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1 Disclaimer This Comprehensive Annual Financial Report (CAFR) of the Hennepin County Regional Railroad Authority (HCRRA) contained on the County's web pages is historical information as of December 31, The information in the CAFR has not been updated for developments subsequent to the date of the independent auditor s report. The County has taken reasonable security measures to protect the integrity of its website and information posted thereon. However, no web site can fully ensure against infiltration. Absent any unauthorized act that deletes, edits, or somehow manipulates the words or data, this publication represents the presentation of the HCRRA s CAFR dated December 31, This online document has been formatted for two-sided printing.

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3 HENNEPIN COUNTY REGIONAL RAILROAD AUTHORITY Comprehensive Annual Financial Report Year Ended December 31, 2008

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5 Introductory Section

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7 2008 Comprehensive Annual Financial Report Table of Contents INTRODUCTORY SECTION Page Letter of Transmittal... 1 Principal Officials... 8 FINANCIAL SECTION Independent Auditors Report Management's Discussion and Analysis Basic Financial Statements Governmental Fund Balance Sheets and Statement of Net Assets Statements of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual - General Fund Notes to Required Supplementary Information Supplementary Information Balance Sheet - General Fund Balance Sheet - Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual - Debt Service Fund STATISTICAL SECTION... 33

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9 HENNEPIN COUNTY REGIONAL RAILROAD AUTHORITY 417 North Fifth Street, Suite 320, Minneapolis, MN (612) FAX: (612) August 4, 2009 The Honorable Members of the Hennepin County Regional Railroad Authority Board: Minnesota Statutes require all governmental agencies to issue an annual report on its financial position and activity prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants or the state auditor. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Hennepin County Regional Railroad Authority (HCRRA) for the fiscal year ended December 31, Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. McGladrey & Pullen, LLP, Certified Public Accountants, has issued an unqualified ( clean ) opinion on HCRRA financial statements for the year ended December 31, The independent auditor s report is located at the front of the financial section of this report. Management s discussion and analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with the letter. Profile of the Government The HCRRA was established in 1980 as a political subdivision and local government unit of Minnesota. It was established for the purpose of preservation, improvement, and implementation of local rail service in accordance with the powers and authorities granted in Laws of Minnesota Chapter 616. The HCRRA advises and participates with the Metropolitan Council Metro Transit Division and the Minnesota Department of Transportation (MnDOT) in the development of rail transit in Hennepin County. In the course of rail transit development, the HCRRA has purchased abandoned rail corridors, park and ride sites, and maintenance facilities. In April 2008 Hennepin County joined Anoka, Dakota, Ramsey, and Washington counties in the establishment of the Counties Transit Improvement Board (CTIB). The Minnesota Legislature authorized this joint powers board to impose a one-quarter percent sales and use tax, and an excise tax of $20 on sales of motor vehicles. The taxes began on July 1, 2008 and will be used BOARD OF COMMISSIONERS Peter McLaughlin Gail Dorfman Mark Stenglein Jan Callison Mike Opat Randy Johnson Jeff Johnson Chair Vice Chair Secretary Treasurer 1

10 Profile of the Government Continued to provide grants to fund improvements to the transit system. CTIB is committed to the development of a system of transitways to better serve the residents and businesses of the Twin Cities Metropolitan Area and to efficiently move people and goods throughout the region, which is consistent with the mission of the HCRRA. Although a legally separate entity, the HCRRA is in substance part of the operations of Hennepin County. Therefore, the HCRRA s activity is combined with financial information of Hennepin County and reported as a special revenue fund within the County s Comprehensive Annual Financial Report. The HCRRA Board, which includes the seven members of the Hennepin County Board of Commissioners, is responsible, among other things, for adopting the annual budget. Budgets are adopted on a basis consistent with GAAP. Beginning in approximately August of each year a budget is prepared and includes information on the past year, current year estimates, and requested appropriations. The Board legally enacts the budget by passage of a resolution no later than December 31. A budget to actual comparison for the general fund is presented in the Required Supplementary Information section of this report. Existing Hiawatha Light Rail Transit Corridor The Hiawatha line, which runs 11.6 miles between the Mall of America in Bloomington and downtown Minneapolis, currently has 17 stations. Construction of an additional light rail transit (LRT) station at American Boulevard and 34 th Avenue in Bloomington is to begin in 2009 and is expected to be operational by The line is served by four park an ride lots providing 2,680 parking spaces to commuters. Ridership in 2008 totaled 10.2 million, which was 12.3 percent higher than in This is the first time annual rail ridership has topped 10 million. With 244 train trips daily and 34 connecting bus routes south of downtown, the route has an average of 30,500 riders per weekday. Ridership on the line has exceeded the pre-construction estimates for the year 2020 of 24,800 riders per weekday. In October, 2008, the Metropolitan Council accepted a grant from CTIB to fund 50 percent of the 2009 Hiawatha Light Rail Transit operating costs previously funded through Hennepin County property taxes. 2

11 Northstar Commuter Rail Project The Northstar Commuter Rail project is designed to save commuters significant travel time, reduce demands on highway infrastructure, and offer riders an on-time and reliable commuting option. A Northstar rider s commute from Elk River to Minneapolis is expected to be approximately 45 minutes. In contrast, the typical car commute is nearly 70 minutes. Northstar is expected to have the capacity to carry 7,000 riders per day the equivalent of approximately one lane of highway traffic at peak travel times. In 2010, it is expected that this line will have approximately 4,110 riders per weekday. Phase One of Northstar, expected to be complete in late 2009, is commuter rail service on the 40-mile segment of existing Burlington Northern Santa Fe (BNSF) railroad tracks along Highways 10 and 47 from Big Lake to downtown Minneapolis. Service will end within feet of the new Twins ballpark. Trains will make the 40-mile trip at speeds of up to 80 miles per hour and will have a direct connection to the Hiawatha line at the planned Minneapolis Transit Hub, for a seamless connection between the two modes of transit. Four trains will make five trips morning and night, with a reverse direction commute trip in each rush period. Three round trips will be provided each weekend day. There will be stations in Big Lake, Elk River, Anoka, Coon Rapids, Fridley and Minneapolis. Funding for Northstar was provided by the State of Minnesota, the regional rail authorities for Anoka, Hennepin, and Sherburne counties, the Metropolitan Council, the Minnesota Twins, and federal matching funds. Additionally, in October 2008, CTIB approved the funding to build the Fridley Station ($9.9 million) and 50 percent of the 2009 project start-up operating costs ($3.8 million). The HCRRA stated commitment to the project is not to exceed $8,265,000. 3

12 Central Corridor Light Rail Transit Project The Central Corridor project includes 11 miles of exclusive right of way between downtown St. Paul and downtown Minneapolis. The line will have a total of 15 new stations, plus five shared stations with the Hiawatha line. It links five major centers of activity in the Twin Cities region downtown Minneapolis, the University of Minnesota, the Midway area, the State Capitol complex and downtown St. Paul. It will connect to the existing Hiawatha Line at the Metrodome Station, and it will terminate at a planned Minneapolis Transit Hub that will also serve the new Northstar Line. It is expected that following final design, the line will be built in and open in Weekday ridership on the Central Corridor Line is projected to be 41,000 by A section of the planned Central Corridor The Metropolitan Council is managing the Central Corridor project with funding from the HCRRA, Ramsey County RRA, CTIB, the State of Minnesota, and the Federal Transit Administration. The Central Corridor Management Committee, which is made up of policymakers representing Hennepin County, Ramsey County, Minneapolis, St. Paul and the University of Minnesota along with the Minnesota Department of Transportation and the Metropolitan Council, provides policy direction for the project. The Metropolitan Council is responsible for the design, construction and operations of LRT in the Central Corridor. In 2008, the scope of the project was approved, clearing the way for the project to complete preliminary engineering on all components of the line. Costs for the Central Corridor project will be shared by federal, state, and local government agencies. Additionally, in October 2008, CTIB approved a grant to provide $26 million for preliminary engineering, final design, property acquisition and utility relocation. The Central Corridor Project has an estimated total cost of approximately $900 million, with the HCRRA share at $27,000,000 or 3% of the cost. 4

