CITY OF ST. PAUL PARK FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

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1 FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014

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3 FINANCIAL STATEMENTS For the Fiscal Year Ended December 31, 2014 TABLE OF CONTENTS INTRODUCTORY SECTION Elected and Appointed Officials Organizational Chart PAGE i ii FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 4 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Balance Sheet - Governmental Funds 18 Reconciliation of Net Position in the Government-wide Financial Statements and Fund Balances in the Fund Basis Financial Statements 20 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 21 Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 23 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund 24 Combining Statement of Net Position - Proprietary Funds 25 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 26 Combining Statement of Cash Flows - Proprietary Funds 27 Notes to Financial Statements 28 Required Supplemental Information Schedule of Funding Progress - Other Post Employment Benefits 63 Combining Nonmajor Fund Statements and Schedules Combining Balance Sheet - Nonmajor Governmental Funds 64 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 65 Combining Balance Sheet - Nonmajor Special Revenue Funds 66 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Special Revenue Funds 67 Combining Balance Sheet - Nonmajor Debt Service Funds 68 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Debt Service Funds 70 Combining Balance Sheet - Nonmajor Capital Project Funds 72 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Capital Project Funds 74 OTHER REPORT SECTION 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 76 Independent Auditor's Report on Minnesota Legal Compliance 78

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5 INTRODUCTORY SECTION December 31, 2014

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7 ELECTED AND APPOINTED OFFICIALS December 31, 2014 POSITION NAME TERM EXPIRES City Council: ELECTED OFFICIALS Mayor Keith Franke December 31, 2015 Council Member Jennifer Cheesman December 31, 2015 Council Member Tim Jones December 31, 2015 Council Member Sandi Dingle December 31, 2017 Council Member Jeff Swenson December 31, 2017 APPOINTED OFFICIALS City Administrator Kevin Walsh Continuous City Clerk Sharon Ornquist Continuous Finance Officer Kimberly Sommerland Continuous i

8 Organizational Chart Citizens City Council (5) Advisory Commissions (4) City Administrator (1) Attorney (Contracted) Engineer (Contracted) Building Official (Contracted) Planner (Contracted) Administration Police Fire Public Works City Clerk (1) Police Chief (1) Fire Chief (1) Public Works Supervisor (1) Finance Officer (1) Sergeant (1) Asst. Chief (1) Public Works Asst Supervisor (1) Accounting Clerk (1) Administrative Assistant (1) Patrol Officers (7) Community Service Officer (1) Safety Officer (1) Captains (3) Chief Engineer (1) Maintenance Workers (5) Volunteer Firefighters (25) ii

9 FINANCIAL SECTION December 31, 2014

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11 Honorable Mayor and Members of the City Council City of St. Paul Park INDEPENDENT AUDITOR S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of St. Paul Park, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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 of St. Paul Park, as of December 31, 2014, and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America.

12 Honorable Mayor and Members of the City Council City of St. Paul Park Page 2 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis on pages 4 through 14 and the Schedule of Funding Progress Other Post-Employment Benefits on page 63 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of St. Paul Park's financial statements. The introductory section and combining nonmajor fund financial statements listed in the Financial Section of the Table of Contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section has not been subjected the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Report on Summarized Comparative Information The financial statements include partial prior year comparative information. Such information does not include all of the information required to constitute a presentation in accordance with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the City's financial statement for the year ended December 31, 2013, from which such partial information was derived.

13 Honorable Mayor and Members of the City Council City of St. Paul Park Page 3 We have previously audited the City's 2013 financial statements and our report, dated June 26, 2014, expressed unmodified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013, is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2015, on our consideration of the City of St. Paul Park's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and 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 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 in considering the City of St. Paul Park's internal control over financial reporting and compliance. Maplewood, Minnesota June 29, 2015

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15 MANAGEMENT S DISCUSSION AND ANALYSIS As management of the City of St. Paul Park, we offer readers of the City of St. Paul Park's financial statements this narrative overview and analysis of the financial activities of the City of St. Paul Park for the fiscal year ended December 31, 2014, with comparative data for the fiscal year ended December 31, FINANCIAL HIGHLIGHTS The assets of the City of St. Paul Park exceeded its liabilities at the close of the most recent fiscal year by $21,196,694 (net position). Of this amount, $3,152,671 (unrestricted net position) may be used to meet the City s ongoing obligations to citizens and creditors in accordance with the City s fund designations and fiscal policies. The City s total net position decreased by $117,222 during As of the close of the current fiscal year, the City of St. Paul Park governmental funds reported combined ending fund balances of $3,839,066. The amount of these fund balances that was restricted was $1,773,584, the nonspendable amount (related to prepaid expenses) was $9,928 and the assigned amount was $609,201. At the end of the current fiscal year, unassigned and assigned fund balance for the general fund was $2,003,502 or 79% of 2014 total general fund expenditures. The City of St. Paul Park increased long-term liabilities by $889,245 during the current fiscal year, primarily due to the issuance of the 2014A General Obligation Improvement Bonds. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of St. Paul Park's basic financial statements. The City of St. Paul Park's basic financial statements are comprised of the following three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other 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 of St. Paul Park's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City of St. Paul Park's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of St. Paul Park is improving or deteriorating. The statement of activities presents information showing how the City s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the 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). 4

16 MANAGEMENT S DISCUSSION AND ANALYSIS Both of the government-wide financial statements distinguish functions of the City of St. Paul Park 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 of St. Paul Park include general government, public safety, highways and streets, compost, and parks and recreation. The business-type activities of the City of St. Paul Park include the sewer and water funds. The government-wide financial statements can be found on pages of this report. 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 of St. Paul Park, 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 of St. Paul Park can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on nearterm 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 financial 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. The City of St. Paul Park maintains twenty-four 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, the Tax Increment Funds District 2 fund, the Improvement Bonds of 2009-A fund, the Improvement Bonds of 2011-A fund, the 2007 Street Reconstruction fund and the 2014 Street & Utility Improvements fund, which are considered to be major funds. Individual fund data for the other eighteen nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City of St. Paul Park adopts an annual budget for its general fund. Budgetary comparison statements have been provided for this fund (page 24) to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages of this report. 5

17 MANAGEMENT S DISCUSSION AND ANALYSIS Proprietary funds. The City of St. Paul Park maintains one type of proprietary fund which is enterprise funds. Enterprise funds are used to report the same functions presented as businesstype activities in the government-wide financial statements. The City of St. Paul Park uses enterprise funds to account for its sanitary sewer and water operations. 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 the sanitary sewer and water funds, which are considered to be major funds of the City of St. Paul Park. The basic proprietary fund financial statements can be found on pages of this report. Notes to the 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. The notes to the financial statements can be found on pages of this report. Other information. The combining statements referred to earlier in connection with non-major governmental funds can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the City of St. Paul Park, assets exceeded liabilities by $21,196,694 at the close of the most recent fiscal year. The largest portion of the City of St. Paul Park's net position ($15,086,418 or 71%) reflects its investment in capital assets (e.g. land, buildings, machinery and equipment) less any related debt used to acquire those assets that is still outstanding. The City of St. Paul Park uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of St. Paul Park's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 6

18 MANAGEMENT S DISCUSSION AND ANALYSIS City of St. Paul Park's Net Position Governmental Activities Business-type Activities Total Current and other assets $ 5,703,607 $ 6,208,725 $ 1,238,581 $ 1,226,304 $ 6,942,188 $ 7,435,029 Capital assets 17,832,206 16,541,404 2,872,400 2,983,459 20,704,606 19,524,863 Total assets 23,535,813 22,750,129 4,110,981 4,209,763 27,646,794 26,959,892 Long-term liabilities outstanding 5,061,690 4,228,371 1,041, ,529 6,103,145 5,213,900 Other liabilities 277, ,828 69, , , ,076 Total liabilities 5,339,160 4,510,199 1,110,940 1,135,777 6,450,100 5,645,976 Net position: Invested in capital assets, net of related debt 13,155,486 12,658,756 1,930,932 2,089,892 15,086,418 14,748,648 Restricted 2,957,605 4,031,077 2,957,605 4,031,077 Unrestricted 2,083,562 1,550,097 1,069, ,094 3,152,671 2,534,191 Total net position $ 18,196,653 $ 18,239,930 $ 3,000,041 $ 3,073,986 $ 21,196,694 $ 21,313,916 An additional portion of the City of St. Paul Park's net position (14%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($3,152,671) may be used to meet the government s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of St. Paul Park is able to report positive balances in all categories of net position, both for the government as a whole, as well as for its business-type activities. The same situation held true for the prior fiscal year. Governmental activities. Governmental activities account for of the City of St. Paul Park's net position. The total decrease in net position for governmental activities was $43,277. Key elements of this decrease are as follows: Public safety expenditures increased by $333,432 (26.2%) from the previous year due primarily to the purchase of firefighter protective gear and a breathing air system. In addition, the police department had an increase in wages and related benefits as a result of being fully staffed throughout the entire year in comparison to partial vacancies during Highways and streets expenditures decreased by $293,721 (23.9%) from the previous year due primarily to higher capitalized costs in 2014 as a result of the 2014 street project. 7

19 MANAGEMENT S DISCUSSION AND ANALYSIS Business-type activities. Business-type activities decreased the City of St. Paul Park's net position by $73,945. This decrease is due primarily to increased operating expenses in the water fund for watermain repairs, reservoir removal, purchase of replacement water meters and engineering services to complete the required Wellhead Protection Plan amendment. City of St. Paul Park's Change in Net Position Governmental Activities Business-type Activities Total Revenues: Program revenues: Charges for services $ 847,187 $ 874,019 $ 1,159,325 $ 1,233,034 $ 2,006,512 $ 2,107,053 Operating grants and contributions 221, , , ,128 Capital grants and contributions 364, , , , ,401 General revenues: Property taxes 1,948,507 2,227,955 1,948,507 2,227,955 Grants and contributions not restricted to specific programs 462, , , ,970 Refund of unused tax increment (437,762) (437,762) Other 77,752 50,768 4,890 (973) 82,642 49,795 Total revenues 3,483,415 3,726,924 1,164,215 1,435,378 4,647,630 5,162,302 Expenses: General government 593, , , ,017 Public safety 1,604,836 1,271,404 1,604,836 1,271,404 Highways and streets 935,040 1,228, ,040 1,228,761 Compost 10,231 10,515 10,231 10,515 Parks and recreation 264, , , ,998 Interest on long-term debt 134, , , ,702 Sewer and water 1,222,360 1,107,742 1,222,360 1,107,742 Total expenses 3,542,492 3,501,397 1,222,360 1,107,742 4,764,852 4,609,139 Increase (decrease) in net position before transfers (59,077) 225,527 (58,145) 327,636 (117,222) 553,163 Transfers 15,800 15,800 (15,800) (15,800) Increase in net position (43,277) 241,327 (73,945) 311,836 (117,222) 553,163 Net position, beginning of year 18,239,930 17,998,603 3,073,986 2,762,150 21,313,916 20,760,753 Net position, end of year $ 18,196,653 $ 18,239,930 $ 3,000,041 $ 3,073,986 $ 21,196,694 $ 21,313,916 8

