Deposits Statement of Net Assets Cash and investments $ 51,583,157 Temporarily restricted cash and investments 5,520,133 Temporarily restricted investments held by trustee 923,336 Statement of Fiduciary Net Assets Cash and investments 5,478,426 Total cash and investments $ 63,505,052 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 — In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may be lost. Minnesota Statutes require that all deposits be protected by federal deposit insurance, corporate surety bond, or collateral. The market value of collateral pledged must equal 110 percent of the deposits not covered by federal deposit insurance or corporate surety bonds. Authorized collateral includes treasury bills, notes, and bonds; issues of U.S. government agencies; general obligations rated "A" or better; revenue obligations rated "AA" or better; irrevocable standard letters of credit issued by the Federal Home Loan Bank; and certificates of deposit. Minnesota Statutes require that securities pledged as collateral be held in safekeeping in a restricted account at the Federal Reserve Bank or in an account at a trust department of a commercial bank or other financial institution that is not owned or controlled by the financial institution furnishing the collateral. The City 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. At year -end, the carrying amount of the City's deposits was $536,903 while the balance on the bank records was $754,831. 57 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 2 — Cash and Investments (continued) C. Investments The City's investments as of December 31, 2009 are as follows: Investment Type Money market funds Minnesota Municipal Wells Fargo First American Treasury Obligation Certificates of deposit U.S. government agencies U.S. government agencies U.S. government agencies Total investments N/R - Not rated N/A - Not applicable Credit Risk Rating Aeencv Fair Value Interest Risk - Maturity Duration in Years Less More Than 1 11 = 5 6 -10 Than 10 N/R N/A $16,982,221 $ - $ $ $ N/R N/A 216,664 Aaa Moody's 701,892 N/R N/A 23,524,000 14,698,000 8,826,000 Aaa Moody's 17,325,573 4,229,775 12,473,102 401,252 221,444 P1 Moody's 1,302,500 1,302,500 N/R N/A 2,902,684 2,902,684 $62,955,534 $ 23, 132 ,959 $21,299,102 $401,252 $221,444 The City's Minnesota Municipal money market fund is an external investment pool regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities. The fund is an unrated 2a7 -like pool and the fair value of the position in the pool is the same as the value of pool shares. 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. 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. 58 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 2 — Cash and Investments (continued) C. Investments (continued) 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, 2009, the City's investment portfolio includes the following securities of single issuers exceeding 5 percent: 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 Federal National Mortgage Association Federal Horne Loan Mortgage Corporation Federal Home Loan Bank 5.6% 9.6% 15.8% 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 59 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3 — Capital Assets A summary of changes in governmental capital assets during the year ended December 31, 2009 are as r l� 1U11U Ws: Governmental Activities Depreciable Buildings Machinery and equipment Other improvements Infrastructure Streets Storm sewer Parks Total depreciable at cost Less accumulated depreciation Buildings Machinery and equipment Other improvements Infrastructure Streets Storm sewer Parks Total accumulated depreciation Total depreciable, net Non - depreciable Land Historical treasures Construction in process Total non - depreciable Depreciable, net Total capital assets, net Balance January 1 $ 39,858,510 $ 13,131,294 $ 15,673,657 1,370,400 (787,229) 2,846,600 960,467 117,028,196 48,941,530 17,478,354 241,826,847 (6,328,989) (8,118,726) (1,315,462) (49,711,277) (9,951,260) (7,831,570) (83,257,284) $158,569,563 $ 20,788,707 100,000 16,477,289 37,365,996 158,569,563 $195,935,559 Depreciation expense was charged to governmental functions as follows: General government Public safety Public works Parks and recreation Total depreciation expense 60 Additions 2,066,411 944,185 621,334 19,094,091 (990,687) (1,362,486) (168,344) (4,255,583) (992,464) (877,132) (8,646,696) $ 10,447,395 $ 701,762 446,328 1,148,090 10,447,395 $ 11,595,485 $ 303,240 762,832 5,858,020 1,722,604 $ 8,646,696 Balance Deletions December 31 $ 52,989,804 16,256,828 3,807,067 (1,117,382) 117,977,225 49,885,715 - 18,099,688 (1,904,611) 259,016,327 (7,319,676) 613,143 (8,868,069) (1,483,806) 509,511 (53,457,349) (10,943,724) (8,708,702) 1,122,654 (90,781,326) $ (781,957) $168,235,001 $ - $ 21,490,469 100,000 (16,437,289) 486,328 (16,437,289) 22,076,797 (781,957) 168,235,001 $ (17,219,246) $190,311,798 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 3 — Capital Assets (continued) A summary of changes in business -type capital assets during the year ended December 31, 2009 are as follows: Business -type Activities Depreciable Buildings Machinery and equipment Infrastructure Water Sanitary sewer Total depreciable at cost Less accumulated depreciation Buildings Machinery and equipment Infrastructure Water Sanitary sewer Total accumulated depreciation Total depreciable, net Non - depreciable land Depreciable, net Total capital assets, net Balance Balance January 1 Additions Deletions December 31 $ 25,818,178 $ - $ - $ 25,818,178 1,736,596 378,047 (63,377) 2,051,266 66,726,749 51,741,993 146,023,516 843,775 251,056 1,472,878 (4,467,310) (541,303) (5,008,613) (1,409,240) (137,102) 63,377 (1,482,965) (18,152,684) (1,404,610) (19,557,294) (14,993,967) (1,029,418) - (16,023,385) (39,023,201) (3,112,433) 63,377 (42,072,257) $ 107,000,315 $ (1,639,555) $ $ 105,360,760 $ 1,800,456 $ - $ $ 1,800,456 107,000,315 (1,639,555) - 105,360,760 $ 108,800,771 $ (1,639,555) $ - $ 107,161,216 Depreciation expense was charged to enterprise funds as follows: Liquor fiord $ 117,211 Utility fund 2,995,222 Total depreciation expense $ 3,112,433 Note 4 — Accrued Compensated Absences The vested or accumulated liability for accrued vacation and severance pay for governmental funds (including applicable salary- related payments) as of December 31, 2009 was $2,076,636. This amount is included in the non - current liabilities of the government -wide Statement of Net Assets. The general fund and the responsible special revenue fund will pay the accumulated vacation portion, while the special revenue benefit accrual fund will pay the vested severance portion. The City has accumulated $889,514 in the special revenue benefit accrual fund for payment of the severance portion. 61 67,570,524 51,993,049 (63,377) 147,433,017 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 4 — Accrued Compensated Absences (continued) The proprietary enterprise funds have $296,580 in vested or accumulated vacation and severance pay liability as of December 31, 2009 (including applicable salary- related payments); these amounts are recorded as an expense when earned in the responsible funds. Note 5 — Deferred Revenue Government funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. The various components of deferred revenue — unavailable and unearned - in the governmental funds as of December 31, 2009 are as follows: Unavailable Unearned Eliminated Total Taxes receivable $ 607,952 $ $ $ 607,952 Special assessments receivable 3,996,224 3,996,224 Other receivables 1,767,032 418,393 2,185,425 Charges for services 443,966 443,966 Miscellaneous 47,148 47,148 Tax increment loan receivable 255,000 255,000 Total deferred revenue $ 6,371,208 $ 909,507 $ 255,000 $ 7,535,715 Note 6 — Leases Equipment Capital Lease (ice arena dehumidification equipment): During fiscal year 2005, the City entered into a capital lease purchase agreement (as lessee) to finance the acquisition of dehumidification equipment at the Lakeville Ames Arena. The carrying value of the dehumidification system within in machinery and equipment of governmental capital assets is $130,500. Title to the equipment will transfer to the City at the time the lease expires on February 1, 2021. The following is a schedule of the future minimum lease payments as of December 31, 2009: Future Lease Dehumidification Lease Payment Dates Payments February 1, 2010 and August 1, 2010 $ 13,073 February 1, 2011 and August 1, 2011 13,073 February 1, 2012 and August 1, 2012 13,073 February 1, 2013 and August 1, 2013 13,073 February 1, 2014 and August 1, 2014 13,073 February 1, 2015 through August 1, 2019 65,365 February 1, 2020 through February 1, 2021 19,609 Total minimum lease payments 150,339 Less: amount representing interest (38,249) Present value of lease payments 62 Deferred Revenue $ 112,090 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 6 — Leases (continued) Operating 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 2009 lease revenue totaled $183,626. The agreement will remain in effect until August 1, 2019. Operating Lease - Purchase (Hasse Arena): The City entered into an operating lease - purchase agreement (as lessee) with the Housing and Redevelopment Authority (HRA as lessor) of Lakeville, Minnesota, on December 1, 2006. 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 issued). 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. Operating 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. Operating Lease (Fire Station #4): The City entered into an operating lease agreement (as lessee) with the Housing and Redevelopment Authority (HRA as lessor) of Lakeville, Minnesota on April 15, 2002. The lease, consisting of land, building and equipment of the newly constructed fire station #4 (located at 9465 185 Street), requires the City to provide lease payments sufficient to pay when due, the principal and interest on the HRA Public Facility Lease Revenue Bonds, Series 2002 A, of which the City paid $189,660 in 2009. The term of the lease coincides with the bond maturity date of February 1, 2023. Operating 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 $14,150 plus a proportionate share of real estate taxes, property insurance, special assessments, common area maintenance, and management fees. The fiscal year 2009 lease expense totaled $167,100. 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. 63 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 7 — Lona -Term Debt General Obligation Bonds The City's general obligation bonds are supported primarily from revenues derived from property taxes, special assessment levies, tax increment levies, state -aid street revenue, water revenue connection 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. 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. 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 Public Facility Lease Revenue Bonds, Series 2002 A, will be supported solely from lease payments to be made by the City pursuant to the lease agreement between the HRA of Lakeville and the City. 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. Liquor Revenue Bonds, Series 1997 and 2007, are payable solely from enterprise liquor fund revenues. 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 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. 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 Street Reconstruction Bonds, Series 2009 A (Taxable) On December 30, 2009, the City issued $4,945,000 in General Obligation Street Reconstruction Bonds, Series 2009 A (Taxable). The City issued these bonds (referred to as "Build America Bonds" Direct Payment) under the authorization of Section 1531, Title 1 of Division B of the American Recovery and Reinvestment Act of 2009 (ARRA). The Build America Bonds (Direct Payment) designation provides for a Federal subsidy credit to be paid to the City by the U.S. Treasury Department in an amount equal to 35 percent of the interest payable to investors in these taxable bonds. The credit will be received semi- annually to coincide with the debt service payment schedule. The bonds were issued to provide financing for the remaining City share of costs of the Interstate Highway 35 /County Road 70 Interchange Reconstruction Project. The bonds mature February 1, 2030, (without a provisional call) and bear interest rates ranging from 1.0% - 5.95 %. Debt service will be payable solely from property taxes. 64 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 7 — Long -Term Debt (continued) General Obligation Improvement Refunding Bonds, Series 2009 B On December 30, 2009, the City issued $4,250,000 in General Obligation Improvement Refunding Bonds, Series 2009 B, in a crossover refunding transaction. The new bonds were issued to call the principal amounts of the Improvement Bonds, Series 2000 A and Series 2001 A (totaling $4,285,000) maturing in years 2011 — 2020, on February 1, 2010. The new bonds will mature on February 1, 2020, (without a provisional call) and bear interest rates ranging from 2.0% - 3.0 %. As with the 2000 A and 2001 A refunded bonds, debt service for the 2009 B bonds will be payable primarily from property taxes and special assessments levied to benefiting properties. The refunding transaction yielded a net savings to the City of $560,421 with a present value economic gain of $507,423. General Obligation Tax Increment Refunding Bonds, Series 2009 B On December 30, 2009, the City issued $930,000 in General Obligation Tax Increment Refunding Bonds, Series 2009 B, in a crossover refunding transaction. The new bonds were issued to call the principal amounts of the Tax Increment Bonds, Series 1999 B ($940,000) maturing in years 2011 — 2014, on February 1, 2010. The new bonds will mature on February 1, 2014, (without a provisional call) and bear a flat interest rate of 2.0 %. As with the 1999 B refunded bonds, debt service for the 2009 B bonds will be payable primarily from tax increment and property taxes. The refunding transaction yielded a net savings to the City of $87,238 with a present value economic gain of $85,067. The total long -term bonded debt outstanding as of December 31, 2009 (including amounts to be called 2/1/2010 of $5,225,000) is summarized as follows: Governmental Bonds General obligation bonds Equipment certificates Park Capital improvement Street construction Special assessment Tax increment State -aid revenue Water revenue Ice arena revenue Total general obligation bonds Gross revenue recreation facility HRA public facility lease revenue HRA ice arena lease revenue Total govemmental Business -type Bonds Liquor revenue Total long -term bonded debt outstanding Maturities Interest Rates Amount 2011 -2012 2015 2030, 2032 2026 -2030 2013 -2020 2014 -2022 2018 -2021 2016 2015 2019 2023 2032 2010 -2027 65 2.20 % -4.25% 3.25 % -3.75% 4.625 % -5.00% 1.00%-5.95% 2.00 % -4.75% 2.00 % -5.10% 4.00 % -4.95% 4.00% 2.20 % -3.25% 5.00 % -5.40% 4.50 % -5.35% 4.25 % - 4.625% $ 3,010,000 2,260,000 28,810,000 24,025,000 12,785,000 4,905,000 7,075,000 6,735,000 775,000 90,380,000 770,000 1,985,000 9,050,000 102,185,000 5.00 % -5.20% 3,985,000 $106,170,000 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 7 - Lon2-Term Debt (continued) 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 $42,076,557 are as follows: Year Ending December 31., 2010 2011 2012 2013 2014 2015 -2019 2020 -2024 2025 -2029 2030 -2032 Total Governmental Activities Capital lease General obligation bonds Gross revenue recreation facility bonds HRA lease revenue bonds Metropolitan Council loan Total long -term debt Accrued compensated absences Unamortized bond premium Net OPEB obligation Total governmental activities Business -type Activities Accrued compensated absences Unamortized bond premium Net OPEB obligation Liquor revenue bonds Total business -type activities Total governmental and business -type activities Principal $ 15,285,000 7,150,000 5,690,000 5,305,000 5,145,000 22,075,000 18,075,000 16,925,000 6,535,000 $ 102,185,000 Governmental Balance January 1 Interest $ 3,885,641 3,558,342 3,329,682 3,129,933 2,935,909 11,823,576 7,613,231 3,444,624 383,584 $ 40,104,522 $ 119,061 $ 86,390,000 835,000 11,265,000 1,466,300 100,075,361 1,932,520 974,017 27,353 66 Business -type Principal Interest $ 295,000 145,000 150,000 160,000 165,000 955,000 1,225,000 890,000 $ 3,985,000 10,125,000 10,125,000 1,288,915 116,016 36,006 103,009,251 11,565,937 $ 192,035 180,875 173,500 165,750 157,625 652,625 381,625 68,000 $ 1,972,035 $ (6,971) $ (6,135,000) (65,000) (230,000) Total $ 19,657,676 11,034,217 9,343,182 8,760,683 8,403,534 35,506,201 27,294,856 21,327,624 6,918,584 $148,246,557 During the year ended December 31, 2009 the following changes occurred in non - current liabilities: Balance Due Within Additions Deletions December 31 One Year 112,090 $ 7,338 90,380,000 15,030,000 770,000 11,035,000 255,000 1,466,300 103,763,390 15,292,338 2,076,636 1,160,469 1,006,907 56,062 (6,436,971) (1,144,799) (83,126) (7,297) (7,672,193) 106,902,995 16,452,807 277,733 205,647 (186,800) 296,580 188,859 27,727 (1,533) 26,194 4,826 5,860 (1,187) 9,499 4,265,000 - (280,000) 3,985,000 295,000 4,575,286 211,507 (469,520) 4,317,273 483,859 $ 107,584,537 $ 11,777,444 $ (8,141,713) $ 111,220,268 $ 16,936,666 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 8 — Invested in Capital Assets, Net of Related Debt Invested in capital assets, net of related debt as of December 31, 2009 is calculated as follows: Capital assets, net of depreciation Less applicable: Lease payable Bonds payable Loan payable Unamortized bond discount Unamortized bond premium Invested in capital assets, net Note 9 — Net Assets (Restricted) Restricted Net Assets Cash and investments Temporarily restricted Cash and investments Investments held by trustee Receivables Less: Related liabilities Debt related to temporarily restricted cash and investments Governmental Business -type $ 190,311,798 $ 107,161,216 $ 297,473,014 (112,090) (68,095,000) (3,985,000) (1,466,300) 347 (939,653) (26,194) $ 119,699,102 $ 103,150,022 $ 222,849,124 The City has $34,090,000 in bonds and ($55,495) in bond discount/premium (net) costs that are unrelated in the calculation above. The government -wide Statement of Net Assets reports restricted amounts in the net assets section. These amounts represent assets (less any related liabilities) that have imposed restrictions placed on them by parties outside the City government. Net assets restricted for debt service represent assets pledged by bond covenant to the repayment of City bond obligations. The government -wide restricted net assets are as follows: Governmental Business -type Activities Activities $ 9,211,895 $ 5,225,000 923,336 4,358,399 (3,995,704) (5,180,000) Restricted for debt service $ 10,542,926 $ 295,133 $ 10,838,059 67 Total (112,090) (72,080,000) (1,466,300) 347 (965,847) Total $ 9,211,895 295,133 5,520,133 923,336 4,358,399 (3,995,704) (5,180,000) CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 10 — Construction Commitments The City has several outstanding construction projects as of December 31, 2009. These projects include an upgrade to the HVAC system at the Lakeville Arts Center, a channel stabilization project in the vicinity of 205 Street, the Highview Avenue reconstruction from Heritage Drive to Dodd Boulevard, park projects that include the new Fieldstone Park and North Park field irrigation, the ongoing replacement of utility customers outdated water meters, and other water and sanitary sewer projects. The City's commitments with contractors and other governmental entities are shown as follows: Remaining Projects Spent -to -Date Commitment Governmental Activities Arts Center HVAC upgrade 205th Street channel stabilization Highview Avenue reconstruction Parks (various) City of Lakeville /City of Apple Valley sanitary sewer interceptor Total governmental Business -type Activities North Park elevated water tank maintenance Water meter replacement program Total business -type Note 11 — Fund Equity Balances, Unreserved, Designated $ 16,400 $ 129,193 867,457 383,140 4,100 12,879 14,025 14,352 53,591 55,614 1,449,781 100,970 70,500 217,517 288,017 23,500 312,337 335,837 Total governmental and business -type $ 1,737,798 $ 436,807 In the combined governmental funds Balance Sheet, the unreserved, designated fund balances of the general fund and special revenue funds represent the financial resources to be utilized in the ensuing year's adopted budget. Note 12 — Contributed Assets from City Government and Private Land Developers The ownership of local streets, storm sewer and park infrastructure assets that are constructed and completed during the year by private land developers becomes contributed property of the City; this excludes roads and highways that are located within Dakota County and State of Minnesota right -of -way boundaries. 