13 Additional Projects The HCRRA also participates in the planning and design of other rail projects, including: Southwest Transit Corridor The HCRRA has been acquiring property for the Southwest Transit Corridor running between Minneapolis and Eden Prairie since In 2008, the HCRRA approved $2.5 million to fund an environmental-impact statement of three proposed Southwest corridor routes and another $400,000 to fund the Southwest Station master plan. The results of the study will be used to seek federal funding. Bottineau Corridor The Bottineau Corridor is a transitway corridor extending from downtown Minneapolis through North Minneapolis, the developed communities of Robbinsdale, Crystal, Osseo, Brooklyn Park and Maple Grove, and potentially to the rapidly growing communities of Dayton, Rogers and Hassan Township. HCRRA funding for an Alternatives Analysis study was approved in March 2008, beginning the process of identifying the best alignment and mode for the corridor and is expected to be complete in late Red Rock Corridor The Red Rock Corridor transit proposals focus on a 30-mile corridor from Hastings through St. Paul, and then Minneapolis. In 2007, the Red Rock Corridor Commission completed the Red Rock Corridor Alternatives Analysis (AA). The results of the AA study indicate that expanding the bus service, increasing bus frequency and providing additional park and ride facilities, are the first steps toward building a strong transit base in the corridor. This stronger base is a key component in the phasing of corridor improvements prior to the construction of commuter rail. Northern Lights Express (Minneapolis to Duluth/Superior Passenger Rail) The HCRRA, in partnership with the St. Louis and Lake County Regional Railroad Authority, Anoka County Regional Railroad Authority, Isanti County Regional Railroad Authority, Pine County Regional Railroad Authority, the Mille Lacs Band of Ojibwe, and the City of Duluth, contracted for the completion of a comprehensive feasibility study and business plan for intercity passenger rail service between Minneapolis and the Twin Ports. The study projects that the line would attract as many as 3,000 riders per day. Modeling efforts with BNSF Railway and the necessary environmental study are in progress. Interim Use of Properties Acquired for Future Projects The HCRRA currently owns 55 miles of rail corridor; 11 sites suitable for future park and ride lots or stations; and 2 railroad depots; for a total of 83 acres. Although acquired for future transportation needs, recreational trails have been constructed on these corridors as an interim use. With the construction of additional bike trails in 2008, all 55 miles of corridor are devoted to permanent or interim use. 5

14 Economic and Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the HCRRA operates. Local economy. Hennepin County, the geographic area in which the HCRRA is established, has longstanding characteristics of strength and diversity in comparison to outstate, regional and even the national economy as shown in measurements of income and employment. Healthcare, medical device manufacturing, retail sales, financial services and insurance, high tech, and food processing are significant economic sectors providing a strong employment and wage base in the County. Many large international companies maintain their headquarters in Hennepin County. At year-end 2008, employment in Hennepin County shows some slowed growth. The December 2008 unemployment rate at 4.9 percent was higher than the previous month s rate of 3.8 percent. However, the year-end 2008 rate remained lower than the State rate of 5.4 percent and the national rate of 5.8 percent. Long-term financial planning. In 2008, the HCRRA was responsible for Hiawatha Light Rail Transit Corridor operating costs of $7,950,000. These costs were paid through the use of HCRRA reserves or taxes levied by the HCRRA. Beginning in 2009, the operating costs will the responsibility of CTIB. Cash management policies and practices. With the exception of a small percentage of escrowed funds (held in trust in US Treasuries or money market funds), cash held by the County for the HCRRA is invested in AAA-rated obligations of U.S. governmentsponsored enterprises and repurchase agreements with primary dealers. The County manages its exposure to fair value losses arising from market conditions by limiting its effective duration to six years or less, and by ensuring that it could hold investments to maturity if necessary. On December 31, 2008, the County s investment portfolio had an effective duration of 1.02 years and a 12-month cash yield of 3.99 percent. To manage credit risk, the County s general investment policy is to apply the prudent-investor rule: investments are made as a prudent investor would be expected to act. Debt management. The HCRRA has $43,895,000 of outstanding limited tax levy supported debt. This debt is currently rated Aaa by Moody s Investor Service, AAA by Standard & Poor s Corporation and AAA from Fitch IBCA. The State of Minnesota Statute 398A.04 limits taxing authority for this debt to percent of the taxable market value within Hennepin County. This taxing authority could generate approximately $70.0 million per year at the current estimated market value of taxable properties. In 2008, the HCRRA levied slightly over $15.5 million in taxes and anticipates a tax levy of $7 million in This taxing authority is deemed to be adequate for repaying the bondholders. Risk management. The HCRRA has a comprehensive risk management program, which includes risk retention, transfer, and control techniques. Purchased insurance primarily covers certain property loss exposures. Tort liability claims are self-financed. Additional information is available in note 6 to the basic financial statements. The preparation of this report could not have been accomplished without the efficient and dedicated services of the entire financial staff of Hennepin County. We would like to express our 6

15 appreciation to all staff who assisted and contributed to the preparation of this report. Credit also must be given to the HCRRA Board for their support for maintaining the highest standards of professionalism in the management of HCRRA finances. Respectfully submitted, Richard P. Johnson Executive Director 7

16 Principal Officials 2008 Board of Commissioners: Peter McLaughlin, Chair Linda Koblick, Vice Chair Mark Stenglein, Secretary Gail Dorfman, Treasurer Mike Opat Randy Johnson Penny Steele Executive Director: Richard P. Johnson 8

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19 Independent Auditor s Report Hennepin County Regional Railroad Authority Hennepin County, Minnesota We have audited the accompanying financial statements of the governmental activities and the major funds of Hennepin County Regional Railroad Authority (HCRRA), a component unit of Hennepin County, Minnesota, as of and for the year ended December 31, 2008, as listed in the table of contents. These financial statements are the responsibility of the HCRRA s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial positions of the governmental activities and the major funds of the HCRRA as of December 31, 2008, and the respective changes in their financial positions for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Management s Discussion and Analysis and budgetary comparison information are not required parts of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise HCRRA s basic financial statements. The introductory section, supplementary information, and the statistical section are presented for purposes of additional analysis and are not required parts of the basic financial statements. The 2008 supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements for the year ended December 31, 2008, taken as a whole. We have also previously audited, in accordance with auditing standards generally accepted in the United States of America, the HCRRA s basic financial statements for the year ended December 31, 2007, which are not presented with the accompanying financial statements. In our report dated June 19, 2008, we expressed unqualified opinions on the respective financial statements of the governmental activities and the major funds. In our opinion, the 2007 supplementary information is fairly stated in all material respects in relation to the basic financial statements for the year ended December 31, 2007, taken as a whole. The introductory section and statistical section as listed in the accompanying table of contents have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on them. Minneapolis, Minnesota August 4, 2009 McGladrey & Pullen, LLP is a member firm of RSM International an affiliation of separate and independent legal entities. 11