20 MANAGEMENT S DISCUSSION AND ANALYSIS Below are specific graphs that provide comparisons of the governmental activities direct program revenues with their expenditures. Any shortfalls in direct revenues are primarily supported by property tax levy or general state aid. Expenses and Program Revenues - Governmental Activities Program revenues Expenses $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 General government Public safety Highways and streets Compost Parks Revenues by Source - Governmental Activities Grants and contributions not restricted to specific programs 12% Interest and other 2% Property taxes 50% Charges for services 21% Capital grants and contributions 9% Operating grants and contributions 6% 9

21 MANAGEMENT S DISCUSSION AND ANALYSIS The following graphs relate the business-type activity s program revenues with its expenditures. Since this activity requires significant physical assets to operate, any excess revenues are held for planned capital expenditures to keep pace with growing demand for services. Expenses and Program Revenues - Business-type Activities Program revenues Expenses $1,000,000 $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Water Sewer Revenues by Source - All Business-type Activities Capital grants and contributions 0% Interest and other < 1% Charges for services 100% 10

22 MANAGEMENT S DISCUSSION AND ANALYSIS Financial Analysis of the Government s Funds As noted earlier, the City of St. Paul Park uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of St. Paul Park'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 of St. Paul Park's financing requirements. In particular, unassigned 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 of St. Paul Park's governmental funds reported combined ending fund balances of $3,839,066, a decrease of $435,832 from the prior year. Approximately 54% of total fund balance, or $2,055,554, constitutes assigned and unassigned fund balance, which is available for spending at the government s discretion. The remainder of the fund balance ($1,783,512) is restricted or nonspendable to indicate that it is not available for new spending because it has already been restricted by creditors, grantors or regulations of other governments or has been expended for prepaid items. The general fund is the chief operating fund of the City of St. Paul Park. At the end of the current fiscal year, unassigned fund balance of the general fund was $1,954,570. As a measure of the general fund s liquidity, it may be useful to compare the unassigned fund balance to total fund expenditures. Unassigned fund balance represents 77% of total 2014 general fund expenditures. The fund balance of the City of St. Paul Park's general fund improved by $371,202 during the current fiscal year. The main factor for this change was the increase in Local Government Aid. The Tax Increment Funds District 2 fund decreased its fund balance by $738,240 with the payment of excess tax increment funds to Washington County following decertification of the district. The Improvement Bonds of 2009-A fund decreased its fund balance by $13,022 due primarily to scheduled bond payments in excess of property taxes, special assessments and transfers collected in the fund. The Improvement Bonds of 2011-A fund balance increased by $21,872 due mainly to the receipt of levied special assessments and transfers from the water fund in excess of scheduled debt service payments. The fund balance of the 2007 Street Reconstruction fund increased by $59,077 due to the receipt of levied special assessments. The fund balance of the 2014 Street & Utility Improvements fund increased by $261,977 due to proceeds from the issuance of the 2014A general obligation improvement bonds in excess of expenditures for capital outlay for the project. 11

23 MANAGEMENT S DISCUSSION AND ANALYSIS The special revenue funds decreased their collective fund balance by $431,149. This was mainly due to the expenditures related to the 8 th Avenue Outfall storm sewer improvements in excess of operating fees collected. The debt service funds, other than the Tax Increment Funds District 2, Improvement Bonds of 2009-A and Improvement Bonds of 2011-A funds described previously, increased their overall fund balances by $133,754 due primarily to collections of property taxes, special assessments and intergovernmental revenue in excess of scheduled debt service expenditures. The capital project funds, other than the 2007 Street Reconstruction and 2014 Street & Utility Improvements funds described previously, decreased their collective fund balance by $101,303 due primarily to capital outlay expenditures in excess of assessments collected and transfers into these funds. Proprietary funds. The City of St. Paul Park's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted assets for water operations at the end of the year amounted to $721,317, and those for sewer operations amounted to $347,792. The total decrease in net position for both funds was $20,699 and $53,246, respectively. Other factors concerning the finances of these two funds have already been addressed in the discussion of the City of St. Paul Park's business-type activities. General Fund Budgetary Highlights Differences between the original budget and the final amended budget for the General fund amounted to $23,222. The main components of the change was a reduction to sealcoating/crackfill services. Major variances between the final amended budget and actual amounts consist of the following: Property tax revenues exceeded budget by $329,171 due primarily to the receipt of excess tax increment funds redistributed from Washington County following the decertification of the district. General government expenditures were less than budget by $57,708, due primarily to lower than budgeted contracted services, including engineering and legal. Public safety expenditures were less than budget by $48,123 mainly as a result of lower than budgeted salaries and related benefits in the police department. Salaries and related benefits were budgeted based on the maximum contracted salary; however, not all officers were paid at the maximum rate. Parks and recreation current expenditures were less than budget by $36,610 due primarily to less than budgeted costs to make improvements to the hockey rink. 12

24 Capital Asset and Debt Administration CITY OF ST. PAUL PARK MANAGEMENT S DISCUSSION AND ANALYSIS Capital assets. The City of St. Paul Park's investment in capital assets for its governmental and business-type activities as of December 31, 2014, amounts to $20,704,606 (net of accumulated depreciation). This investment in capital assets includes land, buildings and systems, improvements, machinery and equipment, park facilities, roads, and highways. The total increase in the City of St. Paul Park's reported investment in capital assets for the current fiscal year was $1,179,743, or 6%. This increase is primarily a result of the completion of the restoration of the City's water tower as well as construction in progress as of December 31, 2014 related to the street improvement project started during City of St. Paul Park Capital Assets (net of depreciation) Governmental Activities Business-type Activities Total Land $ 1,296,373 $ 1,296,373 $ 39,000 $ 39,000 $ 1,335,373 $ 1,335,373 Construction in progress 1,233,434 18, ,840 1,233, ,363 Buildings 1,689,371 1,772,089 2,790,621 1,936,748 4,479,992 3,708,837 Improvements other than buildings 158, , , ,357 Machinery and equipment 667, ,300 42,779 56, , ,171 Infrastructure 12,786,598 12,632,762 12,786,598 12,632,762 Total $ 17,832,206 $ 16,541,404 $ 2,872,400 $ 2,983,459 $ 20,704,606 $ 19,524,863 Additional information on the City of St. Paul Park's capital assets can be found in Note 3C on pages of this report. Long-term debt. At the end of the current fiscal year, the City of St. Paul Park had $5,609,468 in bonds, certificates and notes payable outstanding. The entire $5,609,468 outstanding comprises debt backed by the full faith and credit of the government. City of St. Paul Park's Outstanding Debt General Obligation Bonds, Certificates and Notes Payable Governmental Activities Business-type Activities Total General obligation bonds $ 4,245,000 $ 3,405,000 $ $ $ 4,245,000 $ 3,405,000 General obligation notes 941, , , ,567 General obligation certificates 423, , , ,000 Total $ 4,668,000 $ 3,878,000 $ 941,468 $ 893,567 $ 5,609,468 $ 4,771,567 The City of St. Paul Park's total bonds and certificates payable increased by $837,901 during the current fiscal year. The increase was due primarily to the issuance of the 2014A General Obligation Improvement Bonds. 13

25 MANAGEMENT S DISCUSSION AND ANALYSIS The City of St. Paul Park maintained an AA bond rating from Standard & Poor s for general obligation debt as of December 31, State statutes limit the amount of general obligation debt a Minnesota City may issue to 3% of its market value of taxable property. The debt limitation for the City of St. Paul Park in 2014 was $7,978,032. The City s outstanding obligations applicable to the debt limit total $1,013,000, which is significantly less than the statutory limitation. A more detailed breakdown of these obligations can be found in Note 3D, beginning on page 45 of this report. Requests for Information This financial report is designed to provide a general overview of the City of St. Paul Park's finances for all those with an interest in the City s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the City Administrator, 600 Portland Avenue, St. Paul Park, MN Respectfully submitted, Kimberly Sommerland Finance Officer Kevin Walsh City Administrator 14

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27 GOVERNMENT-WIDE FINANCIAL STATEMENTS December 31, 2014

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29 STATEMENT OF NET POSITION December 31, 2014 With Comparative Totals for December 31, 2013 Governmental Business-type Total Activities Activities ASSETS Cash and investments $ 3,896,714 $ 977,435 $ 4,874,149 $ 5,261,403 Receivables (net of allowance for uncollectibles) 1,785, ,656 2,043,948 2,157,506 Due from other governmental units 11,673 11,673 7,922 Prepaid items 9,928 2,490 12,418 8,198 Capital assets: Nondepreciable 2,529,807 39,000 2,568,807 2,304,736 Depreciable, net 15,302,399 2,833,400 18,135,799 17,220,127 Total assets 23,535,813 4,110,981 27,646,794 26,959,892 LIABILITIES Accounts payable 109,144 9, , ,998 Accrued interest payable 53,596 53,596 40,877 Accrued expenses 7,407 7,407 3,466 Customer deposits 40,011 40,011 29,986 Unearned revenue 67,312 60, , ,749 Noncurrent liabilities: Due within one year 821,457 89, , ,691 Due in more than one year 4,240, ,531 5,191,764 4,258,209 Total liabilities 5,339,160 1,110,940 6,450,100 5,645,976 NET POSITION Net investment in capital assets 13,155,486 1,930,932 15,086,418 14,748,648 Restricted 2,957,605 2,957,605 4,031,077 Unrestricted 2,083,562 1,069,109 3,152,671 2,534,191 Total net position $ 18,196,653 $ 3,000,041 $ 21,196,694 $ 21,313,916 See Notes to Financial Statements 15