68 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 12 — Contributed Assets from City Government and Private Land Developers (continued) The City assumed ownership of the following capital assets through private land developers during the current fiscal ycar as follows: Special Revenue Fund Private Land Governmental Capital Assets Developers Infrastructure Streets $ 1,008,134 Storm sewer 214,210 Parks 120,302 Total $ 1,342,646 The ownership of machinery and equipment, water and sanitary sewer infrastructure assets that are constructed and completed during the year by private land developers and through the City Government (through various funding sources at cost) becomes contributed property of the City's enterprise utility fund; this also includes water and sanitary sewer infrastructure assets constructed within Dakota County and State of Minnesota right -of -way boundaries since they are serviced and maintained by th Cit The City's enterprise utility fund assumed ownership of the following capital assets contributed through the City and private land developers during the current fiscal year as follows: City Private Land Utility Fund Capital Assets Government Developers Total Machinery and equipment $ 191,492 $ $ 191,492 Infrastructure Water 717,583 75,024 792,607 Sanitary sewer 167,827 83,228 251,055 Total $ 1,076,902 $ 158,252 $ 1,235,154 Note 13 — Excess of Expenditures over Appropriations For the year ended December 31, 2009, total expenditures (the legal level of budgetary control) in the special revenue benefit accrual fund exceeded appropriations. The expenditures exceeding budget of ($1,851) were funded by available fund balance carryforward from December 31, 2008. Benefit accrual fund $ 86,710 $ 88,561 $ (1,851) 69 Total Expenditures Variance Final With Final Budget Actual Budget CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 14 — Interfund Transfers The City provides financing for a variety of operations and capital projects utilizing resources from certain finds, intcrfund transfers used for these various activities during the current fiscal year are as follows: Transfers To: Debt Supported by Other General Prop. Special Bldg. Govntl. Utility Transfers From Fund Taxes Assmts. Fund Funds Fund Total General fund $ $ - $ $ $ 1,263,647 $ - $ 1,263,647 Building fund 238,000 238,000 imp. const. fund 12,469 12,469 Othergovntl. funds 192,063 1,301,645 1,358,419 20,484 2,872,611 Total 192,063 238,000 1,314,114 2,622,066 20,484 4,386,727 Liquor fund 139,094 100,000 200,000 189,660 628,754 Utility fund 120,825 120,825 Internal service fund 40,663 40,663 Total 1 492,645 $ 338,000 $ 1,314,114 $ 200,000 $ 2,811,726 $ 20,484 5,176,969 (1) (2) (3) (4) (5)(6) Less: Utility fund (7) (20,484) Total governmental funds $ 5,156,485 The following are explanations to interfund transfers sub -notes 1 through 7. 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 Description Comm. (SR) $ 47,267 Public communications and city hall overhead costs. Surface wtr. mgmt. (SR) 108,566 Street sweeping, vactor use, and city hall overhead costs. Storm sewer (CP) 36,230 G.I.S. storm sewer infrastructure data maintenance costs. Liquor (E) 139,094 Patrol, chemical awareness, and city hall overhead costs. Utility (E) 120,825 City hall overhead costs. Municipal reserves (IS) 40,663 City hall overhead costs. Total $ 492,645 (2) The total transfer to debt service property tax fund ($338,000) was provided by the building fund ($238,000) representing unused construction funds upon completion of the new police station, and ($100,000) from the liquor fund to be applied towards the debt service of the new police station. 70 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 14 — Interfund Transfers (continued) (3) The total transfer to debt service special assessment fund ($1,314,114) was provided primarily by various capital projects funds related to City improvement projects whereby user connection service charges are pledged towards the special assessment improvement bonds debt service requirements. (4) The transfer to capital projects building fund ($200,000) was provided by the enterprise liquor fund for major building maintenance projects at City Hall, Fire Stations #2 and #3, and the Arts Center. (5) (7) The total transfer to other governmental funds ($2,622,066) was provided from the following governmental funds: From: Amount To: General fund $ 1,263,647 Equipment (CP) for various capital equipment. Comm. (SR) Surface wtr. mgmt. (SR) Tax increment (DS) Water (CP) Total other govntl. Total 9,483 1,356 57,700 1,289,880 1,358,419 $ 2,622,066 Benefit accrual (SR) for 2009 liabilitiy portion. Benefit accrual (SR) for 2009 liabilitiy portion. Storm sewer (CP) for DHY TIF district loan. Water revenue (DS) for debt service requirments. (6) The transfer to other governmental funds ($189,660) by the enterprise liquor fund represents funding provided for debt service requirements within the HRA lease revenue fund. The transfer to enterprise utility fund ($20,484) was provided from the special revenue surface water management fund for customer service billing overhead costs. Included within the transfers from governmental activities to business -type activities of ($347,807) on the Statement of Activities is the City government contribution of utility capital assets of $1,076,902. Note 15 — 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 abovementioned 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. 71 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 15 — Joint Powers Debt Commitment (continued) 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. Payments from the City of Lakeville are provided from general fund appropriations. The City of Lakeville's future member payments to DCC as of December 31, 2009 are as follows: Payment Year Amount 2010 $ 137,950 2011 142,200 2012 142,200 2013 147,000 Total $ 569,350 Pursuant to Section 9.5 of the joint powers agreement, member payments are submitted monthly and held in escrow by U.S. Bank National Association (trustee) until the funds are remitted to the bond holders according to the established bond principal and interest due dates. The interest earnings from the escrow account will reduce future member obligations on the debt. Information regarding the Dakota Communications Center can be obtained at the website www.mn- dcc.org/stats.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 @ci.lakeville.mn.us. Note 16 — 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 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 subd. 466.04) provide limits of liability for the City. 72 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 16 — Risk Financing and Related Insurance Issues (continued) 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 2009 and 2008 were $303,644 and $251,431, 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. Note 17 — 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 - Employment Insurance Benefits - All retirees of the City have the option under state law to continue their medical insurance coverage through the City from the time of retirement until the employee reaches the age of eligibility for Medicare. For members of all employee groups, the retiree must pay the full premium to continue coverage for medical and dental insurance. The City is legally required to include any retirees for whom it provides health insurance coverage in the same insurance pool as its active employees, whether the premiums are paid by the City or the retiree. Consequently, participating retirees are considered to receive a secondary benefit known as an "implicit rate subsidy." This benefit relates to the assumption that the retiree is receiving a more favorable premium rate than they would otherwise be able to obtain if purchasing insurance on their own, due to being included in the same pool with the City's younger and statistically healthier active employees. B. Funding Policy The required contribution is based on projected pay -as- you -go financing requirements, with additional amounts to pre -fund benefits as determined annually by the City. 73 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 17 — Other Post - Employment Benefits (OPEB) Plan (continued) C. Annual OPEB Cost and Net OPEB Obligation The City's annual OPEB cost (expense) is calculated based on annual required contributions (ARC) of the City, an amount determined on an actuarially determined basis in accordance with the parameters of GASB Statement 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. 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 Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year 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, 2008 $ 42,474 $ 10,295 December 31, 2009 $ 41,866 $ 8,484 D. Funded Status and Funding Progress $ 42,474 1,287 (1,895) 41,866 (8,484) 33,382 32,179 $ 65,561 Percentage of Annual OPEB Net OPEB Cost Contributed Obligation 24.2% $ 32,179 20.3% $ 65,561 As of January 1, 2008, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $290,424, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $290,424. The covered payroll (annual payroll of active employees covered by the plan) was $11,365,890, and the ratio of the UAAL to the covered payroll was 2.6 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 fmancial 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. 74 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 17 — 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, 2008 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial assumptions included: a 4.0 percent investment rate of return (net of administrative expenses) based on the City's own investments; a 2008 annual healthcare cost trend rate of 0.0 percent initially, increased to 8.0 percent, and reduced by decrements of 1.0 percent to an ultimate rate of 5.0 percent after five years for medical insurance. The UAAL is being amortized on a level dollar basis over a closed period. The remaining amortization period at January 1, 2009 was 29 years. Note 18 — Defined Benefit Pension Plans - Statewide A. Plan Description 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 Public Employees Retirement Fund (PERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost - sharing, multiple- employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. 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 three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for 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. 75 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 18 — Defined Benefit Pension Plans — Statewide (continued) A. Plan Description (continued) For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all PERF 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. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained on the interne at www.mnpera.org, 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. PERF Coordinated Plan members were required to contribute 6.0% of their annual covered salary in 2009. PEPFF members were required to contribute 9.4% of their annual covered salary in 2009. The City of Lakeville is required to contribute the following percentages of annual covered payroll: 6.75% for Coordinated Plan PERF members, and 14.1% for PEPFF members. The employer contribution rates for the Coordinated Plan will increase to 7.0 %, effective January 1, 2010. The City's contributions to the PERF Coordinated Plan for the years ending December 31, 2009, 2008, and 2007 were $578,225, $575,007, and $525,627, respectively. The City's contributions to the PEPFF for the years ending December 31, 2009, 2008, and 2007 were $602,343, $524,673, and $438,592, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. 76 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 19 — Defined Contribution Plan — Statewide A. Plan Description Four 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 Policy 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. 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, 2009 were as follows: Percentage of Contribution Amount Covered Payroll Required Employee Employer Employee Employer Rates Note 20 — Lakeville Fire Relief Association A. Plan Description $ 1,020 $ 1,020 5.0% 5.0% 5.0% 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 Public Employee Retirement System (PERS) established in 1972 to provide benefits for members of the Lakeville Fire Department. The Association 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. 77 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 20 — Lakeville Fire Relief Association (continued) A. Plan Description (continued) 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. B. Current Plan Membership At December 31, 2009, membership data related to the Association was as follows: Members C. Benefit Provisions Retired members entitled to benefits, but not yet receiving them 20 Active Plan Participants Vested 3 Partially vested 47 Non - vested 28 Total plan membership 98 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 $6,230 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. Any member who retires after 20 years of service and is under the age of 50 is placed on the deferred pension roll. All moneys deferred shall earn interest at 5% compounded annually. 78 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 20— Lakeville Fire Relief Association (continued) C. Benefit Provisions (continued) The Relief Association Membership amended their bylaws by increasing the lump sum benefit amount as follows: Yearly Service Effective Date Pension Amount January 1, 2009 $ 6,230 January 1, 2008 $ 6,000 January 1, 2007 $ 5,820 January 1, 2006 $ 5,725 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: For Duty 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. 79 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 20 — Lakeville Fire Relief Association (continued) C. Benefit Provisions (continued) 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% 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. 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 attributed 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: Total Net State of City of Pension % of APC Pension Year Minnesota Lakeville Contribution APC Contributed Obligation 2009 $ 191,073 $ - $ 191,073 $ 191,073 100% $ - 2008 224,674 92,071 316,745 316,745 100% 2007 267,923 85,933 353,856 353,856 100% - 80 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 20 — Lakeville Fire Relief Association (continued) E. Funding Progress F. Additional Information: Note 22 — Litigation Actuarial Valuation Date December 31 2009 2008 2007 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: Note 21— Deferred Compensation Plan Actuarial Value Accrued (Unfunded) Funded of Assets Liability Overfunded Ratio $ 5,045,601 $ 5,182,016 $ (136,415) 97.4% 4,188,846 4,876,743 (687,897) 85.9% 5,191,726 4,195,748 995,978 123.7% August 1, 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 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. 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. 81 CITY OF LAKEVILLE, MINNESOTA NOTES TO BASIC FINANCIAL STATEMENTS DECEMBER 31, 2009 Note 23 — 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, 2009, $2,000,000 remains outstanding on this note. Note 24 — Subsequent Events On January 1, 2010, the City issued $2,680,000 in General Obligation State -Aid Street Refunding Bonds, Series 2010 A, in a refunding transaction. The new bonds were issued to call the remaining principal amounts of the State -Aid Street Bonds, Series 2000 C ($2,730,000 for years maturing 2011 — 2020) on April 1, 2010. The new bonds will mature on April 1, 2020, (without a provisional call) and bear interest rates ranging from 2.0% - 4.0 %. As with the 2000 C refunded bonds, debt service for the 2010 A bonds will be payable solely from state -aid revenue received from the State of Minnesota. The refunding transaction yielded a net savings to the City of $426,700 with a present value economic gain of $378,275. 82 This page intentionally left blank. REQUIRED SUPPLEMENTARY INFORMATION CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 Revenues Property taxes General property taxes Current Delinquent Fiscal disparities Mobile home tax Gravel tax Licenses and permits Charges for services General govemment Public safety Public works Parks and recreation Fines Investment income (continued) Total property taxes Intergovernmental Market value homestead credit Market value homestead mobile home credit State -aid police State -aid fire State -aid streets State -aid PERA State police and fire grants State other grants Federal other grants County and other grants Total intergovernmental Total charges for services Budget As Originally Adopted $ 13,581,822 84,163 1,651,798 47,364 6,000 83 Variance Final With Final Budget Actual Budget $ 13,619,545 84,163 1,651,798 47,364 6,000 $ 13,451,844 316,738 1,713,240 45,171 17,160 $ (167,701) 232,575 61,442 (2,193) 11,160 15,371,147 15,408,870 15,544,153 135,283 1,397,905 1,142,405 1,062,368 (80,037) 629,884 1,961 1,961 18,330 18,330 18,233 (97) 335,887 335,887 351,623 15,736 257,313 259,177 192,073 (67,104) 379,127 379,127 234,139 (144,988) 21,303 21,303 21,303 - 32,253 32,253 52,066 19,813 200 6,890 6,637 (253) 31,056 41,309 10,253 29,700 58,258 47,752 (10,506) 1,703,997 1,142,281 967,096 (175,185) 173,399 196,522 144,524 (51,998) 326,535 355,535 324,502 (31,033) 1,064,160 819,160 1,043,578 224,418 488,311 551,099 493,190 (57,909) 2,052,405 1,922,316 2,005,794 83,478 272,394 272,394 297,413 25,019 253,826 83,826 161,318 77,492 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 Budget As Variance Originally Final With Final Adopted Budget Actual Budget Revenues (continued) Donations $ 21,500 $ 29,881 $ 33,996 $ 4,115 Miscellaneous 57,451 57,451 154,655 97,204 Expenditures Total revenues 21,130,625 20,059,424 20,226,793 167,369 General government Mayor and Council Personnel services 50,222 50,222 45,263 4,959 Commodities 50 50 50 Other charges and services 62,097 62,097 55,318 6,779 Total Mayor and Council 112,369 112,369 100,581 11,788 Committees /Commissions Personnel services 34,797 39,917 42,279 (2,362) Commodities 1,671 1,671 855 816 Other charges and services 39,685 38,685 34,526 4,159 City administration Personnel services 336,742 331,935 283,732 48,203 Commodities 850 850 543 307 Other charges and services 15,698 13,698 7,809 5,889 Capital outlay 1,850 - (continued) Total committees /commissions 76,153 80,273 77,660 2,613 Total city administration 84 355,140 346,483 292,084 54,399 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31. 