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21 Management s Discussion and Analysis This discussion and analysis is intended to provide financial statement readers with a financial overview and narrative analysis of the financial position and activities of the Hennepin County Regional Railroad Authority (HCRRA), a component unit of Hennepin County for the year ended December 31, This information should be considered in conjunction with the information contained in the financial statements, which follow this section. FINANCIAL HIGHLIGHTS Government-Wide At December 31, 2008, the assets of the HCRRA exceeded its liabilities by $23,676,376. Of the total net assets, $37,437,812 was invested in capital assets and $224,465 was restricted for debt service. The remainder consisted of negative unrestricted net assets of $13,985,901. Negative unrestricted assets exist because the HCRRA has $43.8 million of debt outstanding relating to bond proceeds that were contributed to the Metropolitan Council in 2002 for the Hiawatha Avenue Light Rail Transit project. Future property tax revenues are expected to be sufficient to offset long-term liabilities as they come due. The HCRRA total net assets, as reported in the Statement of Activities, increased by $3,355,612 during This increase was largely due to increased property tax receipts. Fund Level At the end of the fiscal year, the HCRRA s governmental funds reported total ending fund balances of $30,081,551, an increase of $2,522,284 from the prior year balance of $27,559,267. The increase in fund balance primarily relates to increased revenue from property taxes and intergovernmental payments. Decreased capital outlay was offset by higher outlays for contractual services. Unreserved fund balance for the General Fund was $29,529,109, which is more than twice the total general fund expenditures for the year ended December 31, Long-Term Debt The HCRRA s total long term debt decreased $1,005,000 due to scheduled repayments in OVERVIEW OF THE FINANCIAL STATEMENTS Management s discussion and analysis is intended to serve as an introduction to the HCRRA basic financial statements, which are comprised of two components: 1) combined government-wide and fund financial statements, and 2) notes to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of HCRRA finances, in a manner similar to a private-sector business. The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information about the HCRRA as a whole using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus results in the reporting of all inflows, outflows, 13

22 OVERVIEW OF THE FINANCIAL STATEMENTS CONTINUED and balances affecting or reflecting HCRRA net assets. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. There are two government-wide statements. The Statement of Net Assets presents information on all HCRRA assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as an indicator of whether the financial position of the HCRRA is improving or deteriorating. The Statement of Activities presents information showing how the HCRRA net assets changed during the year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. In both statements, HCRRA activities are reported as governmental activities, which are defined as functions that are principally supported by taxes and intergovernmental revenues. Fund Financial Statements The fund financial statements provide detailed information about the HCRRA major funds. 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. HCRRA activity is reported in two major governmental funds, the General Fund and the Debt Service Fund. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources. This approach is known as using the flow of current financial resources measurement focus and the modified accrual basis of accounting. The fund statements provide a detailed short-term view of HCRRA finances that assists in determining whether there will be adequate financial resources available to meet current needs. 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 HCRRA s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The reconciliations are presented in the adjustments column in each of the basic financial statements. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as an indicator of a government's financial position. In the case of the HCRRA, assets exceeded liabilities by $23,676,376 at December 31, The Statement of Net Assets presents all of the HCRRA s assets and liabilities, with the difference between the two reported as net assets. 14

23 GOVERNMENT-WIDE FINANCIAL ANALYSIS CONTINUED Summary of Net Assets Current and other assets $ 31,278,598 $ 28,484,299 Capital assets 37,437,812 37,609,630 Total assets 68,716,410 66,356,984 Long-term liabilities outstanding 42,706,246 43,744,973 Other liabilities 2,333,788 2,291,246 Total liabilities 45,040,034 46,036,219 Total net assets $ 23,676,376 $ 20,320,765 Invested in capital assets net of related debt $ 37,437,812 $ 37,609,630 Restricted 224, ,353 Unrestricted (13,985,901) (17,445,218) Total net assets $ 23,676,376 $ 20,320,765 The largest portion of HCRRA net assets, $37,437,812, reflects its investment in capital assets (e.g., land, and buildings), less any related debt used to acquire those assets that is still outstanding. (No such related debt exists.) The HCRRA uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. An additional portion of the HCRRA s net assets, $224,465, represents resources that are subject to external restrictions on how they may be used. The remainder consisted of negative unrestricted net assets of $13,985,901. Negative unrestricted assets exist because the HCRRA has $43.8 million of debt outstanding relating to bond proceeds that were contributed to the Metropolitan Council in 2002 for the Hiawatha Avenue Light Rail Transit project. Future property tax revenues are expected to be sufficient to offset long-term liabilities as they come due. HCRRA net assets increased by $3,355,612 during This increase was largely due to increased property tax receipts and to unrealized investment earnings. Changes in Net Assets Governmental Activities Revenues: General revenues: Property taxes $ 15,084,946 $ 12,057,831 Other taxes 8,678 6,653 Investment earnings 1,628,111 1,334,042 Intergovernmental and other 1,247,387 2,342,836 Total revenues 17,969,122 15,741,362 Expenses: HCRRA 12,491,547 11,414,301 Interest on long-term debt 2,121,963 2,156,064 Total expenses 14,613,510 13,570,365 Change in net assets 3,355,612 2,170,997 Net assets beginning 20,320,765 18,149,768 Net assets ending $ 23,676,376 $ 20,320,765 15

24 FUND FINANCIAL ANALYSIS Changes in Fund Balance The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing HCRRA financing requirements. In particular, unreserved fund balance may serve as a useful measure of net resources available for spending at the end of the fiscal year. At the end of the fiscal year, the HCRRA s governmental funds reported total ending fund balances of $30,081,551, an increase of $2,522,284 from the prior year. The increase in fund balance primarily relates to increased revenue from property taxes and intergovernmental payments. Decreased capital outlay was offset by higher outlays for contractual services. Nearly all of ending fund balance, or $29,529,109, constitutes General Fund unreserved fund balance, which may be used to meet the HCRRA s ongoing obligations in accordance with contractual agreements, fund designations, and fiscal policies. The remainder of fund balance is committed for the payment of debt service. Budgetary Highlights At year-end, actual General Fund expenditures of $12,323,007 were significantly lower than the final $33,667,533 budget. Additionally, General Fund revenues were $10,548,120 lower than budgeted. The 2008 revenue and expenditure budgets had allowed for intergovernmental revenue and construction costs for projects that were not yet fully funded by Federal Transit Administration grant agreements. However Federal funding was approved, eliminating the need for HCRRA contributions to those portions of the Northstar and Central Corridor projects. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets HCRRA investment in capital assets as of December 31, 2008, amounts to $37,437,812 (net of accumulated depreciation). This investment in capital assets consists of land (including rail corridor) and buildings. Due to depreciation, the HCRRA s investment in capital assets decreased $171,818 from the prior year s balance. Additional information on HCRRA capital assets can be found in note 4 on page 28 of this report. Debt administration At the end of the current fiscal year, the HCRRA had total long-term levy supported bonds outstanding of $43,751,246 (including unamortized discount). HCRRA total long-term debt decreased by $1,005,000 (approximately 2.0 percent) during the current fiscal year due to principal repayment. HCRRA outstanding bonds are rated as follows: Moody s Investors Service, Inc. Standard and Poor s Corporation Fitch IBCA, Inc. Aaa AAA AAA Additional information on HCRRA long-term debt can be found in note 5 on page 28 of this report. 16

25 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The 2009 General Fund budget is $17,611,902 lower than the 2008 budget. The decrease primarily relates to completion of Northstar project commitments. Additionally, Hiawatha Avenue Light Rail Transit operating costs that Minnesota Statutes previously required the HCRRA to support will instead be supported by sales tax revenues collected for the Counties Transit Improvement Board beginning in REQUESTS FOR INFORMATION This financial report is designed to provide an overview for those interested in the HCRRA s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Hennepin County Regional Railroad Authority, A-2301 Government Center, Minneapolis, MN