30 STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 With Comparative Totals for the Year Ended December 31, 2013 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Governmental activities: General government $ 593,441 $ 440,625 $ 18,338 $ Public safety 1,604, , ,046 Highways and streets 935, ,927 54, ,316 Compost 10,231 9,324 Parks and recreation 264,731 11,145 17,714 Interest on long-term debt 134,213 Total governmental activities 3,542, , , ,316 Business-type activities: Water 602, ,908 Sewer 619, ,417 Total business-type activities 1,222,360 1,159,325 Total $ 4,764,852 $ 2,006,512 $ 221,197 $ 364,316 General revenues: General property taxes Grants and contributions not restricted to specific programs Investment income (loss) Gain on sale of assets Refund of unused tax increment Net transfers Miscellaneous Total general revenues Change in net position Net position - beginning Net position - ending See Notes to Financial Statements 16

31 Net (Expense) Revenue and Changes in Net Position Governmental Business-type Total Activities Activities $ (134,478) $ (134,478) $ (79,456) (1,303,624) (1,303,624) (995,753) (300,698) (300,698) (735,798) (907) (907) (2,351) (235,872) (235,872) (266,106) (134,213) (134,213) (119,702) (2,109,792) (2,109,792) (2,199,166) $ (55,591) (55,591) 165,411 (7,444) (7,444) 163,198 (63,035) (63,035) 328,609 (2,109,792) (63,035) (2,172,827) (1,870,557) 1,948,507 1,948,507 2,217, , , ,911 45,345 4,890 50,235 (10,520) 2,576 2,576 8,335 (437,762) (437,762) 15,800 (15,800) 29,831 29,831 51,980 2,066,515 (10,910) 2,055,605 2,421,233 (43,277) (73,945) (117,222) 550,676 18,239,930 3,073,986 21,313,916 20,760,753 $ 18,196,653 $ 3,000,041 $ 21,196,694 $ 21,311,429 17

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33 FUND FINANCIAL STATEMENTS December 31, 2014

34 BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2014 With Comparative Totals for December 31, 2013 Tax Increment Improvement Improvement Funds - Bonds of Bonds of General District A A Assets Cash and investments $ 1,503,633 $ $ $ 203,557 Receivables (net of allowance for uncollectibles) Accounts 64,415 Taxes 89,777 4,241 Special assessments 4, , ,329 Notes 41,840 Prepaid expenses 9,628 Due from other funds 550,730 Due from other governmental units 11,673 TOTAL ASSETS $ 2,276,489 $ $ 256,467 $ 520,886 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ 52,283 $ $ $ 64 Accrued liabilities 7,407 Escrow deposits Due to other funds 2,225 Unearned revenue 67,312 Total liabilities 127,002 2, Deferred Inflows of Resources Unavailable revenue: Taxes 63,804 3,347 Special assessments 4, , ,329 Notes 41,840 Total deferred inflows of resources 110, , ,329 Fund Balance (Deficit) Nonspendable 9,628 Restricted 25, ,493 Assigned 48,932 Unassigned 1,954,570 (1,157) Total fund balance (deficit) 2,039,050 (1,157) 203,493 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 2,276,489 $ $ 256,467 $ 520,886 See Notes to Financial Statements 18

35 2014 Street & Other 2007 Street Utility Governmental Total Governmental Funds Reconstruction Improvements Funds $ $ 246,905 $ 1,942,619 $ 3,896,714 $ 4,330,282 41, , ,971 13, , , , ,865 1,530,108 1,552,847 41,840 43, ,928 6, , ,798 11,673 7,922 $ 275,895 $ 246,905 $ 2,677,695 $ 6,254,337 $ 6,748,523 $ $ 52,427 $ 4,370 $ 109,144 $ 157,833 7,407 3,466 40,011 40,011 29, , , , ,798 67,312 49, ,754 52, , , ,749 10,320 77, , , ,376 1,521,356 1,548,875 41,840 43, , ,696 1,640,667 1,692, ,928 6, ,478 1,349,693 1,773,584 2,851, , , ,851 (439,665) (67,395) 1,446,353 1,019,259 (439,665) 194,478 1,842,867 3,839,066 4,274,898 $ 275,895 $ 246,905 $ 2,677,695 $ 6,254,337 $ 6,748,523 19

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37 RECONCILIATION OF NET POSITION IN THE GOVERNMENT-WIDE FINANCIAL STATEMENTS AND FUND BALANCES IN THE FUND BASIS FINANCIAL STATEMENTS December 31, 2014 Amounts reported for governmental activities in the statement of net position are different because: Total governmental fund balances (pages 18 and 19) $ 3,839,066 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental funds - capital assets $ 24,204,618 Accumulated depreciation (6,372,412) Other long-term assets are not available to pay for current-period expenditures and, therefore, are unavailable in the funds. Delinquent property taxes $ 77,471 Delinquent and deferred special assessments 1,521,356 Long-term note receivable 41,840 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. Bonds and notes payable $ (4,668,000) Compensated absences (215,859) Post employment benefit obligation (169,111) Accrued interest (53,596) Unamortized premium (75,854) Unamortized discount 67,134 17,832,206 1,640,667 (5,115,286) Net position of governmental activities (page 15) $ 18,196,653 See Notes to Financial Statements 20

38 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2014 With Comparative Totals for the Year Ended December 31, 2013 Tax Increment Improvement Improvement Funds - Bonds of Bonds of General District A A REVENUES Taxes $ 1,845,035 $ $ 85,579 $ Special assessments 2,357 43,095 69,878 Licenses and permits 69,389 Intergovernmental revenues 665,482 Charges for services 401,303 Franchise fees 168,784 Fine and forfeits 50,231 Other Revenue Investment earnings (loss) 32, Miscellaneous 29,114 TOTAL REVENUES 3,264, ,674 70,625 EXPENDITURES Current General government 487,509 Public safety 1,373,674 Street 464,004 Compost 10,231 Parks and recreation 198,887 Capital Projects General government Public safety Street Parks and recreation Debt Service Bond principal retirement 300,000 45,000 Interest and fiscal charges 24,930 19,553 Issuance costs Other expenses TOTAL EXPENDITURES 2,534, ,930 64,553 Excess (deficiency) of revenues over (under) expenditures 729,915 (196,256) 6,072 OTHER FINANCING SOURCES (USES) Sale of assets 14,656 Refund of unused tax increment (738,240) Transfers from other funds 183,234 15,800 Transfers to other funds (373,369) Issuance of debt Premium (discount) on issuance of debt Total other financing sources (uses) (358,713) (738,240) 183,234 15,800 Net change in fund balances 371,202 (738,240) (13,022) 21,872 FUND BALANCES (DEFICIT), beginning 1,667, ,240 11, ,621 FUND BALANCES (DEFICIT), ending $ 2,039,050 $ $ (1,157) $ 203,493 See Notes to Financial Statements 21

39 2014 Street & Other 2007 Street Utility Governmental Total Governmental Funds Reconstruction Improvements Funds $ $ $ 341,564 $ 2,272,178 $ 2,239,983 59, , , ,050 69,389 84, , , , , , , , ,755 50,231 40, ,271 45,345 (9,547) 1,166 30,280 59,897 59, ,234 4,256,632 3,925, , , ,373,824 1,244,623 62, , ,273 10,231 10, , ,027 34,435 34,435 3, , ,045 13,050 1,214, ,679 1,740, ,870 55,593 55, , , ,000 49,025 93, ,169 27,635 27,635 8,046 3,528 1,242,546 1,324,643 5,490,977 3,606,663 59,077 (1,241,744) (591,409) (1,234,345) 318,345 2,576 17,232 9,766 (738,240) 373, , ,093 (183,234) (556,603) (144,293) 1,500,000 1,500, ,000 3,721 3,721 1,503, , , ,566 59, ,977 (398,698) (435,832) 766,911 (498,742) (67,499) 2,241,565 4,274,898 3,507,987 $ (439,665) $ 194,478 $ 1,842,867 $ 3,839,066 $ 4,274,898 22

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41 RECONCILIATION OF THE STATEMENT OF REVENUES, CITY OF ST. PAUL PARK EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2014 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds (pages 21 and 22) $ (435,832) Governmental funds reported capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay-construction improvement $ 1,886,794 Depreciation expense (595,992) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Unavailable revenue, end of year $ 1,640,667 Unavailable revenue, beginning of year (1,692,876) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences, end of year $ (215,859) Compensated absences, beginning of year 203,251 Post employment benefit obligation, end of year (169,111) Post employment benefit obligation, beg. of year 142,472 1,290,802 (52,209) (39,247) Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal retirement on long-term debt $ 710,000 Issuance of long-term debt (1,500,000) Change in accrued interest, bond premium, and bond discount (16,791) (806,791) Change in net position of governmental activities (pages 16 and 17) $ (43,277) See Notes to Financial Statements 23

42 GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual For the Year Ended December 31, 2014 With Comparative Totals For the Year Ended December 31, Budgeted Amounts Variance Favorable 2013 Original Final Actual (Unfavorable) Actual REVENUES Property taxes $ 1,515,864 $ 1,515,864 $ 1,845,035 $ 329,171 $ 1,535,188 Special assessments 2,357 2,357 1,470 Licenses and permits 68,750 68,750 69, ,691 Intergovernmental 617, , ,482 15, ,026 Charges for services 190, , ,306 (1,494) 196,428 Franchise fees 169, , ,784 (216) 176,755 Fines and forfeits 48,700 48,700 50,231 1,531 39,181 Investment earnings (loss) 20,000 20,000 32,525 12,525 (6,848) Rental income 210, , ,997 1, ,615 Miscellaneous ,050 29,114 16,064 58,959 Total revenues 2,841,564 2,885,739 3,264, ,481 2,647,465 EXPENDITURES Current: General government 536, , ,509 57, ,531 Public safety 1,394,525 1,421,797 1,373,674 48,123 1,243,323 Highways and streets 503, , ,004 20, ,988 Compost 12,320 12,311 10,231 2,080 10,515 Parks and recreation 219, , ,887 36, ,098 Total current 2,666,595 2,699,038 2,534, ,733 2,458,455 Capital outlay: Public safety 1,600 1,600 1,600 Parks and recreation 25,000 25,000 25,000 66,929 Total capital outlay 26,600 26,600 26,600 66,929 Total Expenditures 2,693,195 2,725,638 2,534, ,333 2,525,384 Excess (deficiency) of revenues over (under) expenditures 148, , , , ,081 Other Financing Sources (Uses) Sale of assets 3,417 14,907 14,656 (251) 3,416 Transfers in 30,225 Transfers out (373,369) (373,369) (373,369) (73,416) Total other financing sources (uses) (369,952) (358,462) (358,713) (251) (39,775) Net change in fund balances (221,583) (198,361) 371, ,563 82,306 Fund Balance, January 1 1,667,848 1,667,848 1,667,848 1,585,542 Fund Balance, December 31 $ 1,446,265 $ 1,469,487 $ 2,039,050 $ 569,563 $ 1,667,848 See Notes to Financial Statements 24