2009 Expenditures (continued) Budget As Variance Originally Final With Final Adopted Budget Actual Budget General government (continued) City Clerk Personnel services $ 98,319 $ 97,325 $ 95,770 $ 1,555 Commodities 300 300 88 212 Other charges and services 14,650 16,667 13234 3,433 Capital outlay 1,850 (continued) Total City Clerk Total finance Total information systems Total human resources Insurance coverage Other charges and services 85 115,119 114,292 109,092 5,200 Finance Personnel services 501,546 483,881 487,169 (3,288) Commodities 3,815 3,345 3,410 (65) Other charges and services 66,259 60,181 57,117 3,064 Capital outlay 430 430 430 572,050 547,837 547,696 141 Information systems Personnel services 368,355 327,353 320,480 6,873 Commodities 8,954 8,954 3,321 5,633 Other charges and services 150,420 142,764 128,676 14,088 Capital outlay 34,338 34,338 28,002 6,336 562,067 513,409 480,479 32,930 Human resources Personnel services 255,111 243,859 233,655 10,204 Commodities 2,237 2,010 677 1,333 Other charges and services 56,010 47,490 38,386 9,104 313,358 293,359 272,718 20,641 280,072 280,072 280,031 41 Legal counsel Other charges and services 83,681 83,681 80,770 2,911 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 Expenditures (continued) Budget As Variance Originally Final With Final Adopted Budget Actual Budget General government (continued) Planning Personnel services $ 479,710 $ 437,921 $ 417,787 $ 20,134 Commodities 22,675 30,061 36,855 (6,794) Other charges and services 66,955 74,102 59,483 14,619 (continued) Total planning Total community and economic development Total inspections 86 569,340 542,084 514,125 27,959 Community and economic development Personnel services 252,423 249,098 240,918 8,180 Commodities 650 350 135 215 Other charges and services 19,202 53,165 30,669 22,496 272,275 302,613 271,722 30,891 Inspections Personnel services 916,821 875,534 846,944 28,590 Commodities 25,655 21,880 13,929 7,951 Other charges and services 78,888 82,608 67,873 14,735 Capital outlay 11,843 3,591 3,591 1,033,207 983,613 928,746 54,867 General government facilities Personnel services 203,164 207,859 198,911 8,948 Commodities 45,080 45,080 28,376 16,704 Other charges and services 306,502 300,661 253,553 47,108 Capital outlay 4,126 - Total general government facilities 558,872 553,600 480,840 72,760 Total general government 4,903,703 4,753,685 4,436,544 317,141 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 Expenditures (continued) Public safety Police Personnel services $ 6,102,995 $ 5,919,002 $ 5,805,225 $ 113,777 Commodities 369,777 341,917 250,460 91,457 Other charges and services 1,685,616 1,662,586 1,584,828 77,758 Capital outlay 386 (386) Total police 8,158,388 7,923,505 7,640,899 282,606 Fire protection Personnel services 1,046,785 1,020,867 894,802 126,065 Commodities 152,054 127,264 62,715 64,549 Other charges and services 268,068 252,349 218,823 33,526 Total fire protection 1,466,907 1,400,480 1,176,340 224,140 Total public safety 9,625,295 9,323,985 8,817,239 506,746 Public works Engineering Personnel services 726,557 671,373 657,243 14,130 Commodities 11,800 11,800 9,532 2,268 Other charges and services 49,980 49,186 36,753 12,433 Capital outlay 3,439 Total engineering Street maintenance Personnel services 1,455,739 1,399,595 1,419,760 (20,165) Commodities 661,566 657,844 616,102 41,742 Other charges and services 835,461 825,934 807,742 18,192 (continued) Total street maintenance 2,952,766 2,883,373 2,843,604 39,769 Total public works Budget As Variance Originally Final With Final Adopted Budeet Actual Budget 87 791,776 732,359 703,528 28,831 3,744,542 3,615,732 3,547,132 68,600 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 Expenditures (continued) Budget As Variance Originally Final With Final Adopted Budget Actual Budget Parks and recreation Park maintenance Personnel services $ 1,477,042 $ 1,421,760 $ 1,350,669 $ 71,091 Commodities 266,607 267,018 208,062 58,956 Other charges and services 571,350 419,329 328,316 91,013 Capital outlay 10,160 2,098 - 2,098 Total park maintenance 2,325,159 2,110,205 1,887,047 223,158 Recreation Personnel services 369,248 346,873 327,914 18,959 Commodities 27,892 27,892 17,686 10,206 Other charges and services 266,481 265,977 214,836 51,141 Capital outlay 12,197 3,575 3,663 (88) Total recreation 675,818 644,317 564,099 80,218 Arts Center Personnel services 216,274 214,760 212,527 2,233 Commodities 17,199 17,199 15,891 1,308 Other charges and services 174,288 200,076 170,100 29,976 (continued) Total arts center 407,761 432,035 398,518 33,517 Total parks and recreation 3,408,738 3,186,557 2,849,664 336,893 Other 294,000 - 21,976,278 20,879,959 19,650,579 1,229,380 Total expenditures Excess (deficiency) of revenues over expenditures (845,653) (820,535) 576,214 1,396,749 88 CITY OF LAKEVILLE, MINNESOTA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGETARY COMPARISON YEAR ENDED DECEMBER 31, 2009 (continued) Other financing sources (uses) Transfers from /(to) Special Revenue - Communications Fund Special Revenue - Surface Water Mgmt. Fund Capital Projects - Equipment Fund Capital Projects - Storm Sewer Fund Enterprise - Liquor Fund Enterprise - Utility Fund Internal Service - Municipal Reserves Fund Disposal of capital assets Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Budget As Variance Originally Final With Final Adopted Budget Actual Budget $ 40,927 110,842 $ - $ (1,435,461) 89 37,136 151,403 307,462 41,883 156,000 $ 47,267 $ 47,267 $ 108,566 108,566 (1,263,647) (1,263,647) 36,230 36,230 139,170 120,825 40,663 156,000 139,094 120,825 40,663 156,000 845,653 (614,926) (615,002) (76) (76) (38,788) $1,396,673 11,245,513 $ 11,206,725 CITY OF LAKEVILLE, MINNESOTA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2009 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. 90 CITY OF LAKEVILLE, MINNESOTA OTHER POST - EMPLOYMENT BENEFITS PLAN - SCHEDULE OF FUNDING PROGRESS DECEMBER 31, 2009 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% 91 This page intentionally left blank. 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 channel and public communications, including long -term replacement of equipment. Benefit Accrual Fund This fund accounts for the accrued liability of employee benefits attributed primarily to severance compensation. Funding is provided by property taxes and interest earnings on investments. Surface Water Management Fund This fund accounts for those expenditures that are directly related to storm water maintenance, education, Takes /streams monitoring, and treatment. 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 272. 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 are restricted to the payment of Tong -term debt principal and interest, but excluding debt issued for and serviced by an enterprise fund. Debt Supported Primarily by Tax Increment 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. Debt Supported Primarily by State -aid Revenue 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. Debt Supported Primarily by Water Revenue 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. (continued) NONMAJOR GOVERNMENTAL FUNDS Debt Supported Primarily by Arena Revenue 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. NONMAJOR GOVERNMENTAL FUNDS Debt Service Funds (continued) Debt Supported Primarily by HRA Lease Revenue The Lakeville Housing and Redevelopment Authority (HRA) issued the Public Facility Lease Revenue Bonds, Series 2002 A for the construction of Lakeville's fourth fire station and the acquisition of a new fire truck. Debt service will be payable solely from lease payments to be made by the City pursuant to the lease agreement between the Authority and the City. 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). Public Works Reserve Fund This fund accounts for road improvement projects designated by the City Council. 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. Funds are appropriated towards the construction costs of wells, pump houses, towers, water main systems, 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 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. Equipment Fund This fund accounts for the purchase of equipment for general government, public safety, public works, and park maintenance. Tax Increment Fund This fund accounts for revenue received from tax increment districts property that does not require debt financing. The expenditures are for current and future development of tax increment property. This page intentionally left blank. CITY OF LAKEVILLE, MINNESOTA NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET DECEMBER 31, 2009 LIABILITIES AND FUND BALANCE ASSETS Cash and investments Investments held by trustee Interest receivable Taxes receivable Unremitted Delinquent Accounts receivable Loan receivable Special assessments Unremitted Delinquent Deferred Other Liabilities Salaries payable Accounts payable Contracts payable Deposits payable Deferred revenue Total assets Total liabilities Fund balance Reserved for Accrued compensated absences Debt service Encumbrances Unreserved Designated for subsequent year's expenditures Undesignated Total fund balance Special Revenue Funds $2,096,003 $ 2,506,005 923,336 8,757 2,496 18,664 45,345 141,648 465,893 $2,246,408 $ 3,961,739 $ 9,921,548 $ 6,101 $ 5,722 29,402 6,460 10,782 1 463,738 18,284 503,922 889,514 12,879 1,325,731 2,228,124 3,457,817 Total liabilities and fund balance $2,246,408 $ 3,961,739 $ 9,921,548 $ 16,129,695 92 Debt Service Funds 3,457,817 $ Capital Projects Funds $ 8,543,898 35,471 607 357,975 255,000 10,832 3,729 287,617 426,419 344,054 86,133 31,737 1,324,730 1,786,654 83,991 8,050,903 8,134,894 Total Nonmajor Governmental Funds $13,145,906 923,336 46,724 19,271 45,345 965,516 255,000 10,832 3,729 287,617 426,419 $ 16,129,695 $ 6,101 379,178 92,593 42,519 1,788,469 2,308,860 889,514 3,457,817 96,870 1,325,731 8,050,903 13,820,835 CITY OF LAKEVILLE, MINNESOTA NON -MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2009 Revenues Property taxes Tax increment Licenses Intergovernmental Charges for services Special assessments Investment income Donations Miscellaneous Expenditures - current General government Public safety Public works Parks and recreation Total revenues Total expenditures - current 855,648 Expenditures - capital outlay General government 43,213 Public safety Public works Parks and recreation Total expenditures - capital outlay 43,213 Expenditures - debt service Principal bond maturities Principal lease maturities Interest on debt Fiscal charges Total expenditures - debt service Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfers from other funds Transfers to other funds Refunding bonds issued Premium on bonds issued Disposal of capital assets Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Special Debt Capital Revenue Service Projects Funds Funds Funds $ - $ 336,163 $ 1,195,722 629,064 222,722 541,541 22,912 833,879 1,124,983 598,843 261,976 1,177,405 141,297 36,659 6,958 158,884 196,699 96,150 3,925 158,994 1,203,880 2,264,739 4,276,157 442,184 18,710 359,353 35,401 898,861 10,839 (187,156) (176,317) 128,702 2,099 2,155,000 6,971 1,393,116 59,229 3,614,316 3,614,316 1,479,540 1,321,347 (57,700) (2,627,755) 930,000 24,148 209,196 2,585,184 (1,306,408) 1,235,607 2,222,210 $ 2,228,124 $3,457,817 $ 8,134,894 390,793 434,006 399,660 399,660 3,868,601 3,868,601 691,581 691,581 5,350,635 5,393,848 5,350,635 9,863,812 305,019 (1,349,577) (1,074,478) (2,119,036) (2,380,886) 10,515,780 Total Nonmajor Governmental Funds $ 1,531,885 851,786 541,541 1,981,774 2,038,224 141,297 202,501 292,849 162,919 7,744,776 442,184 18,710 359,353 35,401 855,648 2,155,000 6,971 1,393,116 59,229 3,614,316 2,811,726 (2,872,611) 930,000 24,148 209,196 1,102,459 (1,016,577) 14,837,412 $ 13,820,835 CITY OF LAKEVILLE, MINNESOTA SPECIAL REVENUE FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2009 ASSETS Total assets Surface Downtown Benefit Water Economic Special Communications Accrual Management Development Service District Total Cash and investments $ 583,975 $885,616 $ 535,602 $ 56,209 $ 34,601 $2,096,003 Interest receivable 2,405 3,898 2,185 269 8,757 Accounts receivable 139,147 - - 2,500 1 141,648 LIABILITIES AND FUND BALANCE $ 725,527 ':89,514 $ 537,787 $ 58,978 $ 34,602 $2,246,408 Liabilities Salaries payable $ 4,065 $ - $ 2,036 $ $ $ 6,101 Accounts payable 3,544 2,178 5,722 Contracts payable 6,460 6,460 Deferred revenue - - 1 1 Total liabilities 7,609 10,674 - 1 18,284 Fund balance Reserved for accrued compensated absences 889,514 889,514 Reserved for encumbrances 12,879 12,879 Unreserved - designated for subsequent year's expenditures 717,918 514,234 58,978 34,601 1,325,731 Total fund balance 717,918 889,514 527,113 58,978 34,601 2,228,124 Total liabilities and fund balance $ 725,527 $889,514 $ 537,787 $ 58,978 $ 34,602 $2,246,408 94 CITY OF LAKEVILLE, MINNESOTA SPECIAL REVENUE FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2009 Revenues Licenses $ 541,541 $ intergovernmental 516 Charges for services Investment income 10,067 16,318 Miscellaneous 3,925 - Total revenues 556,049 16,318 Expenditures Current General government Public safety Public works Parks and recreation Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from/(to) General Fund Special Revenue - Communications Fund Special Revenue - Benefit Accrual Fund Special Revenue - Surface Water Mgmt. Fund Enterprise - Utility Fund Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Benefit Communications Accrual 366,767 30,517 18,710 3,933 35,401 43,213 409,980 88,561 146,069 (72,243) 242,093 (47,267) (9,483) (56,750) 95 9,483 1,356 10,839 89,319 (61,404) 628,599 950,918 Surface Downtown Water Economic Special Management Development Service District Total 22,396 565,968 9,149 597,513 355,420 355,420 (108,566) (1,356) (20,484) (130,406) 111,687 $ 717,918 $889,514 $ 527,113 $ 2,500 1,125 3,625 10,543 10,543 (6,918) (6,918) 415,426 65,896 58,978 $ $ - $ 541,541 22,912 30,375 598,843 36,659 3.925 30,375 1,203,880 34,357 442,184 18,710 359,353 35,401 43,213 34,357 898,861 (3,982) 305,019 (3,982) 38,583 (155,833) 9,483 (10,839) 1,356 (20,484) (176,317) 128,702 2,099,422 34,601 $2,228,124 CITY OF LAKEVILLE, MINNESOTA DEBT SERVICE FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2009 ASSETS Cash and investments Investments held by trustee Interest receivable Taxes receivable Unremitted Delinquent Accounts receivable Total assets LIABILITIES AND FUND BALANCE Liabilities Accounts payable Deposits payable Deferred revenue Total liabilities Fund balance Reserved for debt service Debt Supported Primarily by Tax State -aid Water Arena HRA Lease Increment Revenue Revenue Revenue Revenue Total $1,669,555 $ 35,696 $ 4,217 $207,523 $ 589,014 $2,506,005 923,336 923,336 1,048 8 605 835 2,496 4,144 38,788 418,393 $ 2,131,928 $ 35,704 $ 4,217 $255,628 $1,534,262 $3,961,739 $ 5,384 $ 24,018 $ - $ 10,782 457,181 462,565 1,669,363 34,800 96 47,500 14,520 18,664 6,557 45,345 465,893 $ $ 29,402 10,782 6,557 463,738 6,557 503,922 904 4,217 255,628 1,527,705 3,457,817 Total liabilities and fund balance $ 2,131,928 $ 35,704 $ 4,217 $255,628 $1,534,262 $3,961,739 CITY OF LAKEVILLE, MINNESOTA DEBT SERVICE FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2009 Debt Supported Primarily by Tax State -aid Water Arena HRA Lease Increment Revenue Revenue Revenue Revenue Total Revenues General property taxes Current and delinquent $ 66,874 $ $ $ - $ 234,686 $ 301,560 Fiscal disparities 7,701 - - 26,902 34,603 Total general property taxes 74,575 - 261,588 336,163 Tax increment 629,064 629,064 Intergovernmental - state -aid 833,879 833,879 Charges for services 261,976 261,976 Investment income 4,386 36 2,536 6,958 Donations 196,699 196,699 Total revenues 708,025 833,915 199,235 523,564 2,264,739 Expenditures - debt service Principal bond maturities 360,000 500,000 1,000,000 65,000 230,000 2,155,000 Principal lease maturities 6,971 6,971 Interest on debt 188,582 332,949 289,400 68,664 513,521 1,393,116 Fiscal charges 30,919 10,514 480 666 16,650 59,229 Total expenditures - debt service 579,501 843,463 1,289,880 141,301 760,171 3,614,316 Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from /(to) Capital Projects 128,524 (9,548) (1,289,880) 57,934 (236,607) (1,349,577) Storm Sewer Fund (57,700) (57,700) Water Fund 1,289,880 1,289,880 Enterprise - Liquor Fund 189,660 189,660 Refunding bonds issued 930,000 930,000 Premium on bonds issued 24,148 24,148 Disposal of capital assets 209,196 209,196 Total other financing sources (uses) 1,105,644 1,289,880 - 189,660 2,585,184 Net change in fund balance 1,234,168 (9,548) - 57,934 (46,947) 1,235,607 Fund balance, January 1 435,195 10,452 4,217 197,694 1,574,652 2,222,210 Fund balance, December 31 $ 1,669,363 $ 904 $ 4,217 $255,628 $ 1,527,705 $3,457,817 97 CITY OF LAKEVILLE, MINNESOTA CAPITAL PROJECTS FUNDS (NONMAJOR) COMBINING BALANCE SHEET DECEMBER 31, 2009 ASSETS Cash and investments Interest receivable Taxes receivable - unremitted Accounts receivable Loan receivable Special assessments Unremitted Delinquent Deferred Other Total assets LIABILITIES AND FUND BALANCE Liabilities Accounts payable Contracts payable Deposits payable Deferred revenue Total liabilities Fund balance Reserved for encumbrances Unreserved - undesignated Total fund balance Public Works Storm Reserve Sewer $ 3,292,684 $393,711 $496,794 $2,417,787 13,309 1,636 3,839 10,575 2,457 $ 56,476 $ 42,203 - 129,463 - 255,000 7,128 7,475 56,969 14,025 - - Sanitary Water Sewer 195 3,509 1,527 2,202 145,883 131,370 71,794 297,656 $ 3,308,450 $851,382 $720,032 $2,863,099 - $ 1,689 $ - 28,994 4,428 26,125 2,457 448,907 219,204 431,228 101,136 448,907 249,887 461,781 ■ 55,614 3,193,289 402,475 470,145 2,345,704 3,207,314 402,475 470,145 2,401,318 Total liabilities and fund balance $ 3,308,450 $851,382 $720,032 $2,863,099 Park Tax Dedication Equipment Increment Total $786,903 $1,032,020 $ 123,999 $8,543,898 4,753 1 ,356 3 35,471 607 607 110,480 118,032 - 357,975 255,000 10,832 - 3,729 432 - - 287,617 426,419 $902,568 $1,151,408 $ 124,609 $9,921,548 $ 18,792 $ 154,796 $ 112,301 $ 344,054 10,508 86,133 3,112 2,500 31,737 105,902 117,032 1,324,730 138,314 274,328 112,301 1,786,654 14,352 - 83,991 749,902 877,080 12,308 8,050,903 764,254 877,080 12,308 8,134,894 $902,568 $1,151,408 $ 124,609 $9,921,548 99 CITY OF LAKEVILLE, MINNESOTA CAPITAL PROJECTS FUNDS (NONMAJOR) COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED DECEMBER 31, 2009 Revenues General property taxes - current $ 1,195,722 $ $ - $ Tax increment Intergovernmental Market value homestead credit - ALF Ambulance Federal grant 811,509 State grant - - Charges for services - 143,090 751,108 174,962 Special assessments 3,511 19,054 67,449 51,203 Investment income 57,501 6,851 24,673 44,271 Donations - - Miscellaneous - - 138,898 Total revenues 2,068,243 168,995 982,128 270,436 Expenditures - capital outlay General government Public safety Public works Parks and recreation Total expenditures - capital outlay Excess (deficiency) of revenues over expenditures Net change in fund balance Fund balance, January 1 Fund balance, December 31 Public Works Storm Sanitary Reserve Sewer Water Sewer 2,181,573 75,311 567,767 255,272 2,181,573 75,311 567,767 255,272 (113,330) 93,684 414,361 15,164 Other financing sources (uses) Transfer from /(to) General Fund (36,230) Debt Service - Special Assessments Fund - (331,000) (496,093) (463,647) Debt Service - Tax Increment Fund 57,700 Debt Service - Water Revenue Fund - (1,289,880) Total other financing sources (uses) (309,530) (1,785,973) (463,647) (113,330) (215,846) (1,371,612) (448,483) 3,320,644 618,321 1,841,757 2,849,801 $3,207,314 $402,475 $ 470,145 $2,401,318 Park Tax Dedication Equipment Increment Total $ - $ $ - $1,195,722 222,722 222,722 - 16,050 16,050 292,579 292,579 811,509 4,845 - - 4,845 108,245 - 1,177,405 80 141,297 19,898 5,679 11 158,884 