26 Governmental Fund Balance Sheets and Statement of Net Assets December 31, 2008 General Debt Service Adjustments Statement of Fund Fund Total (Note 1) Net Assets ASSETS Current assets: Interest in Hennepin County investment pool $ 30,388,827 $ 408,488 $ 30,797,315 $ - $ 30,797,315 Taxes receivable (net) 237, , ,209 Other receivables 162, , ,386 Total current assets 30,788, ,488 31,196,910-31,196,910 Noncurrent assets: Deferred issuance costs ,688 81,688 Capital assets: Land and rail corridor ,197,290 36,197,290 Buildings ,371,256 2,371, ,568,546 38,568,546 Less accumulated depreciation (1,130,734) (1,130,734) Net capital assets ,437,812 37,437,812 Total noncurrent assets ,519,500 37,519,500 Total assets $ 30,788,422 $ 408,488 $ 31,196,910 $ 37,519,500 $ 68,716,410 LIABILITIES Current liabilities: Accounts and contracts payable $ 1,096,483 $ 10,594 $ 1,107,077 $ - $ 1,107,077 Accrued liabilities 4,545-4, , ,974 Unearned revenue 3,737-3,737-3,737 Current portion of long-term debt ,045,000 1,045,000 Total current liabilities 1,104,765 10,594 1,115,359 1,218,429 2,333,788 Noncurrent liabilities: Noncurrent portion of long-term debt ,706,246 42,706,246 Total liabilities 1,104,765 10,594 1,115,359 43,924,675 45,040,034 FUND BALANCES/NET ASSETS Fund balances: Reserved for encumbrances 154, ,548 (154,548) - Unreserved: Designated for: Subsequent years' expenditures 5,743,276-5,743,276 (5,743,276) - Special purposes 100, ,000 (100,000) - Unrealized gain on investments 425, ,981 (425,981) - Undesignated 23,259, ,894 23,657,746 (23,657,746) - Total fund balances 29,683, ,894 30,081,551 (30,081,551) - Total liabilities and fund balances $ 30,788,422 $ 408,488 $ 31,196,910 Net assets: Invested in capital assets, net of related debt 37,437,812 37,437,812 Restricted for debt service 224, ,465 Unrestricted (13,985,901) (13,985,901) Total net assets $ 23,676,376 $ 23,676,376 The notes to the financial statements are an integral part of these statements. 18

27 Statements of Governmental Fund Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities For the Year ended December 31, 2008 Debt Service Adjustments Statement General Fund Fund Total (Note 1) of Activities REVENUES/GENERAL REVENUES Property taxes $ 11,897,976 $ 3,186,970 $ 15,084,946 $ - $ 15,084,946 Other taxes 6,845 1,833 8,678-8,678 Intergovernmental 384, , ,178 Investment earnings 1,628,111-1,628,111-1,628,111 Other 863, , ,209 Total revenues 14,780,319 3,188,803 17,969,122-17,969,122 EXPENDITURES/PROGRAM EXPENSES Regional Railroad Authority: Current: Commodities 18,807-18,807-18,807 Contractual services 11,507,279-11,507,279-11,507,279 Depreciation , ,818 Other 796, ,921 (3,278) 793,643 Debt service: Principal retirement - 1,005,000 1,005,000 (1,005,000) - Interest and fiscal charges - 2,118,831 2,118,831 3,132 2,121,963 Total expenditures/expenses 12,323,007 3,123,831 15,446,838 (833,328) 14,613,510 Excess of revenues over expenditures 2,457,312 64,972 2,522, ,328 - Net change in fund balances 2,457,312 64,972 2,522,284 (2,522,284) - Change in net assets ,355,612 3,355,612 FUND BALANCES/NET ASSETS Beginning 27,226, ,922 27,559,267 (7,238,502) 20,320,765 Ending $ 29,683,657 $ 397,894 $ 30,081,551 $ (6,405,175) $ 23,676,376 The notes to the financial statements are an integral part of these statements 19

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29 Notes to the Basic Financial Statements December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Financial Reporting Entity The Hennepin County Regional Railroad Authority (HCRRA) was established in 1980 for the purpose of the preservation, improvement, and implementation of local rail service in accordance with the powers and authorities granted in Laws of Minnesota Chapter 616. In the course of light rail transit development, the HCRRA purchases rail corridors, park/ride sites, and maintenance facilities. The HCRRA is a blended component unit of Hennepin County, Minnesota. A blended component unit, although a legally separate entity, is in substance part of the County s operations and so data from this unit is combined with financial information of the primary government and reported as a special revenue fund in Hennepin County s Comprehensive Annual Financial Report, which can be obtained from the County. Hennepin County was established in 1852 as an organized county having powers, duties, and privileges granted counties by Minnesota Statutes. The County is governed by a seven-member board of commissioners elected from districts within the County. The County Commissioners comprise the entire HCRRA board and exercise financial accountability. Employees of Hennepin County staff the projects of the HCRRA. The HCRRA has no employees. The financial statements of the HCRRA are prepared in accordance with accounting principles generally accepted in the United States of America as established for governmental entities. Measurement Focus, Basis of Accounting and Basis of Presentation The annual financial report includes two separate sets of statements, the government-wide financial statements and the fund financial statements. The measurement focus, basis of accounting and basis of presentation differs between the government-wide financial statements and the fund financial statements. These differences, along with an explanation of the differing purposes and information provided by these separate financial statements, are described in the sections below. As a special-purpose government engaged in a single governmental program, the government-wide statements and the fund financial statements have been combined in one statement. An adjustments column reflects the following differences between the two types of statements: Governmental funds report 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. The adjustments column represents the recording of long-term liabilities and the related effect of these transactions on the Statement of Activities. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the fund financial statements. 21

30 Notes to the Basic Financial Statements December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Government-wide Financial Statements The government-wide financial statements report information on all of the nonfiduciary activities of the government entity using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus results in the reporting of all inflows, outflows, and balances affecting or reflecting the HCRRA s net assets. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The structure of the two government-wide financial statements (the statement of net assets and the statement of activities) is described in the following two paragraphs. Statement of Net Assets This statement is designed to display the financial position of the HCRRA. The HCRRA reports all capital assets and long-term liabilities, such as long-term debt. The net assets of the HCRRA are broken down into three categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted. Restrictions shown are those imposed by parties outside the HCRRA, such as creditors, grantors, contributors, laws and regulations of other governments. When both restricted and unrestricted resources are available for use, it is the government s policy to use restricted resources first, and then unrestricted resources as they are needed. Statement of Activities This statement demonstrates the degree to which expenses of a given function are offset by program revenues. 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 and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. During 2008, the HCRRA received no program revenues. Taxes and other items not properly included among program revenues are reported as general revenues. Just as the statement of net assets includes all capital assets, the Statement of Activities includes depreciation expenses. Fund Financial Statements The accounts of the HCRRA are organized on the basis of funds. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. All individual funds are considered major and are reported as separate columns in the fund financial statements. Governmental Funds are used to account for the HCRRA s activities. Governmental fund types use the financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are measurable and available ). Measurable means the amount of the transaction can be determined. Intergovernmental revenues are considered measurable when applicable eligibility requirements have been met. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The HCRRA considers revenues to be available if they are collected within 60 days after year-end. Changes in the fair value of investments are recognized in interest revenues at the end of each year. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due. 22