43 PROPRIETARY FUNDS Combining Statement of Net Position December 31, 2014 With Comparative Totals for December 31, 2013 Water and Sewer Utility Funds Water Sewer Totals Fund Fund ASSETS Current assets Cash and cash equivalents $ 734,537 $ 242,898 $ 977,435 $ 931,121 Accounts receivable and unbilled service 108, , , ,297 Prepaid items 1,374 1,116 2,490 1,886 Total current assets 844, ,424 1,238,581 1,226,304 Property and equipment Land 39,000 39,000 39,000 Construction in progress 950,840 Buildings and improvements 4,255,613 1,358,862 5,614,475 4,655,023 Equipment and machinery 120, , , ,382 Total property and equipment 4,415,236 1,543,621 5,958,857 5,950,245 Less: accumulated depreciation 2,211, ,011 3,086,457 2,966,786 Net property and equipment 2,203, ,610 2,872,400 2,983,459 TOTAL ASSETS $ 3,047,947 $ 1,063,034 $ 4,110,981 $ 4,209,763 LIABILITIES AND NET POSITION Current liabilities Accounts payable $ 8,575 $ 555 $ 9,130 $ 69,165 Deferred revenue 58,578 1,777 60,355 81,083 Current portion of note payable 42,468 42,468 19,485 Current portion of compensated absences 26,259 21,197 47,456 43,679 Total current liabilities 135,880 23, , ,412 Noncurrent liabilities Note payable, net of current portion 899, , ,082 Compensated absences and post employment benefit obligation, net of current portion 29,428 23,103 52,531 48,283 Total noncurrent liabilities 928,428 23, , ,365 Total liabilities 1,064,308 46,632 1,110,940 1,135,777 Net position Net investment in capital assets 1,262, ,610 1,930,932 2,089,892 Unrestricted 721, ,792 1,069, ,094 Total net position 1,983,639 1,016,402 3,000,041 3,073,986 TOTAL LIABILITIES AND NET POSITION $ 3,047,947 $ 1,063,034 $ 4,110,981 $ 4,209,763 See Notes to Financial Statements 25

44 PROPRIETARY FUNDS Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended December 31, 2014 With Comparative Totals for the Year Ended December 31, 2013 Water and Sewer Utility Funds Water Sewer Totals Fund Fund Operating revenues $ 468,092 $ 610,554 $ 1,078,646 $ 1,167,894 Operating expenses Metro waste control 278, , ,216 Salaries and wages 218, , , ,433 Public employee retirement 14,098 11,127 25,225 25,354 Payroll taxes 15,962 12,580 28,542 29,349 Employee insurance benefits 25,016 20,489 45,505 44,532 Utilities 27, ,700 38,969 Parts and small tools 506 1,210 1,716 2,779 Building supplies and repairs 38,343 12,700 51,043 28,562 Repairs, supplies, chemicals, fuel 89,771 17, ,673 84,419 Insurance 7,993 16,615 24,608 19,821 Office expense 28, ,733 12,650 Telephone ,537 Postage 1,641 1,595 3,236 3,201 Conference and travel 1,018 1,120 2,138 2,988 Other services 25,169 2,529 27,698 10,070 Rent expense 25,000 25,000 50,000 50,000 Depreciation 71,415 48, , ,862 Total Operating Expenses 590, ,861 1,210,124 1,107,742 Operating income (loss) (122,171) (9,307) (131,478) 60,152 Nonoperating revenues (expenses) Investment earnings (loss) 3,457 1,433 4,890 (973) Special assessments 1,362 1,863 3,225 5,405 Rental income 77,454 77,454 59,735 Interest expense (12,236) (12,236) Capital grant 4,500 Total nonoperating revenues (expenses) 70,037 3,296 73,333 68,667 Income before noncash contributions and transfers (52,134) (6,011) (58,145) 128,819 Noncash capital contributions 198,817 Transfers in 47,235 47,235 Transfers out (15,800) (47,235) (63,035) (15,800) Change in net position (20,699) (53,246) (73,945) 311,836 Net position, beginning 2,004,338 1,069,648 3,073,986 2,762,150 Net position, ending $ 1,983,639 $ 1,016,402 $ 3,000,041 $ 3,073,986 See Notes to Financial Statements 26

45 PROPRIETARY FUNDS Combining Statement of Cash Flows For the Year Ended December 31, 2014 With Comparative Totals for the Year Ended December 31, 2013 Water and Sewer Utility Funds Water Sewer Totals Fund Fund Cash Flows From Operating Activities Cash received from customers $ 542,820 $ 627,193 $ 1,170,013 $ 1,298,274 Cash payments to suppliers (305,526) (359,069) (664,595) (460,206) Cash payments to employees (269,585) (208,887) (478,472) (477,228) Net cash provided by (used in) operating activities (32,291) 59,237 26, ,840 Cash Flows From Investing Activities Investment earnings (losses) 3,457 1,433 4,890 (973) Cash Flows From Noncapital Financing Activities Transfers from other funds 47,235 47,235 Transfers to other funds (15,800) (47,235) (63,035) (15,800) Net cash provided by (used in) noncapital financing activities 31,435 (47,235) (15,800) (15,800) Cash Flows From Capital and Related Financing Activities Capital grant 4,500 Special assessments 1,362 1,863 3,225 5,405 Acquisition of capital assets (8,612) (8,612) (950,840) Interest paid on long-term debt (12,236) (12,236) Principal paid on long-term debt (19,485) (19,485) Proceeds from issuance of long-term debt 67,386 67, ,567 Net cash provided by (used in) capital and related financing activities 28,415 1,863 30,278 (47,368) Net Increase in Cash and Cash Equivalents 31,016 15,298 46, ,699 Cash and Cash Equivalents, January 1 703, , , ,422 Cash and Cash Equivalents, December 31 $ 734,537 $ 242,898 $ 977,435 $ 931,121 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ (122,171) $ (9,307) $ (131,478) $ 60,152 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization 71,415 48, , ,862 Rental income - included in nonoperating revenues 77,454 77,454 59,735 (Increase) decrease in: Accounts receivable 17,703 16,938 34,641 9,753 Prepaids (303) (301) (604) 463 Increase (decrease) in: Accounts payable (59,767) (268) (60,035) 53,543 Deferred revenue (20,429) (299) (20,728) 60,892 Compensated absences and post employment benefit obligation 3,807 4,218 8,025 5,440 Net cash provided by (used in) operating activities $ (32,291) $ 59,237 $ 26,946 $ 360,840 Noncash Investing, Capital and Financing Activities Receipt of contributed property $ $ $ $ 198,817 See Notes to Financial Statements 27

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47 NOTES TO FINANCIAL STATEMENTS December 31, 2014

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49 NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The financial statements of the City of St. Paul Park, (the City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the City s accounting policies are described below. A. Reporting Entity The City was incorporated in 1909 under the laws of the State of Minnesota and operates under an elected Mayor-Council form of government. As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of St. Paul Park (the primary government) and any component units. A component unit is a legally separate entity for which the primary government is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit include whether or not the primary government appoints the potential component unit s board, is able to impose its will on the potential unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon by the potential component unit. The component unit below is included in the City's reporting entity because of the significance of its operational or financial relationship with the City. Blended Component Unit The St. Paul Park Economic Development Authority (EDA) was created to administer economic development activity within the City. It is a legal entity separate from the City and is governed by a board comprised of the City's elected Council. The EDA is the administering authority for the tax increment funds. The transactions of the EDA are blended in this report as a special revenue fund; separate financial statements are not prepared for the EDA. Related Organizations The St. Paul Park Fire Department Relief Association (Association) is organized as a legally separate entity from the City by its members to provide pension and other benefits to its members in accordance with Minnesota statutes. The membership appoints the board of the Association and separate financial statements are issued by the Association. All funding is conducted in accordance with Minnesota statutes. Although the City levies property taxes for the Association, the Association is fiscally independent to determine and levy taxes. The City's portion of the pension benefit costs related to the Association is included in the general fund. The Association does not have any significant operational or financial relationship with the City. 28

50 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e. the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded when payment is due. 29

51 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Property taxes, licenses and permits, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. The District 2 tax increment fund accounts for the continued accumulation of financial resources to be used for developing and/or paying debt related to the City s tax increment district. The Improvement Bonds of A fund is an accumulation of resources (special assessments and property tax revenues) for payment of the improvement bonds and interest. The Improvement Bonds of A fund is an accumulation of resources (special assessments and property tax revenues) for payment of the improvement bonds and interest. The 2007 street reconstruction fund is an accumulation of resources for expenditures for the street reconstruction project that began in The 2014 street and utility improvements fund is an accumulation of resources for expenditures for the street improvement project that began in

52 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The City reports the following major proprietary funds: The sewer utility fund and water utility fund account for the operation of the Cityowned sewer and water utility systems, respectively. 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 the Governmental Accounting Standards Board. Governments 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. As a general rule the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City s enterprise funds and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the City s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All other revenues and expenses are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City s policy to use restricted resources first, then unrestricted resources as they are needed. 31

53 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity 1. Cash and investments (including cash equivalents) Cash balances from all funds (including cash equivalents) are pooled and invested to the extent available in various securities as authorized by Minnesota statutes. Earnings from the pooled investments are allocated to the respective funds on the basis of applicable cash balance (or due from other funds balance) participation by each fund. Investments are stated at fair value, based upon quoted market prices at the reporting date. Cash and cash equivalents for purposes of the basic financial statements includes amounts in demand deposits as well as all investments held by the City. 2. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either due to/from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as due to/from other funds. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as interfund balances. Advances between funds, if any, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property tax levies are set by the City Council in December of each year and are certified to Washington County for collection in the following year. In Minnesota, counties act as collection agents for all property taxes. The County spreads all levies over taxable property. Such taxes become a lien on January 1, of the following year, and are recorded as receivables by the City at that date. Revenues from property taxes are accrued and recognized in the year collectible, net of delinquencies. Real property taxes may be paid by taxpayers in two equal installments on May 15 and October 15. Personal property taxes may be paid on February 28 and June 30. The County provides tax settlements to cities and other taxing districts normally during the months of January, July and December. 32