96,150 96,150 19,096 1,000 158,994 248,314 299,258 238,783 4,276,157 184,432 206,361 390,793 399,660 399,660 788,678 - 3,868,601 673,030 18,551 - 691,581 673,030 1,391,321 206,361 5,350,635 (424,716) (1,092,063) 32,422 (1,074,478) 1,263,647 - 1,227,417 (10,905) (1,301,645) 57,700 (1,289,880) 1,263,647 (10,905) (1,306,408) (424,716) 171,584 21,517 (2,380,886) 1,188,970 705,496 (9,209) 10,515,780 $ 764,254 $ 877,080 $ 12,308 $8,134,894 101 CITY OF LAKEVILLE, MINNESOTA COMMUNICATIONS - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2009 Revenues Licenses Intergovernmental - 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 (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from /(to) General Fund Special Revenue - Benefit Accrual Fund Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Budget Variance With As Originally Final Final Adopted Budget Actual Budget $ 508,959 $ 508,959 $ 541,541 $ 32,582 516 516 516 - 10,200 10,200 (10,200) 19,381 19,381 10,067 (9,314) 84 84 3,925 3,841 102 539,140 539,140 556,049 16,909 293,826 298,768 295,954 10,585 10,585 3,255 112,499 112,499 67,558 167,500 167,500 43,213 584,410 589,352 409,980 179,372 (45,270) (50,212) 146,069 196,281 (40,927) (47,267) (47,267) - (9,483) (9,483) (9,483) - (50,410) (56,750) (56,750) - $ (95,680 $ (106,962) 89,319 $ 196,281 628,599 $ 717,918 2,814 7 44,941 124,287 CITY OF LAKEVILLE, MINNESOTA BENEFIT ACCRUAL - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2009 Revenues General property taxes - current $ 175,000 $ - $ - $ Investment income 29,550 9,710 16,318 6,608 Expenditures Current - personnel General government Public safety Public works Parks and recreation Total revenues Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from /(to) Special Revenue - Communications Fund Special Revenue - Surface Water Mgmt Fund Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Budget Variance With As Originally Final Final Adopted Budget Actual Budget 103 204,550 9,710 16,318 6,608 4,296 27,551 30,517 (2,966) 3,686 18,710 1 8,710 11,583 2,750 3,933 (1,183) 555 37,699 35,401 2,298 20,120 86,710 88,561 (1,851) 184,430 (77,000) (72,243) 4,757 9,483 9,483 9,483 1,356 1,356 1,356 10,839 10,839 10,839 195,269 $ (66,161) (61,404) $ 4,757, 950,918 $889,514 CITY OF LAKEVILLE, MINNESOTA SURFACE WATER MANAGEMENT - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2009 Revenues Intergovernmental - state -aid pera Intergovernmental - local grant Charges for services Investment income Total revenues Expenditures - public works Current Personnel Commodities Other charges and services Capital outlay Total expenditures - public works Excess (deficiency) of revenues over expenditures Other financing sources (uses) Transfer from/(to) General Fund Special Revenue - Benefit Accrual Fund Enterprise - Utility Fund Total other financing sources (uses) Net change in fund balance Fund balance, January 1 Fund balance, December 31 Budget As Originally Final Adopted Budget $ 292 583,489 3,888 $ (74,229) $ (71,953) 104 587,669 198,868 10,361 317,964 2,023 529,216 58,453 (110,842) (108,566) (1,356) (1,356) (20,484) (20,484) (132,682) (130,406) $ 292 $ 292 $ 22,104 22,104 583,489 565,968 (17,521) 3,888 9,149 5,261 587,669 597,513 198,868 189,068 10,361 5,766 317,964 160,586 2,023 529,216 355,420 58,453 242,093 Variance With Final Actual Budget (108,566) (1,356) (20,484) (130,406) 415,426 $527,113 9,844 9,800 4,595 157,378 2,023 173,796 183,640 111,687 $ 183,640 CITY OF LAKEVILLE, MINNESOTA ECONOMIC DEVELOPMENT - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2009 Budget Variance With As Originally Final Final Adopted Budget Actual Budget Revenues Charges for services $ 11,250 $ 11,250 $ 2,500 $ (8,750) Investment income 1,949 1,949 1,125 (824) Expenditures - General government Current Other charges and services Excess (deficiency) of revenues over expenditures Fund balance, January 1 Total revenues 13,199 13,199 3,625 (9,574) 20,000 10,543 9,457 $ 13,199 $ (6,801) (6,918) $ (117) 65,896 Fund balance, December 31 $ 58,978 105 CITY OF LAKEVILLE, MINNESOTA DOWNTOWN SPECIAL SERVICE DISTRICT - SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE YEAR ENDED DECEMBER 31, 2009 Revenues Charges for services Expenditures - general government Current Personnel Commodities Other charges and services Total expenditures - general government Excess (deficiency) of revenues over expenditures Fund balance, January 1 Budget Variance With As Originally Final Final Adopted Budget Actual Budget $ 27,534 $30,340 $30,375 $ 35 106 10,800 10,800 11,481 350 350 362 19,375 25,284 22,514 30,525 36,434 34,357 (2,991) $ (6,094) (3,982) $ 2,112 38,583 Fund balance, December 31 $34,601 (681) (12) 2,770 2,077 CITY OF LAKEVILLE, MINNESOTA AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES YEAR ENDED DECEMBER 31, 2009 Escrow Fund Balance 107 Balance January 1 Increases Decreases December 31 Assets Cash and investments $ 5,355,256 $ 557,957 $ 434,787 $ 5,478,426 Liabilities Deposits payable $ 5,355,256 $ 557,957 $ 434,787 $ 5,478,426 This page intentionally left blank. SUPPLEMENTAL INFORMATION CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF CHANGES IN BONDED INDEBTEDNESS YEAR ENDED DECEMBER 31, 2009 Bonded Debt Property tax supported Special assessment supported Tax increment supported State -aid supported Water connection revenue supported Ice arena revenue supported HRA lease revenue supported Liquor revenue supported Total Bonded Indebtedness Outstanding January 1 Issued Redeemed $ 55,545,000 $ 4,945,000 $ 2,385,000 10,425,000 4,250,000 1,890,000 12,785,000 4,335,000 7,575,000 7,735,000 1,610,000 11,265,000 4,265,000 108 930,000 360,000 500,000 1,000,000 65,000 230,000 280,000 Outstanding December 31 $ 58,105,000 4,905,000 7,075,000 6,735,000 1,545,000 11,035,000 3,985,000 $ 102,755,000 $ 10,125,000 $ 6,710,000 $ 106,170,000 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Property Tax Supported Equipment Certificates and Bonds Equipment Certificates of 2006 A 10/15/06 Principal and interest 3.80 2/1/10 $ 405,000 $ 25,100 Principal and interest 3.85 2/1/11 425,000 8,500 Total 830,000 33,600 Equipment Certificates of 2007 E 8/1/07 Principal and interest 4.25 2/1/10 415,000 46,219 Principal and interest 4.25 2/1/11 430,000 28,263 Principal and interest 4.25 2/1/12 450,000 9,563 Total 1,295,000 84,045 Equipment Certificates of 2008 A 10/1/08 Principal and interest 2.20 2/1/10 615,000 13,515 Principal and interest 2.50 2/1/11 270,000 3,375 Total 885,000 16,890 Park Refunding Bonds of 2003 B 3/15/03 Principal and interest 3.25 2/1/10 340,000 74,256 Principal and interest 3.50 2/1/11 355,000 62,519 Principal and Interest (call provision date) 3.50 2/1/12 375,000 49,744 Principal and interest 3.50 2/1/13 380,000 36,531 Principal and interest 3.625 2/1/14 395,000 22,722 Principal and interest 3.75 2/1/15 415,000 7,781 Total 2,260,000 253,553 Capital Improvement Bonds of 2004 A 11/1/04 (Central Maintenance Facility) Principal and interest 3.00 2/1/10 185,000 622,444 Principal and interest 3.25 2/1/11 215,000 616,175 Principal and interest 3.50 2/1/12 245,000 608,394 Principal and interest 4.00 2/1/13 280,000 598,506 Principal and interest 4.00 2/1/14 320,000 586,506 Principal and Interest (call provision date) 4.00 2/1115 360,000 572,906 Principal and interest 4.25 2/1/16 400,000 557,206 Principal and interest 4.25 2/1/17 445,000 539,250 Principal and interest 4.25 2/1/18 495,000 519,275 Principal and interest 4.375 2/1/19 545,000 496,834 Principal and interest 4.50 2/1/20 600,000 471,413 Principal and interest 4.50 2/1/21 660,000 443,063 Principal and interest 4.50 2/1/22 720,000 412,013 Principal and interest 4.50 2/1/23 790,000 378,038 Principal and interest 4.50 2/1/24 860,000 340,913 Principal and interest 4.50 2/1/25 935,000 300,525 Principal and interest 4.50 2/1/26 1,015,000 256,650 Principal and interest 4.60 2/1/27 1,105,000 208,398 (continued) 109 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Property Tax Supported Equipment Certificates and Bonds (continued) Capital Improvement Bonds of 2004 A (continued) Principal and interest 4.60 2/1/28 $ 1,195,000 $ 155,498 Principal and interest 4.75 2/1/29 1,295,000 97,256 Principal and interest 4.75 2/1/30 1,400,000 33,250 Total 14,065,000 8,814,513 Capital Improvement Bonds of 2007 D 8/1/07 (Police Station) Principal and interest 5.00 2/1/10 385,000 713,488 Principal and interest 5.00 2/1/11 400,000 693,863 Principal and interest 5.00 2/1/12 415,000 673,488 Principal and interest 5.00 2/1/13 435,000 652,238 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 2/1/16 490,000 583,113 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 2/1/21 610,000 445,863 Principal and interest 5.00 2/1/22 635,000 414,738 Principal and interest 5.00 2/1/23 665,000 382,238 Principal and interest 5.00 2/1/24 695,000 348,238 Principal and interest 5.00 2/1/25 730,000 312,613 Principal and interest 5.00 2/1/26 765,000 275,238 Principal and interest 5.00 2/1/27 800,000 236,113 Principal and interest 5.00 2/1/28 835,000 195,238 Principal and interest 4.625 2/1/29 875,000 154,128 Principal and interest 4.625 2/1/30 920,000 112,619 Principal and interest 4.625 2/1/31 965,000 69,028 Principal and interest 4.625 2/1/32 1,010,000 23,356 Total 14,745,000 9,592,653 Street Reconstruction Bonds of 2003 A 3/15/03 Principal and interest 3.25 2/1/10 625,000 531,839 Principal and interest 3.50 2/1/11 640,000 510,483 Principal and interest 3.50 2/1/12 660,000 487,733 Principal and interest 3.50 2/1/13 680,000 464,283 Principal and Interest (call provision date) 4.00 2/1/14 700,000 438,383 Principal and interest 4.00 2/1/15 725,000 409,883 Principal and interest 4.00 2/1/16 750,000 380,383 Principal and interest 4.00 2/1/17 700,000 351,383 Principal and interest 4.00 2/1/18 730,000 322,783 Principal and interest 4.00 2/1/19 760,000 292,983 Principal and interest 4.125 2/1/20 795,000 261,386 (continued) 110 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Date Rate Date Amount Interest General Property Tax Supported Equipment Certificates and Bonds (continued) Street Reconstruction Bonds of 2003 A (continued) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Street Reconstruction Bonds of 2005 A 12/1/05 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 Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Street Reconstruction Bonds of 2007 H 12/15/07 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 (call provision date) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest (continued) Issue Interest Principal Maturity Annual 111 4.25 4.30 4.375 4.40 4.50 4.50 2/1/21 $ 830,000 2/1/22 865,000 2/1/23 905,000 2/1/24 950,000 2/1/25 990,000 2/1/26 1,035,000 13,340,000 $ 227,351 191,116 152,722 112,025 68,850 23,288 5,226,874 3.85 2/1/10 125,000 113,509 3.85 2/1/11 130,000 108,600 3.85 2/1/12 135,000 103,499 3.85 2/1/13 140,000 98,205 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 2/1/20 180,000 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 4.20 2/1/26 235,000 4,935 2,930,000 1,111,510 3.50 2/1/10 100,000 112,945 3.50 2/1/11 105,000 109,358 3.50 2/1/12 110,000 105,595 3.50 2/1/13 115,000 101,658 3.50 2/1/14 120,000 97,545 4.00 2/1/15 125,000 92,945 4.00 2/1/16 125,000 87,945 4.00 2/1/17 130,000 82,845 4.00 2/1/18 140,000 77,445 4.00 2/1/19 145,000 71,745 4.00 2/1/20 150,000 65,845 4.10 2/1/21 155,000 59,668 4.125 2/1/22 160,000 53,190 4.20 2/1/23 170,000 46,320 4.375 2/1/24 175,000 38,922 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest General Property Tax Supported Equipment Certificates and Bonds (continued) Street Reconstruction Bonds of 2007 H (continued) 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 2,810,000 1,276,418 Taxable Street Reconstruction Bonds (Build America Bonds) 2009 A Interest August 1, 2010 12/30/09 129,668 Principal and interest 1.00 2/1/11 170,000 220,385 Principal and interest 1.55 2/1/12 195,000 218,024 Principal and interest 2.20 2/1/13 200,000 214,313 Principal and interest 2.70 2/1/14 205,000 209,345 Principal and interest 3.00 2/1/15 205,000 203,503 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 4,945,000 2,930,956 Total General Property Tax Supported Certificates and Bonds $ 58,105,000 $ 29,341,012 Special Assessment Supported Bonds Improvement Bonds of 2000 A 9/1/00 Principal and Interest 4.75 2/1/10 $ 605,000 $ 112,770 Principal (call 2/1/10) 3,945,000 - Total 4,550,000 112,770 Improvement Bonds of 2001 A 12/1/01 Principal and Interest 4.25 2/1/10 115,000 10,091 Principal (call 2/1/10) 340,000 Total 455,000 10,091 (continued) 112 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Date Rate Date Amount Special Assessment Supported Bonds (continued) Improvement Refunding Bonds of 2007 B 2/1/07 Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Improvement Bonds of 2007 F 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 Improvement Bonds of 2008 A 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 8/1/07 10/1/08 Improvement Refunding Bonds of 2009 B 12/30/09 Interest August 1, 2010 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) Issue Interest Principal Maturity 113 3.875 3.875 3.875 3.875 3.875 3.875 3.875 2/1/10 $ 2/1/11 2/1/12 2/1/13 2/1/14 2/1/15 2/1/16 4.00 2/1/10 315,000 33,813 4.00 2/1/11 330,000 20,913 4.00 2/1/12 55,000 13,213 4.00 2/1/13 50,000 11,113 4.00 2/1/14 50,000 9,113 4.00 2/1/15 50,000 7,113 4.00 2/1/16 50,000 5,113 4.00 2/1/17 50,000 3,088 4.125 2/1/18 50,000 1,031 1,000,000 104,510 2.20 2/1/10 185,000 15,035 2.50 2/1/11 190,000 10,625 2.70 2/1/12 35,000 7,778 3.00 2/1/13 30,000 6,855 3.10 2/1/14 30,000 5,940 3.25 2/1/15 30,000 4,988 3.75 2/1/16 30,000 3,938 3.75 2/1/17 30,000 2,813 3.75 2/1/18 30,000 1,688 3.75 2/1/19 30,000 563 620,000 60,223 2.00 2/1/11 2.00 2/1/12 2.00 2/1/13 2.00 2/1/14 2.00 2/1/15 2.50 2/1/16 2.75 2/1/17 3.00 2/1/18 575,000 380,000 380,000 295,000 95,000 90,000 95,000 1,910,000 825,000 515,000 510,000 385,000 380,000 390,000 375,000 355,000 Annual Interest $ 62,872 44,369 29,644 16,566 9,009 5,425 1,841 169,726 57,710 90,213 76,813 66,563 57,613 49,963 41,288 31,256 20,775 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Issue Interest Principal Maturity Annual Date Rate Date Amount Interest Special Assessment Supported Bonds (continued) Improvement Refunding Bonds of 2009 B (continued) 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 4,250,000 504,569 Total Special Assessment Supported Bonds $ 12,785,000 $ 961,889 Tax Increment Supported Bonds Tax Increment Bonds of 1999 B 12/1/99 Principal and Interest 4.95 2/1/10 $ 205,000 $ 29,420 Principal (call 2/1/10) 940,000 - Total 1,145,000 29,420 Tax increment Refunding 2/1/07 Bonds of 2007 A Principal and interest 4.00 2/1/10 55,000 88,461 Principal and interest 4.00 2/1/11 70,000 85,961 Principal and interest 4.00 2/1/12 70,000 83,161 Principal and interest 4.00 2/1/13 55,000 80,661 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 2,210,000 739,976 Taxable Tax Increment Refunding 2/1/07 Bonds of 2007 C Principal and interest 5.00 2/1/10 115,000 28,630 Principal and interest 5.10 2/1/11 120,000 22,695 Principal and interest 5.10 2/1/12 120,000 16,575 Principal and interest 5.10 2/1/13 130,000 10,200 Principal and interest 5.10 2/1/14 135,000 3,443 Total 620,000 81,543 Tax Increment Refunding 12/30/09 Bonds of 2009 B Interest August 1, 2010 10,902 Principal and interest 2.00 2/1/11 220,000 16,400 (continued) 114 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Tax Increment Supported Bonds (continued) Issue Interest Principal Maturity Annual Date Rate Date Amount Interest Tax Increment Refunding (continued) Bonds of 2009 B Principal and interest 2.00 2/1/12 $ 235,000 $ 11,850 Principal and interest 2.00 2/1/13 235,000 7,150 Principal and interest 2.00 2/1/14 240,000 2,400 Total 930,000 48,702 Total Tax Increment Supported Bonds $ 4,905,000 $ 899,641 State - aid Revenue Supported Bonds State -aid Street Bonds of 2000 C 9/1100 Principal and Interest 4.75 4/1/10 $ 200,000 $ 75,323 Principal (call 4/1/10) 2,730,000 Total 2,930,000 75,323 State -aid Street Bonds of 2001 C 1211/01 Principal and Interest (callable) 4.35 4/1/10 50,000 34,243 Principal and interest 4.35 4/1/11 50,000 32,068 Principal and interest 4.70 4/1/12 50,000 29,805 Principal and interest 4.70 4/1/13 55,000 27,338 Principal and interest 4.70 4/1/14 55,000 24,753 Principal and interest 4.70 4/1/15 60,000 22,050 Principal and interest 4.70 4/1/16 60,000 19,230 Principal and interest 4.95 4/1/17 65,000 16,211 Principal and interest 4.95 4/1/18 70,000 12,870 Principal and interest 4.95 4/1/19 70,000 9,405 Principal and interest 4.95 4/1/20 75,000 5,816 Principal and interest 4.95 4/1/21 80,000 1,980 Total 740,000 235,769 State -aid Street Bonds of 2007 G 12/15/07 Principal and interest 4.00 4/1/10 325,000 129,700 Principal and interest 4.00 4/1/11 335,000 116,500 Principal and interest 4.00 4/1/12 345,000 102,900 Principal and interest 4.00 4/1/13 365,000 88,700 Principal and interest 4.00 4/1/14 375,000 73,900 Principal and interest 4.00 4/1/15 390,000 58,600 Principal and Interest (call provision date) 4.00 4/1/16 405,000 42,700 Principal and interest 4.00 4/1/17 425,000 26,100 Principal and interest 4.00 4/1/18 440,000 8,800 Total 3,405,000 647,900 Total State -aid Supported Bonds $ 7,075,000 $ 958,992 (continued) 115 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 Issue Date Water Connection Revenue Supported Bonds Water Revenue Refunding Bonds of 2004 B Principal and interest Principal and interest Principal and interest Principal and interest Principal and Interest (call provision date) Principal and interest Principal and interest Ice Arena Revenue Supported Bonds Gross Revenue Recreation Facility Bonds of 1999 (Ames Ice Arena) Interest (callable) Interest Interest Interest Interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Total Ice Arena Revenue Supported Bonds (continued) 11/1/04 Total Water Connection Revenue Supported Bonds Ice Center Refunding Bonds of 2008 A 10/1/08 (Ames Ice Arena) Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total 4/1/99 116 Interest Principal Maturity Annual Rate Date Amount Interest 4.00 2/1/10 $ 1,020,000 $ 249,000 4.00 2/1/11 1,085,000 206,900 4.00 2/1/12 870,000 167,800 4.00 2/1/13 895,000 132,500 4.00 2/1/14 890,000 96,800 4.00 2/1/15 960,000 59,800 4.00 2/1/16 1,015,000 20,300 2.20 2/1/10 $ 115,000 $ 20,535 2.50 2/1/11 125,000 17,708 2.70 2/1/12 130,000 14,390 3.00 2/1/13 130,000 10,685 3.10 2/1/14 135,000 6,643 3.25 2/1/15 140,000 2,275 775,000 72,236 5.30 5.30 5.30 5.30 5.30 5.30 5.30 5.30 5.40 5.40 2/1/10 & 8/1/10 2/1/11 & 8/1/11 2/1/12 & 8/1/12 2/1/13 & 8/1/13 2/1/14 & 8/1/14 8/1/15 8/1/16 8/1/17 8/1/18 8/1/19 $ 6,735,000 $ 933,100 135,000 145,000 155,000 165,000 170,000 770,000 1,545,000 41,145 41,145 41,145 41,145 41,145 41,145 33,990 26,305 18,090 9,180 334,435 $ 406,671 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 HRA Lease Revenue Supported Bonds HRA Public Facility Lease Revenue Bonds of 2002 A (Fire Station #4) 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 Total HRA Ice Arena Lease Revenue Bonds of 2006 (Hasse Ice Arena) 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 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 (continued) Issue Interest Principal Maturity Date Rate Date Amount 4/15/02 12/01/06 1 17 Annual Interest 4.50 2/1/10 $ 105,000 $ 98,170 4.60 2/1/11 105,000 93,393 4.70 2/1/12 110,000 88,393 4.80 2/1/13 115,000 83,048 4.90 2/1/14 125,000 77,225 5.00 2/1/15 130,000 70,913 5.00 2/1/16 135,000 64,288 5.13 2/1/17 140,000 57,325 5.13 2/1/18 150,000 49,894 5.25 2/1/19 155,000 41,981 5.25 2/1/20 165,000 33,581 5.25 2/1/21 175,000 24,656 5.35 2/1/22 185,000 15,114 5.35 2/1/23 190,000 5,083 1,985,000 803,064 4.25 2/1/10 150,000 404,838 4.25 2/1/11 175,000 397,931 4.25 2/1/12 190,000 390,175 4.25 2/1/13 210,000 381,675 4.25 