31 Notes to the Basic Financial Statements December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED The HCRRA reports the following major governmental funds: The general fund is the HCRRA s primary operating fund. It accounts for all financial resources of the general government except those required to be accounted for in another fund. The debt service fund accounts for the servicing of general long-term debt. Cash and Investments The HCRRA s cash is deposited in pooled accounts of the Hennepin County Investment Pool (the Pool), an internal investment pool. Cash surpluses in these accounts are invested by the County, and investment earnings, including gains and losses on sales of securities, are allocated to the HCRRA on the basis of average monthly cash balances. Investments are stated at fair value. The fair value of investments is determined annually and is based on current market prices received from broker dealers. State law authorizes the County to invest in the following instruments: United States Treasury obligations Federal agency issues Repurchase agreements Reverse repurchase agreements Certificates of deposit General obligations of state, local, and housing finance agencies that are rated "A" or better by a national bond rating service Revenue obligations of any state or local government that are rated "AA" or better by a national bond rating service Bankers acceptances Commercial paper Futures contracts Guaranteed investment contracts Options Shares of certain investment companies Capital Assets Capital assets are reported in the government-wide financial statements. Such assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at their estimated fair value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Buildings of the HCRRA are depreciated using the straight-line method. Estimated life assigned to buildings is years. 23

32 Notes to the Basic Financial Statements December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED Long-Term Obligations In the government-wide financial statements, long-term debt is reported as a liability. Bonds payable are reported net of the applicable bond premium or discount. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. Governmental funds recognize bond premiums and discounts, as well as bond issuance costs, in the period issued. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources and discounts on debt issuances are reported as other financing uses. Issuance costs, even if withheld from the actual net proceeds received, are reported as expenditures. Bond principal payments and interest are reported as expenditures in the period in which the related payments are made. Fund Balance and Net Assets In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a special purpose. Designations of fund balance represent tentative management plans that are subject to change. On the statement of net assets, the portion of net assets that is invested in capital assets net of related debt is reported separately. Restricted net assets are reported for amounts that are legally restricted by outside parties to be used for a specific purpose. Comparative Data/Reclassifications Comparative totals data for the prior year have been presented in the selected sections of the accompanying financial statements and footnotes in order to provide an understanding of the changes in the HCRRA s financial position and operations. Also, certain amounts presented in the prior year data may have been reclassified in order to be consistent with the current year s presentation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from these estimates. 24

33 Notes to the Basic Financial Statements December 31, INTEREST IN HENNEPIN COUNTY INVESTMENT POOL The County s Office of Budget and Finance is responsible for the treasury function of all of the County s deposits and investments held by its funds and blended component units. Cash from all funds is pooled for deposit and investment purposes. At December 31, the HCRRA comprised $30,797,315 or 5.6 percent of the County s total cash and investments. As of December 31, 2008, the County had 97 percent of investments invested in U.S. government agency securities, 2 percent invested in money market funds and 1 percent invested in mutual funds. Detailed information about the County s deposits with financial institutions, repurchase agreements, interest rate risk, credit risk, concentration of credit risk, and custodial credit risk can be obtained directly from the County s 2008 financial statements. Investment earnings are allocated based on average monthly cash balances. The realized and unrealized components of the 2008 HCRRA investment earnings are presented below Investment income and realized gains and losses $ 1,303,479 Net increase (decrease) in the fair value of investments 324,632 Total Investment Earnings $ 1,628, RECEIVABLES The HCRRA is a special taxing district with the authority to levy property taxes. Property taxes are a lien on property from the year in which the property is assessed. The lien attaches on the first Monday of the following year. Tax levies are certified to the county auditor five business days after December 20 of the year the property is assessed. The taxes levied are payable in the following year in two equal installments. The amounts and due dates for taxes on real property are half on or before May 15 and the balance on or before October 15. Personal property taxes are due in one installment on May 15. The amount of the allowance for uncollectible delinquent taxes is an estimate based on historical collection experience. Estimated uncollectible delinquent taxes total $122,030 at December 31, The portion of property taxes not included in the allowance and not collected within 60 days is offset by deferred revenue. Other miscellaneous receivables consist of building and land rental. 4. CHANGES IN PROPERTY AND EQUIPMENT Capital asset activity for the year ended December 31, 2008 was as follows: Balance January 1, 2008 Additions Deletions Balance December 31, 2008 Capital assets not being depreciated: Land (including rail corridor) $ 36,197,290 $ - $ - $ 36,197,290 Capital assets being depreciated: Buildings 2,371, ,371,256 Less accumulated depreciation 958, ,818-1,130,734 Total capital assets being depreciated, net 1,412,340 (171,818) - 1,240,522 Capital Assets, Net $ 37,609,630 $ (171,818) $ - $ 37,437,812 25

34 Notes to the Basic Financial Statements December 31, LONG-TERM DEBT Limited Tax Levy Debt In 2001 the HCRRA issued $50,000,000 in limited tax levy supported debt with interest rates ranging from 3.0% to 5.0% and due dates extending thru Debt Service Requirements Cash Available Balance, January 1, 2008 $44,900,000 Additions - Reductions (1,005,000) Balance, December 31, ,895,000 Less deferred amount for discount (143,754) Less amount due within one year (1,045,000) $42,706,246 Principal Interest Total 2009 $ 1,045,000 $ 2,081,144 $ 3,126, ,095,000 2,040,650 3,135, ,145,000 1,996,850 3,141, ,195,000 1,951,050 3,146, ,255,000 1,903,250 3,158, ,275,000 8,663,810 15,938, ,420,000 6,804,000 16,224, ,310,000 4,201,500 16,511, ,155, ,250 10,087,250 $ 43,895,000 $ 30,574,504 $ 74,469,504 At December 31, 2008, there was cash available of $408,488 in the Debt Service Fund to service debt. There are no significant limitations and restrictions contained in the debt indentures. 6. RISK MANAGEMENT The HCRRA is exposed to various risks of loss related to general and professional liability torts; and theft of, damage to, and destruction of assets. The HCRRA has chosen to retain the risk of torts. Commercial property insurance is purchased by the County on behalf of the HCRRA to cover the HCRRA s buildings, money, and securities, subject to deductible amounts. Settled claims from insured losses for the County and HCRRA have not exceeded commercial insurance coverage for the past three years. Because commercial liability insurance is not purchased to provide for funding any future claims, $100,000 has been designated for tort liability risk retention. 26

35 Notes to the Basic Financial Statements December 31, RESTRICTED NET ASSETS The use of restricted net assets is subject to constraints that are externally imposed by creditors, grantors, contributors, laws, or regulations. Restrictions indicate that the net assets may only be used for a specific purpose that is narrower than the purpose of the reporting unit. Restricted net assets are reduced by liabilities related to those assets. Restricted net assets that are reported in the Statement of Net Assets differ from reserved fund balance shown in the Governmental Funds Balance Sheet. The restriction for debt service is shown at the government-wide level, but not at the fund level due to the different reporting perspective. Government-wide restricted net assets at December 31 total $224, COMMITMENTS In 2007, the HCRRA Board resolved to expend up to $7,300,000 for preliminary engineering costs relating to the Central Corridor project between Minneapolis and St. Paul. Such engineering costs will be considered as a contribution to the County s total financial obligation for the Central Corridor project. In 2008, the scope of the project was approved, clearing the way for the project to complete preliminary engineering on all components of the line. The total HCRRA share of this project is currently estimated at $27,000,000 or 3 percent of the estimated total project cost of $900 million. 9. NEW ACCOUNTING PRONOUNCEMENTS Accounting Standards Adopted in the Current Year GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations addresses accounting and financial reporting standards for pollution remediation obligations (including contamination), which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. This standard was implemented in The HCRRA had no pollution remediation obligations that met the disclosure or reporting requirements. Accounting Standards Not Yet Adopted GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets, will be effective for the HCRRA beginning the year ending December 31, This statement requires that all intangible assets not specifically excluded by its scope provisions by classified as capital assets, and it provides related guidance. Management has not yet determined the effect this statement will have on the financial statements. GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, will be effective for the HCRRA beginning the year ending December 31, This statement provides clearer fund balance classifications and clarifies existing governmental fund type definitions. Management has not yet determined the effect this statement will have on the financial statements. 27