54 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 2. Receivables and payables (continued) Taxes which remain unpaid at December 31 are classified as delinquent taxes receivable. The net amount of delinquent taxes receivable are fully offset by deferred revenue in the governmental funds of the fund financial statements because they are not known to be available to finance current expenditures. Assessments are levied at various times upon City Council resolution for property owner improvements made by the City. Generally, assessment collections are deferred over periods ranging from fifteen to twenty years with interest charges ranging from 4.5% to 7.0%. Revenue from these assessments is recognized when assessed in the government-wide financial statements and as the annual installments become collectible in the governmental funds of the fund financial statements. Annual installments not collected as of each December 31 are classified as delinquent assessments receivable. The net amount of delinquent assessments receivable are fully offset by deferred revenue in the governmental funds of the fund financial statements because they are not known to be available to finance current expenditures. 3. Capital assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Donated capital assets are recorded at estimated fair market value at the date of donation. 33

55 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 3. Capital assets (continued) Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed, net of interest earned on the invested debt proceeds over the same period. Property, plant and equipment are capitalized when acquired, and depreciation is provided using the straight-line method applied over the following estimated useful lives of the assets. Useful Life in Years Buildings Infrastructure Other Improvements Machinery and Equipment Compensated absences It is the City s policy to permit employees to accumulate a limited amount of earned but unused vacation, sick pay and compensatory overtime which is paid to the employees upon separation. Vacation, sick pay and compensatory overtime are accrued when incurred in the government-wide financial statements and the proprietary fund types. A liability is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirement. 34

56 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 5. Long-term obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statements of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as a current expenditure in the applicable activity. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 6. Fund equity In the government-wide and proprietary financial statements, net position is classified in the following categories: Net Investment in Capital Assets This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt attributed to the acquisition, construction or improvement of the assets. Restricted Net Position This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. Unrestricted Net Position This amount is all net position that does not meet the definition of "net investment in capital assets" or restricted net position. 35

57 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 6. Fund equity (continued) The City classifies governmental fund balances as follows: Non-spendable includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual restraints. Restricted amounts are restricted by external creditors, grantors, contributors, laws or regulations of other governments. Committed includes amounts that can be used only for specific purposes imposed by formal action (resolution) of the City Council, which is the City's highest level of decision-making authority. Those committed amounts cannot be used for any other purpose unless the Council rescinds or changes the specified use by taking the same type of action (resolution) it employed to previously commit those amounts. Assigned includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. The City Council, by majority vote, may assign fund balances to be used for specific purposes when appropriate. The Council has delegated the power to assign fund balances to the City Administrator and Finance Director. Unassigned includes positive fund balances within the General Fund which have not been classified within the above mentioned categories and negative fund balances in other governmental funds. The City uses restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are conflicting legal requirements, such as a grant agreement requiring dollar for dollar spending. Additionally, the City would first use committed, then assigned and lastly unassigned amounts when expenditures are made. The City Council has formally adopted a fund balance policy for the General fund. The City s policy is to maintain an unrestricted fund balance in the general fund equal to 35 to 50 percent of budgeted expenditures to ensure funds are available at all times to meet cash flow needs and accommodate emergency contingency concerns. 36

58 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 1. Summary of Significant Accounting Policies (Continued) D. Assets, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued) 7. Interfund transactions Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses or revenues/income initially made from it that are properly applicable to another fund are recorded as expenditures/expenses or revenues/income in the fund that is reimbursed. All other interfund transactions, except interfund services provided and used, are reported as transfers. E. Concentration of Credit Risk Financial instruments which expose the City to a concentration of credit risk consist primarily of cash investments and accounts and loans receivable. Credit risk related to cash and investments is discussed in Note 3A. The City's accounts and loans receivable are concentrated geographically, and for the most part, amounts are due from individuals residing in and businesses located in the City of St. Paul Park. F. Comparative Data The financial statements include certain prior year comparative financial information in total. Such information does not include sufficient detail to constitute a presentation in conformity with Generally Accepted Accounting Principles. Accordingly, such information should be read in conjunction with the City s financial statements for the year ended December 31, 2013 from which the summarized information was derived. G. Use of estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates that affect amounts reported in the financial statements during the reporting period. Actual results could differ from such estimates. 37

59 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Stewardship, Compliance, and Accountability A. Budgetary Information Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are legally adopted by Council resolution for the General Fund. Formal budgetary integration is employed as a management control device during the year for the General Fund. The City follows these legal compliance procedures in establishing the budgetary data reflected in the financial statements. 1. Budget requests are submitted by all department heads to the City Administrator and Finance Officer. The Administrator's office compiles the budget requests into an overall preliminary City budget, balancing budget requests with available resources. 2. The preliminary budget is submitted to the City Council in September for its review and/or modification. 3. When required, a truth-in-taxation public hearing is held on the proposed budget. 4. The City Council adopts the budget for the ensuing year in December. 5. All budgeted appropriations lapse at the end of the fiscal year. The legal level of control (the level on which expenditures may not legally exceed appropriations) for each budget is at the fund level. Administration cannot legally amend or transfer appropriations between funds without the approval of the City Council once the budget has been approved. Any over expenditures of appropriations or transfers of appropriated amounts must be approved by the City Council. 38

60 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Stewardship, Compliance, and Accountability A. Budgetary Information (Continued) All budget amounts presented in the accompanying supplementary information reflect the original budget and the final budget (which were not the same for the year ended December 31, 2014). For the year ended December 31, 2014, General fund expenditures, both at the fund level and the department level, were less than budget. B. Fund Balance Deficits As of December 31, 2014, the following funds had deficit fund balances: Fund Amount Major: Improvement Bonds of A $ 1, Street Reconstruction 439,665 Nonmajor: Storm Water Management 36,567 St. Paul Park Road 7, Street & Utility Improvement 23,214 The fund balance deficits will be eliminated by future revenues and financing sources. 39

61 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds A. Deposits and Investments In accordance with applicable Minnesota statutes, the City maintains deposits at depository banks authorized by the City Council. All such depositories are members of the Federal Reserve System. Minnesota statutes require that all deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or surety bonds. Authorized collateral includes certain state or local government obligations and legal investments described in the investment policy section. Minnesota Statutes require that securities pledged as collateral be held in safekeeping by the City Treasurer or in a financial institution other than the institution furnishing the collateral. The City's deposits were entirely covered by federal depository insurance or collateral at December 31, Investment Policy The City does not maintain a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates or that would limit its investment choices as a means of managing its exposure to credit risk. The City is authorized by Minnesota Statutes to invest idle funds as follows: (a) Direct obligations or obligations guaranteed by the United States or its agencies. (b) Shares of investment companies registered under the Federal Investment Company Act of 1940 and whose only investments are in securities described in (a) above. (c) General obligations of the State of Minnesota or its municipalities. (d) Bankers acceptances of United States banks eligible for purchase by the Federal Reserve System. (e) Commercial paper issued by United States corporations or their Canadian subsidiaries, of the highest quality, and maturing in 270 days or less. (f) Repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a reporting dealer to the Federal Reserve Bank of New York, or certain Minnesota securities broker-dealers. 40

62 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) A. Deposits and Investments (Continued) Investment Policy (Continued) (g) Money market funds with institutions that have portfolios consisting exclusively of United States Treasury obligations and Federal Agency issues. (h) Guaranteed investment contracts (gic s) issued or guaranteed by United States commercial banks or domestic branches of foreign banks or United States insurance companies and with a credit quality in one of the top two highest categories. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needs for operation. The following is a summary of the City of St. Paul Park's cash and investment portfolio including the range of maturities and investment ratings by type of investment: Range of Investment Maturities Rating Value Cash N/A N/A $ 3,610,551 Municipal Bonds 6/16 AA3 131,965 Money Market Funds N/A Unrated 120,816 Franklin U.S. Government Securities Mutual Fund N/A 2 Star 1,010,817 Total $ 4,874,149 N/A Not applicable or not available Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. The City s investments are rated by various credit rating agencies, where applicable, to indicate the associated credit risk. Investment ratings by investment type (as applicable) are included in the preceding summary of investments. 41

63 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) A. Deposits and Investments (Continued) Concentration of Credit Risk Investments in any one issuer that represented 5% or more of total investments as of December 31, 2014 were as follows: Issuer Investment Type Value Anchor Bank Money Market Savings $ 1,293,879 Central Bank CD Savings Account 2,301,444 Franklin Templeton Investments US Gov't Securities Mutual Fund 1,010,817 Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counter party, the City will not be able to recover the value of its investment securities that are in the possession of an outside party. At December 31, 2014 all investments were insured or registered or the securities were held by the City or its agent in the City s name. B. Receivables Accounts Receivable Accounts receivable as of December 31, 2014 ($364,843) are expected to be collected in full. Based upon management s assessment of the creditworthiness of the customers comprising the receivable balance, no allowance for uncollectible accounts is deemed necessary. Due from Other Governmental Units Amounts due from other governmental units as of December 31, 2014 were as follows: Fund Type Washington County State of Minnesota Grey Cloud Island Township Total General $ 9,270 $ 2,390 $ 13 $ 11,673 42

64 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) C. Capital Assets Capital asset activity for the year ended December 31, 2014 was as follows: Governmental Activities Capital assets, not being depreciated: Beginning Balance Increases Decreases Ending Balance Land $ 1,296,373 $ $ $ 1,296,373 Construction in progress 18,523 1,214,911 1,233,434 Total capital assets, not being depreciated 1,314,896 1,214,911 2,529,807 Capital assets, being depreciated: Buildings and improvements 3,137,747 3,137,747 Land Improvements 238, ,284 Infrastructure 14,800, ,976 15,325,780 Machinery and equipment 2,853, ,907 27,762 2,973,000 Total capital assets, being depreciated 21,030, ,883 27,762 21,674,811 Less accumulated depreciation for: Buildings and improvements 1,365,658 82,718 1,448,376 Land Improvements 60,927 18,651 79,578 Infrastructure 2,168, ,140 2,539,182 Machinery and equipment 2,209, ,483 27,762 2,305,276 Total accumulated depreciation 5,804, ,992 27,762 6,372,412 Total capital assets, being depreciated, net 15,226,508 75,891 15,302,399 Governmental activities capital assets, net $ 16,541,404 $ 1,290,802 $ $ 17,832,206 43

65 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) C. Capital Assets (Continued) Business-type activities Capital assets, not being depreciated: Beginning Balance Increases Decreases Ending Balance Land $ 39,000 $ $ $ 39,000 Construction in progress 950,840 8, ,452 Total capital assets, not being depreciated 989,840 8, ,452 39,000 Capital assets, being depreciated: Buildings and improvements 4,655, ,452 5,614,475 Machinery and equipment 305, ,382 Total capital assets, being depreciated 4,960, ,452 5,919,857 Less accumulated depreciation for: Buildings and improvements 2,718, ,579 2,823,854 Machinery and equipment 248,511 14, ,603 Total accumulated depreciation 2,966, ,671 3,086,457 Total capital assets, being depreciated, net 1,993, ,781 2,833,400 Business-type activities capital assets, net $ 2,983,459 $ 848,393 $ 959,452 $ 2,872,400 44