2/1/14 225,000 372,431 4.25 2/1/15 245,000 362,444 4.25 2/1/16 270,000 351,500 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 9,050,000 5,800,153 CITY OF LAKEVILLE, MINNESOTA SCHEDULE OF BONDS AND INTEREST PAYABLE DECEMBER 31, 2009 HRA Lease Revenue Supported Bonds (continued) Total HRA Lease Revenue Supported Bonds Liquor Revenue Supported Bonds Liquor Revenue Bonds of 1997 Principal and interest Liquor Revenue Bonds of 2007 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 Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Principal and interest Total Total Liquor Revenue Supported Bonds Total Bonds Payable Issue Interest Principal Maturity Annual Date Rate Date Amount Interest 9/1/97 5/1/07 118 5.00 2/1/10 5.00 2/1/11 5.00 2/1/12 5.00 2/1/13 5.00 2/1/14 5.00 2/1/15 5.00 2/1/16 5.00 2/1/17 5.00 2/1/18 5.00 2/1/19 5.00 2/1/20 5.00 2/1/21 5.00 2/1/22 5.00 2/1/23 5.00 2/1/24 5.00 2/1/25 5.00 2/1/26 5.00 2/1/27 $ 11,035,000 $ 6,603,217 5.20 2/1/10 $ 160,000 $ 4,160 135,000 145,000 150,000 160,000 165,000 175,000 180,000 190,000 200,000 210,000 220,000 235,000 245,000 255,000 270,000 285,000 295,000 310,000 3,825,000 187,875 180,875 173,500 165,750 157,625 149,125 140,250 131,000 121,250 111,000 100,250 88,875 76,875 64,375 51,250 37,375 22,875 7,750 1,967,875 $ 3,985,000 $ 1,972,035 $ 106,170,000 $ 42,076,557 CITY OF LAKEVILLE, MINNESOTA COMBINED SCHEDULE OF BONDED INDEBTEDNESS DECEMBER 31, 2009 Interest Issue Call Maturity Rates % Date Date Date General Obligation Bonds Equipment Certificates of 2006 A 3.80 -3.85 Oct -15 -06 n/a Feb -01 -11 Equipment Certificates of 2007 E 4.25 Aug -01 -07 nia Feb -01 -12 Equipment Certificates of 2008 A 2.20 -2.50 Oct -01 -08 n/a Feb -01 -11 Total Certificates Park Refunding Bonds of 2003 B 3.25 -3.75 Mar -15 -03 Feb -01 -12 Feb -01 -15 Capital Improvement Bonds of 2004 A 3.00 -4.75 Nov -01 -04 Feb -01 -15 Feb -01 -30 Capital Improvement Bonds of 2007 D 4.625 -5.00 Aug -01 -07 Feb -01 -17 Feb -01 -32 Street Reconstruction Bonds of 2003 A 3.25 -4.50 Mar -15 -03 Feb -01 -14 Feb -01 -26 Street Reconstruction Bonds of 2005 A 3.85 -4.20 Dec -01 -05 Feb -01 -16 Feb -01 -26 Street Reconstruction Bonds of 2007 H 3.50 -4.50 Dec -15 -07 Feb -01 -18 Feb -01 -28 Street Reconstruction Bonds of 2009 A (Taxable) 1.00 -5.95 Dec -30 -09 Feb -01 -20 Feb -01 -30 Total Park, Capital, and Street Bonds Total Property Tax Supported Bonds Improvement Bonds of 2000 A 4.75 Sep -01 -00 Cali 2/1/10 Feb -01 -20 Improvement Bonds of 2001 A 4.25 Dec -01 -01 Call 2/1/10 Feb -01 -13 Improvement Refunding Bonds of 2007 B 3.875 Feb -01 -07 n/a Feb -01 -16 Improvement Bonds of 2007 F 4.00 -4.125 Aug -01 -07 Feb -01 -14 Feb -01 -18 Improvement Bonds of 2008 A 2.20 -3.75 Oct -01 -08 n/a Feb -01 -19 Improvement Refunding Bonds of 2009 B 2.0 -3.00 Dec -30 -09 n/a Feb -01 -20 Total Special Assessment Supported Bonds Tax Increment Bonds of 1999 B 4.95 Dec -01 -99 Cali 2/1/10 Feb -01 -14 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) 5.00 -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 Supported Bonds State -aid Street Bonds of 2000 C State -aid Street Bonds of 2001 C State -aid Street Bonds of 2007 G Total State -aid Revenue Supported Bonds Water Revenue Refunding Bonds of 2004 B Ice Center Refunding Bonds of 2008 A HRA Public Facility Lease Revenue Bonds of 2002 A HRA Ice Arena Lease Revenue Bonds of 2006 Total HRA Lease Revenue Bonds Liquor Revenue Bonds of 1997 Liquor Revenue Bonds of 2007 Total Liquor Revenue Bonds Total Bonded Indebtedness 119 4.75 Sep - 01 - 00 Call 4/1/10 Apr - 01 - 20 4.35 -4.95 Dec -01 -01 Apr -01 -10 Apr -01 -21 4.00 Dec -15 -07 Apr -01 -16 Apr -01 -18 4.00 Nov -01 -04 Feb -01 -14 Feb -01 -16 220 -3.25 Oct -01 -08 n/a Feb -01 -15 Gross Revenue Recreation Facility Bonds of 1999 5.30 -5.40 Apr -01 -99 Feb -01 -06 Aug -01 -19 4.50 -5.35 Apr -15 -02 Feb -01 -12 Feb -01 -23 4.25 -4.625 Dec -01 -06 Feb -01 -17 Feb -01 -32 5.20 Sep -01 -97 Feb -01 -07 Feb -01 -10 5.00 May -01 -07 Feb -01 -17 Feb -01 -27 Authorized $ 1,585,000 1,690,000 885,000 4,160,000 3,225,000 14,445,000 15,115,000 14,890,000 5,430,000 2,810,000 4,945,000 60,860,000 65,020,000 9,460,000 1,040,000 3,165,000 1,310,000 620,000 4,250,000 19,845,000 2,575,000 2,265,000 820,000 930,000 6,590,000 4,290,000 1,080,000 3,675,000 9,045,000 9,735,000 775,000 1,250,000 2,535,000 9,230,000 11,765,000 1,400,000 3,955,000 5,355,000 Issued Retired $ 1,585,000 1,690,000 885,000 4,160,000 3,225,000 14,445,000 15,115,000 14,890,000 5,430,000 2,810,000 4,945,000 60,860,000 65,020,000 9,460,000 1,040,000 3,165,000 1,310,000 620,000 4,250,000 19,845,000 2,575,000 2,265,000 820,000 930,000 6,590,000 4,290,000 1,080,000 3,675,000 9,045,000 9,735,000 775,000 1,250,000 2,535,000 9,230,000 11,765,000 1,400,000 3,955,000 5,355,000 Bonds Due in 2010 $ 755,000 $ 830,000 395,000 1,295,000 885,000 1,150,000 3,010,000 965,000 2,260,000 380,000 14,065,000 370,000 14,745,000 1,550,000 13,340,000 2,500,000 2,930,000 2,810,000 4,945,000 5,765,000 55,095,000 6,915,000 58,105,000 4,910,000 4,550,000 585,000 455,000 1,255,000 1,910,000 310,000 1,000,000 620,000 4,250,000 7,060,000 12,785,000 1,430,000 1,145,000 55,000 2,210,000 200,000 620,000 - 930,000 1,685,000 4,905,000 1,360,000 2,930,000 340,000 740,000 270,000 3,405,000 1,970,000 7,075,000 3,000,000 6,735,000 775,000 480,000 770,000 550,000 180,000 730,000 1,240,000 130,000 1,370,000 Outstanding Principal Interest 1,985,000 9,050,000 11,035,000 160,000 3,825,000 3,985,000 $ 405,000 415,000 615,000 1,435,000 340,000 185,000 385,000 625,000 125,000 100,000 1,760,000 3,195,000 4,550,000 455,000 575,000 315,000 185,000 6,080,000 1,145,000 55,000 115,000 1,315,000 2,930,000 50,000 325,000 3,305,000 1,020,000 115,000 $ 25,100 46,219 13,515 84,834 74,256 622,444 713,488 531,839 113,509 112,945 129,668 2,298,149 2,382,983 112,770 10,091 62,872 33,813 15,035 57,710 292,291 29,420 88,461 28,630 10,902 157,413 75,323 34,243 129,700 239,266 249,000 20,535 41,145 105,000 98,170 150,000 404,838 255,000 503,008 160,000 4,160 135,000 187,875 295,000 192,035 $ 129,380,000 $129,380,000 $ 23,210,000 $ 106,170,000 $ 15,580,000 $4,077,676 120 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 Assets by Category - Government -wide Changes in Net Assets - Governmental Activities Changes in Net Assets - Business -type Activities Changes in Net Assets - 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. N CO N 0 N N r 0) 0) O)I C) cal O o C N CA O r FH r �t LO CO O N 0 col LC) C) O O co M O CA O r N O co" M N N r 6H N N ti LO Cc) CI M O I� O O N r- N ti ti N r 0 O r CO LC) O co Tr' OI N N CO O CO N- 00 N NI' L-:r co (f3 CO CO O CND CO CD • N_ 0) M o ti 0 CO r N. 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M co (D N N NMCO O r CIO O LO - 14)(n r N O M O O r r iv M LO M M r (0 CO LO ( (+) O 0 O O ti CO 0 L1) CO 0 LC) N- r Ln M LO O ti O o o o co_ 0 ~ r- 0) CO 0 CV 0 COON M 0) O N ) I"- 0) O O ■ (0 0) O N O C) 6O CD CO CV O N L() r O O M 00 CIO O 0) 0) O CO ti N CO cD N O co CD O co M O co 121 0) CO N O CO r 0 N- Ci C6 66 C‘I CV 0 N O L- N r r N N O r 0) N 0 0 T co N LO Cr; r- r r N w O N N O CD co co M (O ti 0 (o O M N r r N M O r CO LO r co N- 0) 0) CO 0) N_ 0) O O N M O CO O N L() N 4, N O ti CV CO 0) 0) CO 49 C N 0 CID N ti N _ fR k. k 0 o h co N •p 7 C co U O C 7 Q L VJ y co 0 E 4) co r- CO 3 O • y . 0 co •D O Q 0 o C H X O ro V (O - 0 E c 0 0 C N N L y L c i o W Q N C Tel' CO w U 0 o C M C O b 0 0 ~ ti coo ( N O , g N N ` C O C CO 0) E >. o 0 Tx a) To E co ° f° r N co o o W _ co 0 N 0 Y C ( 0 N C _ O _) O >, u: E $ c co O 09 C 0 p , N o CO 0 u)09 p', • co j co ao • p a0.c3 c2 Z 0 co 4) N C 0 ro 0 N (0 C a ro .a E o -a '5 O a ; L U U) co >Y :° ro ro .c co y "1-13 O C CITY OF LAKEVILLE, MINNESOTA Changes in Net Assets - Governmental Activities Last Seven Fiscal Years (accrual basis of accounting) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 Expenses General govemment $ 3,404,145 $ 3,593,032 $ 3,733,657 $ 4,452,707 $ 4,712,995 $ 6,169,957 $ 5,916,590 Public safety 7,634,812 8,439,118 8,928,681 10,057,597 10,308,296 10,019,681 9,726,394 Public works 7,985,301 18,238,780 12,970,903 7,507,095 15,844,963 15,706,515 12,866,216 Parks and recreation 2,826,918 3,044,450 3,535,082 3,819,806 4,556,759 4,900,341 4,774,745 Interest on Tong -term debt 2,784,308 3,109,159 4,032,004 3,278,091 3,867,395 4,218,695 3,994,790 Total expenses 24,635,484 36,424,539 33,200,327 29,115,296 39,290,408 41,015,189 37,278,735 Program Revenues Charges for services General govemment 3,758,735 3,965,377 3,313,130 2,960,761 2,495,649 2,238,739 1,940,423 Public safety 693,486 674,034 691,070 850,033 659,989 581,930 643,174 Public works 8,430,227 7,618,764 9,123,403 6,064,174 4,985,965 4,239,190 2,817,604 Parks and recreation 1,299,975 1,924,946 2,598,033 1,556,284 1,437,308 1,937,523 882,507 Operating grants and contributions General govemment 11,347 30,269 42,748 114,152 43,839 25,083 44,648 Public safety 604,281 636,132 683,047 741342 698,926 639,173 1,048,160 Public works 106,707 152,216 105,659 106,871 6,604,149 783,843 1,142,494 Parks and recreation 9,893 12,658 15,906 33,575 13,456 46,058 20,294 Capital grants and contributions General govemment 50,337 171,400 Public safety 49,900 4,651 326,143 5,000 50,000 Public works 17,164,034 9,872,250 13,320,961 6,169,357 3,384,857 1,420,813 2,783,528 Parks and recreation 1,312,088 806,770 1,595,022 2,272,358 550,757 871,266 289,398 Total program revenues 33,491,010 25,698,067 31,488,979 21,366,450 20,879,895 12,833,618 11,612,230 Net (Expense) Revenue General govemment 416,274 402,614 (377,779) (1,206,394) (2,173,507) (3,906,135) (3,931,519) Public safety (6,287,145) (7,124,301) (7,554,564) (8,140,079) (8,944,381) (8,748,578) (8,035,060) Public works 17,715,667 (595,550) 9,579,120 4,833,307 (869,992) (9,262,669) (6,122,590) Parks and recreation (204,962) (300,076) 673,879 42,411 (2,555,238) (2,045,494) (3,582,546) Interest on long -term debt (2,784,308) (3,109,159) (4,032,004) (3,278,091) (3,867,395) (4,218,695) (3,994,790) Total net (expense) revenue 8,855,526 (10,726,472) (1,711,348) (7,748,846) (18,410,513) (28,181,571) (25,666,505) General Revenues and Other Property taxes 12,176,835 13,049,107 15,491,536 18,009,237 20,873,431 23,391,055 23,912,318 Investment earnings 557,709 794,732 1,023,616 1,505,062 1,977,519 1,383,236 463,092 Disposal of capital assets 1,434,692 Transfers in (out) 484,702 307,071 (867,254) (450,960) 131,796 (2,029,933) (347,807) Total general revenues and other (net) 13,219,246 14,150,910 15,647,898 20,498,031 22,982,746 22,744,358 24,027,603 Change in net assets $22,074,772 $ 3,424,438 $13,936,550 $12,749,185 $ 4,572,233 $ (5,437,2) $ (1,638,902) Note: Data not available prior to fiscal year 2003 implementation of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Govemments. 122 CITY OF LAKEVILLE, MINNESOTA Changes in Net Assets - Business -type Activities Last Seven Fiscal Years (accrual basis of accounting) Fiscal Year 2003 2004 2005 2006 2007 2008 2009 Expenses Liquor $1597,300 $1,648,759 $1,791,612 $1,940,626 $2,164.440 $2.407.714 $2.437,654 Utility 7,247,801 6,699,466 7,020,440 7,925,809 8,029,064 8,319,303 9,086,172 Total expenses 8,845,101 8,348,225 8,812,052 9,866,435 10,193,504 10,727,017 11,523,826 Program Revenues Charges for services Liquor 2,382,723 2,590,308 2,911,820 3,080,692 3,314,721 3,603,240 3,797,780 Utility 5,083,820 5,105,936 5,263,274 5,855,346 6,553,811 7,355,207 7,491,674 Operating grants and contributions Liquor 7,762 3,762 3,762 3,762 3,762 3,762 Utility 3,264 3,264 3,264 3,264 3,264 3,264 Capital grants and contributions Utility 6,922,442 3,114,733 6,911,241 3,239,467 1,394,810 975,410 158,252 Total program revenues 14,388,985 10,822,003 15,093,361 12,182,531 11,270,368 11,940,883 11,454,732 Net (Expense) Revenue Liquor 785,423 949,311 1,123,970 1,143,828 1,154,043 1,199,288 1,363,888 Utility 4,758,461 1,524,467 5,157,339 1,172,268 (77,179) 14,578 (1,432,982) Total net (expense) revenue 5,543,884 2,473,778 6,281,309 2,316,096 1,076,864 1,213,866 (69,094) General Revenues and Other Investment income Disposal of capital assets Transfers in (out) Total general revenues and other (net) 104,970 129,549 127,669 315,007 468,478 457,466 227,055 798,429 (484,702) (307,071) 867,254 450,960 (131,796) 2,029,933 347,807 (379,732) (177,522) 994,923 765,967 1,135,111 2,487,399 574,862 Change in net assets $ 5,164,152 $ 2,296,256 $7,276,232 $ 3,082,063 $ 2,211,975 $ 3,701,265 $ 505,768 Note: Data not available prior to fiscal year 2003 implementation of Govemmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Govemments. 123 CITY OF LAKEVILLE, MINNESOTA Changes in Net Assets - Total Governmental and Business -type Activities Last Seven Fiscal Years (accrual basis of accounting) Expenses Govemmental activities Business -type activities Total expenses Program Revenues Govemmental activities Business -type activities Total program revenues Total net (expense) revenue General Revenues and Other Governmental activities Business -type activities Total general revenues and other (net) Change in Net Assets Govemmental activities Business -type activities Total change in net assets Note: Data not available prior to fiscal year 2003 implementation of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Govemment. Fiscal Year 2003 2004 2005 2006 2007 2008 2009 $24,635,484 $36,424,539 $33,200,327 $29,115,296 $39,290,408 $41,015,189 $37,278,735 8,845,101 8,348,225 8,812,052 9,866,435 10,193,504 10,727,017 11,523,826 33,480,585 44,772,764 42,012,379 38,981,731 49,483,912 51,742,206 48,802,561 33,491,010 25,698,067 31,488,979 21,366,450 20,879,895 12,833,618 11,612,230 14,388,985 10,822,003 15,093,361 12,182,531 11,270,368 11,940,883 11,454,732 47,879,995 36,520,070 46,582,340 33,548,981 32,150,263 24,774,501 23,066,962 Net (Expense) Revenue Govemmental activities 8,855,526 (10,726,472) (1,711,348) (7,748,846) (18,410,513) (28,181,571) (25,668,505) Business -type activities 5,543,884 2,473,778 6,281,309 2,316,096 1,076,864 1,213,866 (69,094) 14,399,410 (8,252,694) 4,569,961 (5,432,750) (17,333,649) (26,967,705) (25,735,599) 13,219,246 14,150,910 15,647,898 20,498,031 22,982.746 22,744,358 24,027,603 (379,732) (177,522) 994,923 765,967 1,135,111 2,487,399 574,862 12,839,514 13,973,388 16,642,821 21,263,998 24,117,857 25,231,757 24,602,465 22,074,772 3,424,438 13,936,550 12,749,185 4,572,233 (5,437,213) (1,638,902) 5,164,152 2,296,258 7,276,232 3,082,063 2,211,975 3,701,265 505,768 $27,238,924 $ 5,720,694 $21,212,782 $15,831,248 $ 6,784,208 $ (1,735,948) $ (1,133,134) 124 CITY OF LAKEVILLE, MINNESOTA Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year General Fund Reserved $ - $ - $ - Unreserved 6,513,106 6,714,006 7,616,278 8,756,931 Total general fund 6,513,106 6,714,006 7,616,278 8,756,931 All Other Governmental Funds Reserved 12,415,075 6,160,774 4,111,548 8,323,038 Unreserved Special revenue 758,653 711,016 785,227 841,832 Capital projects 12,792,804 11,606,411 10,944,846 24,862,284 Total all other governmental funds Total Governmental Funds Reserved Unreserved All governmental funds percentage change 25,966,532 18,478,201 15,841,621 34,027,154 12,415,075 6,160,774 4,111,548 8,323,038 20,064,563 19,031,433 19,346,351 34,461,047 Total governmental funds $ 32,479,638 $ 25,192,207 $ 23,457,899 $ 42,784,085 2000 2001 2002 2003 21.1% -22.4% 2004 2005 2006 2007 2008 2009 $ - $ 10,322 $ 8,238 $ 8,483 $ 7,420 $ 9,899 9,089,470 10,012,455 11,010,426 11,698,291 11,238,093 11,196,826 9,089,470 10,022,777 11,018,664 11,706,774 11,245,513 11,206,725 29, 655,447 19,548,472 15,314,937 16,217,023 10,464,632 16, 713,410 799,538 810,972 937,978 1,083,601 1,107,202 1,325,731 16,213,118 13,076,770 9,839,833 17,115,258 11,074,322 12,549,905 46,668,103 33,436,214 26,092,748 34,415,882 22,646,156 30,589,046 29,655,447 19, 558, 794 15, 323,175 16, 225, 506 10,472, 052 16, 723, 309 26,102,126 23,900,197 21,788,237 29,897,150 23,419,617 25,072,462 $55,757,573 $ 43,458,991 $ 37,111,412 $ 46,122,656 $ 33,891,669 $ 41,795,771 30.3% -22.1% 24.3 % -26.5% 23,a% 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 Donations Miscellaneous Total revenues Expenditures General government Public safety Public works Parks and recreation Capital outlay Debt service Principal retirement Interest and 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 Disposal of capital assets Total other financing sources (uses) Net change in fund balances Debt service as a % of noncapital expenditures $ 7,605,258 2,368,359 6,507,215 5,965,469 2,469,466 2,140,265 143,187 881,902 28,081,121 27,472,117 2,444,943 2,622,385 2,902,201 2,972,240 5,635,751 6,142,144 6,738,049 6,961,425 2,532,825 2,821,464 2,960,189 3,513,913 1,562,446 1,788,825 1,973,844 2,169,700 15,687, 591 19,743,165 16,389,702 13,307,291 37,960,628 38,780,127 39,256,508 34,744,687 (9,879,507) (11,308,010) (6,608,084) (2,371,285) 5,430,244 5,367,001 4,794,423 6,241,430 (4,470,263) (4,211,046) (4,332,151) (4,990,500) 14,613,195 2,890,000 4,430,144 20,497,274 15,528,623 4,020,579 4,873,776 21,697,471 $ 5,649,116 $ (7,287,431) $ (1,734,308) $ 19,326,186 Note: The City has no other taxes than property taxes. 127 2000 (44,553) aa 2001 $ 8,924,597 2,418,411 4,357,521 6,205,645 3,001,895 1,652,960 282,431 628,657 (25,376) 42.3% 2002 $ 10,748,481 2,781,140 6,308,613 9,054,748 2,321,798 799,687 297,084 336,873 32,648,424 (18,640) 56.9% 2003 $ 11,989,619 3,471,896 3,352,557 10,524,322 1,804,620 554,428 246,613 429,347 32,373,402 7,710,000 2,995,000 5,725,000 3,165,244 2,387,072 2,667,144 2,567,523 2,654,874 (50,733) 51.2 2004 2005 $ 12,982,754 3,674,865 5,716.864 10,310,238 1,247,294 789,600 281,576 289,499 35,292,690 34,801,414 3,233,316 7,776,381 3,888,882 2,175,558 23, 770,126 3,783,000 3,360,565 47,987,828 (12,695,138) 3,361,954 (2,138, 784) 24,180,000 346,672 (81,216) 25,668,626 $ 12,973,488 21.4% $ 15,398,468 2,984,753 1,305,587 12,460,552 931,771 1,019,087 319,949 381,247 (19,416,359) 4,343,025 (2,775,293) 5,564, 000 33.8% (13,955) 7,117,777 $ (12,298,582) 2006 $ 17,882,708 2,651,382 2,400, 581 8,207,104 709,126 1,496,836 896,414 371,033 34,615,184 3,199,306 3,582,410 3,939,573 5,172,645 4,850,726 8,063,605 8,865,167 9,346,490 8,911,017 8,835,563 3,437,161 3,551,118 3,970,680 4,535,118 3,906,485 2,446,065 2,706,898 2,968,924 3,233,422 2,881,402 29,290,726 15,745,297 29,913,271 18,133,199 7,140,715 4,016,900 4,097,026 7,021,291 5,301,622 6,436,971 3,764,010 3,622,478 3,573,158 4,413,393 4,283,746 54,217,773 42,170,394 60,733,387 49,700,416 38,335,608 (7,555,210) 5,634,822 (4,997,410) 12,281,300 (12,825,000) 68,479 1,045,440 1,207,631 $ (6,347,579) macl 2007 $ 20,171,031 2,182,252 8,420,985 7,105,600 826,453 1,970,411 475,676 326,059 41,478,467 (19,254,920) 4,327,025 (3,600,158) 30,850,000 (3,945,000) 610,404 (3,242) 27,135 28,266,164 $ 9,011,244 295 % 2008 $ 22,901,637 1,936,532 2,250,332 6,713,370 777,153 1,379,315 1,008,326 366,680 37,333,345 (12,367,071) 7,688,315 (6,857,231) 2,280,000 (2,975,000) 136,084 $ (12,230,987) $ 7,904,102 2009 $ 23,785,468 1,603,909 3,158,128 4,044,018 769,624 459,967 406,845 635,781 34,863,740 (3,471,868) 5,156,485 (4,386,727) 4,945,000 5,180,000 116,016 365,196 11,375,970 CITY OF LAKEVILLE, MINNESOTA Tax Capacity Valuation and Assessor's Taxable Market Value of Taxable Property Last Ten Fiscal Years Fiscal Year Taxable Net Tax Capacity Valuation of Taxable Property Tax capacity value $ 32,665,479 $ 38,273,103 $ 30,860,946 $ 35,160,455 Less: Captured tax increment tax capacity Contributions to fiscal disparities pool Plus: Distribution from fiscal disparities pool Total taxable net tax capacity Taxable Net Tax Capacity Valuation by Class of Property Homestead residential Commercial /industrial, public utility, and personal property Non - homestead residential /apartments Agriculture and seasonal /recreational Total taxable net tax capacity Taxable net tax capacity as a percentage of assessor's taxable market value Direct tax capacity rate Notes: 2000 2001 2002 2003 The Omnibus Tax Bill adopted by the Minnesota Legislature during the First Special Session in 2001 made numerous changes to the Minnesota property tax system. Among those numerous changes to the property tax system, the Legislature compressed the class rates applicable to various classes of property. Taxes are determined by multiplying the taxable net tax capacity by the direct tax capacity rate 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. (1,695,189) (1,836,853) (1,409,425) (1,512,956) (2,511,793) (3,046,722) (2,016,210) (2,243,786) 3,961,886 4,719,318 3,360,512 3,976,442 $ 32,420,383 $ 38,108,846 $ 30,795,823 $ 35,380,155 $ 23,413,844 $ 28,023,170 $ 23,925,194 $ 28,508,725 7,632,338 8,704,157 5,724,659 5,661,002 1,010,968 1,028,082 844,787 853,597 363,233 353,437 301,183 356,831 32,420,383 $ 38,108,846 $ 30,795,823 $ 35,380,155 Assessor's taxable market valuation $ 2,080,485,400 $ 2,414,628,100 $ 2,767,785,500 $ 3,188,207,500 1.558% 1,57$% 1. _t13% 1.110% 19.466% 2Q,OZ9% 34.545% 32.