36 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund For the Year Ended December 31, 2008 With Comparative Actual Amounts for the Year Ended December 31, Variance with Budgeted Amounts Final Budget Positive 2007 Original Final Actual (Negative) Actual REVENUES Property taxes $ 12,004,561 $ 11,624,696 $ 11,897,976 $ 273,280 $ 8,908,997 Other taxes 4,700 4,700 6,845 2,145 4,912 Intergovernmental 12,450,000 12,829, ,178 (12,445,687) 1,639,436 Investment earnings 500, ,000 1,628,111 1,128,111 1,334,042 Other 369, , , , ,400 Total revenues 25,328,439 25,328,439 14,780,319 (10,548,120) 12,590,787 EXPENDITURES Current: Commodities 7,700 7,700 18,807 (11,107) 5,660 Contractual services 12,983,243 12,983,243 11,507,279 1,475,964 7,725,550 Other 18,625,340 18,625, ,921 17,828, ,134 Capital outlay 2,051,250 2,051,250-2,051,250 3,491,479 Total expenditures 33,667,533 33,667,533 12,323,007 21,344,526 11,566,823 Deficiency of revenues over expenditures (8,339,094) (8,339,094) 2,457,312 10,796,406 1,023,964 OTHER FINANCING SOURCES Proceeds from sale of capital assets ,925 Net change in fund balances (8,339,094) (8,339,094) 2,457,312 $ 10,796,406 1,048,889 Fund Balances - Beginning 27,226,345 27,226,345 27,226,345 26,177,456 Fund Balances - Ending $ 18,887,251 $ 18,887,251 $ 29,683,657 $ 27,226,345 See notes to required supplementary information 28

37 Notes to Required Supplementary Information December 31, 2008 Legal Compliance Budgets Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted for the general and debt service funds based on the modified accrual basis of accounting. All annual appropriations lapse at year-end to the extent that they have not been expended or encumbered. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation is utilized in the general fund. Encumbrances outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. The encumbrances are reappropriated as part of the following year s budget. The HCRRA Board must adopt a proposed maximum property tax levy by September 15. The Board holds public hearings, makes modifications to the budget, and legally enacts the budget by passage of a resolution no later than December 31. Any changes in the budget must be within the revenues and reserves estimated or the revenue estimates must be changed by a vote of the Board. Expenditures may not legally exceed budgeted appropriations. 29

38 Balance Sheet General Fund December 31, 2008 and December 31, ASSETS Interest in Hennepin County investment pool $ 30,388,827 $ 28,058,746 Delinquent taxes receivable, net 237, ,414 Other receivables 162,386 97,641 Total assets $ 30,788,422 $ 28,321,801 LIABILITIES AND FUND BALANCES Liabilities: Accounts and contracts payable $ 1,096,483 $ 1,090,911 Accrued liabilities 4,545 4,545 Deferred revenue 3,737 - Total liabilities 1,104,765 1,095,456 Fund balances: Reserved for encumbrances 154,548 81,356 Unreserved: Designated for: Subsequent years' expenditures 5,743,276 8,339,094 Special purposes 100, ,000 Unrealized gain on investments 425, ,349 Undesignated 23,259,852 18,604,546 Total fund balances 29,683,657 27,226,345 Total liabilities and fund balances $ 30,788,422 $ 28,321,801 30

39 Balance Sheet Debt Service Fund December 31, 2008 and December 31, ASSETS Interest in Hennepin County investment pool $ 408,488 $ 347,143 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 10,594 $ 14,221 Fund balances: Unreserved 397, ,922 Total liabilities and fund balances $ 408,488 $ 347,143 31

40 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Debt Service Fund For the Year Ended December 31, 2008 With Comparative Actual Amounts for the Year Ended December 31, Variance with Budgeted Amounts Final Budget Positive Original Final Actual (Negative) Actual REVENUES Property taxes $ 3,123,831 $ 3,123,831 $ 3,186,970 $ 63,139 $ 3,148,834 Other taxes - - 1,833 1,833 1,741 Total revenues 3,123,831 3,123,831 3,188,803 64,972 3,150,575 EXPENDITURES Debt service: Principal retirement 1,005,000 1,005,000 1,005, ,000 Interest and fiscal charges 2,118,831 2,118,831 2,118,831-2,152,606 Total expenditures 3,123,831 3,123,831 3,123,831-3,117,606 Net change in fund balance ,972 $ 64,972 32,969 Fund Balance - Beginning 332, , , ,953 Fund Balance - Ending $ 332,922 $ 332,922 $ 397,894 $ 332,922 32

41 Statistical Section 33

42 34

43 Statistical Section Contents Table No. Category and Title Page Financial Trends This section provides information that shows how the HCRRA s financial position has changed over time. 1 Government-wide Net Assets Government-wide Change in Net Assets Fund Balances - Governmental Funds Change in Fund Balances - Governmental Funds Revenue Capacity This section provides information that shows factors affecting the HCRRA's ability to generate its own-source revenues. 5 Property Estimated Market Value Property Tax Rates - Direct and Overlapping Governments Principal Taxpayers Property Tax Levies and Collections Net Tax Capacity and Estimated Market Value of Taxable Property Debt Capacity This section provides information regarding the HCRRA s current level of outstanding debt and its ability to issue additional debt. 10 Ratios of Outstanding Debt by Type Direct and Overlapping General Obligation Debt Legal Debt Margin Information Ratio of Debt Service Expenditures for General Obligation Debt to Total Expenditures Demographic and Economic Information This section provides information regarding the HCRRA's socioeconomic environment and facilitates comparisons over time and among governments. 14 Demographic and Economic Statistics Labor Force Size and Unemployment Rate Employment Information by Industry Principal Employers

44 Government-wide Net Assets Last Six Years Table 1 Governmental Activities Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total 2003 $ 34,682, ,706 (17,466,654) $ 17,658, $ 36,500, ,881 (18,660,134) $ 18,104, $ 36,522, ,600 (18,948,172) $ 17,841, $ 37,478, ,953 (19,628,940) $ 18,149, $ 37,609, ,353 (17,445,218) 20,320, $ 37,437, ,465 (13,985,901) 23,676,376 Unaudited 36

45 Government-wide Change in Net Assets Last Six Years Table 2 Governmental Activities General Government Expenses Debt Service Expenses General Revenue Transfers Change in Net Assets 2003 $ 2,232,349 2,267,242 7,581, ,082, $ 4,914,809 2,241,981 7,602, , $ 6,919,198 2,215,768 8,872,047 - (262,919) 2006 $ 9,803,985 2,186,585 12,298, , $ 11,414,301 2,156,064 15,741,362-2,170, $ 12,491,547 2,121,963 17,969,122-3,355,612 Unaudited 37

46 Fund Balances - Governmental Funds Last Six Years Table 3 General Fund Debt Service Fund Year Reserved Unreserved Total Unreserved 2003 $ 159,471 30,848,722 $ 31,008,193 $ 442, $ 1,111,576 27,845,527 $ 28,957,103 $ 263, $ 603,424 27,177,768 $ 27,781,192 $ 267, $ - 26,177,456 26,177,456 $ 299, $ 81,356 27,144,989 27,226,345 $ 332, $ 154,548 29,529,109 29,683,657 $ 397,894 Unaudited 38