66 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) C. Capital Assets (Continued) Depreciation expense for the year ended December 31, 2014 was charged to functions/programs as follows: Governmental Activities: General government $ 75,659 Public safety 39,737 Highways and streets 413,830 Park and recreation 66,766 Total $ 595,992 Business-Type Activities: Water $ 71,415 Sewer 48,256 Total $ 119,671 D. Long-Term Debt The City issues general obligation bonds and equipment certificates to provide funds for economic development and for the acquisition and construction of major capital assets including infrastructure. General obligation bonds have been issued for both governmental and business-type activities. Bonds issued to provide funds for businesstype activities are reported in proprietary funds if they are expected to be repaid from proprietary revenues. General obligation bonds and certificates are direct obligations and pledge the full faith and credit of the City. General obligation improvement bonds are expected to be repaid, in part, from assessments to the benefited properties. 45

67 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) D. Long-Term Debt (Continued) A summary of long-term debt outstanding at December 31, 2014 is as follows: Range of Final Balance Issue Date Interest Rates Maturity 12/31/14 General obligation bonds: 2009 A Improvement Bonds 3/31/ % % 2020 $ 610, B Improvement Bonds 6/3/ % % , A Improvement Bonds 6/10/ % , A Improvement Bonds 8/4/ % % , A Improvement Bonds 7/11/ % % , A Improvement Bonds 6/23/ % % ,500,000 General obligation certificates: 2013 Equipment Certificates 11/25/ % % ,000 General obligation note payable: Note Payable - Public Facilities Authority 7/22/ % ,468 Other Liabilities: Compensated Absences 263,315 Post Employment Benefit Obligation 221,642 Unamortized premium 75,854 Less: Unamortized discount (67,134) Total Long-term Debt $ 6,103,145 Liquidation of the compensated absences liability occurs within the department and fund for which the corresponding employees are assigned. The City is subject to statutory limitation by the State of Minnesota for bonded indebtedness payable principally from property taxes. As of December 31, 2014, the City had not utilized $6,965,032 of its net legal debt margin. 46

68 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) D. Long-Term Debt (Continued) The following is a summary of the changes in long-term debt obligations for the year ended December 31, 2014: Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation bonds: 2009 A Improvement Bonds $ 910,000 $ $ 300,000 $ 610,000 $ 105, B Improvement Bonds 720, , , , A Improvement Bonds 245, , , , A Improvement Bonds 715,000 45, ,000 45, A Improvement Bonds 815,000 45, ,000 65, A Improvement Bonds 1,500,000 1,500,000 General obligation certificates: 2008 Equipment Certificates 50,000 50, Equipment Certificates 423, , ,000 Other Liabilities: Compensated Absences 203, , , , ,457 Post Employment Benefit Obligation 142,472 26, ,111 Unamortized premium 46,259 35,221 5,626 75,854 Less: Unamortized (discount) (41,611) (31,500) (5,977) (67,134) Governmental Activities Long-term Liabilities 4,228,371 1,737, ,047 5,061, ,457 BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: General obligation note payable: Note Payable - Public Facilities Authority 893,567 67,386 19, ,468 42,468 Other Liabilities: Compensated Absences 45,841 52,689 51,074 47,456 47,456 Post Employment Benefit Obligation 46,121 6,410 52,531 Business-Type Activities Long-term Liabilities 985, ,485 70,559 1,041,455 89,924 Total $ 5,213,900 $ 1,863,851 $ 974,606 $ 6,103,145 $ 911,381 47

69 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) D. Long-Term Debt (Continued) Debt service requirements to maturity for long-term debt, excluding compensated absences, as of December 31, 2014 were as follows: General Obligation General Obligation Improvement Bonds Equipment Certificates Note Payable Year Principal Interest Principal Interest Principal Interest 2015 $ 480,000 $ 115,755 $ 135,000 $ 3,821 $ 42,468 $ 15, , , ,000 2,600 43,000 14, ,000 92, , ,000 13, ,000 83,764 45,000 13, ,000 75,178 46,000 12, ,310, , ,000 50, ,000 79, ,000 30, ,000 1, ,000 9,005 Totals $ 4,245,000 $ 804,866 $ 423,000 $ 7,364 $ 941,468 $ 158,612 The City of St. Paul Park Economic Development Authority was the administering authority for the City of St. Paul Park, Minnesota Tax Increment Financing District, No. 2. The district was redevelopment type and authorized under Minnesota law chapter 472A. District No. 2 was certified in 1986 and continued until December 31, During 2014, the City was required to pay excess tax increment funds of $738,240 to Washington County for redistribution. Washington County subsequently returned $300,478 of excess tax increment funds to the City during During 2013, the City entered into a loan agreement with the Minnesota Public Facilities Authority for funds used to repair the City's water tower. Loan proceeds of $893,567 were disbursed to the City during 2013 and an additional $67,386 was disbursed during Additionally, the City issued bonds during 2013 to provide funding to a private sector entity for a project deemed to be in the public interest. Although these bonds bear the name of the City, the City has no obligation for such debt. Accordingly, the bonds are not reported as liabilities in the financial statements of the City. As of December 31, 2014, the outstanding principal amount of these bonds was $4,450,

70 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) E. Interfund Receivables, Payables and Transfers Interfund Receivables and Payables The following schedule reports the interfund receivables and payables within the City's funds as of December 31, 2014: Due To Other Funds Due From Other Funds General Fund $ $ 550,730 Improvement Bonds of A Fund 2, Street Reconstruction Fund 440,754 Storm Water Management Fund 77,223 St. Paul Park Road Fund 7, Street & Utility Improvements Fund 23,214 Total $ 550,730 $ 550,730 Interfund receivables and payables are the result of expenditures of funds prior to the collection of special assessments, property taxes and other revenues. All interfund balances will be repaid as the revenues are collected by the individual funds. 49

71 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) E. Interfund Receivables, Payables and Transfers (Continued) Interfund Transfers The following schedule reports the interfund transfers within the City's funds during the year ended December 31, 2014: Transfers In Transfers Out Major Governmental Funds: General Fund $ $ 373,369 Improvement Bonds of A 183,234 Improvement Bonds of A 15,800 Subtotal 199, ,369 Nonmajor Governmental Funds: Capital Projects 2003 Street Reconstruction & Huber/Lynch 114, Street Reconstruction & 18th Ave. 68,348 Other Capital Projects 373,369 Subtotal 373, ,234 Total Governmental Funds 572, ,603 Major Business-Type Funds: Water Fund 47,235 15,800 Sewer Fund 47,235 Subtotal 47,235 63,035 Total $ 619,638 $ 619,638 Transfers are used to move revenues from the fund with collection authorization to the debt service fund as debt service principal and interest payments become due and to move unassigned general fund revenues to finance various programs that the government must account for in other funds in accordance with budgetary authorizations. 50

72 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. Detailed Notes on All Funds (Continued) F. Fund Equity Below is a schedule of ending fund balances as of December 31, 2014: General Tax Increment Funds - District 2 Improvement Bonds of A Improvement Bonds of A 2007 Street Reconstruction 2014 Street & Utility Improvements Other Governmental Funds Total Governmental Funds Nonspendable Prepaid items $ 9,628 $ $ $ $ $ $ 300 $ 9,928 Restricted Debt service 203, , ,489 Revolving loan 16,206 78,524 94,730 Police 10,491 10,491 Parks 9,714 9,714 Capital equipment 93,006 93,006 Capital improvements 194, , ,154 Total Restricted 25, , ,478 1,349,693 1,773,584 Assigned Severance 46,679 46,679 Fire Parks and recreation 1,833 1,833 Capital equipment 60,594 60,594 Capital improvements 489, ,624 Economic development 10,051 10,051 Total Assigned 48, , ,201 Unassigned 1,954,570 (1,157) (439,665) (67,395) 1,446,353 Total Fund Balance $ 2,039,050 $ $ (1,157) $ 203,493 $ (439,665) $ 194,478 $ 1,842,867 $ 3,839,066 51

73 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors or omissions; injuries to employees; or natural disasters. The City participates in the League of Minnesota Cities Insurance Trust (LMCIT) to provide its general liability and property coverage. The LMCIT is a public entity risk pool currently operating as a common risk management and insurance program for participating Minnesota Cities. All cities in the LMCIT are jointly and severally liable for all claims and expenses of the pool. The amount of any liability in excess of assets of the pool may be assessed to the participating cities if a deficiency occurs. The City purchases commercial insurance for property values in excess of the LMCIT policy limits and all other risks of loss. Settled claims have not exceeded the LMCIT or commercial coverage in any of the past three fiscal years. Worker s compensation insurance is also purchased through the League of Minnesota Cities Insurance Trust (LMCIT). The worker compensation program is a retrospectively rated contract with premiums or required contributions based primarily on the experience rates of the participating cities. There were no significant reductions in insurance coverage from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. B. Commitments and Contingencies Insurance: The City has outstanding claims subject to its insurance deductible. Although the outcome of these actions are not presently determinable, in the opinion of management, the resolution of these matters will not have a material adverse effect on the financial condition of the City. General Litigation: There are two ongoing lawsuits in which the City is involved. It is the opinion of management that any potential claim regarding these lawsuits against the City would be covered by the liability insurance of the City and that any potential claim against the City would not affect the financial statements. 52

74 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) C. Police and fire services The City provides police and fire services for the adjacent Grey Cloud Township and various others for an annually negotiated charge. During 2014, the City received $86,323 for police services and $10,100 for fire services. D. Other Post Employment Benefits The City provides health insurance benefits for eligible retirees (as required by Minnesota Statute ) and police or firefighters disabled in the line of duty (as required by Minnesota Statute 299A.465). The majority of retirees are required to pay the total premium cost. The exception applies to the employees retiring under the labor agreements for Law Enforcement Labor Services and St. Paul Park Employees Association for which the City will contribute five percent of the cost of health insurance premiums, to a maximum $200 per month, for those who have retired with at least fifteen years of continuous service and have reached the age of sixty. The City contribution applies only to the cost of individual coverage for the retiree and ceases upon the retiree reaching age sixty-five. As of December 31, 2014, there were no retirees or disabled police or firefighters participating in the City s group health plan. The City's annual other post employment benefit (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. 53