$44 °Lv 129 2004 2005 2006 2007 2008 2009 $ 41,253,071 $ 48,211,759 $ 55,521,140 $ 62,477,351 $ 66,208,936 $ 67,887 456 (1,684,734) (1,821,312) (1,935,093) (2,129,445) (2,173,426) (2,127,819) (2,434,792) (2,848,021) (3,429,966) (3,848,084) (4,416,898) (4,888,029) 4,281,367 4,416,475 4,707,601 5,329,560 5,967,401 7,115,384 $ 41,414,912 $ 47,958,901 $ 54,863,682 $ 61,829,382 $ 65,586,013 $ 67,986,992 $ 32,609,971 $ 37,990,902 $ 44,087,330 $ 49,458,056 $ 52,038,379 $ 51,916,328 7,466,958 8,512,830 9,178,530 10,660,273 11,801,273 14,325,341 892,175 913,735 939,412 1,008,576 1,000,649 1,082,546 445,808 541,434 658,410 702,477 745,712 662,777 $ 41,414,912 $ 47,958,901 $ 54,863,682 $ 61,829,382 $ 65,586,013 $ 67,986,992 $ 3,742,588,600 $ 4,361,601,400 $ 5,034,819,600 $ 5,642,591,100 $ 5,951,319,600 $ 6,024,665,500 1.107% 1.100% 1,09Q% 1.096% 1.102% 30.050% 31.326% 31.610% 31.583 ° /Q 34.19 33.973% 1.128% CITY OF LAKEVILLE, MINNESOTA Property Tax Rates - Direct and Overlapping Governments Last Ten Fiscal Years Tax Capacity Rates for a City of Lakeville Resident living in Independent School District #194: Direct Rate - City of Lakeville Overlapping Rates Total Direct & Fiscal General Debt Dakota Ind. School Special Overlapping Year Levy Levy Total County District #194 Districts Rates Notes: 2000 17.564% 1.902% 19.466% 27.247% 58.045% 2.389% 126.613% 2001 17.456% 2.623% 20.079% 25.320% 56.209% 2.356% 124.043% 2002 31.762% 2.783% 34.545% 33.102% 25.984% 3.550% 131.726% 2003 27.526% 5.418% 32.944% 32.463% 30.962% 3.566% 132.879% 2004 24.629% 5.421% 30.050% 30.300% 26.901% 3.315% 120.616% 2005 24.788% 6.538% 31.326% 28.267% 25.411% 3.443% 119.773% 2006 25.321% 6.289% 31.610% 26.318% 25.670% 3.140% 118.348% 2007 24.250% 7.333% 31.583% 25.127% 25.252% 5.024% 118.569% 2008 25.142% 9.053% 34.195% 25.184% 26.272% 4 996% 124.842% 2009 25.002% 8.971% 33.973% 25.821% 27.062% 4.916% 125.745% Taxes are determined by multiplying the taxable net tax capacity by the tax capacity rate expressed as a percentage. The foregoing tax capacity rates do not reflect reductions for state property tax 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. Source: Dakota County Auditor and Treasurer's Office. ]31 CITY OF LAKEVILLE, MINNESOTA Principal Property Taxpayers Fiscal Year Ended December 31, 2009 and December 31, 2000 Principal Property Taxpayer Lakeville 2004 LLC Dakota Electric Association Heritage Commons LLC Target Corporation Argonne Investments LLC LTF Real Estate Company Inc. Southfork Apts. Ltd. Partnership CRW Lakeville LLC Cobblestone Lake LLC Muller Family Theatres of Lakeville Hasse Real Properties LLC International Home Food, Inc. Xcel Energy Mills Property Inc. Merillat Industries CenterPoint Energy Menasha Corporation Total Principal Taxpayer All Other Taxpayers Total Source: Dakota County Auditor and Treasurer's Office. Percentage Percentage Taxable of Taxable Taxable of Taxable Net Tax Net Tax Net Tax Net Tax Capacity Capacity Capacity Capacity Type of Business Value Rank Value Value Rank Value Commercial $ 375,562 1 0.6% Utility 321,276 2 0.5% $ 467,823 1 1.4% Retail 315,278 3 0.5% Retail 297,592 4 0.4% Retail 291,237 5 0.4% Real Estate 268,582 6 0.4% Apartments 210,395 7 0.3% 264,600 2 0.8% Retail 204,742 8 0.3% Industrial 204,392 9 0.3% Commercial 202,582 10 0.3% 236,727 5 0.7% Commercial 240,344 3 0.7% Food mfg. 238,146 4 0.7% Utility 216,793 6 0.7% Retail 214,444 7 0.7% Wood cabinet mfg. 183,831 8 0.6% Utility 174,092 9 0.5% Corrugated box mfg. 147,420 10 0.5% 2,691,638 4.0% 2,384,220 7.3% 65,295,354 96.0% 30,036,163 92.7% $ 67,986,992 1Q0,0% $32 420,383 100.0 °lQ 132 2009 2000 CITY OF LAKEVILLE, MINNESOTA Property Tax Levy and Collections Last Ten Fiscal Years Percentage Current of Total Year Collection of Current Collection Collections Fiscal Tax Levy Year's Levy of Prior Total To Tax Levy Year Certified Amount Percent Year Levy Collections Certified 2000 $ 8,835,262 $ 8,767,404 99.23% $ 58,519 $ 8,825,923 99.89% 2001 10,141,595 10,055,085 99.15% 82,496 10,137,581 99.96% 2002 11,393,492 11,289,918 99.09% 101,046 11,390,964 99.98% 2003 (1) 11,924,189 11,144,545 93.46% 114,295 11,258,840 94.42% 2004 (1) 12,838,429 12,068,753 94.00% 116,352 12,185,105 94.91% 2005 (1) 15,232,317 14,460,888 94.94% 96,209 14,557,097 95.57% 2006 (1) 17,741,065 16,943,054 95.50% 151,234 17,094,288 96.35% 2007 19,942,716 19,652,615 98.55% 258,926 19,911,541 99.84% 2008 (1) 22,690,614 22,023,558 97.06% 324,012 22,347,570 98.49% 2009 (1) 23,527,163 22,473,650 95.52% 22,473,650 95.52% Note: (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 2003 $ 562,069 4.71% 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% 133 CITY OF LAKEVILLE, MINNESOTA Ratio of Outstanding Debt by Type Last Ten Fiscal years Governmental Activities Business -type Total General General Activity Total % of Outstanding Fiscal Obligation Revenue Capital Obligation Revenue Outstanding Population Personal Debt Year Bonds Bonds Leases Capital Note Bond Debt u Income (2) Per Capita 2000 $51,730,000 $1,160,000 $325,976 $ - $ 1,270,000 $54,485,976 43,128 3.5 $ 1,263 2001 51,665,000 1,135,000 283,850 1,170,000 54,253,850 44,751 3.3 1,212 2002 47,660,000 3,640,000 241,724 220,144 1,065,000 52,826,868 46,285 3.0 1,141 2003 64,965,000 3,610,000 263,192 179,900 955,000 69,973,092 47,523 3.8 1,472 2004 85,560,000 3,485,000 219,888 136,900 840,000 90,241,788 49,097 4.5 1,838 2005 87,270,000 3,355,000 210,142 720,000 91,555,142 51,472 4.3 1,779 2006 72,110,000 12,445,000 183,697 590,000 85,328,697 52,323 3.8 1,631 2007 92,180,000 12,300,000 152,037 4,410,000 109,042,037 53,829 4.5 2,026 2008 86,390,000 12,100,000 119,061 4,265,000 102,874,061 54,328 4.1 1,894 2009 90,380,000 11,805,000 112,090 3,985,000 106,282,090 54,848 N/A 1,938 Source: (1) Metropolitan Council as of April 1, (except for 2000 Federal Census, 2009 City estimate). (2) See Demographic and Economic Statistics page. 134 •o co -0 0 CO z mo a) 0. 0 0 0 0 O'0 CU 0 ac+ 0 c0 0 m I V g z �F' CV CO LO N M co C r 0 � C M O 0) r r 'Tr ti N. 00 r 0 O r r r C 00 r LO M I- N co) 0) 00 CO O N 0 00 N C) I N N N N Lo o co co co co M • r N Cr; 3 V V V V V 10 LC) LO O a o C z 0 0 E d I O D � a) c 0 0 0 0 0 0 0 0 0 o CA r In et 0 CD N. r In N- C N O CO N 0) 00 ti 7 Co Ln o O - - N C O D CO C CO CO N 0) c0 0 0 0 O co 7 CD > =, M co Cr) CD N r N N CO N L_ a 00 • CV Ln r O CO CO r 0) .: V Cr) 00 CO r C) 0) CD CO O 0) CO •- 0 o Ln o co M a) co co 3 csi r O N. c) v 0) 03 0 o LO CO q a GO O C f mt Co Co co C) ' o iY. Ea _0I a) mr O 0) vs- co O 0) CD M 00 N.. Cr) 0) N N N 00 r r 0) C 0.0 r co in 0) O I. co 0 > O To - N M CD 4 O Ili 00 o M N •o tC) � Cr) ti 0) 0) 1 L >+ ih LO N 3 r O co 3 N. N - " _ - J 0 0 N cc) co V co 100 CD 63 CO C N 0 O t- CO 0 r co CO ~ O O CU 00 Cr) c0 o Tr O 0) 135 0 N co CA T Ili T C U co Ln 1.0 CO � L C) CO CO N c - 0)) / 0)) 0 V L C ^a)` E W O O O O O O O O O E) U co O 0) 0) O O O 0 O •C y - ao C O D c6 N L O CO L CO 0 LO L0 Co CO CO 0 O C) R 16 M o I+ CV CO CO 0 90 .4 LO CO CO M 0 0 0 0 0 0 0 0 0 0 E C a) o o 0 o o 0 O o 0 o E C C C0 4- > 00)) co O M 0 0 0 ti O y F2 2 y ii LO LO CD 0) 0) CO O O 0 z r r T C Q m a) co •o T N M Ln CD I.- co 0) 0 d N C O O O O O O O O O I- co V co N 0 0 N 0 0 0 0 0 0 CITY OF LAKEVILLE, MINNESOTA Direct and Overlapping Governmental Debt As of December 31, 2009 Name of Governmental Unit (1) Overlapping Debt (2) ISD 194 (Lakeville) $ 184,028,024 69.30% $ 127,531,421 ISD 192 (Farmington) 223,622,000 18.90% 42,264,558 Dakota County 76,380,000 13.80% 10,540,440 ISD 196 (Rosemount) 137,086,645 5.10% 6,991,419 Metropolitan Council 27,085,000 1.90% 514,615 Metropolitan Transit 202,915,000 2.20% 4,464,130 Total Overlapping Debt Direct Debt (3) City of Lakeville net bonded debt Total Direct and Overlapping Debt Notes: (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. (2) Only those units with general obligation debt outstanding are shown. Source: Dakota County Auditor and Treasurer's Office. General Debt Applicable to Taxable Obligation Debt Net Tax Capacity in the City Outstanding Percentage Amount 136 192,306,583 60,213,098 252,519,681 (3) City of Lakeville direct debt includes gross bonded debt and excludes debt payable from other sources supporting special assessment bonds, tax increment bonds, state -aid bonds, water revenue bonds, ice center refunding bonds, gross revenue recreation facility bonds, HRA public facility lease revenue bonds, liquor revenue bonds, and debt service monies available to pay both principal and interest. CITY OF LAKEVILLE, MINNESOTA Legal Debt Margin Last Ten Fiscal Years Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Legal Debt Margin Calculation: Assessor's Taxable Market Valuation $ 2,080,485,400 2,414,628,100 2,767,785,500 3,188,207,500 3,742,588,600 4,361,601,400 5,034,819,600 5, 642, 591,100 5,951,319,600 6,024,665,500 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: Special assessment bonds Tax increment bonds State -aid revenue bonds Water revenue bonds Ice center refunding bonds Gross revenue recreation facility bonds HRA public facility lease revenue bonds Liquor revenue bonds Debt payable from taxes Less debt service monies available to pay principal and interest Net bonded debt applicable to debt limit Source: Dakota County Auditor and Treasurer's Office. Legal Debt Limit $ 41,609,708 48,292, 562 55,355,710 63,764,150 74,851,772 87,232,028 100,696,392 112,851,822 178,539,588 180,739,965 $ 12,785,000 4,905,000 7,075,000 6,735,000 775,000 770,000 1,985,000 3,985,000 137 Net Bonded Debt Applicable to Debt Limit $ 5,451,174 5,582,630 6,233,199 21,546,324 35,144,523 39,070,920 45,395,089 60,848, 716 58,799,613 60,213,098 $ 106,170,000 (39,015,000) 67,155,000 (6,941,902) Net Bonded Debt Applicable Legal to Debt Limit as Debt a Percentage of Margin Legal Debt Limit $ 36,158,534 42,709,932 49,122,511 42,217,826 39,707,249 48,161,108 55,301,303 52,003,106 119,739,975 120,526,867 Fiscal Year 2009 $ 6,024,665,500 $ 180,739,965 60,213,098 60,213,098 Legal debt margin $ 120,526,867 Note: Minnesota Statutes 475.53, Subdivision 1, No municipality, except a school district or a city of the first 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. 13.10% 11.56% 11.26% 33.79% 46.95% 44.79% 45.08% 53.92% 32.93% 33.31% 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 2000 $ 5,909,593 $ 2,562,259 $ 3,347,334 $ 770,000 $ 943,504 $ 1,713,504 1.95 2001 6,174,825 2,574,699 3,600,126 825,000 911,268 1,736,268 2.07 2002 6,293,312 2,651,111 3,642,201 865,000 866,592 1,731,592 2.10 2003 7,942,245 3,062,937 4,879,308 915,000 978,279 1,893,279 2.58 2004 8,694,671 3,494,556 5,200,115 1,050,000 896,198 1,946,198 2.67 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 8,480,973 3,945,627 4,535,346 1,335,000 734,087 2,069,087 2.19 2008 9,360,504 4,092,983 5,267,521 1,350,000 747,273 2,097,273 2.51 2009 8,431,972 4,483,869 3,948,103 1,445,000 661,378 2,106,378 1.87 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 revenue, ice center refunding, gross revenue recreation facility, HRA public facility lease revenue, and liquor revenue. 138 CITY OF LAKEVILLE, MINNESOTA Demographic and Economic Statistics Last Ten Fiscal Years (1) Year Population Percentage Increase from Previous Year 2000 43,128 6.98% $ 1,577,493 $ 36,577 440 2001 44,751 3.76% 1,645,852 36,778 382 2002 46,285 3.43% 1,739,899 37,591 314 2003 47,523 2.67% 1,846,554 38,856 422 2004 49,097 3.31% 1,990,785 40,548 382 2005 51,472 4.84% 2,146,691 41,706 237 2006 52,323 1.65% 2,248,110 42,966 221 2007 53,829 2.88% 2,424,727 45,045 183 2008 54,328 0.93% 2,518,483 46,357 137 2009 54,848 0.96% N/A N/A 127 Annual percentage increase average last ten fiscal years 6.28% City of Lakeville Dakota County Unemp- Unemp- Labor loyment Labor loyment Year Force Rate Force Rate 2000 24,552 1.5% 215,912 2.2% 2001 25,665 2.0% 222,265 2.8% 2002 26,072 2.8% 226,750 3.8% 2003 28,302 2.5% 230,968 3.6% 2004 27,950 3.1% 229,734 4.2% 2005 28,745 3.2% 231,322 4.0% 2006 29,677 3.9% 230,427 4.1% 2007 30,492 4.3% 232,670 4.6% 2008 30,471 5.6% 229,716 6.1% 2009 30,727 6.4% 231,391 6.9% Personal Per Capita Building Permits Issued Income (2) Personal Family Dwellings (31 Housing units (In tho usands) Income Single Multiple Total Valuation Labor Force Unemployment Rate (2) 175 615 155 537 377 691 367 789 524 906 428 665 223 444 195 378 279 416 47 174 139 Unemployment Rate State of United Minnesota States 3.1% 3.7% 4.4% 5.4% 4.4% 5.8% 4.5% 5.4% 5.0% 5.4% 4.8% 4.8% 4.9% 4.5% 4.7% 5.1% 6.8% 7.1% 7.4% 10.0% Source: (1) Metropolitan Council as of April 1, (except for 2000 Federal Census, 2009 City Estimate). (2) U.S. Department of Commerce Bureau of Economic Analysis as of December 31, 2009. (3) City of Lakeville Inspections Department. N/A - Not available. $ 113,998,000 108,984,000 126,154,000 149,884,000 160,871,000 131,774,000 101,474,955 72,128,000 71,062,000 41,010,000 CITY OF LAKEVILLE, MINNESOTA Principal Employers Current Year and Nine Years Ago Employer (1) Lakeville Public School District #194 Ryt -Way Industries, Inc. ConAgra Store Brands Imperial Plastics, Inc. Despatch Industries, Inc. City of Lakeville (2) Menasha Corporation Jeff Belzer's Chevy- Dodge -KIA National Polymers, Inc. Hearth & Home Technologies, Inc. Merillat Industries Fleet Farm Rosemount Office Systems ReXam Flexible & Medical Pkg. All other employers • Total City of Lakeville civilian labor force (3) Product/Service Elementary & secondary schools Food service contractors Breakfast cereal products Plastics material & resin mfg. Industrial furnace & oven mfg. City govemment Corrugated & solid fiber box mfg. New & used auto dealership Plastics material & resin mfg. Fireplaces /metal work Wood cabinet manufacturing Retail- wholesale merchandise Office furniture (except wood) Unsupported plastics film /sheet Source: (1) Telephone survey of individual employers, November 2009. (2) As of December 31, 2009 (full -time equivalent). (3) U.S. Department of Commerce Bureau of Economic Analysis as of December 31, 2009. 140 Employees Rank % Employees Rank % 30,727 2009 1,420 1 4.6% 636 2 2.1% 489 3 1.6% 225 4 0.7% 215 5 0.7% 200 6 0.7% 191 7 0.6% 110 8 0.4% 100 9 0.3% 80 10 0.3% 27,061 1,120 350 625 200 182 200 325 207 180 150 88.0% 21,013 100,0% 24,552 2000 1 4.6% 3 1.4% 2 2.5% 6 0.8% 8 0.7% 7 0.8% 4 1.3% 5 0.8% 9 0.7% 10 0.8% 85.6% CITY OF LAKEVILLE, MINNESOTA Commercial and Industrial Building Permits Issued Years 2009 and 2008 BUSINESS Uponor First Industrial Brunswick Zone XL Kent 46 Office Bldg Buffalo Wild Wings Primrose School of North Lakeville Green Planet Car Wash Heritage Commons 3rd Ace Hardware Kinder Care GCR Tire Center BUSINESS Brackett's Crossing Con Agra Foods Mendell Mfg. Malt -O -Meal Ryt -Way Industries Hearth & Home Corporate Office Minnesota School of Business Holyoke Crossing Just Kidding Around Daycare NEW BUILDING PERMITS 2009 AND 2008 (in excess of $250,000) PRODUCT /SERVICE Distribution facility Speculative warehouse /distribution Bowling /family entertainment Office building Restaurant Daycare Car wash /detail center Multi- tenant retail Retail hardware store Daycare Commercial tire repair /distribution EXPANSION OR REMODEL BUILDING PERMITS 2009 AND 2008 (in excess of $250,000) Notes: (1) Valuation excludes land and personal property. Source: City of Lakeville Inspections Department. PRODUCT /SERVICE Private country club /golf course Store brand /private label food products Medical technology manufacturer Admin. offices /technology center Food packaging Hearth products producer Private business school Multi- tenant retail Daycare 141 VALUATION (1) $ 8,225,000 7,998,000 4,300,000 2,760,000 1,625,000 1,400,000 1,400,000 1,100,000 1,400,000 900,000 400,000 VALUATION (1) $ 2,800,000 1,400,000 690,000 600,000 500,000 425,000 413,000 385,400 350,000 CITY OF LAKEVILLE, MINNESOTA Employees by Function /Program (Full -Time Equivalent) Last Ten Fiscal Years Function /Prooram 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 General government City administration 2.7 2.7 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Communications 3.3 3.5 4.9 4.9 4.7 4.7 4.7 4.8 4.1 3.9 City clerk 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Finance 5.3 6.0 6.0 6.0 6.0 6.0 5.6 6.6 6.6 6.5 Information systems 1.9 2.0 2.0 2.6 2.6 3.0 3.9 4.0 4.0 3.3 Human resources 2.0 2.0 2.5 2.6 2.6 2.8 2.9 3.0 3.0 2.9 Planning 5.0 4.8 4.5 5.5 5.5 5.5 5.5 5.5 4.5 3.8 Community and economic development 2.3 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Protective inspection 10.7 11.0 11.0 11.0 12.0 12.0 12.0 12.0 12.4 8.7 General government buildings 2.8 2.6 2.6 2.5 2.0 2.0 2.5 3.1 3.1 3.1 Total general government 37.1 38.1 40.0 41.6 41.9 42.5 43.6 45.5 44.2 38.7 Public safety Police officers (sworn) 41.5 43.4 43.5 44.3 46.0 48.0 49.5 51.2 52.8 51.0 Police dispatchers 7.8 8.0 8.0 8.0 8.4 10.0 10.0 Police administration 10.8 12.4 11.9 11.9 12.0 11.4 11.4 12.9 12.4 11.1 Fire (excluding volunteer firefighters) 2.5 3.0 3.0 3.0 3.0 3.5 4.5 4.6 4.6 4.6 Total public safety 62.6 66.8 66.4 67.2 69.4 72.9 75.4 68.7 69.8 66.7 Public works Engineering 10.7 12.4 12.9 12.9 13.0 13.0 14.0 14.0 12.3 9.3 Street maintenance 14.2 16.5 16.4 17.0 17.0 17.6 18.5 19.8 20.0 19.4 Total public works 24.9 28.9 29.3 29.9 30.0 30.6 32.5 33.8 32.3 28.7 Parks and recreation Park maintenance 11.5 12.0 12.9 14.0 14.0 14.8 15.0 15.0 15.0 14.5 Recreation 4.6 4.6 4.7 4.7 4.7 4.7 4.7 5.3 5.3 4.9 Arts center 0.5 1.6 2.8 3.0 3.0 3.0 3.0 3.2 3.6 3.7 Total parks and recreation 16.6 18.2 20.4 21.7 21.7 22.5 22.7 23.5 23.9 23.1 Total governmental activities 141.2 152.0 156.1 160.4 163.0 168.5 174.2 171.5 170.2 157.2 Liquor 27.2 29.2 24.4 24.2 24.8 24.8 25.9 26.4 25.9 25.7 Utility 14.0 15.0 15.0 18.0 15.0 15.5 16.5 17.5 18.0 18.0 Total business -type activities 41.2 44.2 39.4 42.2 39.8 40.3 42.4 43.9 43.9 43.7 Total employees 182.4 196.2 195.5 202.6 202.8 208.8 216.6 215.4 214.1 200.9 Source: City of Lakeville Human Resources Department. 142 CITY OF LAKEVILLE, MINNESOTA Operating Indicators by Function Last Ten Fiscal Years Function 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 General government Number of registered voters 23,566 N/A 23,700 N/A 26,834 N/A 30.072 N/A 31,024 N/A Number of final plats approved 13 20 28 26 26 34 21 18 10 7 Number of building permits issued 2,551 2,435 2,435 2,528 2,623 2,179 3,970 3,487 1,878 1,421 Valuation of building permits issued (in millions) $ 149 $ 151 $ 163 $ 250 $ 230 $ 187 $ 165 $ 126 $ 111 $ 62 Public safety Crimes against person reported 266 241 235 215 201 194 141 155 158 151 Crimes against property reported 1,815 1,810 1,655 1,755 1,198 1,376 1,165 1,477 1 ,424 1,245 Traffic citations issued 2,953 2,827 3,709 3,871 4,404 5,020 4,229 6,086 6,985 6,487 Number of volunteer firefighters 63 70 84 77 75 88 80 80 90 78 Number of annual fire calls 649 710 782 762 852 1,048 1,078 1,149 1,230 964 Public works City street miles added Parks and recreation Park acres mowed N/A N/A N/A 434 442 453 465 465 475 475 Park facility reservations taken N/A N/A N/A 379 363 312 400 432 479 559 Program activity registrations taken N/A N/A N/A 5,146 6,627 5,396 6,749 6,836 7,994 8,201 Liquor Annual sales (in millions) $ 8.6 $ 8.9 $ 9.5 $ 9.9 $ 10.5 $11.5 $ 12.1 $13.0 $ 14.4 $ 14.6 2.4 9.8 6.1 9.6 5.8 9.8 3.5 2.1 1.0 0.5 Utility (in millions of gallons) Water (average daily consumption) 5.2 5.5 4.7 6.0 5.7 5.6 6.0 6.5 6.3 6.1 Sanitary sewer (1) 3.7 3.8 4.0 4.3 4.2 4.1 3.9 3.9 4.0 3.3 (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. 