47 39

48 Change in Fund Balances - Governmental Funds Last Six Years Revenues Property taxes $ 4,421,245 6,071,219 7,204,933 7,251,381 Other taxes 2,995 4,627 4,879 4,615 Intergovernmental 605, , , ,834 Investment earnings 646, , ,052 1,099,693 Other 691, , ,775 1,079,682 Total revenues 6,367,736 7,602,487 8,872,047 9,787,205 Expenditures General government 2,225,932 4,806,715 6,721,067 7,656,942 Capital outlay 993,846 2,092, ,253 3,100,247 Debt service: Principal 840, , , ,000 Interest 2,263,069 2,237,869 2,211,919 2,182,831 Total expenditures 6,322,847 10,002,377 10,044,239 13,870,020 Excess of revenues over (under) expenditures 44,889 (2,399,890) (1,172,192) (4,082,815) Other Financing Sources (Uses) Transfers in Sale of capital assets 2,354, ,975-2,511,432 Total other financing sources (uses) 2,355, ,975-2,511,432 Net change in fund balances $ 2,400,125 (2,229,915) (1,172,192) (1,571,383) Debt service as a percentage of noncapital expenditures 58.2% 39.2% 31.6% 28.9% Unaudited 40

49 Table ,057,831 15,084,946 6,653 8,678 1,639, ,178 1,334,042 1,628, , ,209 15,741,362 17,969,122 8,075,344 12,323,007 3,491, ,000 1,005,000 2,152,606 2,118,831 14,684,429 15,446,838 1,056,933 2,522, ,925-24,925-1,081,858 2,522, % 20.2% 41

50 Property Estimated Market Value (000s omitted) 1 Last Ten Years Real Estate Residential Multiple Commercial Public Utilities Property Dwelling & Industrial Agricultural & Miscellaneous 1999 $ 41,705,509 3,677,757 14,805, ,425 17, % $ 45,361,587 4,060,545 16,119, ,652 19, % $ 60,571,223 5,704,822 19,509, ,176 25, % $ 69,909,403 6,499,918 20,264, ,497 34, % $ 78,678,876 7,321,272 20,165, ,926 37, % $ 87,082,509 7,805,970 20,541, ,861 26, % $ 96,564,547 8,130,642 22,365, ,315 28, % $ 104,903,604 8,236,029 25,052, ,554 33, % $ 109,251,869 8,562,454 28,186, ,835 84, % $ 107,145,474 8,628,267 29,764, ,041 68, % Property estimated market value is for the assessment year indicated. Applicable taxes are collectible in the subsequent year. Source: Hennepin County Property Information System. Unaudited 42

51 Table 5 Total Taxable and Total Taxable Total Personal Exempt Estimated Estimated Total Direct Exempt Real Estate Property Property Value Property Value Tax Rate 10,035,711 70,586, ,705 $ 71,515,285 $ 61,479, % % 10,035,711 75,954, ,536 $ 76,943,585 $ 66,907, % % 10,035,711 96,268, ,814 $ 97,266,804 $ 87,231, % % 10,035, ,198,290 1,024,891 $ 108,223,181 $ 98,187, % % 10,035, ,730,255 1,064,528 $ 117,794,783 $ 107,759, % % 18,965, ,977,067 1,102,615 $ 136,079,682 $ 117,114, % % 18,965, ,784,300 1,165,961 $ 147,950,261 $ 128,984, % % 18,965, ,030,935 1,232,185 $ 159,263,120 $ 140,297, % % 18,965, ,940,398 1,217, ,158, ,192, % % 18,965, ,436,884 1,234, ,671,807 $ 147,706, % % 43

52 Property Tax Rates and Levies - Direct and Overlapping Governments 1 Last Ten Years HCRRA Direct Taxes Hennepin County Tax Payable Year Tax Rates Tax Levies Tax Rates Tax Levies ,687, ,726,729, ,685, ,801,845, ,679, ,893,370, ,682, ,694,901, ,684, ,798,087, ,407, ,839,119, ,544, ,929,968, ,534, ,073,863, ,521, ,218,680, ,529, ,353,094,925 1 The Metropolitan Airport Commission, an overlapping government, receives all of its revenue from sources other than property taxes. Unaudited 44

53 Table 6 Metropolitan Transit Metropolitan Mosquito Commission Tax Metropolitan Council Tax Control District Tax Tax Rates Tax Levies Tax Rates Tax Levies Tax Rates Tax Levies ,820, ,495, ,542, ,554, ,492, ,808, ,137, ,861, ,931, ,510, ,618, ,692, ,702, ,536, ,542, ,701, ,224, ,058, ,412, ,576, ,726, ,691, ,929, ,852, ,509, ,973, ,395, ,283, ,092, ,801,856 45

54 Table 7 Hennepin County Regional Railroad Authority Principal Taxpayers 1 Current Year and Nine Years Ago Percentage Percentage of Total of Total Taxpayer Tax Capacity Rank Tax Capacity Tax Capacity Rank Tax Capacity MOA Mall Holdings LLC $ 11,999, % $ 15,194, % MB Minneapolis 8th St LLC 4,679, Minneapolis 225 Holdings LLC 4,309, ,546, NWC Limited Partnership 4,147, First Minneapolis-Hines Co 3,611, Wells REIT 3,453, Best Buy Co Inc 3,064, Flanagan-AMEX 2,869, Ameriprise Financial Corp 2,785, KAN AM Grund Kapitalanlage 2,723, Second Ave Ltd Partnership 7,628, First National Bank of Mpls 6,053, Heitman/IDS 5,696, City Center Associates 5,563, DB Holdings Inc. 3,340, Federal Reserve Bank/Mpls 3,340, Xcel Energy (NSP) 3,317, Ridgedale Joint Venture 3,228, Total $ 43,641, $ 59,911, Xcel Energy includes both real and personal property tax capacity. All others are based on the tax capacity of individual parcels. Source: Hennepin County Property Information System. Unaudited 46

55 Property Tax Levies and Collections Last Ten Years Table 8 Collected in the Year Levied Total Collections to Date Subsequent Year Tax Collections Percentage Collections Tax Collections Percentage Year Taxes Levied 1 Net of Refunds of Levy Net of Refunds Net of Refunds of Levy ,687,358 4,641, ,641, ,685,461 4,641, ,961 4,660, ,679,958 4,635, ,405 4,644, ,682,436 4,645, ,760 4,651, ,684,560 4,645, ,264 4,663, ,407,280 6,333, ,608 6,341, ,544,112 7,452, ,755 7,484, ,534,074 7,424, ,488 7,476, ,521,979 12,315, ,083 12,386, ,529,575 15,241, ,465 15,387, Including current year adjustments (i.e., abatements, cancellations, and increases to the current year levy). Unaudited 47

56 Net Tax Capacity and Estimated Market Value of Taxable Property Last Ten Years Property Outside the City of Minneapolis Minneapolis Net Estimated Net Estimated Assessment Tax Market Tax Market Year Capacity Value Capacity Value 1999 $ 802,550,295 $ 49,927,105,300 $ 281,161,210 $ 16,980,768, ,636,440 56,031,034, ,978,790 19,383,387, ,644,971 64,096,397, ,566,900 23,134,698, ,733,176 72,315,485, ,694,160 25,871,984, ,641,255 79,234,702, ,042,122 28,524,370, ,456,710 86,023,891, ,462,012 31,090,167, ,443,572 94,192,785, ,041,511 34,791,850, ,105,871, ,200,930, ,841,727 37,096,565, ,192,261, ,551,270, ,535,647 38,641,276, ,198,620, ,594,398, ,935,332 38,111,782,650 Unaudited 48

57 Table 9 Total Percentage of Total Net Estimated Net Tax Capacity HCRRA Net Tax Capacity Tax Market to Estimated Outside Capacity Value Market Value Minneapolis Minneapolis $ 1,083,711,505 $ 66,907,873, % 74.1 % 25.9 % 1,203,615,230 75,414,421, ,211,871 87,231,095, ,427,336 98,187,470, ,070,683, ,759,072, ,193,918, ,114,059, ,334,485, ,984,636, ,480,713, ,297,495, ,602,797, ,192,546, ,612,555, ,706,180,