75 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) D. Other Post Employment Benefits (Continued) The following table shows the components of the City's annual OPEB cost for 2014, the amount actually contributed to the plan, and changes in the City's net OPEB obligation: Annual required contribution $ 43,836 Interest on net OPEB obligations 8,487 Adjustment to ARC (11,734) Annual OPEB Cost 40,589 Contributions during the year (7,539) Increase in net OPEB obligation 33,050 Net OPEB, beginning of year 188,592 Net OPEB, end of year $ 221,642 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2014 were as follows: Fiscal Year Ended Annual OPEB Cost Net OPEB, Beginning of Year Employer Contribution Percentage Contributed Net OPEB Obligation 12/31/2012 $ 41,979 $ 115,285 $ 3, % $ 153,749 12/31/ , ,749 6, % 188,592 12/31/ , ,592 7, % 221,642 54

76 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) D. Other Post Employment Benefits (Continued) The City has not funded the post employment liability and therefore the actuarial value of assets is zero. Actuarial Valuation Date 1/1/2012 Actuarial Value of Assets Actuarial Accrued Liability Unfunded Actuarial Accrued Liability Funded Ratio Covered Payroll $ 0.0% 1,385,110 UAAL as a Percentage of Covered Payroll $ $ 313, ,140 $ 22.61% 1/1/ , , % 1,311, % Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations. At the January 1, 2012 actuarial valuation date, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 4.50% discount rate. The City currently does not plan to prefund for this benefit. The annual healthcare cost trend rate was calculated to be 8.00% initially, reduced incrementally to an ultimate rate of 5.00% after six years. Both rates include a 2.5% inflation assumption. The unfunded actuarial liability is being amortized as a level percentage of projected payroll over 30 years on a closed basis. 55

77 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans The following disclosures are made in accordance with GASB Statement 50: 1. Public Employees Retirement Association (PERA) - Defined Benefit A. Plan Description All full-time and certain part-time employees of the City of St. Paul Park are covered by defined benefit plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF), which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Statutes, Chapter 353 and 356. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters, and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after five years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. 56

78 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 1. Public Employees Retirement Association (PERA) - Defined Benefit (continued) A. Plan Description (continued) Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0 percent for each year of service. For all PEPFF members and GERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 55 for PEPFF members and 65 for Basic and Coordinated members hired prior to July 1, Normal retirement age is the age for unreduced Social Security benefits capped at 66 for Coordinated members hired on or after July 1, A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. 57

79 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 1. Public Employees Retirement Association (PERA) - Defined Benefit (continued) A. Plan Description (continued) PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the internet at by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota or by calling (651) or B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.25%, respectively, of their annual covered salary in PEPFF members were required to contribute 10.20% of their annual covered salary in In 2014, the City of St. Paul Park was required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.25% for Coordinated Plan members and 15.30% for PEPFF members. The City's contributions to the Public Employees Retirement Fund for the years ending December 31, 2014, 2013 and 2012 were $167,693, $150,902, and $152,520, respectively. The City s contributions were equal to the contractually required contributions for each year as set by state statute. Contribution rates will increase on January 1, 2015 in the Coordinated Plan (6.5% for members and 7.5% for employers) and the Police and Fire Fund (10.8% for members and 16.2% for employers). 58

80 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 2. Public Employees Retirement Association (PERA) - Defined Contribution Three council members of the City of St. Paul Park 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. 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 St. Paul Park during fiscal year 2014 were: Contribution Amount Percentage of Covered Payroll Employees Employer Employees Employer Required Rates $ 597 $ 597 5% 5% 5% 59

81 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 3. St. Paul Park Firefighter's Relief Association Plan Description Volunteer fire fighters of the City of St. Paul Park are members of the St. Paul Park Firefighter s Relief Association (Association). The Association is administrator of a single-employer defined benefit pension plan available to firefighters that operates under the provisions of Minnesota Laws 1965, Chapter 446, as amended and Minnesota State Statutes Chapters 69 and 424. It is governed by a Board of six officers and trustees elected by the members of the Association for two-year terms. The Chief of the St. Paul Park Fire Department, the Mayor, and the City Clerk are ex officio, non-voting members of the Board of Trustees. The St. Paul Park Firefighter s Relief Association issues a publicly available financial report that includes financial statements for the Organization. That report may be obtained by contacting the Fire Department at the City of St. Paul Park. For financial reporting purposes, the Association s financial statements are not included in the City of St. Paul Park's financial statements because the Association is not a component unit of the City. Pension Benefits Benefits are payable in a lump sum, based upon years of service, to eligible members of the St. Paul Park Firefighter s Relief Association. At December 31, 2013 (most current information available), the pension benefit level was at $2,200 per year of service. Funding Policy Minnesota Statutes specify minimum contributions that may be required from the City on an annual basis. These statutes are established and amended by the state legislature. The Association is comprised of volunteers; therefore, members have no contribution requirements. A voluntary contribution in the amount of $20,000 was made to the Plan by the City for the year ended December 31, The St. Paul Park Firefighter s Relief Association also receives funding from the State of Minnesota two-percent fire premium tax. The City receives the contributions and is required by state statute to pass this through as payment to the Association. This contribution amounted to $26,515 for the year ended December 31,

82 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 3. St. Paul Park Firefighter's Relief Association (continued) Annual Pension Cost and Net Pension Obligation (data shown is as of December 31, the most current information available) Annual pension cost - total $ 49,330 Contributions made: City $ 20,000 State Aid - pass-through $ 29,330 Actuarial valuation date 12/31/13 Actuarial cost method Amortization method Remaining amortization period: Normal cost Prior service cost Asset valuation method Entry age normal Level dollar closed 20 years 10 years Market Actuarial assumptions: Investment rate of return 5% Projected salary increases N/A Inflation rate N/A Cost of living adjustments None The City s net pension obligation for the St. Paul Park Firefighter s Relief Association for the years ended December 31, 2013, 2012 and 2011 (most current information available) are as follows: Disclosure Annual Pension Cost (APC) $ 49,330 $ 39,802 $ 41,410 Percentage of APC Contributed 100% 100% 100% Net Pension Obligation N/A N/A N/A 61

83 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. Other Information (Continued) E. Pension Plans (Continued) 3. St. Paul Park Firefighter's Relief Association (continued) Membership of the St. Paul Park Firefighter s Relief Association at December 31, 2013 (most current information available) was comprised of the following: Terminated members entitled to benefits but have not received them: 4 Current Members: Vested (Fully or Partially) 8 Non-Vested 16 Total Plan Members 28 Schedule of Funding Progress (most current information available shown) Assets in Excess of Pension Actuarial Actuarial Actuarial (Unfunded)/ Benefit Valuation Value of Accrued Accrued Funded Per Year Date Assets Liability Liability Ratio of Service 12/31/2011 $ 560,763 $ 570,772 $ (10,009) 98.2% $ 2,200 12/31/ , ,864 46, ,200 12/31/ , , , ,200 Related Party Investments As of December 31, 2014, and for the year then ended, the Association held no securities issued by the City or other related parties. 5. Accounting Standards Issued But Not Yet Adopted GASB 68, Accounting and Financial Reporting for Pensions, will be effective for the City beginning with its year ending December 31, This statement requires the reporting of unfunded pension liabilities in the government-wide and proprietary financial statements. Management has not determined the impact adoption of this new standard will have on the City's financial position. 62

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85 REQUIRED SUPPLEMENTAL INFORMATION December 31, 2014

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87 FORM D-1 CITY OF ST. PAUL PARK SCHEDULE OF FUNDING PROGRESS OTHER POST EMPLOYMENT BENEFITS For the Year Ended December 31, 2014 Actuarial Valuation Date 1/1/2012 Actuarial Value of Assets Actuarial Accrued Liability Unfunded Actuarial Accrued Liability Funded Ratio Covered Payroll $ 0.0% 1,385,110 UAAL as a Percentage of Covered Payroll $ $ 313, ,140 $ 22.61% 1/1/ , , % 1,311, % Actuarial valuations are provided every two or three years unless events occur (e.g. plan changes, layoffs, etc.) that would materially impact results. See Note 4D in the Notes to Financial Statements for more details on this schedule. 63

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89 COMBINING FUND STATEMENTS AND SCHEDULES December 31, 2014

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91 NONMAJOR FUNDS December 31, 2014 SPECIAL REVENUE FUNDS City Development Fund: This fund is used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. They are also used to finance specified activities as required by law or administrative regulation. Storm Water Management Fund: This fund is used to accumulate resources from fees collected for expenditures to maintain or improve the storm water system. Economic Development Authority Fund: This fund is used to account for the general operating activities of the St. Paul Park Economic Development Authority. DEBT SERVICE FUNDS Improvement Bonds of 2009-B Fund: This fund is an accumulation of resources (special assessments) for payment of the improvement bonds and interest. Municipal State Aid Bonds of 2009-B Fund: This fund is an accumulation of resources (municipal state aid) for payment of the municipal state aid bonds and interest. Equipment Certificates of 2008 Fund: This fund is an accumulation of resources (property tax revenues) for payment of the equipment certificates. Improvement Bonds of 2010-A Fund: This fund is an accumulation of resources (property tax revenues) for payment of the improvement bonds and interest. Improvement Bonds of 2012-A Fund: This fund is an accumulation of resources (property tax revenues) for payment of the improvement bonds and interest. Equipment Certificates of 2013 Fund: This fund is an accumulation of resources (property tax revenues) for payment of the equipment certificates. Improvement Bonds of 2014-A Fund: This fund is an accumulation of resources (property tax revenues) for payment of the improvement bonds and interest. Other Bonds Fund: This fund accounts for the accumulation of resources (property taxes) for payment of general obligation bonds, equipment certificates and interest. CAPITAL PROJECT FUNDS Equipment Acquisition Fund: This fund is used to account for the accumulation of resources for the purchase of capital equipment Street Reconstruction and Huber/Lynch Fund: This fund is an accumulation of resources for expenditures for the street reconstruction project that began in 2003 and includes the Huber/Lynch area Street Reconstruction & 18 th Avenue Fund: This fund is an accumulation of resources for expenditures for the street reconstruction project that began in 2002 and includes the 18 th Avenue area. St. Paul Park Road Fund: This fund accounts for the financial resources to be used for construction related to the St. Paul Park Road within City limits Street and Utility Improvements Fund: This fund is an accumulation of resources for expenditures for the street and utility improvement project that began in Street and Utility Improvements Fund: This fund is an accumulation of resources for expenditures for the street and utility improvement project that began in Other Capital Projects Fund: This fund accounts for the residual revenues and/or expenses of capital projects that have closed.