143 CITY OF LAKEVILLE, MINNESOTA Capital Assets Statistics by Function Last Ten Fiscal Years Function (1) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Public safety Police stations 1 1 1 1 1 1 1 1 1 1 Fire stations 3 3 4 4 4 4 4 4 4 4 Public works City streets (miles) 210.5 220.3 226.4 236.0 241.8 251.6 255.1 257.2 258.2 258.7 Parks and recreation Acres of parks, conservation areas, and greenways N/A N/A N/A 1,306 1,314 1,325 1,610 1,610 1,623 1,636 Parks N/A N/A N/A 52 53 53 53 55 56 59 Conservation areas N/A N/A N/A 18 18 18 18 18 18 18 Trails and sidewalks - paved (miles) N/A N/A N/A 77 79 83 86 88 91 91 Ice rinks - outdoor (fully boarded) N/A N/A N/A 10 11 11 12 12 12 12 Ice rinks - indoor 2 2 2 2 2 2 2 3 3 3 Fields (softball, soccer, baseball, football, Lacrosse) N/A N/A N/A 120 122 125 125 137 140 140 Courts (basketball, volleyball, tennis) N/A N/A N/A 23 26 27 27 36 39 39 Playgrounds N/A N/A N/A 33 33 36 38 38 39 39 Swimming beaches 3 3 3 3 3 3 3 3 3 3 Liquor Number of stores owned 2 2 2 2 2 2 2 2 2 2 Number of stores leased 1 1 1 1 1 1 1 1 1 1 Utility Water Water mains (miles) 205 222 232 247 270 290 297 304 310 311 Fire hydrants 2,286 2,416 2,481 2,634 2,840 3,031 3,128 3,313 3,374 3,386 Wells 10 12 12 13 14 15 15 16 16 17 Sanitary sewer Sanitary sewer mains (miles) 186 194 199 208 221 230 238 253 255 256 Sanitary sewer lift stations 20 20 20 21 21 21 20 20 20 20 Notes: (1) Indicators for general government functions are not available. N/A Indicates information is not available for this period at the printing of this report. Source: Various City of Lakeville Departments. 144 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, 2009 CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA Year Ended December 31, 2009 Table of Contents Page Independent Auditor's Report on Schedule of Expenditures of Federal Awards 1 Schedule of Expenditures of Federal Awards 2 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 Independent Auditor's Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A -133 Independent Auditor's Report on Compliance With Minnesota State Laws and Regulations 3-4 5-6 7 Schedule of Findings and Questioned Costs 8 -9 tydiR CERTIFIED PUBLIC ACCOUNTANTS City Council and Residents City of Lakeville, Minnesota INDEPENDENT AUDITOR'S REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 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 (the City) as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements, and have issued our report thereon dated June 16, 2010. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. Our audit was performed 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 Nonprofit Organizations, and is not a required part of the basic fmancial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. June 16, 2010 PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA -1- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Telephone: 952- 545 -0424 • Telefax: 952- 545 -0569 • www.mmkr.com CITY OF LAKEVILLE Schedule of Expenditures of Federal Awards Year Ended December 31, 2009 Federal Grantor/Pass- Through Grantor/Program Title Federal Federal CFDA No. Expenditures U.S. Department of Housing and Urban Development Passed through Dakota County Community Development Block Grants/Entitlement Grants 14.218 $ 59,767 U.S. Department of Justice Direct — Bulletproof Vest Partnership Program 16.607 2,421 U.S. Department of Transportation Passed through Minnesota Department of Transportation ARRA — Highway Planning and Construction 20.205 811,509 Passed through Minnesota Department of Public Safety Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.608 2,337 Safety Belt Performance Grants 20.609 10,175 Passed through the City of Mendota Heights Alcohol Impaired Driving Countermeasures Incentive Grants I 20.601 9,438 Total federal awards $ 895,647 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 Nonprofit 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. -2- M KR 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 City Council and Residents City of Lakeville, Minnesota 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 (the City) as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements, and have issued our report thereon dated June 16, 2010. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. 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. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. -3- PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA (continued) Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Telephone: 952- 545 -0424 • Telefax: 952 - 545 -0569 • www.mmkr.com Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of 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. We noted certain matters that we reported to management of the City in a separate letter dated June 16, 2010. This report is intended solely for the information and use of the City Council, management of the City, others within the City, federal awarding agencies, and pass - through entities and is not intended to be, and should not be, used by anyone other than these specified parties. i1 , ,e u , ez 4 a. PA. June 16, 2010 MMKR CERTIFIED‘PUBLIC ACCOUNTANTS Compliance INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 City Council and Residents City of Lakeville, Minnesota We have audited the compliance of the City of Lakeville (the City) with the types of compliance requirements described by the U.S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement that are applicable to each of its major federal programs for the year ended December 31, 2009. The City's major federal programs are identified in the summary of the auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. 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 Nonprofit 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. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended December 31, 2009. Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, 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. PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA (continued) -5- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Telephone: 952 -545 -0424 • Telefax: 952- 545 -0569 • www.mmkr.com 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. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses as defined above. This report is intended solely for the information and use of the City Council, management of the City, federal awarding agencies, and pass - through entities and is not intended to be, and should not be, used by anyone other than these specified parties. -24616 7 /44440zaay., A June 16, 2010 M KR CERTIFIED 'PUBLIC ACCOUNTANTS City Council and Residents City of Lakeville, Minnesota INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH MINNESOTA STATE LAWS AND REGULATIONS 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 (the City) as of and for the year ended December 31, 2009, which collectively comprise the City's basic financial statements, and have issued our report thereon dated June 16, 2010. We conducted our audit 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 the provisions of the Minnesota Legal Compliance Audit Guide for Local Governments, promulgated by the Office of the State Auditor pursuant to Minnesota Statute § 6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Minnesota Legal Compliance Audit Guide for Local Governments covers seven main 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 study included all of the listed categories. The results of our tests indicate that, for the items tested, the City complied with the material terms and conditions of applicable legal provisions. This report is intended solely for the information and use of the City Council, management of the City, and the state of Minnesota and is not intended to be, and should not be, used by anyone other than these specified parties. - /'v( `' -` , C:D •, P A . June 16, 2010 PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA -7- Malloy, Montague, Karnowski, Radosevich & Co., P.A. 4353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Telephone: 952 -545 -0424 • Telefax: 952 -545 -0569 www.mmkr.com A. SUMMARY OF AUDIT RESULTS Financial Statements What type of auditor's report is issued? CITY OF LAKEVILLE Schedule of Findings and Questioned Costs Year Ended December 31, 2009 This summary is formatted to provide federal granting agencies and pass - through agencies answers to specific questions regarding the audit of federal awards. Internal control over fmancial reporting: Are there significant control deficiencies disclosed? Yes No X Are any of these condition(s) a material weakness? Yes No N/A X Noncompliance material to the financial statements: Are there findings material to the financial statements? Yes No X Federal Awards Internal controls over major federal award programs: Are there significant control deficiencies disclosed? Yes No X Are any of these condition(s) a material weakness? Yes No N/A X Major federal award program compliance: What type of auditor's report is issued? Unqualified X Qualified Adverse Disclaimer Are there audit findings relative to the major programs? Yes No X Programs tested as major programs: Program or Cluster CFDA No. U.S. Department of Transportation ARRA — Highway Planning and Construction 20.205 Threshold for distinguishing type A and B programs: $ 300,000 Does the auditee qualify as a low -risk auditee? Yes No X Unqualified Qualified Adverse Disclaimer X CITY OF LAKEVILLE Schedule of Findings and Questioned Costs (continued) Year Ended December 31, 2009 B. FINDINGS — INTERNAL CONTROL OVER FINANCIAL REPORTING 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 There were no findings reported in the previous year. Management Report for City of Lakeville, Minnesota December 31, 2009 tvdt CERTIFIED PUBLIC ACCOUNTANTS To the City Council City of Lakeville, Minnesota We have prepared this management report in conjunction with our audit of the City of Lakeville's (the City) financial statements for the year ended December 31, 2009. The purpose of this report is to communicate information relevant to city finances in Minnesota and to provide comments resulting from our audit process. We have organized this report into the following sections: • Audit Summary • Funding Cities in Minnesota • Governmental Funds Overview • Financial Trends and Analysis • 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. This report is intended solely for the information and use of those charged with governance of the City, management, and those who have responsibility for oversight of the financial reporting process and is not intended to be, and should not be, used by anyone other than these specified parties. 7 %('n , k June 16, 2010 PRINCIPALS Kenneth W. Malloy, CPA Thomas M. Montague, CPA Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichren, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA Malloy, Montague, Karnowski, Radosevich & Co., P.A. 5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Telephone: 952- 545 -0424 • Telefax: 952- 545 -0569 • www.mmkr.com 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. 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, 2009. 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 to you the following information related to our audit. AUDIT OPINION AND FINDINGS Based on our audit of the City's financial statements for the year ended December 31, 2009: • We have issued an unqualified opinion on the City's fmancial statements. • We reported no matters involving the City's internal control over financial reporting that we consider to be material weaknesses. • The results of our testing disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. • We noted that the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements. • We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses in our testing of major federal programs. • The results of our tests indicate that the City has complied, in all material respects, with the requirements applicable to each major federal program. • We have 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. 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 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 basic 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 of the City were as follows: • 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. Management expects any differences between estimates and actual amounts of these estimates to be insignificant. We reviewed and tested management's procedures and underlying supporting documentation in the areas discussed above. We concluded that the accounting estimates and management judgments appeared to consider all significant factors and resulted in appropriate accounting recognition. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing and completing our audit. 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. 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. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter dated June 16, 2010. 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 MATTERS 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. LEGISLATION FUNDING CITIES IN MINNESOTA The following is a summary of significant legislative activity passed in calendar 2009 affecting the finances of Minnesota cities: Unallotment — The 2009 legislative session ended without an agreement on how to erase the state budget deficit. The Legislature approved and sent a final package of budget - balancing tax items to the Governor, but the Governor vetoed the bill and balanced the budget on his own using his power of unallotment. The Governor's unallotment plan included delays in the payment of state revenues to school districts, and a reduction in appropriations to other state programs, including local government aid (LGA) and market value homestead credit (MVHC). The unallotments included $193 million in reductions in calendar 2009 and 2010 to LGA and MVHC to cities, calculated at 3.31 percent and 7.64 percent, respectively, of the total calendar 2009 aggregated levy and LGA of the city. Cuts are first taken from LGA and then from MVHC, as necessary. A city's total reduction could not exceed $22 and $55 per capita, respectively. Cities with populations below 1,000 and below the state -wide average tax base per capita were exempted from these cuts. In May 2010, the Minnesota Supreme Court ruled on a lawsuit brought by a program that had its funding cut through unallotment. The court ruled that the Governor's "use of unallotment power to address the unresolved deficit exceeded the authority granted to the executive branch by statute." While the court ruled only on the cuts to this specific program, the decision called into question all of the Governor's reductions, which were subsequently revisited during the 2010 legislative session. Levy Limitations — The 2008 Legislature passed a law that limits general operating property tax levy increases for cities with populations over 2,500 to 3.9 percent annually for the next three calendar years. The 2009 legislative session ended with levy limits intact. Levy limits will remain in place for at least the 2010 budget year, with a couple of minor modifications that were contained in laws passed in 2009. For the calendar 2010 tax year, cities will be able to declare "special levies" for the calendar 2008 and 2009 unallotment losses described earlier. The calendar 2010 unallotment losses can be declared for the 2011 tax year. Emergency Certificates of Indebtedness — The law authorizes a city to issue emergency debt certificates if the city's current year revenues are reasonably expected to be reduced below the amount provided in the city's budget approved when the property tax levy of the city was certified. This law only allows for the issuance of this debt if the revenues of the city will be insufficient to meet the expenses incurred or to be incurred during the current fiscal year. For example, emergency debt certificates could be issued as a result of mid -year reductions in state aid payments for LGA or MVHC, or when a city is experiencing a high level of property tax delinquencies. This law also requires the city to levy property taxes for the payment of principal and interest on the certificates issued. FEDERAL RECOVERY ACT The American Recovery and Reinvestment Act of 2009 is expected to provide approximately $300 billion in federal funds to state and local governments, and to institutions of higher education. These funds are intended to supplement existing federal programs, create new programs, or provide more broad fiscal relief. Many cities are hoping to receive some of these temporary funds for programs and projects. The American Recovery and Reinvestment Act of 2009 mandates that there be an unprecedented amount of oversight and transparency around the spending of these funds, including specific audit and internal control requirements. -4- The additional internal control requirements include the need for controls over the acceptance of recovery funds, appropriate controls over the segregation of these funds from other sources of revenue, compliance with the additional laws and regulations specific to each grant award, and additional financial reporting requirements back to the appropriate federal agency. These additional controls also include considerations into whether control procedures are in place over the federal grant expenditures to prevent unallowable expenditures, consideration into whether additional controls and systems will be needed to ensure funds are able to be separately tracked and identified, and consideration into if controls are sufficient for any funds that are passed along to subrecipients. 