58 Ratios of Outstanding Debt by Type Last Ten Years Table 10 Net Limited Tax Net Limited Tax Net Limited Net Limited Tax General Obligation Debt 1 General Obligation General Obligation Tax General Less Amount Debt as a Percentage Debt as a Obligation Available for of Property Estimated Percentage of Debt Per Year Total Debt Service Net Market Value 2 Personal Income 3 Capita ,395, ,872 48,739, % 0.10% ,555, ,706 48,112, % 0.09% ,690, ,881 47,426, % 0.08% ,795, ,600 46,527, % 0.08% ,865, ,953 45,565, % 0.07% ,900, ,143 44,552, % 0.07% ,895, ,488 43,486, % N/A HCRRA debt has historically consisted solely of limited tax general obligation bonds, which are by definition secured in whole or part by the authority to levy taxes on real estate. Per M.S , the net limited tax general obligation debt is determined by deducting from the total limited tax general obligation debt the cash available for servicing the debt and debt intended to be financed primarily by means other than a real estate tax levy. 2 See Table 5 for taxable estimated market value data. 3 See Table 14 for personal income and population data. 4 Data not available at the time of publication. Unaudited 50

59 Direct and Overlapping General Obligation Debt December 31, 2008 Table 11 Percent Amount Debt 1 Applicable Applicable Governmental Unit Total Net To HCRRA 2 to HCRRA Direct - Hennepin County Regional Railroad $ 43,895,000 $ 43,497, % $ 43,497,106 Total Direct Debt 43,895,000 43,497,106 43,497,106 Overlapping: Hennepin County 555,425, ,846, $ 516,846,087 Metropolitan Council 3 1,116,379, ,904, ,932,980 Metropolitan Airport Commission 1,790,917, Total Overlapping Debt 3,462,721, ,750, ,779,067 Total $ 3,506,616,876 $ 698,247,846 $ 622,276,173 1 Debt that is secured in whole or part by the authority to levy taxes on real estate. Per M.S , net general obligation debt is determined by deducting from the total general obligation debt the cash available for servicing the debt and debt that is intended to be financed primarily by means other than a real estate tax levy. 2 The percentages reflect the portion of the general obligation debt which is secured by taxable real estate located within the County. 3 Includes Metropolitan Council Transit Operations debt. Unaudited 51

60 Legal Debt Margin Information Last Ten Years Table 12 The HCRRA is subject to the legal debt limit of Hennepin County as a whole, which is described below: Debt Limit Total Net Debt Applicable to Limit Legal Debt Margin Net Debt Applicable to Limit as a Percentage of Debt Limit ,338,157, ,383,354 1,176,774, ,508,288, ,453,858 1,292,834, ,744,621, ,783,649 1,422,838, ,963,749, ,778,915 1,594,970, ,155,181, ,099,737 1,767,081, ,342,281, ,929,687 1,945,351, ,579,692, ,123,804 2,162,568, ,805,949, ,724,175 2,366,225, ,963,850, ,344,086 2,493,506, ,954,123, ,343,193 2,393,780, % 14.28% 18.44% 18.78% 18.01% 16.95% 16.17% 15.67% 15.87% 18.97% Computation of 2008 Legal Debt Margin 2008 property estimated market value $ 147,706,180,717 Debt limit, 2% of market value $ 2,954,123,614 Amount of levy supported debt $ 565,735,000 Less amount available for debt service 5,391, ,343,193 Legal Debt Margin $ 2,393,780,421 Unaudited 52

61 Ratio of Debt Service Expenditures for General Bonded Debt to Total Expenditures Last Ten Years Table 13 Debt Service Debt Service Expenditures Expenditures Interest and Total to Total Year Principal Fiscal Charges Total Expenditures Expenditures 1998 $ - $ - $ - $ 2,649,425 - % ,608, ,438, ,914, ,000 2,281,219 2,886,219 52,409, ,000 2,263,069 3,103,069 6,322, ,000 2,237,869 3,102,869 10,002, ,000 2,211,919 3,106,919 10,044, ,000 2,182,831 3,112,831 10,757, ,000 2,152,606 3,117,606 11,566, ,005,000 2,118,831 3,123,831 12,323, Unaudited 53

62 Demographic and Economic Statistics Last Ten Years Table 14 Persons 25 years Per and older who K - 12 Capita Total Median are high school School Unemploy- Year Population 1 Income 2 Income Age 3 graduates 3 Enrollment 4 ment Rate ,089,024 $ 40,078 $ 43,645,903, % 157, % ,116,200 43,075 48,080,315, , ,114,977 43,452 48,447,980, , ,122,259 43,732 49,078,630, , ,121,035 45,141 50,604,640, , ,120,897 48,041 53,849,012, , ,119,364 50,412 56,429,377, , ,122,093 52,905 59,364,330, , ,136,599 56,280 63,967,791, , ,140,988 N/A 5 N/A 5 N/A 5 N/A 5 155, Sources: 1 Office of the State Demographer and U.S. Census Bureau 2 U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Accounts Annual Average (per April 2009 release) 3 U.S. Census Bureau,U.S. Community Survey Fall registration for public schools - Minnesota State Department of Education 5 Information not available at time of publication Unaudited 54

63 Table 15 Hennepin County Regional Railroad Authority Labor Force Size and Unemployment Rate 2 Last Ten Years Hennepin County Metropolitan Area 1 State National Labor Unemployment Labor Unemployment Labor Unemployment Labor Unemployment Force Rate Force Rate Force Rate Force Rate , ,695, ,703, ,368, , ,718, ,738, ,863, , ,771, ,814, ,774, , ,880, ,851, ,508, , ,833, ,923, ,510, , ,832, ,951, ,401, , ,850, ,947, ,320, , ,844, ,939, ,428, , ,848, ,930, ,124, , ,837, ,933, ,287, Source: Minnesota Department of Jobs and Training 1 Labor statistics for the metropolitan area include Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, St. Croix, Washington and Wright counties. 2 Annual averages Unaudited 55

64 Employment Information by Industry Last Seven Years Table 16 Hennepin County Industry Ranking Industry Health care and social assistance Professional and technical services Government and government enterprises Retail trade Manufacturing Finance and insurance Administrative and waste services Accomodation and food services Other services, except public administration Wholesale trade Real estate Construction Management of companies and enterprises Transportation and warehousing Arts, entertainment, and recreation Information Educational services Utilities Forestry, fishing, mining, other Farm Note: 2008 information is not yet available. Source: United States Department of Commerce, Bureau of Economic Analysis Unaudited 56

65 Principal Employers Current Year and Three Years Ago Table 17 Employer Employees (rounded to nearest 1,000) Rank Percentage of Total County Employment Employees (rounded to nearest 1,000) Rank Percentage of Total County Employment University of Minnesota 25, % 25, % Thayer/Hidden Creek 11, Abbott Northwestern Hospital 5, % 10, Hennepin County Offices 12, % 8, Fairview University Medical Center 8, % 8, Ameriprise Financial 7, Methodist Hospital 7, % 7, Park Nicollet Health Services 6, % 6, United Parcel Service of America, Inc. 5, % Fairview Southdale Hospital 5, % 5, North Memorial Medical 5, Regions Hospital Cardiac Rhythm Management 5, % Medtronic Tachyarrhythmia Management 4, % 82, % 92, % Sources: ACINET.ORG and Hennepin County Office of Budget and Finance 1 Data not available prior to Unaudited 57

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