92 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS December 31, 2014 Special Capital Revenue Debt Service Project Funds Funds Funds Total Assets Cash and investments $ 141,466 $ 689,153 $ 1,112,000 $ 1,942,619 Receivables (net of allowance for uncollectibles) Accounts 41,772 41,772 Taxes 13,139 13,139 Special assessments ,997 77, ,865 Prepaid expenses TOTAL ASSETS $ 183,811 $ 1,304,289 $ 1,189,595 $ 2,677,695 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ 3,805 $ $ 565 $ 4,370 Escrow deposits 40,011 40,011 Due to other funds 77,223 30, ,751 Total liabilities 121,039 31, ,132 Deferred Inflows of Resources Unavailable revenue: Taxes 10,320 10,320 Special assessments ,973 71, ,376 Total deferred inflows of resources ,293 71, ,696 Fund Balance Fund balance Nonspendable Restricted 89, , ,682 1,349,693 Assigned 10, , ,269 Unassigned (36,867) (30,528) (67,395) Total fund balance 62, ,996 1,087,372 1,842,867 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 183,811 $ 1,304,289 $ 1,189,595 $ 2,677,695 64

93 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2014 Special Capital Revenue Debt Service Project Funds Funds Funds Total REVENUES Property taxes $ $ 341,564 $ $ 341,564 Special assessments ,868 19, ,042 Charges for services 154, ,841 Intergovernmental revenues 119, ,350 Other Revenue Investment earnings (loss) 1,476 1,997 7,798 11,271 Miscellaneous 119 1,047 1,166 TOTAL REVENUES 156, ,779 28, ,234 EXPENDITURES Current General government Public safety Street 62,050 62,050 Capital outlay General government 34,435 34,435 Public safety 232, ,045 Street 524, ,679 Parks and recreation 55,593 55,593 Debt service Bond principal retirement 365, ,000 Interest and fiscal charges 49,025 49,025 TOTAL EXPENDITURES 587, , ,776 1,324,643 Excess (deficiency) of revenues over (under) expenditures (431,149) 133,754 (294,014) (591,409) OTHER FINANCING SOURCES (USES) Sale of assets 2,576 2,576 Transfers from other funds 373, ,369 Transfers to other funds (183,234) (183,234) Total other financing sources (uses) 192, ,711 Net change in fund balances (431,149) 133,754 (101,303) (398,698) FUND BALANCES, beginning 493, ,242 1,188,675 2,241,565 FUND BALANCES, ending $ 62,499 $ 692,996 $ 1,087,372 $ 1,842,867 65

94 COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS December 31, 2014 Economic City Storm Water Development Development Management Authority Total Assets Cash and investments $ 101,415 $ $ 40,051 $ 141,466 Receivables (net of allowance for uncollectibles) Accounts 41,772 41,772 Special assessments Prepaid expenses TOTAL ASSETS $ 101,415 $ 42,345 $ 40,051 $ 183,811 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ 2,389 $ 1,416 $ $ 3,805 Escrow deposits 40,011 40,011 Due to other funds 77,223 77,223 Total liabilities 42,400 78, ,039 Deferred Inflows of Resources Unavailable revenue: Special assessments Fund Balance Fund balance Nonspendable Restricted 59,015 30,000 89,015 Assigned 10,051 10,051 Unassigned (36,867) (36,867) Total fund balance 59,015 (36,567) 40,051 62,499 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 101,415 $ 42,345 $ 40,051 $ 183,811 66

95 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS For the Year Ended December 31, 2014 Economic City Storm Water Development Development Management Authority Total REVENUES Special assessments $ $ 257 $ $ 257 Charges for services 154, ,841 Other revenue Investment earnings (loss) 51 1, ,476 Miscellaneous TOTAL REVENUES , ,693 EXPENDITURES Current General government Public safety Street 62,050 62,050 Capital Outlay Street 524, ,976 TOTAL EXPENDITURES , ,842 Net change in fund balances (99) (430,590) (460) (431,149) FUND BALANCES, beginning 59, ,023 40, ,648 FUND BALANCES, ending $ 59,015 $ (36,567) $ 40,051 $ 62,499 67

96 COMBINING BALANCE SHEET NONMAJOR DEBT SERVICE FUNDS December 31, 2014 Improvement Municipal State Equipment Bonds of Aid Bonds of Certificates B B 2008 Assets Cash and investments $ 278,517 $ 130,166 $ 6,673 Receivables (net of allowance for uncollectibles) Taxes 1,524 Special assessments 198,960 TOTAL ASSETS $ 477,477 $ 130,166 $ 8,197 DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Deferred Inflows of Resources Unavailable revenue: Taxes $ $ $ 1,245 Special assessments 198,688 Total deferred inflows of resources 198,688 1,245 Fund Balance Fund balance Restricted 278, ,166 6,952 Total fund balance 278, ,166 6,952 TOTAL DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 477,477 $ 130,166 $ 8,197 68

97 Improvement Improvement Equipment Improvement Bonds of Bonds of Certificates Bonds of Other A A A Bonds Total $ 17,923 $ 112,595 $ 141,704 $ $ 1,575 $ 689,153 6,032 1,288 2,294 2,001 13, , , ,997 $ 23,955 $ 347,584 $ 143,998 $ 169,336 $ 3,576 $ 1,304,289 $ 4,709 $ 979 $ 1,558 $ $ 1,829 $ 10, , , ,973 4, ,928 1, ,336 1, ,293 19, , ,440 1, ,996 19, , ,440 1, ,996 $ 23,955 $ 347,584 $ 143,998 $ 169,336 $ 3,576 $ 1,304,289 69

98 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICE FUNDS For the Year Ended December 31, 2014 Improvement Municipal State Equipment Bonds of Aid Bonds of Certificates B B 2008 REVENUES Property taxes $ $ $ 827 Special assessments 42,717 Intergovernmental 119,350 Other Revenue Investment earnings (loss) 1, TOTAL REVENUES 44, , EXPENDITURES Debt service Bond principal retirement 30, ,000 50,000 Interest and fiscal charges 14,970 5,500 1,313 TOTAL EXPENDITURES 44, ,500 51,313 Net change in fund balances (932) (1,002) (50,439) FUND BALANCES, beginning 279, ,168 57,391 FUND BALANCES, ending $ 278,789 $ 130,166 $ 6,952 70

99 Improvement Improvement Equipment Improvement Bonds of Bonds of Certificates Bonds of Other A A A Bonds Total $ 136,890 $ 58,061 $ 145,565 $ $ 221 $ 341,564 42,151 84, , , , , , , ,000 45, ,000 5,395 18,515 3,332 49, ,395 63,515 3, ,025 6,495 36, , ,754 12,751 76,693 1, ,242 $ 19,246 $ 113,656 $ 142,440 $ $ 1,747 $ 692,996 71

100 COMBINING BALANCE SHEET NONMAJOR CAPITAL PROJECT FUNDS December 31, Street 2002 Street Equipment Reconstruction Reconstruction St. Paul Park Acquisition & Huber/Lynch & 18th Ave. Road Assets Cash and investments $ 153,600 $ 475 $ 293,363 $ Receivables (net of allowance for uncollectibles) Special assessments TOTAL ASSETS $ 153,600 $ 475 $ 293,363 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable $ $ $ $ Due to other funds 7,314 Total liabilities 7,314 Deferred Inflows of Resources Unavailable revenue: Special assessments Fund Balance Fund balance Restricted 93, ,363 Assigned 60, Unassigned (7,314) Total fund balance (deficit) 153, ,363 (7,314) TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 153,600 $ 475 $ 293,363 $ 72

101 2011 Street & 2012 Street & Other Utility Utility Capital Improvements Improvements Projects Total $ 118,404 $ $ 546,158 $ 1,112,000 77,595 77,595 $ 118,404 $ $ 623,753 $ 1,189,595 $ 565 $ $ $ ,214 30, ,214 31,093 71,130 71, ,839 63, , , ,218 (23,214) (30,528) 117,839 (23,214) 552,623 1,087,372 $ 118,404 $ $ 623,753 $ 1,189,595 73

102 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR CAPITAL PROJECT FUNDS For the Year Ended December 31, Street 2002 Street Equipment Reconstruction Reconstruction St. Paul Park Acquisition & Huber/Lynch & 18th Ave. Road REVENUES Special assessments $ $ $ $ Other revenue Investment earnings (loss) 1, ,784 Miscellaneous 1,047 TOTAL REVENUES 2, ,784 EXPENDITURES Capital outlay General government 34,435 Public safety 232,045 Street Parks and recreation 55,593 TOTAL EXPENDITURES 322,073 Excess (deficiency) of revenues over (under) expenditures (319,611) 475 1,784 OTHER FINANCING SOURCES (USES) Sale of assets 2,576 Transfers from other funds Transfers to other funds (114,886) (68,348) Total other financing sources (uses) 2,576 (114,886) (68,348) Net change in fund balances (317,035) (114,411) (66,564) FUND BALANCES (DEFICIT), beginning 470, , ,927 (7,314) FUND BALANCES (DEFICIT), ending $ 153,600 $ 475 $ 293,363 $ (7,314) 74

103 2011 Street & 2012 Street & Other Utility Utility Capital Improvements Improvements Projects Total $ $ $ 19,917 $ 19, ,517 7,798 1, ,434 28,762 34, , , , (138) 23,434 (294,014) 2, , ,369 (183,234) 373, , (138) 396,803 (101,303) 117,797 (23,076) 155,820 1,188,675 $ 117,839 $ (23,214) $ 552,623 $ 1,087,372 75

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105 OTHER REPORT SECTION December 31, 2014

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107 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of St. Paul Park We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregated remaining fund information of the City of St. Paul Park, as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City of St. Paul Park's basic financial statements and have issued our report thereon dated June 29, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of St. Paul Park's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of St. Paul Park's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of St. Paul Park's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 76

108 To the Honorable Mayor and Members of the City Council City of St. Paul Park Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of St. Paul Park's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Maplewood, Minnesota June 29,

109 INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE To the Honorable Mayor and Members of the City Council City of St. Paul Park We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of St. Paul Park, Minnesota, as of and for the year ended December 31, 2014, and the related notes to the financial statements, and have issued our report thereon dated June 29, The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to Minnesota State Statutes Sec. 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions and tax increment financing. Our audit considered all of the listed categories, except that we did not test for compliance with the provisions for tax increment financing because the City's lone tax increment financing district has been decertified. In connection with our audit, nothing came to our attention that caused us to believe that the City of St. Paul Park failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the City of St. Paul Park's noncompliance with the above referenced provisions. The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose. Maplewood, Minnesota June 29,