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 revenue from state aids and fees related to new development have dwindled due to the struggling economy. This has placed added pressure on local taxpayers already beset by higher unemployment, lower property values, and tighter credit markets. As a result, municipalities in general are experiencing increases in tax delinquencies, abatements, and foreclosures. This instability has led to significant fiscal challenges for many local governments, and increased the investing public's concerns about the security of the municipal debt market. Property values within Minnesota cities experienced average increases of 7.0 percent for taxes payable in 2008 and 1.5 percent for those payable in 2009, reflecting the slowdown in growth in market values. It is important to remember that the 2009 market value is based on estimated values as of January 1, 2008, and the housing market is still experiencing difficult times In comparison, the City's market value increased 5.5 percent in 2008 and 1.2 percent in 2009. The following graph shows the City's changes in taxable market value over the past 10 years: $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 $- Estimated Market Value G 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 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 local tax capacity increased 5.5 percent in 2008 and 2.1 percent in 2009. The following graph shows the City's change in tax capacities over the past 10 years: $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 - $10,000,000 - $- Local Tax Capacity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Rates expressed as a percentage of net tax capacity Average tax rate City County School Special taxing Total All Cities Seven - County City of State -Wide Metro Area Lakeville 2008 2009 2008 2009 2008 2009 36.3 36.9 33.6 33.7 34.2 33.9 38.0 39.3 34.9 34.7 25.2 25.8 21.1 22.0 21.3 22.1 27.4 28.2 5.6 5.6 7.0 5.9 3.6 4.2 101.0 103.8 96.8 96.4 90.4 92.1 Although it is impossible to consider every aspect and variable of local government spending, average tax rates are often used as a benchmark. The total tax capacity rates for the City's residents have been below the state -wide and metro area averages in recent years. The City's levy rate decreased for 2009. This decrease was the result of a $370,000 reduction in the City's levy to offset an increase in the Metropolitan Council transit levy (included in special taxing districts above). GOVERNMENTAL FUNDS REVENUE 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. Governmental funds include the General Fund, special revenue funds, debt service funds, and capital project funds. We have also included the most recent comparative state -wide averages available from the State Auditor. The reader needs to consider the effect of inflation and other known changes or differences when comparing this data. 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 amounts received from the typical major sources of revenue will naturally vary between cities based on their particular situation. This would include the City's stage of development, location, size and density of its population, property values, services it provides, and other attributes. The following table presents the City's revenue per capita of its governmental funds for the past three years, together with state -wide averages: Governmental Funds Revenue per Capita With State -Wide Averages by Population Class State -Wide City of Lakeville Year December 31, 2008 2007 2008 2009 Population 20,000 - 100,000 53,829 54,328 54,848 Property taxes $ 376 $ 359 $ 405 $ 418 Tax increments 61 16 16 16 Franchise fees and other taxes 37 9 10 10 Special assessments 61 15 14 14 Licenses and permits 33 32 26 19 Intergovernmental revenues 147 156 41 58 Charges for services 79 132 124 74 Other 89 51 51 27 Total revenue $ 883 $ 770 $ 687 $ 636 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 revenue from property taxes has been higher than average the last two years as the City has had to increase its levy to make up for lost state aid and to provide for debt service of recent bond issues. The City's governmental funds received total revenues of $34.9 million in 2009, down about $2 5 million (6.6 percent) from the prior year. On a per capita basis, governmental fund revenue for 2009 decreased $51 from the prior year. Revenue from charges for services decreased by $50 per capita, primarily due to the economic recession that caused reductions in revenue streams from development. Other revenue was $24 per capita lower than last year, mainly due to a decrease in investment income of about $919,000 in these funds. Intergovernmental revenues increased $17 due to a federal ARRA grant received in 2009, and an asset liquidation distribution of about $293,000 from ALF Ambulance. -7- GOVERNMENTAL FUNDS EXPENDITURES Similar to our discussion of revenues, the expenditures of governmental funds will 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, which 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: State -Wide Year December 31, 2008 Population 20,000 - 100,000 Current General government Public safety Public works Parks and recreation All other $ Governmental Funds Expenditures per Capita With State -Wide Averages by Population Class 2007 53,829 City of Lakeville 2008 54.328 2009 54,848 86 $ 73 $ 95 $ 88 237 174 164 161 88 74 83 71 86 55 60 53 100 — — $ 597 $ 376 $ 402 $ 373 Capital outlay and construction $ 327 $ 556 $ 334 $ 130 Debt service Principal $ 112 $ 130 $ 98 $ 117 Interest and fiscal 41 66 81 78 $ 153 $ 196 $ 179 $ 195 Total expenditures in the City's governmental funds for 2009 were $38.3 million, a decrease of about $114 million (22.9 percent) from the previous year. On a per capita basis, the City's funds expended a total of $698 in 2009. The City's current operating expenditures for 2009 were $373 per capita, a decrease of $29 from the prior year. Current expenditures decreased in all functional areas, mainly due to budget cuts implemented by the City. The largest decrease was in public works, which decreased $12 per capita due to the elimination of staff positions. The City continues to spend significantly less per capita on current operating costs than other Minnesota cities in its population class. The City's capital outlay costs decreased $204 per capita from the prior year. The main factor in this decrease was the construction of a new police facility in the prior year. Capital outlay expenditures for street and park improvements were also down from the prior year. Debt service costs for 2009 were $16 per capita higher than the previous year. -8- GENERAL FUND $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 $— FINANCIAL TRENDS AND ANALYSIS 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, street maintenance, and parks and recreation. The following graph displays the City's General Fund trends of financial position and changes in the volume of financial activity. Fund balance and cash balance are typically used as indicators of financial health or equity, while annual expenditures are often used to measure the size of the operation. General Fund Financial Position Year Ended December 31, 2009 2005 2006 2007 2008 2009 B!I Fund Balance D Cash Balance (Net of Interfund Borrowing) Expenditures The City's General Fund cash and investments balance at December 31, 2009 was $10,920,387, a decrease of $742,050 from the previous year. Total fund balance at December 31, 2009 was $11,206,725, which is a decrease of $38,788 from the prior year, but $1,396,673 higher than projected in the City's final budget. This fund balance level represents approximately 57.0 percent of the City's annual General Fund expenditures, based on 2009 levels. By comparison, unreserved fund balance at the end of 2008 represented 53.4 percent of annual General Fund expenditures. Over the last few years, the City has generally been able to maintain stable cash and fund balance levels, despite significant legislative cuts to state aid. This is an important factor because a government, like any organization, requires a certain amount of equity to operate. Generally, the amount of equity required typically increases as the size of the operation increases. The primary reason the City needs to maintain adequate fund equity is to provide cash flow for its daily operations. The General Fund received almost 77 percent of its 2009 General Fund revenue from property taxes, which are paid out twice a year. The City's cash reserves provide cash flow until it receives its first tax settlements from the county in June. A healthy financial position also 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 can be a factor in determining the City's bond rating and resulting interest costs. -9- The following graph reflects the City's General Fund revenue sources for 2009 compared to the budget: Taxes Licenses /Permits Intergovernmental Charges for Services Other $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 $ — s( 00 0 00 0 00 0 000 0 00 0 00 0 00 0 000 OOO 000 000 00 0 0 0 0 0 0 0 0 0 0 09 0 09 0 0 9 0 0 9 09 0 9 0 0 9 0 09 0 09 0 09 0 0 9 0 09 0 0 9 0 0 9 0 09 0 0 9 � �o ,� � 494" o � ,� � g 0 O o �o � ,o � h 0 C 4 9 4 9 4 9 4 9 4 9 4 9 4 9 Total General Fund revenues for 2009 were $20,226,793, which was $167,369 (0.8 percent) over the final budget. The City has experienced a substantial decline in residential development in recent years due to the economy, which resulted in revenue from licenses and permits coming in $80,037 under budget for 2009. However, revenues from public works service charges (primarily engineering design and inspection fees) were over budget by $224,418 primarily due to the reconstruction of Holyoke/Highview Avenue. The following graph presents the City's General Fund revenue sources for the last five years: General Fund Revenue by Source Year Ended December 31, 2009 General Fund Revenue Budget 0 Actual - 2005 2006 2007 2008 2009 LED Taxes O Licenses and Permits 0 Intergovernmentaai g Charges for Services 0 Other Overall, General Fund revenues decreased $111,260 (0.6 percent) from the previous year. Revenue from property taxes increased by $118,450 due to an increase in the City's levy for growth and inflation. Charges for services increased approximately $60,385 from last year, mainly due to Holyoke/Highview reconstruction engineering design and inspection services and I -35 /County Road 70 water and sanitary sewer inspection services. Revenue from license and permits decreased about $355,119 due to the drop in residential building permits from 2008. Intergovernmental revenues increased by about $148,397, mostly due to the City allocating more of its state aid street funds to the General Fund for maintenance. The following illustrations present the City's General Fund spending for 2009 and for the past five years: General Government Public Safety Public Works Parks and Recreation $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 $ - 2005 General Fund Expenditures �+, 00 0 00 00 00 00 00 0 0 0 0 0 0 0 0 0 0 00 0 00 0 0 0 0, 0 000 0 00 00 0 Budget ❑ Actual Total General Fund expenditures for 2009 were $19,650,579, which was $1,229,380 (5.9 percent) under the final budget. General Fund expenditures were under budget in every department due to the City's cost cutting efforts, which included reductions to personnel, limiting commodity purchases, and efforts to reduce utility usage. In the public safety department, where reductions included eliminating fire department response to certain medical related calls and lowering the City's contribution for fire relief pensions, expenditures were under budget by $506,746. Parks and recreation costs were under budget $336,893, due in part to the deferral of selected maintenance projects. General government expenditures were $317,141 under budget, mainly in city administration and inspections. General Fund Expenditures by Function Year Ended December 31, 2009 2006 o General Government ❑ Public Safety O Public Works 0 Parks and Recreation Overall, General Fund expenditures decreased $1,414,577 (6.7 percent) from the prior year. General government expenditures were $543,558 lower than last year mainly due to the City's elimination of staff positions and various other cutbacks. Public works expenditures were $392,557 lower than last year mainly due to reductions in engineering salaries and services, as well as street maintenance supplies. Parks and recreation costs were reduced by $395,696 in 2009, with the majority of the decrease in park maintenance salaries and services, and postponing major maintenance projects. 2007 2008 2009 25.4% 25.4% 25.5% 24.9% 26.0% 10.2% 9.7% 10.1% 9.8% 10.7% LIQUOR FUND The following graphs present five years of operating results for the Liquor Fund: $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $— 30% 25% 20% 15% 10% 5% 2005 Liquor Fund — Revenues, Expenses, and Income Year Ended December 31, 2009 2005 2006 2007 2008 2009 ❑ Sales 8 Cost of Sales 18 Operating Expenses 0 Operating Income Liquor Fund — Operating Ratios Year Ended December 31, 2009 2006 2007 -12- 2008 M Gross Profit as a Percentage of Sales ❑ Operating Income as a Percentage of Sales 2009 The Liquor Fund ended 2009 with net assets of $6,230,447, an increase of $818,925 from the prior year. Of this, $595,194 represents the investment in capital assets, and $295,133 is restricted in accordance with revenue bond covenants, leaving $5,340,120 of unrestricted net assets. Gross liquor sales for 2009 were $14,604,481, a $161,126 (1.1 percent) increase from last year. The Liquor Fund generated a gross profit of $3,797,780 in 2009 or about 26 percent of gross sales. Operating expenses for 2009 were $2,231,914, up $40,500 from last year, primarily in other charges and services. Net operating income for 2009 was $1,565,866, about 10.7 percent of gross sales. UTILITY FUND The following graph presents five years of operating results for the Utility Fund: $8,000,000 $ 7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- Utility Fund Year Ended December 31, 2009 2005 2006 2007 = Operating Revenue 1 Operating Expenses Excluding Depreciation Operating Income (Loss) Before Depreciation 2008 2009 The Utility Fund ended 2009 with net assets of $113,086,845, a decrease of $321,758 from the prior year. Of this, $102,554,828 represents the City's investment in capital assets, net of related debt, leaving $10,532,017 of unrestricted net assets. Utility Fund operating revenue was $7,491,674 for 2009, an increase of $136,467 (1.9 percent). Most of this increase was in sewer revenue, which was over $297,000 higher than last year due to increased charges implemented in the City's sewer rate structure in 2009. Operating expenses (including depreciation of $2,995,222) were $9,091,851, which represents an increase of $752,228 (9.0 percent). Most of the expense increase was due to a $173,804 increase in sewer disposal charges paid by the City, the continued customer water meter replacement program which cost approximately $206,000 during 2009, and maintenance costs for the rehabilitation of a sanitary sewer lift station (about $213,000). GOVERNMENT -WIDE FINANCIAL STATEMENTS The City's financial statements include fund -based information that focuses on budgetary compliance, and the sufficiency of the City's current assets to finance its current liabilities. The GASB Statement No. 34 reporting model 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 statements provide information on the total cost of delivering services, including capital assets and long -term liabilities. Statement of Net Assets The Statement of Net Assets essentially tells you what your city owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net assets represent 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, the Statement of Net Assets divides the net assets into three components: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The following table presents the City's net assets as of December 31, 2009 for governmental activities and business -type activities: Calculation of net assets Current and other assets Net book value of capital assets Current liabilities Long -term liabilities (including due within one year) Total net assets Categories of net assets Invested in capital assets, net of related debt Restricted Unrestricted Governmental Activities $ 53,870,342 190,311,798 (5,826,195) (106,902,995) $ 131,452,950 Business -Type Activities Total $ 18,132,087 $ 72,002,429 107,161,216 297,473,014 (1,516,011) (7,342,206) (4,317,273) (111,220,268) $ 119,460,019 $ 250,912,969 $ 119,699,102 $ 103,150,022 $ 222,849,124 10,542,926 295,133 10,838,059 1,210,922 16,014,864 17,225,786 Total net assets $ 131,452,950 $ 119,460,019 $ 250,912,969 The City's total net assets were $1,333,134 lower than at the beginning of the year. Governmental activities decreased net assets by $1,638,902, which was partially offset by a $505,768 increase from business -type activities. The City's investment in capital assets, net of related debt, decreased by $2,641,168, which is primarily due to current year depreciation. Restricted net assets increased by $1,489,839, and the unrestricted net assets, which are available to finance the day -to -day operations of the City, went up by $18,195. -14- 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 assets. 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 net assets of the City for the year ended December 31, 2009: Expenses Program Revenue Net Difference Net (expense) revenue Governmental activities General government $ 5,916,590 $ 1,985,071 S (3,931,519) Public safety 9,726,394 1,691,334 (8,035,060) Public works 12,866,216 6,743,626 (6,122,590) Parks and recreation 4,774,745 1,192,199 (3,582,546) Interest on long -term debt 3,994,790 — (3,994,790) Business -type activities Liquor 2,437,654 3,801,542 1,363,888 Utility 9,086,172 7,653,190 (1,432,982) Total $ 48,802,561 $ 23,066,962 (25,735,599) General revenues Property taxes and tax increments 23,912,318 Investment earnings 690,147 Total general revenues 24,602,465 Change in net assets $ (1,133,134) 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 City's governmental operations tend to rely more heavily on general revenues, such as property taxes. In contrast, the City's business -type activities tend to rely more heavily on program revenues (service charges and liquor sales) to cover expenses. This is critical given the current external downward pressures on general revenue sources such as taxes and state aids. -15- ACCOUNTING AND AUDITING UPDATES GASB STATEMENT No. 51 ACCOUNTING AND FINANCIAL REPORTING FOR INTANGIBLE ASSETS Governments possess many different types of assets that may be considered intangible assets, including easements, water rights, timber rights, patents, trademarks, and computer software. This statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. The requirements in this statement improve financial reporting by reducing inconsistencies that have developed in accounting and financial reporting for intangible assets. These inconsistencies will be reduced through the clarification that intangible assets subject to the provisions of this statement should be classified as capital assets, and through the establishment of new authoritative guidance that addresses issues specific to these intangible assets given their nature. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2009. GASB STATEMENT No. 53 - ACCOUNTING AND FINANCIAL REPORTING FOR DERIVATIVE INSTRUMENTS The guidance in this statement improves financial reporting by requiring governments to measure derivative instruments at fair value in their economic resources measurement focus financial statements. These improvements should allow users of those financial statements to more fully understand a government's resources available to provide services. The disclosures provide a summary of the government's derivative instrument activity and the information necessary to assess the government's objectives for derivative instruments, their significant terms, and the risks associated with the derivative instruments. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2009. GASB STATEMENT No. 54 - FUND BALANCE REPORTING AND GOVERNMENTAL FUND TYPE DEFINITIONS The objective of this statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This statement establishes fund balance classifications (nonspendable, restricted, committed, assigned, and unassigned) that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The definitions of the General Fund, special revenue, capital projects, debt service, and permanent fund types are clarified by the provisions in this statement. Elimination of the reserved component of fund balance in favor of a restricted classification will enhance the consistency between information reported in the government -wide statements and information in the governmental fund financial statements and avoid confusion about the relationship between reserved fund balance and restricted net assets. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2010.